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Enabling a secure
energy transition
Drax Group plc Annual report and accounts 2025
Welcome to our
2025 Annual Report
This year’s key takeaways
Strategic report
1 Our year in numbers
2 Overview and business model
4 Market context
6 Chair’s statement
8 CEO’s review
13 CFO’s financial review
16 Key performance indicators
Sustainable Development
19 Introduction
22 Safeguarding responsible
biomasssourcing
25 Climate positive
27 Nature positive
29 People positive
31 Task Force on Climate-Related
Financial Disclosures (TCFD)
40 Non-Financial and Sustainability
Information Statement
41 Principal risks and uncertainties
49 Viability Statement
Governance report
52 Governance at Drax
54 Corporate Governance Report
56 Board of Directors
60 Section 172 statement
61 Stakeholder engagement
72 Nomination Committee report
77 Audit Committee report
87 Remuneration Committee report
118 Directors’ report
120 Directors’ responsibilities statement
Financial statements
121 Financial statements contents
122 Independent Auditor’s report to the
members of Drax Group plc
Shareholder information
250 Shareholder information
253 Glossary
Drax is a renewable energy company engaged
in generating renewable power, producing
sustainable biomass, and selling renewable
electricityto businesses. We are the UK’s
largestsinglesource of renewable electricity.
Learn more about
what we do at
www.drax.com
What we do
Keeping the lights on: how we
support the UK’s energy security.
Seepage 8
Responsible
biomass sourcing
Our responsibility, policies,
and information around
the carbon cycle.
Seepage 22
Looking ahead
Putting in place the structures
toallow the Group to succeed
andgrow.
Seepage 11
Our year in numbers
Non-financial highlightsFinancial highlights
(1) Alternative performance measures aredescribed in note 2.7 to the Consolidated
financial statements on page 163.
(2) 2024 comparator number re-calculated (see page 21).
Adjusted EBITDA
(1)
Dividend per share
Group carbon emissions Scope
1 and 2 (location-based)
Total recordable
incident rate
£947m
(2024: £1,064m)
29.0p
(2024: 26.0 pence)
557 ktCO
2
e
(2024: 546 ktCO
2
e)
0.33
(2024: 0.24)
Total operating profit Cash generated
from operations
Wood pellets produced Employee
engagement score
£241m
(2024: £850m)
£1,000m
(2024: £1,135m)
4.2Mt
(2024: 4.0Mt)
7. 2
(2024: 7.4)
Total revenue Net debt
(1)
Group emissions per GWh of
electricity generation
(2)
Group carbon
emissions Scope 3
(2)
£5,391m
(2024: £6 ,163m)
£784m
(2024: £992m)
35 tCO
2
e/GWh
(2024: 35 tCO
2
e/GWh)
1,504 ktCO
2
e
(2024: 1,808 ktCO
2
e)
Adjusted basic earnings
pershare
(1)
Total basic earnings per share
Total UK renewable
electricitygenerated (%)
137.7p
(2024: 128.4 pence)
20.7p
(2024: 137.5 pence)
10.6%
(2024: 10%)
Find out more
Read our ESG report
www.drax.com/esg-
performance-report-2025
Read the CFO’s
Financial Review
Seepage 13
Find out how we
source our biomass
Seepage 22
1 Drax Group plc Annual report and accounts 2025Strategic report
Overview and
business model
Our enablers
People Flexible, renewable,
generation assets
Integrated supply
chain
Financial strength
Workforce Shareholders
and investors
Communities Government,
political bodies
and regulators
Customers
and suppliers
Seepage 61 Seepage 62 Seepage 65 Seepage 63 Seepage 62
Seepage 29
Seepage 8 Seepage 8 Seepage 13
How we deliver
Pellet
Production
14 plants: own-use and
third-party supplyof
responsibly sourcedpellets
Drax Power
Stationsite
The UK’s biggest power
station and largest source
of renewable power
Options
for growth
Disciplined capital allocation
policy supports investment
forgrowth and returns to
shareholders
Flexible Generation &
Energy Solutions
(FlexGen)
Pumped storage, hydropower,
Open Cycle Gas Turbines
(OCGTs), battery energy
storagesystems (BESS),
energysolutions
Targeting post-2027 Adjusted EBITDA of £600-700m p.a.
Our stakeholders
Our purpose is to enable
a zero carbon, lower-cost
energy future
Our diversified,
dispatchable, and
renewable portfolio
generates consistent,
flexible and secure
energyfor the UK
The energy we generate
equates to c.5% of the
UK’s total power demands
Number of countries
in which we operate
4
Employees worldwide
2,974
2 Drax Group plc Annual report and accounts 2025
Overview and business model continued
Pellet supply
to Asia
Pellet supply
to Europe
Canada
US
Drax Power
Station site
The 4GW site comprises four fully flexible
and independent biomass units providing
2.6GW of capacity for secure 24/7
renewable power – capable of generating
enough renewable electricity to power the
equivalent of over eight million homes – and
a wide range of system support services.
In addition, the site has a further 1.3GW
ofgrid access.
Options for growth
Options to invest in growth – energy
security, data centres, and flexible,
renewable energy, including GW scale
pipeline of BESS opportunities.
Drax Power Station site – development
ofoptions to utilise 4GW of capacity
andgrid access. Planning application
indevelopment for potential option for
c.100MW data centre. Ambition to grow
to>1GW data centre post 2031. Develop
system support capabilities and FlexGen.
Pellet Production
A vertically integrated producer, user,
buyer, and seller of sustainable biomass.
Producing wood pellets for use for
generation at Drax Power Station and
forcontracted sales to third parties in
Asiaand Europe.
FlexGen
Our portfolio of flexible generation
andenergy solutions includes
c.2.1GWoflong- and short-duration
storage andflexible generation:
0.4 GW capacity
Cruachan pumped storage
hydropowerstation
0.7 GW c apacit y
BESS
(when fully commissioned)
0 .1 GW capacity
Lanark and Galloway
hydropower schemes
0.9 GW capacity
OCGTs (when fully
commissioned)
A portfolio aligned to energy security
and the transition to net zero.
UK
c.5Mt p.a. of capacity
Across
14 plants inthe USA and Canada
3 Drax Group plc Annual report and accounts 2025Strategic report
Market context
The global energy landscape in 2025 continued to evolve
amid a complex landscape of geopolitical, economic,
andtrade tensions, the prioritisation of energy security,
andaccelerating demand for power.
Ongoing conflicts in Ukraine and the Middle East,
combined with the reshaping of international trade
and supply chains, have influenced global energy markets
andheightened concerns over energy resilience.
As a result, security of supply has re-emerged as the
defining energy priority.
This shift has influenced how countries design
and support their energy transition. In some
advanced economies, the emphasis has moved
from net zero towards ensuring reliable,
affordable, and secure energy. Emerging
industries – from AI and data centres to
electrified manufacturing – are driving
increased demand for reliable energy.
Thesystem will need to manage supply
tomeetthese growing demands, while also
balancing affordability and decarbonisation.
Drax, through our flexible generation strategy,
sustainable biomass production, and in the
longer term potential for carbon removals,
isaligned to this change. By delivering
dispatchable, low-carbon power where it
matters most, and leveraging our sustainable
biomass supply chain, we are well placed to
support global energy systems and continue
todevelop our business with benefits to our
investors and stakeholders.
4 Drax Group plc Annual report and accounts 2025
Strengthen focus on
UK security ofsupply
Drax continues to contribute to security of supply and grid
resilience in the UK. In 2025, across our biomass, pumped
storage, and hydro assets, Drax generated around 11% of the
UK’s renewable power.
In 2025, Drax agreed a new low carbon dispatchable contract
for difference (CfD) with the UK Government for the operation
of Drax Power Station from 2027 to 2031.
The low carbon dispatchable CfD will support UK energy
security into the 2030s and deliver a net saving for consumers
compared to alternative sources of dispatchable low carbon or
renewable generation, whilst supporting the rollout of
intermittent renewable generation (wind and solar).
An independent analysis
(1)
estimated consumer savings of up to
£3.1billion over the four-year term, while ensuring Drax Power
Station helps to keep the lights on for millions of homes and
businesses, no matter the weather. The new agreement
includes enhanced biomass sustainability requirements, which
the Group is confident it can meet due to its commitment to
delivering positive outcomes for the climate, nature, and people.
Alongside these developments, energy storage solutions,
primarily short duration battery energy storage systems
(BESS) is increasingly recognised as a potentially effective
means of helping to manage power systems which are
becoming increasingly dependent on intermittent renewables.
Evolving policy frameworks
Despite a more challenging global political, regulatory and
policy landscape, support remains favourable to dispatchable
generation and renewables, which can support energy
security. While carbon removals remains an important feature
of long-term policy, in the short-term support now less certain.
In the UK, the Clean Power 2030 Action Plan and the National
Energy System Operator’s (NESO’s) long-term system
planning explicitly recognise biomass will play an important
role by providing flexible or firm generation. The UK
Government also widely acknowledges the role that carbon
dioxide removals (CDRs) will play in achieving the UK’s Carbon
Budgets and legally binding net-zero target.
The UK Government’s Common Biomass Sustainability
Framework proposes ambitious but achievable new
sustainability criteria for future biomass schemes. However,
clarity about the final sustainability criteria as well as action
from industry, Government and regulators to implement them
and communicate more fully the value of sustainable biomass
to the system is also required.
In the US, the Trump Administration is placing a fresh emphasis
on domestic energy infrastructure whilst simultaneously
moving away from international climate change organisations.
President Trump’s landmark legislation aims to strengthen
energy resilience to support the electrification of the US
economy and growth in data centres with a focus on baseload
power – primarily via fossil fuels. The Administration and
Congress remain strongly supportive of carbon capture, one of
the few incentives preserved and enhanced during the recent
reconciliation process that overhauled the Inflation Reduction
Act. Similarly, the Administration supports sound forest
management practices and recognises the potential for
biomass domestically and internationally.
In the EU, policymakers are considering an extension to the EU
Emissions Trading Scheme (ETS) to include CDRs and linking
the EU ETS with the UK ETS. This has the potential to align
carbon pricing between the UK and the EU, as well as create a
sizeable compliance market for high-integrity carbon removals.
Delivering the power
behind a reliable transition
Globally, the market focus continues to shift, increasingly
centred on reliable and dispatchable generation. New demand,
which we believe will continue to grow, requires power that
isnot just clean, but dispatchable. This is in line with NESO’s
Future Energy Scenarios, which show a potential doubling
oftotal demand for electricity in the UK over the coming
decades, aswell as an increase in curtailment of wind and
reduction indispatchable thermal generation.
Our FlexGen and Biomass Generation strategies are well suited
to meet these evolving needs, and the Group is actively taking
steps to add BESS to enable it to provide fast response and
awider range of system support services from its FlexGen
portfolio. Similarly, the new low-carbon dispatchable CfD
provides options to ensure Drax Power Station continues to
support the regional economy and the UK’s energy system.
As the global energy architecture evolves, Drax remains
committed to creating value and growth in the short, medium,
and long term, aligned to global energy needs. With our
generation portfolio, resilient biomass supply chain, and
carbon removal ambitions, we are well placed to enable
azerocarbon, lower cost energy future.
(1) https://www.drax.com/wp-content/uploads/2025/02/Baringa_Report_
February_2025.pdf
Overview and business model continued
5
Drax Group plc Annual report and accounts 2025
Strategic report
We aim to deliver c.£3 billion
offree cash flow from the
business which can support
investment in energy security,
data centres, and flexible,
renewable energy
Andrea Bertone
Chair
People and values
Throughout the year I continued to engage with stakeholders,
including shareholders and colleagues, regulators and suppliers.
I would like to thank all colleagues for their hard work, dedication,
and expertise in helping us deliver a strong result in 2025, and
their continued commitment to our purpose and the delivery
ofour strategy. Will Gardiner and I continue to enjoy meeting
colleagues and attending the employee MyVoice Forums,
whichalways provide open, rich conversations on a wide range
of topics and which help to inform Board discussions.
Following the signing of the low carbon dispatchable CfD, we
areworking to put in place the right organisation and operating
models, combined with a high-performance culture which can
support growth and success in the future. As a result, during
2025, the Group commenced a reorganisation process on
changes to roles in certain areas of the business. This process
will continue in 2026.
Governance, compliance and sustainability
Good governance, compliance and sustainability are
prerequisites for a well-run company and long-term success.
We recognise the importance of these matters and over the
lastfive years we have continued to invest in governance and
compliance functions as the footprint of the business has grown.
Progress is a journey and there are always opportunities to
evolve and improve.
In August 2025, the UK’s Financial Conduct Authority (FCA)
commenced an investigation into the Company, covering the
period January 2022 to March 2024, relating to certain historical
statements regarding Drax’s biomass sourcing and the
compliance of Drax’s 2021, 2022 and 2023 Annual Reports with
the Listing Rules and Disclosure Guidance and Transparency
Rules. This process is ongoing, and we will continue to co-
operate with the FCA as part of their investigation.
In December 2025, the Group was awarded an A rating by CDP
for its carbon and forestry reporting. This is a year-on-year
improvement and reflects the Group’s continued commitment
tosustainability in its widest sense. This places Drax in the top
4% of those companies that the CDP reports on globally.
Introduction
2025 was a strong year for the Group. Operationally, we
produced large volumes of flexible and renewable energy to
theUK, supporting energy security, and backed up by our North
American supply chain. Financially, our earnings and cash flows
were strong, supporting a strong balance sheet, investment in
the business and returns to shareholders.
Strategy
Between 2025 and 2031, we aim to deliver c.£3 billion of free
cash flow from the business which can support investment in
energy security, data centres, and flexible, renewable energy
inthe UK, underpinning long-term value creation and attractive
returns for shareholders.
Reflecting growing UK power demand, combined with an
increased reliance on intermittent and inflexible generation,
Draxexpects to grow its FlexGen portfolio which can support
energy security and the continued deployment of renewables.
We see battery energy storage systems (BESS) as an important
new technology for our FlexGen portfolio and are developing
agigawatt (GW)-scale pipeline of opportunities. Since October
2025, Drax has signed an agreement to acquire three BESS
projects which, when fully commissioned, will provide capacity
totalling 260MW, and an asset optimisation platform. We also
agreed long-term tolling agreements for a further 450MW.
TheGroup is assessing options for other renewables, which
cancomplement its FlexGen model.
The Group is also focused on options to maximise value from
theDrax Power Station site. This could utilise multiple generation
technologies – including its existing biomass generation as well
as flexible, renewable energy, to continue to support energy
security. This could also, potentially, meet the power demands
ofa large-scale data centre.
In November 2025, we signed a low carbon dispatchable CfD
withthe UK Government to cover all four biomass units at
DraxPower Station over the period April 2027 to March 2031.
This was a significant milestone for the Group and will help
support UK energy security into the 2030s and deliver a net
saving for consumers compared to alternative sources of
dispatchable generation.
Chair’s statement
6
Drax Group plc Annual report and accounts 2025
I would like to thank all colleagues
fortheir hard work, dedication, and
expertise in helping us deliver a strong
result in 2025, andtheir continued
commitment toour purpose and the
delivery ofour strategy.”
Board changes
In December 2024, Andy Skelton, Chief Financial Officer (CFO),
announced his intention to retire from the Board and his role
asCFO. Andy continued to work until August 2025 and stepped
down from the Board on 1 September 2025 and retired from
theGroup in December 2025. I would like to thank Andy for
hisoutstanding service to the Group over the past six years.
Throughout 2025, the Nomination Committee worked on the
recruitment of Andy’s replacement, and on 1 September 2025
we were delighted to welcome Frank Lemmink as the new CFO.
Frank has held senior finance and risk management roles over
a20-year international career with Shell plc. Frank’s experience
includes upstream energy with responsibility for business
performance, strategies for long-term, sustainable growth and
performance, and he has also worked inrenewables and energy
solutions, M&A, and internal audit. Frank’s experience is
invaluable as we develop our plans for the Group.
In February 2026, we were pleased to appoint Mark Clare as
aNon-Executive Director.
Finally, Nicola Hodson stepped down from the Board in May
2025. I would like to thank Nicola for her contribution to Drax.
Summary
In 2025, we generated a record level of renewable generation
across our portfolio of flexible and renewable generation assets
as we continue to play an important role in the UK energy
system, supporting energy security. This has resulted in a strong
financial performance and returns to shareholders.
At the same time, we have made good progress with our
strategy, which is well aligned with our purpose and the
challenge of energy security, affordability, and decarbonisation
(the energy trilemma). We are excited for the opportunities that
2026 and beyond will bring, as we seek to deliver long-term value
creation for stakeholders and realise our purpose of enabling a
zero carbon, lower cost energy future.
Andrea Bertone
Chair
25 February 2026
Chair’s statement continued
7
Drax Group plc Annual report and accounts 2025
Strategic report
CEO’s review
Introduction
Energy security, affordability, and decarbonisation remained
important themes in 2025 and at Drax – which sits at the heart
ofthe UK energy system – we are continuing to play our part
inaddressing these issues.
In 2025, we delivered a strong operational and financial
performance, providing the reliable renewable electricity,
flexibility, and system support services that the grid needs.
During 2025, Drax was the sixth largest source of power, the
third largest source of dispatchable power, and the second
largest source of renewable energy in the UK. Our dispatchable
24/7 generation portfolio, backed up by our resilient North
American supply chain, enables us to supply large-scale reliable
renewable power to the UK. And through our flexibility, we are
an enabler of more renewables on the system, supporting lower
overall system costs and decarbonisation.
In 2025, we also celebrated 60 years of operations at Cruachan
Power Station and 10 years of operations for our Pellet
Production business in the US South. These milestones show
ourcontinuing long-term support for energy security and the
advancement of renewable energy. I would like to thank all our
dedicated colleagues in these businesses and across the Group
for their continued professionalism and commitment.
The ‘Future Energy Scenarios’ report, published by NESO, shows
a potential doubling ofelectricity demand over the next 25 years
as electrification supports decarbonisation and economic
growth. Our four operational power stations are helping to meet
this challenge and we are developing a further three Open Cycle
Gas Turbine (OCGT) and three BESS projects, with additional
tolling agreements.
We also see more opportunities to meet this rise in demand and,
to that end, we are continuing to develop options for investment
in flexible, renewable energy and for the utilisation of the 4GW
Drax Power Station site. The latter could utilise multiple
generation technologies – including its existing biomass
generation, as well as other flexible, renewable energy – to
continue to support energy security. Using multiple technologies
also has the potential to meet the power demands of a large-
scale data centre and, in the long term, has the potential for
carbon removals from bioenergy with carbon capture and
storage (BECCS), subject to the right Government policies and
commercial arrangements.
Will Gardiner
CEO
During 2025, Drax was
thesixth largest source
ofpower, the thirdlargest
source of dispatchable
power, and the second
largest source of renewable
energyin the UK
The Group is also assessing options for other renewables, which
can complement its FlexGen model.
These opportunities are built on a firm base. Our balance sheet is
strong, and the business is generating significant free cash flow.
We stand ready to invest in our strategy and opportunities to
create value from our asset base, and will be disciplined on
capital allocation, as we seek to maximise shareholder value.
Safety
Safety must always be a primary focus, and, in 2025, we have
notperformed at the level we expect. The Total Recordable
Incident Rate (TRIR) was 0.33 (2024: 0.24). The increase is partly
attributable to the disposal of the Opus Energy business, where
asignificant number of hours were worked with a very low
incident rate. We also continue to track leading indicators of
nearmiss and hazard identification rates, where performance
has been much stronger, in addition to the lagging TRIR indicator,
and these both represent key targets for the Group.
Summary of 2025
Adjusted EBITDA of £947 million, represents an 11% decrease
on2024 (£1,064 million). This reflects a strong operational and
financial performance, with a continued high level of renewable
power generation and system support services, partially
offsetting lower average achieved power prices.
Our balance
sheetisstrong,
andthe business
isgenerating
significant free
cashflow.”
8 Drax Group plc Annual report and accounts 2025
Our balance sheet is strong, with total cash and committed
facilities of £942 million and Net debt of £784 million. Net debt
toAdjusted EBITDA is less than 1 times – significantly below the
Group’s target of around 2 times.
In line with our policy to pay a sustainable and growing dividend,
the Group plans to pay a total dividend for 2025 of 29.0 pence
per share. This is an increase of over 11% on 2024 (26.0 pence
per share). Since the policy’s inception in 2017, the annual
average rate of dividend growth has been c.11%.
Throughout the year, the Group has remained focused on
shareholder value. In October 2025, the Group completed a
£300 million share buyback programme, which had commenced
in August 2024. The Group subsequently began a £450 million
share buyback programme (first announced in July 2025), with
an initial £75 million tranche. In aggregate, during 2025, the
share buyback programmes have purchased c.34 million shares
for c.£221 million. When combined with dividend payments this
represents total returns to shareholders of c.£317 million
during2025.
Low carbon dispatchable CfD
In November 2025, Drax signed a low carbon dispatchable CfD
with the UK Government to provide c.6TWh of biomass
generation pa between April 2027 and March 2031 – equivalent
to c.30% of baseload output – with a strike price of £109.90/
MWh (2012 real). In addition, we have the option to produce
merchant generation above the cap, and provide system support
and ancillary services.
The agreement includes a mechanism for Drax to request up
to500MW to power a data centre during this period. This
mechanism is subject to agreement with the UK Government,
taking into account factors including value for money for
consumers, energy security, and sustainability.
We expect the contract to provide increased visibility on EBITDA
from the asset between 2027 and 2031. We also believe that
Drax Power Station will continue to play a long-term role in the
UK energy system through the 2030s.
Flexible Generation & Energy Solutions (FlexGen)
Pumped Storage and Hydro
Adjusted EBITDA was £111 million (2024: £138 million). During
2025, we progressed a major programme of planned outage
works at Cruachan Power Station. This included an upgrade to the
main inlet valves on all four units, in addition to a programme of
works to upgrade transformers that completed in January 2026.
Taking into account this planned programme of outage we
believe that this represents a good underlying performance,
andreflects continued demand for dispatchable and renewable
power generation and system support services.
Work continues on the £80 million investment to refurbish and
upgrade units 3 and 4 through to 2027. This is underpinned by
a15-year Capacity Market agreement worth over £220 million
inrevenue. The work is expected to add 40MW of additional
capacity by 2027 and improve unit operations.
OCGTs
In the first half of 2026, we expect to take control of Hirwaun
Power, the first of three new OCGTs. The second and third sites
are expected to commence commissioning in 2026, which is later
than originally planned, primarily due to delays in grid connection
by the relevant authorities.
The OCGTs will provide combined capacity of c.900MW and be
remunerated under 15-year Capacity Market agreements, worth
over £260 million in revenue. This is in addition to revenues from
peak power generation and system support services.
We have previously considered divestment of these assets, once
commissioned, but the changing generation mix in the UK means
that flexible generation assets will become more important to
theenergy transition. This increased value informs our decision
to retain these grid-balancing assets in the portfolio once
commissioned.
Energy Solutions
Adjusted EBITDA in Energy Solutions was £49 million
(2024:£51 million) comprised of £54 million from our Industrial
and Commercial (I&C) and renewables services business
(2024:£81 million) partially offset by a loss of £5 million from
ourSmall- and Medium-sized Enterprise (SME) business (Opus)
(2024: a loss of £30 million).
Alongside supplying renewable energy, our I&C business is
increasingly active in the provision of value-adding services.
These services include asset optimisation and aroute-to-market
for around 2,000 embedded third-party renewable assets with
capacity of over 800MW.
In May 2025, the Group completed the sale of the remaining
non-core Opus Energy SME customer meter points. We expect
the sale to be supportive of the Group’s target for post-2027
Adjusted EBITDA, with a leaner and more focused I&C business
better able to support customers’ energy needs and
decarbonisation objectives.
CEO’s review continued
Through a disciplined approach
tocapital allocation and
development costs, we expect
tocreate opportunities for
investment in growth and value
creation, underpinned by strong
cash generation and attractive
returns forshareholders.”
Between October
2024 and September
2025 Drax Power
Station generated
over 5% ofthe UK’s
electricity and c.10%
of its renewable
power. “
9
Drax Group plc Annual report and accounts 2025
Strategic report
Pellet Production
Adjusted EBITDA of £129 million was a 10% decrease on 2024
(£143 million), although production increased incrementally and
included the full-year impact of the expansion of the Aliceville
pellet plant (commissioned in H1 2024).
The lower level of EBITDA reflects the cost-plus transfer pricing
methodology used for biomass supplied from operations in the
US South to Drax Power Station. Under this established
arrangement, if the Pellet Production business reduces its cost
base, its sales revenues to the UK business also reduce, resulting
in lower Adjusted EBITDA. The offset to this is a lower cost of
biomass for Drax Power Station, which results in higher EBITDA
at the Group level. This situation illustrates the benefit of the
integrated value chain between operations in the US South and
Drax Power Station, and our ongoing focus on opportunities to
reduce cost.
The Group’s Canadian business, which primarily sells pellets into
Asia under legacy contracts, is more challenged, and we continue
to assess options to improve its financial performance. This
contributed to the decision, announced in December 2025,
toclose the pellet plant in Williams Lake, British Columbia. In
addition, we closed two small satellite plants in the US, with
volumes consolidated into larger plants in the region.
Separately, reflecting lower biomass requirements under the low
carbon dispatchable CfD, the Group does not currently expect
toinvest in additional capacity – including the paused Longview
project inWashington State (US) – in the short to medium term.
Drax Power Station
Adjusted EBITDA of £725 million was a decrease of 11% on 2024
(£814 million). This reflects a combination of lower forward
contracted prices compared to 2024, partially offset by a
continued high level of generation and value from renewable
certificates. In addition, there were no major planned outages
in2025.
Between October 2024 and September 2025 (the most recent
period for which data is available), Drax Power Station generated
over 5% ofthe UK’s electricity and around 10% of its renewable
power. During this period, it produced, on average, 19% of the
UK’s renewable power at times of peak demand and on certain
days over 50%.
During 2025, low wind speeds led to lower proportions of wind
generation and higher demand for electricity from Drax Power
Station, illustrating its ongoing importance to security ofsupply
in the UK.
The Group remains focused on opportunities to maximise value
from its existing asset base. In March 2025, we entered into a
20-year joint venture agreement with Power Minerals Limited
that will allow for the development of a facility adjacent to Drax
Power Station. This facility which will process pulverised fuel ash
into a material which can be sold to the construction industry and
used in the production of cement with a lower carbon footprint.
The new facility is expected to begin operations by the end of
2026, and we believe the project could generate incremental
Adjusted EBITDA of c.£5 million pa for Drax post-2027 through
to2046. There is no capital investment required by Drax.
Development expenditure
Development expenditure of £74 million in 2025 was a reduction
of 5% on 2024 (£78 million). This reflects a significant reduction
in the Elimini business, following one-off costs during its
establishment in 2024 and minimal spend on BECCS, partially
offset by additional OCGT commissioning costs.
The current regulatory environment in the UK and US makes the
risk-return profile on carbon removal projects less attractive in
the short term. Through its Elimini business, the Group continues
to see carbon removals via biomass and other technologies as
acost-effective way to deliver both energy security and high
integrity carbon removals at scale. Accordingly, the Group will
maintain its options for long-term development in the carbon
removals market but expects to commit limited resources for
theforeseeable future. Elimini will also support the development
of new biomass markets.
Reflecting these considerations, the Group expects future
development costs to increasingly focus on more short- and
medium-term opportunities in FlexGen and Drax Power Station.
Adjusted EBITDA and free cash flow targets from the
existing business
The Group continues to target post-2027 Adjusted EBITDA
of£600-700 million pa before development expenditure.
Reflecting growing UK power demand, combined with an
increased system reliance on intermittent and inflexible
generation, Drax expects to grow its FlexGen portfolio to
comprise a greater proportion of total Adjusted EBITDA over time.
Drax is targeting free cash flow of c.£3 billion (2025-2031), based
on strong cash flows from the current business (2025-2026),
together with targeted Adjusted EBITDA (2027-2031), plus working
capital, less maintenance capital expenditure, interest andtax.
The Group’s capital allocation policy is unchanged. Drax expects
to initially allocate more than £1 billion of free cash flow to
shareholder returns (2025-2031). This is inclusive of the ongoing
£450 million three-year share buyback programme, and the
continuation of its long-standing policy to pay a sustainable
andgrowing dividend.
Drax expects to allocate up to c.£2 billion to incremental
investment, primarily in the flexible and renewable energy
theUKneeds, as well as opportunities to maximise value
fromthe Drax Power Station site.
Returns to shareholders and investment for growth follow a
capital ranking process which aims to maximise risk adjusted
returns to shareholders.
Our balance sheet is strong, with
total cash and committed facilities
of £942 million and Net debt of
£784 million. Net debt to Adjusted
EBITDA is less than 1 times –
significantly below the Group’s
target of around 2 times.”
CEO’s review continued
10 Drax Group plc Annual report and accounts 2025
Putting in place the structures to allow the Group to
succeed and grow
Delivery of the Group’s targets and strategy is underpinned by
disciplined cost management and an operating model adapted
toreflect the structure of the new low carbon dispatchable CfD,
combined with a high-performance culture.
Options to invest in growth – FlexGen – flexible and
renewable energy
The continued decarbonisation of the UK power system and
newsources of demand, are leading to a greater reliance on
intermittent renewables. The system is becoming cleaner but
more volatile, driving a growing need for dispatchable power
andsystem support services. This creates long-term earnings
opportunities for, and value from, the Group’s FlexGen assets.
While the trend is clear, it is hard to forecast from year-to-year,
being dependent on weather and associated renewable activity
as much as underlying commodity prices.
This position informs the Group’s view on the value of its FlexGen
portfolio and opportunities for growth, which can support energy
security and the continued deployment of renewables. Since
acquiring the pumped storage and hydro assets in 2018,
utilisation of these assets has increased significantly, delivering
afive-year payback on investment.
In addition to its existing operational assets and developments,
the Group sees BESS as an important new technology for its
FlexGen portfolio. Adding fast response capabilities to existing
long-duration pumped storage and OCGT assets, BESS could
allow the portfolio to provide a wider range of system support
services to the grid.
Drax is developing a GW-scale pipeline of BESS opportunities.
These comprise both physical assets and the capabilities to
optimise third-party assets by providing route-to-market, floor,
and tolling structures. These can complement its existing
route-to-market offering for renewable assets in Energy Solutions.
In October 2025, Drax signed an agreement with Apatura to
acquire three BESS projects for £157.2 million which, when
fullycommissioned, will provide capacity totalling 260MW.
InJanuary 2026, Drax announced the acquisition of Flexitricity
for £36 million, providing an optimisation platform for the
development of the Group’s FlexGen portfolio, including BESS.
Also in January 2026, Drax agreed a 10-year tolling agreement
with Fidra, which gives the Group operational control and
dispatch rights over 250MW of new BESS capacity from 2028,
and a 15-year tolling agreement with Zenobē, which gives the
Group operational control and dispatch rights over 200MW of
new BESS capacity from 2028.
The Group is also assessing options for other renewables projects
to complement its FlexGen model.
Options to invest in growth – Drax Power Station site
The Drax Power Station site comprises over 1,000 acres
and4GW of capacity and grid access, with 2.6GW of active
dispatchable generation, cooling systems, and proximity to
theUK fibre network.
The Group is actively evaluating options to utilise inactive legacy
units to provide system support services. For example, by using
power from the system to spin these inactive turbines we can
synchronise them to the system and use their physical mass
toprovide inertia, thereby helping to stabilise the system.
Drax is also considering a range of options for the site which
could utilise its existing land, grid access, active generation,
cooling solutions, site security, location, and skilled workforce
tomeet the needs of data centre developers.
Drax is preparing a planning application to support the potential
option for a first phase data centre of c.100MW on land identified
at Drax Power Station. This could use the existing infrastructure
and transformers previously used to support coal generation to
import power directly from the grid (front-of-the-meter). This could
support the operation of a data centre at Drax Power Station as
soon as 2027, subject to the necessary consents and agreements.
In the long term, Drax is developing options for over 1GW of data
centre capacity. This could utilise existing generation capabilities
at Drax Power Station to provide a distributed (behind-the-
meter) energy solution with around-the-clock renewable power
directly to a data centre under a long-term Power Purchase
Agreement, subject to necessary consents and agreements.
Any decision to develop data centres at Drax Power Station will
require a full assessment of the capital cost and investment case,
as well as establishing the commercial and development structures.
Pellet Production
As a part of the Group’s post-2027 targets, the low carbon
dispatchable CfD at Drax Power Station is expected to utilise
c.2Mt of own-use pellets from the US South (in addition to
third-party volumes). This, together with existing sales to third
parties, primarily in Asia, provides a good underpin to the current
level of value generated for the Group from Pellet Production.
Long-term development of biomass and carbon markets
In the long term, Drax remains positive on the role of biomass in
industrial decarbonisation and carbon removals via its Elimini
business. Drax continues to assess options for own-use and
third-party sales, from existing and new markets, including
Sustainable Aviation Fuel (SAF), which could represent a new
market opportunity through the 2030s.
Sustainability
In addition to delivering a strong operational and financial
performance and value for shareholders, the Group has remained
focused on the development of its sustainability programme.
In2025, we launched a new Sustainability Framework, Biomass
Sourcing Policy, and a Climate Transition Plan.
£317 million
Total returns to shareholders, including dividends, in 2025
CEO’s review continued
As a purpose-led
organisation, our
growth should lead
to positive outcomes
for climate, nature,
and people.”
11
Drax Group plc Annual report and accounts 2025
Strategic report
CEO’s review continued
As a purpose-led organisation, our growth should lead to positive
outcomes for climate, nature, and people. Our operations can
help sustain more healthy, safe, and economically viable working
forests that continue to provide jobs and opportunities in
communities where we operate.
Working in partnership with industry, communities, scientists,
and civil society organisations will be vital to achieving our
ambitions. We aim to work openly and constructively with
thesegroups to help deliver improvements.
We are fully aligned with the Task Force on Climate-related
Financial Disclosures (TCFD). We are also an early-adopter of
theTaskforce on Nature-related Financial Disclosures (TNFD).
Inaddition, we are members of the Taskforce on Inequality and
Social-related Financial Disclosures (TISFD) Alliance. These
independent taskforces align directly with the three pillars of
ournew Sustainability Framework; Climate, Nature, and People.
We are also a signatory to the UN Global Compact (UNGC) and
we are committed to promoting the UNGC principles concerning
respect for human rights, labour rights, the environment, and
anti-corruption.
Drax is one of the world’s largest users of sustainable biomass
forenergy generation. We are committed to ensuring the woody
biomass we source comes from forests managed in accordance
with standards designed to support their health and growth over
the long term. Forests in the areas where Drax sources material
are subject to national and regional regulation and are typically
supported, and independently monitored for compliance, by
forest certification schemes. These include the Forestry
Stewardship Council® (FSC®) (FSC C123692), the Sustainable
Forestry Initiative (SFI)*, and the Programme for the
Endorsement of Forest Certification® (PEFC) (PEFC/29-31-286).
We supplement this regulation through our own Biomass
Sourcing Policy and supply chain checks. This includes third-
party verification under the Sustainable Biomass Program (SBP),
in respect of woody biomass used at Drax Power Station, which
is also fully compliant with the UK Government’s rule on the use
of sustainable biomass.
Outlook
We are continuing to target post-2027 Adjusted EBITDA of
£600-700 million pa from our FlexGen, Pellet Production, and
Biomass Generation businesses, maximising value from the
business today, while continuing to identify opportunities for
growth across our strategies for flexible, renewable energy.
We will continue to apply our capital allocation policy with
afocus on balance sheet strength, investment in the core
business, and a sustainable and growing dividend. To the extent
thereare residual cash flows beyond the current needs of the
Group, we will also consider additional returns to shareholders.
Through a disciplined approach to capital allocation and
development costs, we expect to create opportunities for
investment in growth and value creation, underpinned by
strongcash generation and attractive returns for shareholders.
Will Gardiner
CEO
25 February 2026
* SFI marks are registered marks owned by the Sustainable Forestry Initiative Inc.
Through a disciplined approach to
capital allocation and development
costs, we expect to create
opportunities for investment
ingrowth and value creation,
underpinned by strongcash
generation and attractive returns
forshareholders.”
12 Drax Group plc Annual report and accounts 2025
CFO’s financial review
Financial performance
Adjusted EBITDA by business
Flexible Generation & Energy Solutions (FlexGen)
Adjusted EBITDA in our Hydro business of £111 million reduced
compared to 2024 (£138 million), reflecting planned outage
work at Cruachan Power Station as part of refurbishment and
upgrade works.
Adjusted EBITDA in Energy Solutions of £49 million (2024:
£51 million) comprised £54 million from our I&C and renewables
services business (2024: £81 million) partially offset by a loss of
£5 million from our Small and Medium-sized Enterprise (SME)
business (Opus) (2024: a loss of £30 million). I&C and renewables
services earnings reflect a similar margin on contracted power
prices to 2024. The sale of the remaining meter points in the
SME business completed in May 2025. The wind down of this
business is now substantially complete.
Introduction
Adjusted EBITDA of £947 million represents strong operational
and underlying financial performance across all segments of
ourbusiness. The decrease compared to £1,064 million in 2024
primarily reflects a lower achieved power price. Total operating
profit was impacted by impairments, as discussed in the ‘Total
operating profit’ section. During the period, we generated cash
from operations of £1,000 million (2024: £ 1,135 million). Our Net
debt: Adjusted EBITDA ratio of 0.8 times (2024: 0.9 times)
remains significantly below our long-term target of around 2
times and during the year we further strengthened our balance
sheet, extending the average maturity of our debt and extending
the Revolving Credit Facility (RCF) by a year to 2028.
Frank Lemmink
CFO
Adjusted EBITDA of £947 million
represents strong operational
and underlying financial
performance across all
segments of our business
Year end 31 December
2025 2024
Financial performance (£m) Total gross profit 1,513 1,877
Operating expenses (641) (761)
Depreciation, amortisation and impairment of non-current assets (621) (256)
Other (10) (10)
Total operating profit 241 850
Exceptional items and certain remeasurements 430 (50)
Adjusted operating profit 671 800
Adjusted depreciation, amortisation and similar charges and share of
losses from associates 275 264
Adjusted EBITDA 947 1,064
Capital expenditure (£m) Capital expenditure 202 321
Cash and Net debt (£m unless
otherwise stated)
Cash generated from operations 1,000 1,135
Net debt 784 992
Net debt to Adjusted EBITDA (times) 0.8 0.9
Cash and committed facilities 942 806
Earnings (pence per share) Adjusted basic 137.7 128.4
Total basic 20.7 137.5
Distributions (pence per share) Interim dividend 11.6 10.4
Proposed final dividend 17. 4 15.6
Total dividend 29.0 26.0
Throughout this document we distinguish between Adjusted measures and Total measures, which are calculated in accordance with International Financial Reporting Standards (IFRS).
We calculate Adjusted financial performance measures, which exclude income statement volatility from derivative financial instruments and the impact of exceptional items. This allows
management and stakeholders to better compare the performance of the Group between the current and previous period without the effects of this volatility and one-off or
non-operational items. Adjusted financial performance measures are described in more detail in the APMs glossary, with a reconciliation to their closest IFRS equivalents in note 2.7.
Return on Capital Employed (ROCE) is calculated as Adjusted operating profit divided by the average of opening and closing capital employed (capital employed is gross assets less
current liabilities). Tables in this financial review may not add down or across due to rounding.
13 Drax Group plc Annual report and accounts 2025Strategic report
CFO’s financial review continued
Adjusted effective tax rate is below the headline corporation
taxrate in the UK of 25% because of benefits from the UK
PatentBox Regime, partially offset by non-deductible expenses.
The exceptional items and certain remeasurements tax credit
of£16 million all related to deferred tax and was the net of
deferred tax on all non-Canadian exceptional items and
certainremeasurements partially offset by the non-allowable
Canadian impairment charge and derecognition of Canadian
deferred tax assets.
Adjusted basic EPS was 137.7 pence (2024: 128.4 pence) and
Total basic EPS was 20.7 pence (2 024 : 137.5 pence). The average
number of shares used in these calculations was 352.8 million
(2024: 383.2 million). The number of outstanding shares at
31December 2025 was 340.4 million, an 8% reduction on
31December 2024 (369.9 million), reflecting the ongoing share
buyback programme.
Capital allocation
Our capital allocation policy remains unchanged and focused
onbalance sheet strength, investment in the core business, a
sustainable and growing dividend and, to the extent there are
residual cash flows beyond the current needs of the Group,
additional returns to shareholders.
Maintain credit rating
During the first half of 2025 the Group extended the maturity
ofthe undrawn £450 million RCF and in July two term loans
totalling c.£171 million were extended from 2027 to 2028.
During December the Group signed a £190 million term loan with
an interest rate of Sterling Overnight Index Average (SONIA) plus
a customary margin. The facility has an option at Drax’s
discretion to extend by two six-month periods. The facility was
undrawn at 31 December 2025 but was subsequently fully
drawn in January 2026.
In August 2025 the CAD term-loan of £109 million was repaid.
InOctober 2025 the remaining £125 million of the 2025 Euro
bond was repaid. In January 2026, term loans totalling
£62 million were repaid.
During the second quarter of 2025, the Group’s Issuer Credit
Ratings were reaffirmed as ‘BB+’ by Fitch and S&P and as
‘BBB(low)’ by DBRS, with a Stable Outlook in each case.
Pellet Production
Adjusted EBITDA of £129 million was below 2024 (£143 million).
The reduction reflects the cost-plus transfer pricing methodology
for shipments to Drax Power Station. This means that cost savings
in the Pellet Production business lead to a lower transfer price,
impacting Adjusted EBITDA. Production in the period totalled
4.2Mt, a record volume for the business (2024: 4.0Mt). Shipments
totalled 5.1Mt (2024: 5.1Mt). Of the 5.1Mt shipped, 3.1Mt was to
Drax Power Station (2024: 3.0Mt). During the period, 1.0Mt of
pellets were acquired from third parties (2024: 1.1Mt).
The US business has performed well, with record production
volumes and margins commensurate with our long-term targets.
The legacy contracts in the Canadian business mean profitability
here is lower, and this is an area of focus for the Group, as
discussed in the CEO review.
Impairments in relation to the Pellet Production business are
documented in the ‘Total operating profit’ section.
Biomass Generation
Adjusted EBITDA from Biomass Generation was £725 million
(2024: £814 million), partially offset by a continued high level
ofgeneration and value from renewable certificates. In addition,
there were no major planned outages in2025.
Drax Power Station produced 15.0TWh (2024: 14.6TWh) of
electricity, a record year for biomass generation and making
itthe UK’s largest single source of renewable energy during
theperiod.
Options for Growth (Innovation, Capital Projects, and Other)
Development expenditure in 2025 totalled £74 million (2024:
£78 million). The reduction reflects the timing of large capital
projects, as described in the CEO review, and therefore a
reduction in the associated spend. We will continue to be
disciplined in the capital and development expenditure deployed
to these projects.
In Other, intra-group eliminations moved to a credit of £7 million
in 2025 from a charge of £3 million in 2024, predominantly due
to a reduction in the volume of pellets in transit compared to the
previous year end.
Total operating profit
Total operating profit was £241 million, compared to £850 million
in 2024. In addition to the factors discussed above, Exceptional
items and certain remeasurements also reduced, from a credit of
£50 million in 2024 to a charge of £430 million in2025. This was
attributable to impairments, gas prices, and foreign exchange
movements. Impairments were recognised forcertain pellet
assets and UK BECCS, whilst continuing depreciation and
amortisation was similar year-on-year.
In Pellet Production, impairment and related charges in Northern
Pellets (Canadian business) were £198 million. Charges in relation
to the Longview project were £138 million and UK BECCS
impairments were £48 million. All of these were classed as
exceptional items. The impairment to Northern Pellets was
driven by a lower growth outlook for the global pellet market
after 2027, particularly in Europe. Linked tothis, the development
project at Longview was paused and nodevelopment is expected
in the near term. Whilst UK BECCS isstill an attractive option for
the Group in the long term, the current political environment and
absence of an appropriate regulatory framework has led to a
reduction in the likelihood ofthe project proceeding in the
short- to medium-term. Accordingly, the capitalised value has
been impaired.
Further information on other Exceptional items and certain
remeasurements can be found in note 2.7.
Profit after tax and Earnings per share
Total net finance and foreign exchange costs for 2025 were
£52 million, a reduction from 2024 (£97 million). Of the reduction,
£24 million was attributable to capitalisation of interest,
£15 million in foreign exchange, and £7 million as a result of
lowercosts in relation to the Energy Solutions receivables
monetisation facility. This was partially offset by a £2 million
reduction in interest received. At 31 December 2025, the
weighted average interest rate payable on the Group’s
borrowings was 5.4% (31 December 2024: 5.4%).
The Adjusted effective tax rate for 2025 of 22% is lower than
2024 (30%), with a key factor being a £nil charge for EGL in the
current year (2024: £161 million) reflecting lower achieved power
prices. EGL is not allowable for corporation tax purposes and the
corporation tax impact of this reduction in EGL was 6%. The
14 Drax Group plc Annual report and accounts 2025
Invest in core business – capital expenditure
Capital expenditure of £202 million (2024: £321 million)
consistsof £98 million of growth expenditure, £72 million of
maintenance, and £32 million of Other (including HSE and IT).
Ofthe £98 million growth expenditure, £26 million related to
BESS assets (2024: £nil) and £23 million related to the OCGTs
(2024: £90 million). The first of the three OCGTs, Hirwaun, is
expected to be under the Group’s commercial control shortly and
the other two units are expected to commence commissioning
during 2026. Growth expenditure also included £15 million in
relation to the ongoing upgrade of Cruachan units 3 and 4
(2024:£34 million).
In October 2025 we announced we had signed an agreement
with Apatura to acquire three BESS projects for £157.2 million.
Completion of the acquisition of the first two projects occurred
in 2025 and completion of the third project is expected soon.
Sustainable and growing dividend
The Board expects to pay a dividend for the 2025 financial year
of 29.0 pence per ordinary share, an 11.5% increase on 2024,
consistent with our policy to pay a dividend which is sustainable
and expected to grow. As has been our practice, 40% of the
expected full year dividend, or 11.6 pence per ordinary share
waspaid as an interim dividend. Subject to approval at the
2026Annual General Meeting, the final dividend will be paid
on15 May 2026.
Return surplus capital beyond current investment requirements
In October 2025, the Group completed a £300 million share
buyback programme which had commenced in August 2024.
TheGroup subsequently began a £450 million share buyback
programme (first announced in July 2025), with an initial
£75 million tranche. In aggregate, during 2025, the share buyback
programmes have purchased c.34 million shares for c.£221 million.
When combined with dividend payments this represents total
returns to shareholders of c.£317 million during 2025.
During 2026, to 24 February 2026, the Group has repurchased
£22 million. We expect the 2025 programme to conclude by
theend of 2028.
Cash and Net debt
Net cash movements
Cash generated from operations, inclusive of working capital,
was £1,000 million (2 0 24 : £ 1,135 million). The net working capital
inflow of £86 million (2024: £122 million) predominantly reflects
a reduction in inventory and receivables, partially offset by a
decrease in payables.
Cash outflows on purchases of property, plant and equipment
and intangibles include repayments of deferred letters of credit
from previous periods. This led to a cash outflow of £294 million,
more than the amount capitalised in the period of £202 million.
Liquidity
Cash and committed facilities of £942 million at 31 December
2025 (31 December 2024: £806 million) provided substantial
headroom over our short-term liquidity requirements. No cash
has been drawn under our RCFs since2018.
Net debt and Net debt to Adjusted EBITDA
31 December 2025
£m
31 December 2024
£m
Cash and cash equivalents 302 356
Current borrowings (61) (119)
Non-current borrowings (918) (1,058)
Impact of hedging
instrumentsand NCI (8) (55)
Lease liabilities (99) (117)
Net debt (784) (992)
Adjusted EBITDA 947 1,064
Net debt to Adjusted EBITDA 0.8 0.9
Going concern and viability
The Group’s operational and underlying financial performance in
2025 was strong. Cash and committed facilities at 31 December
2025 provides substantial headroom over our short-term liquidity
requirements.
The Group refreshes its business plan and forecasts throughout
the year, including scenario modelling designed to test the
resilience of the Group’s financial position and performance to
several possible downside cases. Based on its review of the latest
forecast, the Board is satisfied that the Group has sufficient
headroom in its cash and committed facilities and covenants,
combined with available mitigating actions, to be able to meet
itsliabilities as they fall due across a range of scenarios.
Consequently, the Directors have a reasonable expectation that
the Group will continue to be in existence for a period of at least
twelve months from the date of the approval of the financial
statements and have therefore adopted the going concern basis.
Further, the Directors have a reasonable expectation that the
Group will be able to continue in operation over the five-year
period of the viability assessment, as documented in the Viability
Statement.
Other matters
In January 2026, the Group announced the acquisition of
Flexitricity, an asset optimisation platform, for c.£36 million.
Completion is expected in Q1 2026 and is conditional on
completion of regulatory approvals and processes.
In January 2026, the Group announced a 10-year tolling
agreement with Fidra for 250MW (500MWh) ofBESS, expected
to commence in 2028.
In February 2026, the Group announced a 15-year tolling
agreement with Zenobē for 200MW (800MWh) of BESS,
expected to commence in 2028.
Frank Lemmink
CFO
25 February 2026
CFO’s financial review continued
15
Drax Group plc Annual report and accounts 2025
Strategic report
Our risks:
1
Environment, Health & Safety
2
Political & Regulatory
3
Strategic
4
Biomass Acceptability
5
Plant Operations
6
Trading & Commodity
7
Information Systems & Security
8
Climate Change
9
People
Key performance indicators: Financial
Measure Definition/why it matters Performance Target Link to risks Link to remuneration
Adjusted EBITDA
(£million)
This is our principal financial performance metric,
combining the earnings of each business to give a
Groupoutcome.
The reconciliation of statutory earnings to Adjusted
EBITDA is on page 167.
2
025
2
024
2
023
947
1,064
1,009
The 2025 Scorecard target
range is £810 million to
£990 million.
2
3
4
5
6
7
8
The Adjusted EBITDA performance
measure has a 40% weighting on
the Group Scorecard.
Seepage 106
Adjusted net cash flow
(£million)
This is a key aspect of measuring liquidity through
assessing compliance with the Group’s financial
covenants and is used as a basis by debt rating agencies
to assess credit risk.
Adjusted net cash flow is defined as the net increase or
decrease in cash and cash equivalents, adjusted for cash
flows relating to share buyback programmes and the
refinancing of borrowings.
2
025
2
024
2
023
399
311
280
Adjusted net cash flow targets
for 2025 were £237 million to
£337 million.
3
4
5
6
8
The 2025 bonus Scorecard has a
15% weighting on Adjusted net
cash flow.
Seepage 106
Adjusted basic EPS
(pence)
Earnings per share (EPS) is a key profitability metric to
assess the performance of the Group on a per share
basis.
The calculation of Adjusted basic EPS is on page 171.
2
025
2
024
2
023
137.7p
128.4p
119.6p
The LTIP uses a cumulative
three-year adjusted basis EPS
performance target of 252.5p
to 308.7p. Further details are
included on page 109.
2
3
4
5
6
7
8
Cumulative adjusted basic EPS is
aperformance condition of the
LTIP and has a 50% weighting
measured over a three-year period.
Seepage 108
Adjusted FlexGen &
Energy Solutions EBITDA
(£million)
This is a key measure of the performance of these
operating segments and our ability to manage our
strategy for the combined business.
The reconciliation of statutory earnings to Adjusted
EBITDA and EBITDA by segment is included on page 167.
2
025
2
024
2
023
160
189
302
Targeting Adjusted EBITDA of
£250 million post 2027.
3
5
6
7
8
This is linked to the Group’s
Adjusted EBITDA performance
measure that has a 40% weighting
on the Group Scorecard.
Seepage 106
16 Drax Group plc Annual report and accounts 2025
Our risks:
1
Environment, Health & Safety
2
Political & Regulatory
3
Strategic
4
Biomass Acceptability
5
Plant Operations
6
Trading & Commodity
7
Information Systems & Security
8
Climate Change
9
People
Measure Definition/why it matters Performance Target Link to risks Link to remuneration
Total Recordable Incident
Rate (TRIR)
Keeping our people safe is a core principle. TRIR is
anindustry standard measure of fatalities, lost time
injuries and medical treatment injuries per 100,000
hours worked.
You can read more about health, safety, and wellbeing
in People Positive on page 29.
2
025
2
024
2
023
0.33
0.24
0.38
TRIR of 0.20 per 100,000 hours
worked.
1
9
The safety performance measure
has a 5% weighting in Group
Scorecard.
Seepage 106
Group carbon emissions
Scope 1, 2 and3 (ktCO
2
e)
(1)
We are focused on reducing carbon emissions – as
measured by reductions in our Scope 1, 2 and 3
footprint – which enables us to track progress towards
achieving our near-term and net-zero SBTi targets.
Youcan read more about this in Climate Positive on
page 25.
Scope 1 and 2 Scope 3
2
025
2
024
2
023
1,504
1,808
2,556486
546
557
To achieve our externally
disclosed SBTi decarbonisation
targets, set out on page 25,
which includes a 42%
reduction in Scope 3 emissions
by 2030.
2
3
4
5
6
8
The 2025 Group Scorecard has
a5% weighting on measures
focused on reducing our carbon
emissions.
Seepage 106
Biomass generation
(TWh)
This is an important measure of the renewable power
generation at Drax Power Station and a key part of our
strategy – to be a UK leader in dispatchable, renewable
generation.
2
025
2
024
2
023
14.98
14.63
11.45
To be a UK leader in
dispatchable, renewable
generation.
1
2
3
4
5
6
8
Biomass generation plays a
significant role in the Group
strategy and links to the financial
performance as well as indirectly
linked to other elements of the
Group Scorecard, including
progress on the future of Drax
Power Station.
Seepage 106
Pellets produced (Mt)
Reducing our all-in production cost is a key part of our
strategy. By increasing our pellet production volumes
the all-in cost per tonne reduces through the greater
absorption of fixed costs.
This represents the number of pellets produced
in millions of tonnes.
All-in production costs is defined as direct plant
levelproduction costs plus operations overheads
andport costs.
2
025
2
024
2
023
4.2
4.0
3.8
To optimise the production
volume of sustainable biomass
pellets, delivering the lowest
all-in cost per tonne.
3
4
5
6
8
Progress of the pellet business
model, and in particular all-in
production costs, has a 6.25%
weighting in the Group Scorecard.
Seepage 106
(1) 2023 and 2024 comparator numbers re-calculated (see page 25).
Key performance indicators: Non-financial
17
Drax Group plc Annual report and accounts 2025
Strategic report
ENABLING A SECURE ENERGY TRANSITION
In this section
19 Introduction
22 Safeguarding responsible biomass
sourcing
25 Climate positive
27 Nature positive
29 People positive
31 Task Force on Climate-related
Financial Disclosures (TCFD)
40 Non-Financial and Sustainability
Information Statement
40 Assurance statements
Sustainable
development
Our assets continue to
helpkeep the lights on
for millions ofUK households,
nomatter theweather.
CDP Climate
A (2024: A-)
In 2025, Drax Group received a score
of A (on a scale of A-D-).
CDP Forests
A (2024: A-)
In 2025, Drax Group received a score
of A (on a scale of A-D-).
MSCI
A (2024: A)
In 2025 Drax Group had a rating of A
(on a scale of AAA-CCC) in the
MSSCI ESG Ratings assessment. (1)
Sustainalytics
20.7 (2024: 22)
As of February 2026, Drax Group’s
Sustainalytics ESG Risk Rating was
20.7 – medium risk (on a scale of
1-100 (low-high risk)). (2)
(1) The use by Drax of any MSCI ESG research LLC or its affiliates (“MSCI”) data, and
theuse of MSCI logos, trademarks, service marks or index names herein, do not
constitute a sponsorship, endorsement, recommendation, or promotion of Drax by
MSCI. MSCI services and data are the property of MSCI or its information providers,
and are provided ‘as-is’ and without warranty. MSCI names and logos are trademarks
or service marks of MSCI.
(2) Copyright ©2024 Morningstar Sustainalytics. All rights reserved. The information,
data, analyses and opinions contained herein: (1) includes theproprietary information
of Sustainalytics and/or its content providers; (2) may not be copied or redistributed
except as specifically authorised; (3)do not constitute investment advice nor an
endorsement ofany product, project, investment strategy or consideration of
anyparticular environmental, social or governance related issues as part of any
investment strategy; (4)are provided solely for informational purposes; and (5) are
not warranted tobe complete, accurate or timely. The ESG-related information,
methodologies, tool, ratings, data, andopinions contained orreflected herein are
notdirected to or intended for use or distribution toIndia-based clients or users and
their distribution to Indian resident individuals or entities is not permitted. Neither
Morningstar Inc., Sustainalytics, nor their content providers accept any liability for
the use ofthe information, for actions of third parties in respect to the information,
nor are responsible for any trading decisions, damages or other losses related to
theinformation or its use. Theuse of the data is subject to conditions available
atwww.sustainalytics.com/legal-disclaimers.
18
Drax Group plc Annual report and accounts 2025
Introduction
We are committed to addressing these challenges with
transparency and resolve. Our approach includes ongoing
dialogue with stakeholders, continuous monitoring, evaluation
and improvement of our framework and commitments.
One such stakeholder group is our Independent Advisory Board
(IAB), established in 2019 to provide independent scientific
challenge, insight, and advice on biomass sustainability across
our business. The IAB focuses on the science underpinning each
pillar of our Sustainability Framework, climate, nature, and people
positive, and provides robust oversight of the biomass
sustainability practices that support these pillars.
Our priority for the year ahead is to continue delivering against
the Sustainability Framework and to accelerate progress towards
the commitments and targets it sets out. This means embedding
our principles across every part of the organisation, driving
measurable improvements, and ensuring our actions remain
aligned with long-term climate, nature, and people positive
outcomes. By maintaining focus and accountability, we aim
todemonstrate tangible progress and reinforce our leadership
insustainable business.
In February 2026, Chief Sustainability Officer, Miguel
Veiga-Pestana, formally transitioned leadership to Ross
McKenzie. Passion and commitment to sustainability across
Draxhas continued to be one of our core strengths, and Miguel’s
leadership and dedication have been instrumental in bringing the
Company to this point. The Group looks forward with optimism
as Drax continues to build momentum and deliver positive
impacts for climate, nature, and people.
We recognise the important role we play in shaping a more
sustainable future. The environmental, social, and economic
challenges facing society today are complex and urgent, but they
also present opportunities for transformation. Businesses must
lead from the front, and we are fully committed to doing just that.
In 2025, we took meaningful steps to embed sustainability more
deeply into our business, strategy, and purpose:
– we launched our Sustainability Framework, setting out the
milestones ahead and strengthening transparency across our
plans, processes, and operations;
– we voluntarily published our inaugural Climate Transition Plan,
outlining our climate ambitions, targets, and pathways to
delivery, as well as our contribution to the sector-wide
transition to net zero. This significantly expanded the climate-
related information we make publicly available; and
– we also published our Biomass Sourcing Policy, which sets out
the core principles and sustainability commitments that apply
to all biomass in our supply chain. Supported by external
certification schemes, our internal assurance systems, and
independent third-party audits, it demonstrates how we
ensure our biomass is sourced in line with relevant legislation.
Throughout the year, we continued to make progress against
ourScience Based Targets initiative (SBTi) commitments, further
detail is provided on page 25. We saw improved ratings across
selected ESG benchmarks, and inclusion on CDP’s A List
forclimate change and forests – recognition that reinforces
ourposition as a responsible and transparent operator. These
achievements reflect the dedication of our teams and the
integration of sustainability into our strategic decision making.
Yet we remain responsive to the challenges ahead. The evolving
global and regional regulatory landscape, particularly around
biomass sustainability, carbon accounting, and climate disclosures,
demands agility and continued investment. We continue to face
scrutiny from investors, NGOs, and communities who rightly
expect transparency, accountability, and evidence of impact.
Our mission is to help meet
theworld’s increasing demand
for secure energy, sustainably.
For us, sustainability isn’t
aboutwords, it’s about action –
to benefit the climate, nature,
andpeople.
Our Sustainability Framework
This framework is ourroadmap to ensure we’re reaching
meaningful milestones – these pages are coloured in dark blue.
Seenext page
19 Drax Group plc Annual report and accounts 2025Strategic report: Sustainable development
Sustainable development continuedIntroduction continued
Our Sustainability Framework,
launched in 2025, sets out how
we’re taking action to help
decarbonise our operations,
toprotect and enhance nature,
and tosupport people who work
with and alongside us.
The Framework is a result of looking at our successes and
setbacks, listening to stakeholders, and engaging with experts.
Our goal is to ensure we’re on the right path. Our Framework
has26 time-bound targets, grouped into three pillars: Climate,
Nature and People. This is ourroadmap with the ambition to
ensure we’re reaching meaningful milestones, while
demonstrating transparency in ourplans, processes, and
operations.
See more on pages 25, 27 and 29
See our 26 time-bound commitments
SUSTAINABLE BIOMASS
We will reach net zero by the end
of 2040 across our value chain.
We will deliver evidence on forest
carbon stocks in principal biomass
feedstock sourcing areas by the
end of 2026, using rigorous
science-based approaches.
We will further address the
global climate crisis with positive
contributions to climate change
mitigation and adaptation by the
end of 2030.
We commit to sourcing biomass that delivers climate, nature and
people positive outcomes, adhering to strict compliance,
traceability, and third-party certification standards.
We will mitigate harm and
promote circular resource use
across our operations by the
end of 2030.
We will deliver biodiversity
enhancements across all our sites
by the end of 2030.
We will support biodiversity and
ecosystem resilience in our value
chain, contributing to measurable
restoration and conservation
outcomes by the end of 2030.
We will keep building a fair, safe
and inclusive workplace.
We will continue to collaborate
with our supply chain to promote
fundamental human and labour
rights, including those covered by
theUN Global Compact and the
UN Declaration on the Rights of
Indigenous Peoples.
We will partner with the
communities we operate in,
seeking to make a positive
contribution to their lives
and livelihoods.
Our Sustainability Framework
20 Drax Group plc Annual report and accounts 2025
Introduction continued
While launching the Sustainability
Framework represents a critical
milestone, its true value lies in how
effectively we measure progress
against it and demonstrate tangible,
meaningful outcomes. Transparent
reporting mechanisms ensure that
we move beyond intention to action.
Metric Unit 2025 2024 2020 (Baseline)
Climate positive
Group total Scope 1 ktCO
2
e 301 266 1,691
Group total Scope 2 (location-based) ktCO
2
e 256 280 277
Proportion of Group emissions (Scope 1 and 2 location-based)
withinUK % 43 43 87
Group total Scope 3 ktCO
2
e 1,504 1,808 3,088
Group total energy consumption GWh 42,356 41,521 44,451
Group total energy consumption within the UK GWh 38,370 38,294 41,008
Group emissions (Scope 1 and 2) per GWh of electricity generation tCO
2
e/GWh 35 35 117
Direct biogenic CO
2
emissions
(1)
ktCO
2
e 14,085 13,932 13,615
Nature positive
Nitrogen oxide (combined Generation & Pellet Production businessunit) t 7,4 89 7,636
Particulates (combined Generation & Pellet Production businessunit) t 1,275 1,234
Total water abstracted – Drax Power Station m³ 4 4,857,626 44,491,595
Total water returned – Drax Power Station m³ 39,856,691 37,119,03 6
Average biomass supply chain GHG emissions kgCO
2
e/MWh 87.1
(2)
93.7
(3)
Total volume of woody biomass produced – Pellet Production Mt 4.2 4.0
Proportion of woody biomass pellets produced and sold with
anSBPCompliant claim – Pellet Production
(4)
% 97 96.5
Proportion of woody biomass consumed at Drax Power Station
withSBP Compliant claim % 99.9
(2)
98.6
(3)
People positive
Total Group employees
(5)
n 2,974 3,243
Total Recordable Incident Rate (TRIR)
(6)
per 100,000 hours 0.33 0.24
Near Miss and Hazard identification Rate (NMHIR)
(7)
per 100,000 hours 208.96 167.5 6
Women in senior management % 33.9 35.7
Total donations (including Drax foundation) £m 3.1 3.6
This metric was subject to external independent limited assurance by PricewaterhouseCoopers LLP (“PwC”) as part of their assurance over metrics in the ESG
Performance Report 2025.
(1) The biogenic CO
2
emissions, associated with direct combustion, across the Group are zero-rated under the GHG Protocol methodology and our SBTi targets. Biogenic
CO
2
emissions are reported separately as “outside of scope” in ESG reports or under “Memo items” of UK Emissions Trading Scheme (UK ETS).
(2) This metric was subject to external independent limited assurance by Bureau Veritas UK Limited using the assurance standard ISAE 3000. For assurance statement
seedrax.com/sustainability.
(3) Equivalent limited external assurance was obtained over this metric in prior year and results of that assurance can be found in the ESG Performance Report 2024.
(4) Reported figure reflects pellets produced and sold with an SBP Compliant claim. The remaining volume was produced and sold with an SBP Controlled claim.
(5) Total number of Group employees as at 31 December for the reporting year.
(6) TRIR is the total fatalities (2025: 0), lost time injuries, restricted work, and medical treatment injuries per 100,000 hours worked. Total includes incidents and hours of
both employees and contractors across our sites and offices.
(7) NMHIR is the total near misses and hazard incidents per 100,000 hours worked. Total includes both employees and contractors. The calculation methodology has been
updated in 2025 to include employee overtime hours. See Basis of Reporting for more details.
Some of the 2024 and 2020 (Baseline) equivalents for Climate metrics have been restated following the completion of re-baseline in 2025. For further details on this
re-baseline, see page 25.
ESG Performance Report 2025
This report provides additional
environmental, social, and
governance data.
Visit www.drax.com/esg-
performance-report-2025
Policies
For publicly available policies referenced in this section:
Visit www.drax.com/about-us/corporate-governance/
compliance-and-policies/
21 Drax Group plc Annual report and accounts 2025Strategic report: Sustainable development
Safeguarding responsible biomass sourcing
Regions where we source our feedstock
Our biomass operations
Sustainably sourced biomass plays an important role in
supporting energy security as the world decarbonises, displacing
fossil fuels with renewable generation like wind and solar.
However, wind and solar are intermittent. The energy system
needs dispatchable power, such as biomass, pumped storage,
and battery storage that supports intermittent renewables
whenthe sun doesn’t shine and the wind doesn’t blow.
Drax is committed to ensuring the woody biomass we source
comes from forests that are managed in accordance with
standards designed to support their health and growth over
thelong term. We aim for 100% responsibly sourced biomass
that delivers climate, nature, and people positive outcomes,
adhering to strict compliance, traceability, and third-party
certification standards, where relevant.
Our North American operations are strategically located in the
USSouth and Canada. This provides ready access to large tracts
of responsibly managed working forests, modern infrastructure,
and an available workforce of trained loggers, wood haulers,
plant operators and other specialties.
Canadian operations
British Columbia and Alberta, in Western Canada, are among
theworld’s largest exporters of wood products. The respective
Governments of British Columbia and Alberta, in partnership
with First Nations, have procedures, policies, and laws in place
tohelp ensure sustainable forest management practices,
protectimportant forest ecosystems and support the forest
products sector.
In Canadian forests, removing the debris associated with the
primary timber industry is part of a wider set of activities to
mitigate wildfire risk and the spreading of disease and pests. It is
not a good climate or economical outcome to burn forest residue
in forests or at the roadside. We believe that it is better to utilise
this fibre according to strict criteria and best practice, to
generate social value and renewable electricity.
In Canada in 2025, we operated 10 pellet mills across British
Columbia and Alberta, and towards the end of the year we closed
our Williams Lake plant. 85% of our fibre from Canada came
fromsawdust and other sawmill residues created when the mills
create wood products for construction and other industries.
1
US
60.3%
2
Canada
29.1%
3
Latvia
8.9%
4
Estonia
0.6%
5
UK
0.5%
6
Portugal
0.3%
7
Lithuania
0.2%
8
Brazil
0.1%
9
Other
European
0.03%
The forests of the US South
2
1
8
6
5
9
4
7
3
The forests of the US South play an essential role in
delivering climate, nature and people positive outcomes.
Working forests like these store carbon, protect soil and
water quality, provide habitats for many species, and
encourage biodiversity. And while we don’t own or manage
these forests, we’re proud that our sourcing can assist
forest owners in their forest management.
Harvests like the regeneration harvests that landowners
carry out can mimic natural events – such as storm
damage, forest fires, or disease. They allow full sunlight to
reach the ground and new generations of trees to continue
the cycle, absorbing carbon as they grow. It is important
tous to support responsible forest management like this.
CASE STUDY
The remaining 15% of our fibre came from forest residues,
including low-grade roundwood, tops, branches and bark and
salvage trees. Typically, third-party customers in Asia purchase
the pellets that Drax produces in Canada.
US operations
Drax operated seven wood pellet production facilities across
the US South in 2025, with two of these facilities closing by the
end of the year. In this region, over 85% of forestland is privately
owned – primarily by families, with a smaller proportion held by
large forestry enterprises.
Similar to our operations in Canada, our operations complement
the broader forest products industry by creating a reliable market
for forest residues, including low-grade roundwood and material
from thinning operations that is unsuitable for sawtimber
production or rejected by the sawmill. Thinning is a well-
established and widely practiced method of sustainable forest
management in the US South. It plays a critical role in enhancing
forest health, increasing the yield of high-quality sawtimber,
andimproving overall ecosystem productivity.
22 Drax Group plc Annual report and accounts 2025
Safeguarding responsible biomass sourcing continued
Biomass Sourcing Policy
In 2025, we published a revised Biomass Sourcing Policy, which
applies to all biomass that Drax sources. It covers our own pellet
production, and pellets sold to third parties, or used at Drax
Power Station (including biomass pellets purchased from
third-parties). It also applies to potential future uses, such as
pellets used to power data centres, remove carbon dioxide via
BECCS, or use in SAF.
The revised policy is an evolution of the 2019 Responsible
Sourcing Policy. It more accurately reflects our global business
today and developments in regulation and global standards such
as the Renewable Energy Directive III (REDIII) and SBP v2.0.
Wehave structured the new policy around a series of core
principles, building on the wider Sustainability Framework in
seeking to deliver positive outcomes for climate, nature, and
people. At the same time, it is underpinned by a commitment to
compliance, traceability and transparency, and to conducting
open stakeholder engagement.
Drax will continue to use independent third-party certification
schemes as part of the implementation of the new policy.
Drax Power Station
The biomass that Drax Power Station uses must comply with
thestandards set out in law, regulations, and the requirements of
the renewable support schemes under which the plant operates.
The UK Government outlines sustainability requirements for
biomass generation to be eligible for renewable support. To
qualify for subsidies, the biomass received at Drax Power Station
must comply with the Land Criteria and the Greenhouse Gas
(GHG) Criteria. The Land Criteria for wood pellets sets out a
range of measures for sustainable forest management. The GHG
Criteria is a limit, set out by the UK Government, which ensures
that the totality of emissions involved in our biomass supply
chain represents significant GHG reductions compared to fossil
fuels. The current criteria for biomass, in the UK, is to ensure
supply chain emissions do not exceed 180kgCO
2
e/MWh.
We are required to demonstrate, and assure to an ISAE 3000
limited assurance standard, that the biomass we use at Drax
Power Station is consistent with the UK’s sustainability
standards. We therefore report monthly on the amount of
biomass and type of material used, where it came from, and the
GHG emissions from the supply chain. Under UK regulations, we
must also confirm if the biomass complied with the Land Criteria.
At the end of every compliance year, the renewable support
schemes requires us to have an independent third-party audit
toassess the accuracy of our monthly reporting. At Drax Power
Station, to ensure we can identify and track material through
supply chain, we are SBP and PEFC (PEFC/16-37-1769) certified.
We are also FSC® certified (FSC® C119787).
In November 2025, Drax signed a contract with the UK
Government for a low carbon dispatchable CfD. This will support
electricity produced at Drax Power Station between April 2027
and March 2031. The contract includes strengthened
sustainability criteria across three key areas: (1) increasing the
proportion of biomass that must be sustainably sourced from
70% to 100%; (2) reducing the supply chain emission threshold
from 180kgCO
2
e/MWh to 131.76CO
2
e/MWh (aligned with
international best practice); and (3) including provisions to
exclude material sourced from primary and old growth forests
from receiving support payments.
Due to requirements under the low carbon dispatchable CfD,
including lower contracted volumes, it was determined, during
2025, that effective from April 2027, Drax Power Station would
no longer be supplied by the Group’s Canadian pellet plants.
Third-party pellet sourcing
Beyond our own operations, we source third-party pellets from
suppliers across North America, South America and Europe,
foruse at Drax Power Station. In addition, Drax trades pellets
from North America and Europe to meet long-term commitments
to third-party customers. Pellet sourcing undergoes due
diligence, supported by established processes and procedures to
ensure the material is sustainably produced and fully compliant
with our biomass sourcing policy and applicable legislation.
Regulatory and standard developments
REDIII and EUDR
2025 was a crucial year for the implementation of new
regulations covering biomass sourced for use in the EU. Notably
REDIII strengthens biomass sustainability criteria and adopts the
cascading principle to ensure that wood is utilised to its highest
economic and environmental added value.
Meanwhile, despite the 12-month delay of the incoming EU
Deforestation Regulation (EUDR) implementation, 2025
remained a critical year. The EUDR requires companies to
conduct due diligence to ensure wood products are free from
both deforestation and degradation. Whilst Drax’s interactions
with the EU markets are limited, we are supportive of the
legislation’s intent of preventing deforestation and during 2025,
we continued to work towards compliance with both EUDR and
REDIII, with updates provided to the Sustainability Council.
Sustainable Biomass Program v2.0
2025 was a pivotal year for the transition of suppliers to SBP’s
v2.0. SBP is a certification specific to the biomass industry,
where independent certification bodies audit suppliers against
the standards developed by SBP. It is an independent
certification scheme that regulators, including those in the UK
and EU, have successfully benchmarked as a voluntary scheme.
It can be used to demonstrate compliance with sustainability
criteria in the Renewables Obligation and Contract for Difference
at Drax Power Station and with REDIII in the EU.
The v2.0 standards look holistically across the supply chain,
including the management of forests to ensure the health and
vitality of ecosystems are maintained. Compared to SBP v1.0,
therevised standards place a greater emphasis on ‘outcomes’
and include a new principle on forest carbon. Alongside, there
are new and enhanced social requirements strengthening the
protection of workers and their rights. In 2025, all Drax pellet
plants were audited against SBP v2.0 and successfully
transitioned to v2.0 ahead of the November 2025 deadline.
Third-party certifications andaccreditations
FSC®: Forest Stewardship Council®
PEFC: Programme for the Endorsement ofForest Certification
SBP: Sustainable Biomass Program
SFI®: The Sustainable Forestry Initiative
23 Drax Group plc Annual report and accounts 2025Strategic report: Sustainable development
Safeguarding responsible biomass sourcing continued
We are committed to the long-term use
of sustainably sourced biomass across
our production operations. Rigorously
collecting and analysing biomass
sourcing data allows us to verify
sustainability, trace origins and
understand our procurement practices.
This data-driven approach enables informed decision-making
and reinforces transparency and accuracy in both reporting
andoperational oversight.
Drax Group sources of fibre
Sawmill and other
wood industry
residues (t)
Branches
and tops (t) Thinnings (t)
Low-grade
roundwood (t)
Salvage trees*
(t)
Non-woody
biomass** (t)
Country
total (t)
US 2,672,716 116,112 1,096,284 1,819,805 10,586 161,562 5,87 7,065
Canada 2,404,616 212,023 – 207,181 9,777 – 2,833,597
Latvia 111,997 16,212 9 734,816 – – 863,034
Estonia – 320 10 ,155 48,621 – – 59,096
United Kingdom – – – – – 48,847 48,847
Portugal 735 24 21,082 9,12 8 213 – 31,18 2
Lithuania 9,395 – – 7,997 – – 17,392
Brazil 360 – – – 4,967 – 5,327
Other European 2 ,122 – – 750 – – 2,872
Total 5,201,941 344,691 1,127,530 2,828,298 25,543 210,409 9,738,412
Drax Power Station sources of fibre (material used at Drax Power Station)
Sawmill and other
wood industry
residues (t)
Branches
and tops (t) Thinnings (t)
Low-grade
roundwood (t)
Salvage trees*
(t)
Non-woody
biomass** (t)
Country
total (t)
US 2 ,6 0 8,195 116,112 1,096,284 1,819,805 10,586 161,562 5,812,544
Canada 737,790 74,562 – 77,222 9,777 – 899,351
Latvia 111,997 16,212 9 734,816 – – 863,034
Estonia – 320 10 ,155 48,621 – – 59,096
United Kingdom – – – – – 48,847 48,847
Portugal 735 24 21,082 9,128 213 – 31,182
Lithuania 9,395 – – 7,9 97 – – 17,392
Brazil 360 – – – 4,967 – 5,327
Other European 2 ,122 – – 750 – – 2,872
Total 3,470,594 207,2 3 0 1,127,530 2,698,339 25,543 210,409 7,7 39,6 45
(1)
The above tables display tonnages of finished wood pellet equivalents. The volume of fibre sourced from Canada for use at Drax Power Station increased year on year, reflecting
higher operational activity during the period. This overall increase was driven primarily by greater procurement of third-party pellets from Eastern Canada, which offset a reduction
in fibre sourced from Drax’s own Canadian operations.
(1) This total was subject to external independent limited assurance by Bureau Veritas UK Limited.
* In 2025, SBP published standards v.2.0 within which SBP differentiated Salvage Trees and End-of-life Trees. Prior to this standard change both categories were
combined and referred to as End-of-life Trees. For Annual Reporting in 2025, Drax has reflected this change. Biomass consumed by DPS covering this Annual
report only contains Salvage Trees.
** Following a review of terminology, the category previously titled Agricultural Residues has been renamed in the 2025 Annual report to Non-woody biomass
inorder to more closely reflect RO Sustainability Criteria.
In early 2026, we launched our new Biomass Tracker, an
interactive digital tool designed to enhance understanding
and transparency around the journey of our sustainable
woody biomass. The tool provides clear visibility of where
our biomass is sourced, the types of fibre used, how it is
transported through our global supply chain, and the
carbon emissions associated with each stage of its journey.
See more here
Biomass Tracker tool
CASE STUDY
24
Drax Group plc Annual report and accounts 2025
Our approach
Responding to the challenge of
climate change is central to our
purpose and strategic aims. Our
Climate Policy outlines our approach
in line with the TCFD framework. For
more information on climate-related
governance, see pages 31 to 32.
Ambition and targets
Our climate ambition is to achieve our 2030 and 2040 SBTi
decarbonisation goals. Simultaneously, we will deliver our
corporate strategic objectives, contributing to UK energy
security. While wepursue options for carbon removals, we are
also focused on finding opportunities to reduce our absolute
emissions across Scopes 1, 2 and 3. The SBTi validated our
near-term targets in 2023 and in early 2026, we completed
thefinal steps to fully validate our 2040 net zero target.
We recognise that there are many external dependencies that
could impact our target to be net zero by 2040. These include
the rate of commercialisation and deployment of low-carbon
technologies, and changes to the Group’s corporate strategic
objectives and asset portfolio composition.
Scope 1 and 2 emissions
In 2025, our total Scope 1 and 2 carbon emissions (location-
based) increased by 2% from 2024, however, we have generated
more electricity and produced more pellets in this period. There
has been a reduction in non-biogenic energy consumption per
pellet produced at the North American pellet plants resulting
from the success of energy efficiency projects in2024. These
projects have contributed to an 3% reduction in natural gas
emissions, and, alongside decarbonisation of the regional grids,
a5% reduction in location-based electricity emissions.
Acontinued focus on energy efficiency measures atDrax Power
Station also decreased Scope 1 and 2 emissions from the site
by1% in 2025. We have signed off funding for decarbonisation
measures on our time charter vessels, to be implemented in
2026, targeting further Scope 1 and 2 emissions reductions, and
ensuring a focus on achieving our 2030 non-generation target.
Scope 3 (value chain) emissions
The most significant contributor to our Scope 3 emissions profile
continues to be from fuel and energy-related activities, primarily
driven by the biomass fuel supply chain. In 2025, Group total
Scope 3 emissions decreased by 11% compared with 2024.
Efficiencies within the biomass supply chain have supported
decarbonisation within our Scope 3 emissions, including our
project to replace diesel with 100% hydrotreated vegetable oil
(HVO) in our UK rail operations. We have progressed beyond our
2030 target, with a 51% reduction against our 2020 baseline.
CLIMATE
POSITI E
Sustainable development continued
In summary, we remain ahead of our Generation Scope 1
and 2 intensity target, and progressed beyond our Scope 3
target. Our Scope 1 and 2 non-generation targets remain
behind target trajectory, and will require additional
decarbonisation focus in 2026.
We completed a re-baseline in 2025 to account for the
Opusenergy accounts sale, and a number of methodology
improvements. For the methodological changes, we have
updated emissions factors for spend-based calculations
from a dataset developed in 2019, to a 2025 dataset.
Thisupdate impacted absolute emissions and has been
performed across all annual figures, ensuring consistency
and preventing faux decarbonisation reporting. For further
details, see our Basis of Reporting.
Progress against SBTi targets
SBTi targets
Base year
2020
2024 %
change
2025 %
change
75.7% reduction in Scope
1 and 2 emissions from
electricity generation
by2030 and 91% by
2040(kgCO
2
e/MWh)
13
87%
decrease
87%
decrease
13
100
75.7% reduction in
Scope1, 2 and 3
emissions from all sold
electricity by 2030
and91% by 2040
(kgCO
2
e/MWh)
18
decrease
decrease
100
17
42% reduction in
non-generation
Scope 1 and 2
emissions by 2030
and 90% by 2040 (tCO
2
e)
344,075
22% increase22% increase
345,019
283,014
42% reduction in
Scope 3 emissions
by 2030 and 90%
by 2040 (tCO
2
e)
1,503,866
51%
decrease
41%
decrease
1,807,631
3,088,226
25
Drax Group plc Annual report and accounts 2025
Strategic report: Sustainable development
Framework in focus
We’ve already taken one big step
towards helping to tackle the challenge
of climate change, having converted
Drax Power Station from coal to
sustainable biomass. But we recognise
there is still much to do.
Our objective isn’t just to reduce
emissions, but to have a net positive
impact on the climate. We’ll aim to do
this through the eight targets outlined
inthe Climate Positive section of our
Sustainability Framework, three of which
we have considered in more detail here.
Target
Progress
Achieve our near-term 2030
SBTi targets and aimto
furtherachieve our2040
netzero target
With advancements in action as well as governance we continue
tomake progress against our target to achieve our near-term 2030
science-based target and reach net zero by 2040.
We entered the process of validating our net zero science based
target with SBTi in 2025, achieving validation in early 2026, showing
our ongoing commitment to reach net zero by 2040. We also invested
in decarbonisation projects to support progress against our targets.
Our net zero target commits usto reduce emissions in line with the
SBTi stated reductions and neutralise any residual emissions using
permanent carbon removals. The validated targets and progress
against the near-term targets areshown on page 25.
Develop and pilot a
methodologyfor evaluating
theimpact ofbiomass demand
on carbon stocks in sourcing
regions by 2025
We developed a forest carbon appraisal methodology, including
futures scenario modelling, and shared it with industry stakeholders
at international conferences such as the European Biomass
Conference and Exhibition 2025. This completed the proposed goal
ofthis target. Another component of the methodology includes the
use of remote sensing for monitoring forest carbon stocks in our
catchment areas, among other metrics. We developed the remote
sensing tool in collaboration with Google and NGIS to enable us to
track fibre sourcing to individual parcels of land and increase the
effectiveness of our forest sourcing tracking. The remote sensing tool
also enables us to visualise and analyse changes in the forest carbon
stocks over time and support us in upholding our sustainable sourcing
commitments. In2026, following the publication of the GHG
Protocol’s Land Sector and Removals Guidance, we will utilise the
data to undertake a detailed analysis ofthe carbon stock changes
within our sourcing areas.
Publish and implement
aclimateadaptation plan
bytheend of 2027
Working in conjunction with external consultants, we are in the
process of developing climate change adaptation and mitigations
plans for all our sites in the UK. We have already delivered three
completed plans, identifying climate physical risks across 216 metrics.
This has enabled us to better manage and understand climate risks
and propose changes to our assets to reduce the likelihood of
hazardous events causing an impact at our sites. This enables site
andfinancial security in our operations, and has supported our TCFD
assessments to understand the financial impacts associated with
climate change at our sites.
Sustainable development continued
Climate positive
26
Drax Group plc Annual report and accounts 2025
Environmental management and compliance
Our Group Environmental Policy states our commitment to
manage, monitor, and reduce the environmental impacts caused
by our business. We report monthly on environmental incidents
to the Executive Committee, and the Compliance Committee
Steering Committee also receives a report.
Non-CO
2
emissions to air
For biomass generation, the main emissions to air are nitrogen
oxides, sulphur dioxide, particulates, and VOCs. These are caused
by the machinery and processes associated with harvesting and
pelletisation of biomass. In 2025, sulphur dioxide and nitrogen
oxides emissions reduced compared with 2024.
Pellet production operations are subject to local State laws for
airemissions and pollutants and set requirements on the level
and frequency of self-monitoring and reporting. The main
emissions to air are particulates, volatile organic compounds
(VOCs), carbon monoxide, and nitrogen oxides.
Responding to local concerns
In October 2025, the Amite facility in Gloster, Mississippi
receivedunanimous approval from Mississippi Department of
Environmental Quality for both a modified construction permit
and an initial Title V operating permit. This reversed an earlier
decision from April 2025. The approval followed a two-day
publichearing that drew strong participation from the Gloster
community, many of whom expressed support for Drax
continuing operations, alongside perspectives aligned with
Greater Green Gloster. Although the final administrative steps
arestill underway, we anticipate that the permits will be formally
issued in the first half of 2026. Once in place, they will provide
enhanced operational transparency and reinforce confidence in
our environmental performance. We remain committed to being
aresponsible and engaged partner in Gloster and will continue
tostrengthen our relationships in the community.
We engage with regulators and other stakeholders in connection
with our operations through established regulatory and
administrative processes. Our operations are subject to permits,
oversight, and ongoing regulatory and legal requirements.
Certain regulatory, administrative, or legal matters may be
ongoing from time to time.
Water
The use of water is subject to strict criteria and local laws, with
our operational and HSE teams, plus external regulatory
agencies, overseeing compliance. Drax Power Station uses water
for operational and cooling processes. The power station emits
aproportion of the water it uses as water vapour through its
cooling towers. It recycles the remainder and discharges it under
permit to the River Ouse. We have procedures in place to manage
water system efficiency and usage, ensuring the plant meets the
discharge consent limits.
At Cruachan Power Station, we generate electricity by using
water that flows from Cruachan dam through four turbines into
Loch Awe. Cruachan can reach its full generating capacity in less
than 30 seconds, which makes it a vital asset for balancing the
grid and generating electricity at times of high demand. When
electricity demand is low, we pump water from Loch Awe into
the upper reservoir. We monitor the arrangements for the cycling
of this water and report to the Scottish Environment Protection
Agency (SEPA) as required.
As part of our Sustainability Framework, we have committed to
delivering a Group water strategy by the end of 2026, which will
take into account our existing asset base as well as potential
future opportunities, including data centres.
Taskforce on Nature-related Financial Disclosures
We have been disclosing information aligned with the TNFD
Recommendations since 2023. We have continued dedicated
nature assessments across our sites to understand our
relationship with nature in greater depth. In 2025, we
continuedto implement these nature assessments, including
comprehensive reviews for potential sites of biodiversity
sensitivity across Drax’s portfolio of operational sites.
In 2025 we developed two TNFD core metrics; total spatial
footprint (2025: 26.7km
2
) and value of total fines/penalties
intheyear due to negative nature-related impacts (2025: £0)
aspart ofour enhanced TNFD disclosure.
Enhancing our understanding of the Company’s spatial footprint
supports the identification of nature positive opportunities,
andthe implementation of our Sustainability Framework nature
commitments. There have been no environmental fines or
penalties levied, and no litigation awards or settlements paid
in2025 for nature-related impacts.
NATURE
POSITI E
Our approach
We recognise the interaction and
dependency we have with nature.
From the sustainable biomass we
source, to the water needed to operate
Drax Power Station and to generate
electricity at our Scottish assets, nature
is fundamental to our business. We are
committed to understanding and
addressing nature-related risks, our
dependencies and impacts on nature,
and contributing to actions that
promote nature positive outcomes.
Sustainable development continued
Strategic report: Sustainable development
Drax Group plc Annual report and accounts 2025
27
Framework in focus
The areas that we operate in are home
torich and unique biodiversity. The land
around our sites supports hundreds
ofspecies, and the forests we source
biomass from are similarly full of life.
Avoiding and preventing negative
impacts on nature is critically important
and remains a key area of focus for us.
But we know we’re still at the beginning
of the journey. We’re committed to taking
action that not only aims to protect
nature across all our sites, but actively
enhance it. We’ll aim to do this through
the 10 targets outlined in the Nature
Positive section ofour Sustainability
Framework, three of which we have
considered in more detail here.
Target s Progress
Publish a white paper
onopportunities to adopt
circular economy principles with
a focus on circular bioeconomy
by the end of 2025
In 2025, we initiated new multi-stakeholder discussions on the
circular bioeconomy as part of our commitment to explore further
adoption of circular economy principles. We commissioned Forum
forthe Future, a leading international sustainability organisation
dedicated to a just and regenerative future, to lead this work. Forum
for the Future facilitated a workshop with stakeholders from across
the bioeconomy value chain, and will publish a white paper in early
2026. We will feature this in the Drax Evidence Hub along with our
keytakeaways.
Implement Nature Positive
Action Plans at or related to all
owned sites by the end of 2030
In 2025, we continued to develop Nature Positive Action Plans using
information developed in our TNFD ‘Locate, Evaluate, Assess &
Prepare’ (LEAP) assessments based on the TNFD definition of Nature
Action Plan. We developed a first plan for Drax Power Station and for
Cruachan, identifying priority nature-related dependencies, impacts,
risks and opportunities, and informing where to focusour nature
positive actions.
Publish our first fully aligned
TNFD report by the end of 2026
We continued to progress LEAP assessments across the Drax
portfolio and sourcing areas. We leveraged data from the Integrated
Biodiversity Assessment Tool (IBAT), a leading global biodiversity data
set, and local biodiversity surveys. This helps us to better understand
areas of biodiversity sensitivity in our operating and biomass sourcing
areas, and also informs the Nature Positive Action Plans.
Sustainable development continued
Nature positive
28
Drax Group plc Annual report and accounts 2025
Our colleagues
Employee engagement
In 2025, our My Voice Surveys continued on a quarterly basis to
provide a more immediate and accurate understanding of the key
drivers of engagement across the business. This supports our
commitment to improve employee wellbeing and culture. Our
overall score remained stable across the first three quarters (7.4)
but decreased slightly in Q4 to 7.2 amid a period of uncertainty
driven by organisational change. Our colleague forums (My Voice
Forums) continue to play a vital role by connecting colleague
voices with the Board and influencing culture, through
empowering colleagues to take accountability for change and
constructively challenge the Board.
Health & safety
At Drax, maintaining high health and safety standards is crucial
to retaining our licence to operate. Our Group HSE Governance
Policy, outlines how all employees and contractors have a role to
play in ensuring they keep themselves and their co-workers safe.
To enable ongoing compliance and meet expectations, site-level
Health, Safety, and Environmental (HSE) performance is
reviewed regularly and the Group HSE Committee appraises
Group HSE performance quarterly. The CEO reports on health
and safety to the Board every quarter, with an HSE performance
metric being a constant in our Group Scorecard.
In 2025, we transitioned to a functional HSE model to drive
greater consistency, stronger governance, and more effective
processes across all business units. The functional model
provides integrated strategic oversight across all aspects of HSE.
In early 2026, we launched “Zero Harm”, a framework we will use
to consistently manage health and safety across our business.
Harm is never an acceptable outcome of doing our work, and
thisframework ensures that safety is built into every plan, every
decision, every task, and every outcome to achieve our vision
ofgetting everyone home safe and well, every day.
Our operational UK Generation assets have an integrated
HSEmanagement system certified to ISO 9001:2015 (Quality
Management Systems), ISO 14001:2015 (Environmental
Management Systems), and ISO 45001:2018 (Occupational
Health and Safety Management Systems). Our Pellet Production
sites align to one HSE management system, which sits across
both the US and Canada.
Our communities
Drax Foundation
In 2025, we provided £3.1 million in funding through the Drax
Foundation. We have improved access to STEM education for
28,140 children and provided skills training for 2,260 young
adults in the communities where Drax operates. We also
supported nature-based learning and volunteering for 34,862
people through the funding of nature partnerships.
Community Fund
Through our Community Fund, Drax has supported 190
grassroots organisations with £399,182 in funding. This provided
vital opportunities for local schools, youth programmes,
foodbanks, and events in our communities.
Just Transition
In 2025, we made progress against our commitment to
contribute to a Just Transition through providing education
toemployment pathways in the low carbon economy. We
established working groups in the UK, US, and Canada and
developed a new “Theory of Change” model to increase interest
inSTEM from an early age. This offers meaningful experiences
ofwork, as well as skills development and an increased visibility
of career opportunities.
Our supply chain
Acting ethically and with integrity
We are committed to conducting business ethically, responsibly,
and in compliance with all relevant laws and regulations. We do
not tolerate bribery, corruption, human rights abuses, or any
other unethical conduct and take positive steps to prevent this.
Each year, we review all our Ethics programmes and associated
policies, providing updated and programme-specific risk
assessments to the Ethics and Business Conduct Committee.
TheAudit Committee sets our audit schedule, typically reviewing
at least one programme per year. Our Modern Slavery and Human
Trafficking Statement can be viewed at drax.com/sustainability.
To support accountability, the Group Bonus Scorecard now
includes a compliance-related target. Items specific to Business
Ethics in the 2025 Scorecard included the completion of the
Code of Conduct refresher training and the annual Business
Ethics Declaration.
PEOPLE
POSITI E
Our approach
We take a value chain approach
toPeople Positive, meaning weare
committed to considering the needs
of all stakeholders across our
operations. This includes all Drax
colleagues and contractors, businesses
in our supply chain, and communities
near our operational sites across the
UK, US, and Canada.
Sustainable development continued
29
Drax Group plc Annual report and accounts 2025
Strategic report: Sustainable development
Commitments
Progress
We will work to represent the
communities we operate in,
supported by achieving our
agreedcommitments and targets
In 2025, we took significant steps to better represent the communities
where we operate by introducing consistent, values-led recruitment
practices. We also partner with Historically Black Colleges and
Universities to broaden participation. Additionally, ournew HR
measures enabling colleagues to share socio-economic background
information help us identify and eliminate barriers to opportunity,
ensuring our workforce reflects the diversity of our communities.
Consolidate our Responsible
Sourcing Strategy across our
supply chain by the endof 2026,
including how social
considerations will be integrated
into the assessment ofnew
business opportunities
In 2025, we made progress in consolidating our Responsible Sourcing
Strategy. We also published a Sustainable Biomass Sourcing policy
and have a draft Responsible Sourcing Policy for non-fuel supply
chains under development and which is on track to be published
in2026. This will include climate, nature, and people positive
expectations for our non-fuel supply chain partners, including
business conduct and ethics, human and labour rights, rights
ofIndigenous Peoples, and environmental stewardship.
Implement Community
Engagement Plans in each of the
communities where Drax owns
andoperates an asset, including
aconsultation and informed
participation process, by the
endof2027
We are on track to achieving our goal of having Community
Development Plans in all operational sites of operation by 2027. As a
first step, we conducted extensive community surveys and listening
sessions to identify local needs and priorities in our communities,
toensure we are taking the most effective action to improve the
wellbeing of our communities.
Framework in focus
We believe the energy transition can and
should benefit everyone, while acting to
uphold human and labour rights within
our supply chain. We’re also committed
to making tangible improvements to the
lives and livelihoods of the communities
we operate in, by going beyond the
provision of jobs at Drax sites.
We’ll aim to do this through the eight
targets outlined in the People Positive
section of our Sustainability Framework,
three of which we have considered in
more detail here.
Sustainable development continued
People positive
30
Drax Group plc Annual report and accounts 2025
Sustainable development
continued
Compliance statement
This disclosure has been prepared in line with the Financial
Conduct Authority (FCA) Listing Rule (UKLR 6.6.6R(8)) consistent
with the recommendations of the TCFD and the updated 2021
TCFD Annex guidance. The climate-related financial disclosures
outlined comply with the requirements of the Companies Act
2006, as amended by the Companies (Strategic Report) (Climate-
related Financial Disclosure) Regulations 2022.
Governance
The Drax Board is accountable for climate-related risks and
opportunities. The CEO, supported by the Executive Committee,
oversees and ensures that the Group effectively implements the
business strategy, which aligns to our decarbonisation objectives.
The Senior Sustainability Leadership team, led by the Chief
Corporate Affairs and Sustainability Officer, provides updates
onsustainability matters, including progress and challenges
across our Sustainability Framework, to the CEO, Executive
Committee and Board.
The Chief Corporate Affairs and Sustainability Officer and Senior
Sustainability Leadership team are responsible for the day-to-day
implementation of the Group’s sustainability strategy. The
Sustainability Council acts as a Risk Management Committee,
responsible for review and challenge of the climate change
Principal Risk.
Risk Management
The identification, assessment, and management of climate-
related risks is integrated into our Group-wide approach to risk
management as defined by our Group Risk Management Policy.
Climate change is a Principal Risk category governed within the
approach to risk management (see page 46, Principal Risks and
Uncertainties). Senior leadership and risk owners are collectively
responsible for the identification of risks with the potential to
threaten the achievement of strategic objectives. The Audit
Committee and the Board review the effectiveness of risk
management processes and controls.
The Sustainability function administers the climate change
Principal Risk register. Each risk has an assigned business unit
management owner, responsible for monitoring the risk,
providing updates, and ensuring mitigations and controls are
fitfor purpose. Risk owners provide updates to the risk register
athalf and full year. Additionally, the Sustainability function
identifies, assesses, and manages our climate-related risks
through scenario analysis.
Looking ahead
As part of our commitment to transparent and consistent
sustainability reporting, we have been monitoring developments
from the International Sustainability Standards Board (ISSB). We
recognise their role in building upon TCFD and continuing efforts
to drive consistent, comparable and investor-focused reporting.
We welcome the Government’s adoption of the ISSB standards
under the UK Sustainability Disclosure Requirements (UK SDR).
We expect the UK SDR will become mandated by the FCA
by2027. Accordingly, we have begun reviewing our current
practices in line with the ISSB standards and expect to begin the
process of preparing for our first set of ISSB disclosures in 2026.
Task Force on
Climate-related
FinancialDisclosures
The Task Force on Climate-related
Financial Disclosures (TCFD)provides
acommon framework for the provision
ofclear,comprehensive, high-quality
information on the impacts ofclimate
change. We have been a TCFD Supporter
since 2020, recognising that
identification and disclosure of climate-
related risks and opportunities supports
Drax and our stakeholders to make long-
term decisions.
Governance
Board oversight of climate risks
and opportunities
p.31
Management’s role in assessing
and managing climate-related risks
p.31
Strategy
Climate-related risks and opportunities
identified overtheshort, medium and long
term and their impact onourbusiness,
strategy, and financial planning
p.33, 35 –37
Principal Risks and
Uncertainties p.41
Resilience of Drax’s assets and business
model considering different climate-scenarios
p.34
Risk management
Processes for identifying, assessing and
managing climate-related risks
p.31
Principal Risks and
Uncertainties p.41
How we integrate these processes into the
organisation’s overall risk management
p.31
Principal Risks and
Uncertainties p.41
Metrics and targets
Climate-related metrics and targets p.38
Greenhouse gas emissions and related risks p.38
31 Drax Group plc Annual report and accounts 2025Strategic report: Sustainable development
Drax Group plc Board
The Board meets regularly and has ultimate accountability for climate-related risks and opportunities.
In 2025, the Board:
– Considered the Group’s 2030 Sustainability Framework, Climate Transition Plan, and Biomass Sourcing Policy,
allof which were published in February 2025.
– Approved the Sustainable development report, as included in the 2024 Annual report and accounts, including the
Climatepositive section and associated data and climate targets; and
– Received a progress report on Drax’s ESG scores noting an upgrade in our CDP leadership score in CDP Climate.
Independent Advisory Board
The IAB held four scheduled meetings, with additional ad-hoc as needed, in 2025. The IAB provides external
advice andchallenge on our responsible sourcing of biomass, and wider aspects of our sustainability strategy.
The IAB comprises five scientists and technical specialists (biographies available on theDrax website).
Audit Committee
The Audit Committee has responsibility for overseeing the effectiveness of risk management processes
andcontrols, including the climate change Principal Risk.
In 2025, the Audit Committee:
– Reviewed and challenged the Principal Risks disclosure at half and fullyear; and
– Received a paper with a matrix detailing assurance in place over each key Annual Report disclosure, including
those which are climate-related.
Executive Committee
The Executive Committee holds regular formal meetings, and focuses on the delivery ofour strategy as well as
operational and financial performance.
The Committee is responsible for assisting the CEO with all sustainability-related matters, including the delivery
ofall the commitments set out in the Group’s Sustainability Framework. The Executive Committee is in turn
supported by Sustainability Council.
Sustainability Council
The Sustainability Council was established in 2023. In 2025, the council:
– Made decisions on which decarbonisation projects toproceed with, aligned with our Sustainability Framework
commitment to achieve our near-term 2030targets:
– Reviewed and approved plans to ensure compliance with new legislation impacting biomass, including
EUDRand REDIII: and
– Received quarterly updates against progress of all commitments under the Framework.
Remuneration Committee
The Remuneration Committee oversees the approach to remuneration, including the safety and ESG element
oftheGroup bonus scorecard.
In 2025, the Remuneration Committee:
– Considered the Group Scorecard targets and KPIs. This included three ESG-related KPIs, whichhad an aggregate
weighting of 20%. These KPIs included three carbon reduction projects, projects focused on enhancing our
governance controls, and focusing efforts on improving colleague experiences with respect to diversity, equity
and inclusion. Approval was given by the Remuneration Committee at a subsequent meeting; and
– Received an update on the progress tracking the performance against 2025 targets.
Decarbonisation Working Groups
Comprising representatives from different business areas, these formal Working Groups centrally co-ordinate
theprioritisation and delivery of our decarbonisation projects.
In 2025, the Decarbonisation Working Groups:
– Co-ordinated efforts to progress delivery of 2025 decarbonisation Group Scorecard target projects, as well
asnon-Scorecard projects.
– Originated new decarbonisation projects required to meet our longer term SBTi targets, according to our
emissions reduction “flightpath”; and
– Monitored developing industry trends in carbon accounting, pronouncements from Greenhouse Gas Protocol
and SBTi, and their impact on our corporate strategy.
Business areas and functions
Sustainability: Responsible for our sustainability programme, including decarbonisation projects, co-ordination of climate change Principal Risk, ESG disclosure, data, and assurance.
HSE: Responsible for environmental compliance and performance.
Sustainable development continued
Task Force onClimate-related Financial Disclosures
32
Drax Group plc Annual report and accounts 2025
Sustainable development continued
Task Force onClimate-related Financial Disclosures
Strategy
A strategy to enable a zero carbon lower cost energy future.
The identified climate-related risks and opportunities that could
have a material financial impact on the Group are set out on
pages 35 to 37 and in the Principal Risks and Uncertainties
section (page 41).
Carbon reduction pathway
An overview of our carbon reduction targets and our plans is in
theClimate positive section (page 25). In 2025, we launched our
Climate Transition Plan in line with the Transition Plan Taskforce
Disclosure Framework, which is on our website.
Impact of climate-related risks and opportunities on
financialplanning.
The conclusions from the scenario analysis detailed on page 34
informed the approach to the viability and impairment
assessment. The table below summarises how climate-related
matters influence, and are factored into, the respective areas
ofour financial planning.
Financial planning element Our approach
Revenues We incorporate the impact of a transition to net zero into the forecasts for future power prices, modelled over a 15-year basis. The transition to renewables presents an
opportunity for the Group through increased demand for our products and services. Our assets support the energy network by helping to balance supply and demand.
Thevariability of other renewable sources can cause imbalance, so as reliance on intermittent generation increases, the system is likely to require more balancing services.
Weare able to claim renewable energy guarantee of origin (REGO) certificates, and renewable obligation certificates (ROC) on the electricity produced across our generation
portfolio, and our Energy Solutions business provides REGOs.
Our business plans reflect maintaining our sales into Asia and North America, and maximising our integrated supply chain for Drax Power Station. The primary risk to revenue
from climate change is the potential disruption caused from extreme weather events. Our assessments show this will have more impact on our Pellet Production business,
butcould also have knock-on effects on biomass generation if the supply chain is disrupted.
The Climate Change Committee includes BECCS in its pathway for the UK to reach net zero. We include BECCS as one of our long-term opportunities for the Group. In 2025,
ourcarbon removals business, Elimini, signed a joint development agreement with HOFOR to explore the building of a large-scale BECCS facility at Amagerværket Power Station.
Costs (direct and
indirect)
Our Capital Allocation Policy outlines our focus on: (1) maintaining the Group’s credit rating; (2) investing in the core business; and (3) paying a sustainable and growing dividend;
and (4) returning surplus capital beyond investment requirements.
We have introduced an internal shadow carbon price within the capital expenditure decision-making process used principally to modify the Net Present Value and Internal Rate
of Return models to assess new business and capital investment cases. This provides a value for decarbonisation and a corresponding penalty for investments which increase our
carbon footprint. Drax currently makes use of the UK Patent Box tax relief regime and will ensure it explores any further opportunities arising from UK BECCS patented activities.
Currently, the UK Emissions Trading Scheme excludes biomass. This has provided us with a working capital inflow, through substituting coal (which has incurred taxes) to
biomass (which does not). Over the longer term, management considers the impact of potential changes to the UK grid and demand for dispatchable renewable power and
energy storage solutions. Globally, we recognise the increasing role biomass will have to play in decarbonising other industries. We are conducting research into areas that may
fitour strategy, including biofuels and SAF.
Acquisitions and
divestments
Our strategy closely aligns with climate solutions, enabling net zero energy security. Acquisitions and divestments are therefore guided by, and intended to enable, the
achievement of our strategic goals and decarbonisation aims. In 2025, we signed an agreement with Apatura Limited to acquire three BESS projects which, when fully
commissioned, will provide capacity totalling 260MW. The portfolio consists of two sites in Scotland and one in Northern England, with the first site inMarfleet, Yorkshire
expected to be operational in 2027. In addition to this, in January 2026, we announced a tolling agreement with West Burton C Limited, an independent BESS developer owned
by Fidra Energy, as well as the acquisition of asset optimisation platform, Flexitricity. In February 2026, we also announced the signing of a new agreement with energy developer
Zenobē for their future battery at their Coalburn site, South Lanarkshire, Scotland.
In May 2025, the Group completed the sale of the remaining non-core Opus Energy SME customer meter points. In November 2025 we announced the decision to cease
operations atour Williams Lake pellet plant in British Columbia.
Access to capital We maintain a strong investor base and portfolio of working capital facilities through a financial and sustainability-linked revolving credit facility, which matures in 2027, which
hasadjustments linked to certain Scope 1, 2 and 3 carbon emissions based on the Group’s 2030 SBTi targets. This is consistent with our continued strategic focus on reducing
our carbon emissions. Drax will require Government support to fully realise its ambitions and such support will be critical in attracting cost-effective investment and capital to
thebusiness.
33
Drax Group plc Annual report and accounts 2025
Strategic report: Sustainable development
Sustainable development continued
Task Force onClimate-related Financial Disclosures
Transition risk
Risk Example how risk might materialise Our mitigation strategy
Carbon pricing Development of Carbon Border Adjustment
Mechanism (CBAM) policy could prove concerning
for biomass if determined as a product requiring tax;
development of carbon tax mechanism in sourcing
geography or along the supply chain. We expect
anymechanism unlikely to materially impact our
operations
Maintain close liaison with UK Government and EU
institutions on future policies (including future Carbon
Pricing CBAM); development of carbon removals
capacity at Drax Power Station, and globally (see
page11)
Litigation GHG thresholds for supply chain emissions could
result in biomass failing to meet sustainability
criteria; NGO pressure to deem biomass as
non-renewable
Engagement with policy makers and stakeholders
oncarbon accounting of biomass and exploring steps
Drax is taking to decarbonise the supply chain and
reiterate importance of IPCC principles on carbon
accounting
Reputation Loss of customer, investor, and stakeholder trust;
negative press; lack of understanding by public
ofthe benefits from biomass
Forest carbon research programme evidence’s climate
positive impacts on climate of biomass; global biomass
campaign to counter eNGO claims and continue to
engage with interest groups
Technology Failure to adopt new technologies or investment
into unverified or failed technologies
We continue to track future technology options and
maintain engagement with governments on future
policies
Market Absence of market for negative emissions; pressure
on governments to deem biomass not low carbon;
limited government support for BECCS
Liaison with governments on future policies and
working with them on the delivery of our strategy
Physical risk
Risk Example how risk might materialise Our mitigation strategy
Temperature
extremes
Cooling and ventilation costs and increased
servicing costs; employee productivity; revenue
impact
Weather monitoring; plants built to high standards
tocope with weather issues per location; business
continuity plans in place; winterisation planning
Drought Business interruption; water expenses; foundation
damage
Hydrological modelling; plants distributed in different
fibre baskets; management of larger inventories
Flooding* Clean-up costs; repair costs; business interruption Fibre plants distributed in different fibre baskets;
hydrological modelling; multiple ports to reduce
reliance on given supply chain route
Wildfire Employee health; business interruption; physical
damage
Smaller fibre plants distributed in different fibre
baskets; fire guard measures
Water stress Business interruption; revenue impact Annual water stress assessment completed for all
assets
* Flooding is a combination of coastal, fluvial and pluvial flooding, and tropical cyclone.
Scenario analysis: Summary of results
Using third-party sources, scenario analysis provides a method
for climate risk identification and assessment that is guided by
climate science. In 2025, we continued to review the effect of
physical and transition risks on our business and operations using
S&P Global’s Climanomics platform. We explored how different
physical and transition risks could evolve under three climate
change warming scenarios across our existing Generation and
Pellet Production activities. We applied our analysis across four
time horizons: the 2020s, 2030s, 2040s, and 2050s.
Transition risk:
Our transition risk assessment models the impact of transition
risks and we have detailed how they may materialise, as well as
our mitigation strategy (see table). Like many businesses, the
introduction of a carbon pricing mechanism would represent the
greatest potential financial risks. We are satisfied that the risk
ofa mechanism that affects our operations would be low, and
weare liaising with the appropriate government and regulatory
bodies. We consider the remaining risks present low material
riskand are well mitigated.
Physical risk:
Our physical risk analysis explores the potential impacts resulting
from the physical risks of climate change. We considered how
eight physical climate change hazards could evolve under three
scenarios for our generation and non-generation assets. The
table shows our assessment of these risks and how they could
materialise and affect our business and operations. We also have
a detailed mitigation strategy, and management believes we have
a range of strategic options available. We expect to have the
necessary capital to manage impacts and remain resilient under
the wide range of scenarios. Temperature extremes, drought,
and water stress are identified as the main physical climate-
related risks for Drax. There remains a relatively greater potential
impact on our North American Pellet Production operations.
However, none of the risks arising from physical climate change
over the time horizons are modelled to have a material potential
financial impact.
34
Drax Group plc Annual report and accounts 2025
Description Time frame Our response (strategic mitigation) Related metrics
Risk 1. Physical risks to our Pellet Production operations and supply chain in the US and Canada
Acute hazard and chronic climate hazards
impacting fibre availability and site
operations at US and Canadian pellet
production sites
ST, MT and LT – Weather monitoring with appropriate mitigations taken to minimise the potential
impact of extreme weather events
– Pellet Production business has developed stockpiles to alleviate incidences of
extreme weather-related production interruption
– Diversification into new jurisdictions that reduce seasonal impact on the business
– New-build pellet mills are positioned to minimise risk associated with potential
future weather patterns
– Continue monitoring systemic risks when moving to new geographies
Metric: annual total volume of pellets produced
(see page 38)
Metric: FlexGen, Biomass Generation, and Pellet
Production assets: potential financial impact
(absolute risk, £m) as a % of asset value
(seepage38)
Physical risks to ports and shipping to UK,
including extreme weather events and
flooding at multiple UK port locations and
sea level risk impacting available port
facilities, preventing the receipt of material
into our UK ports
ST, MT and LT – Business continuity plans in place for owned and leased ports, including response
toweather events
Metric: FlexGen, Biomass Generation, and Pellet
Production assets: potential financial impact
(absolute risk, £m) as a % of asset value (see
page38)
Metric: Water consumed from areas of water
stress (see page 38)
River water temperatures at Drax Power
Station rise to a level which could cause
permit breach
ST, MT and LT – Permit variation already in place for the summer months
Risk 2. Policy risks related to the transition to a low-carbon economy
Future regulatory framework(s) no longer
consider biomass to be renewable/require
biomass generators to pay a carbon price on
stack emissions or on supply chain
emissions
ST, MT and LT – Group decarbonisation plans in place to reduce biomass supply chain emissions
– Engaging with regulators, industry bodies and wider stakeholders to understand
theirpriorities, influence the strategic direction, and undertake scenario planning
inpreparedness for ensuring compliance
– Targeted scenario planning and direct engagement with the REDIII negotiation
process and via trade associations suggesting alternative policy and regulatory
solutions, to ensure workable outcomes
Metric: total non-renewable generation capacity
(see page 38)
Metric: Generation business revenue (see page 38)
Metric: Generation Adjusted EBITDA (see page 38)
Updates to sustainability criteria on biomass
cannot be met
MT – Continued engagement with stakeholders around our biomass sourcing and the
benefits of using sustainable biomass from working forests
– Alternative fuels programme looking at options for alternative feedstocks
Metric: total non-renewable generation capacity
(see page 38)
Changes in UK Carbon Budget, UK
Government strategy significantly limits or
does not allow for unabated gas generation
– risk to OCGTs projects
MT and LT – Close liaison with UK Government on future policies. We model future generation
scenarios and predict future generation mix
– Existing Drax assets will either need to decarbonise or close
– Any new gas assets that we will need to plan to decarbonise
Metric: total non-renewable generation capacity
(see page 38)
Metric: capital expenditure (see page 39)
Climate related risks
Time frame
– Short term (ST): 1 year – aligns to our time periods for assessing going concern
– Medium term (MT): 2-5 years – aligns to the period assessed for viability reporting
– Long term (LT): 5+ years – aligns to the period beyond that currently assessed for viability
reporting
Sustainable development continued
Task Force onClimate-related Financial Disclosures
35
Drax Group plc Annual report and accounts 2025
Strategic report: Sustainable development
Climate-related opportunities
Description Our response (strategy to realise opportunity) Related metrics
Opportunity 1. FlexGen, flexible renewable energy
Our range of Flexible assets provides support
to the system, balancing supply and demand
caused by the variability of intermittent
generators like wind and solar. As reliance on
intermittent generation increases the system
is likely to require more of the balancing
services that Drax can offer
MT and LT – An £80m investment to refurbish and upgrade two units at Cruachan Power
Station isprogressing, which will add 40MW of additional capacity by 2027,
andimprove unit operations
– In 2025, we signed an agreement with Apatura Limited to acquire three BESS
projects, which when fully commissioned will provide capacity totalling 260MW.
The portfolio consists of two sites in Scotland, and one in Northern England,
withthe first site in Marfleet, Yorkshire expected to be operational in 2027
See CEO’s Review, page 8, for further information
Metric: capital expenditure (see page 39)
Opportunity 2. Pellet production
As a vertically integrated producer, user,
buyer, and seller of biomass, we operate a
differentiated business model from our peers.
We see the market as a balance of short-term
risk and long-term opportunities for the Group
ST, MT, and LT – Our vertically integrated business model means we produce pellets for both
third-party sales and our own generation at Drax Power Station
– We are developing a pipeline of biomass sales opportunities in North America,
Asia and Europe. In December 2024, we reached heads of terms on a multi-year
deal with Pathway. This could see Drax supply over 1Mt of sustainable biomass
pellets to Pathway’s proposed SAF plant on the US Gulf Coast, in addition to
other similar contracts with the same company
See CEO’s Review, page 8, for further information.
Metric: capital expenditure (see page 39)
Metric: Pellet Production business revenue
(seepage 38)
Metric: annual total volume of pellets produced
(see page 38)
Description Time frame Our response (strategic mitigation) Related metrics
Risk 3. Reputation and market risks related to the transition to a low-carbon economy
UK BECCS is unable to progress at scale due
to limited support mechanisms or absence of
sufficient market for removals
MT and LT – Close liaison with UK Government on future policies. Drax engages with a variety
of MPs and political parties, and the majority recognise the positive role of the
technologies Draxis pursuing
Metric: capital expenditure (see page 39)
Market factors or reputation leads to a
reduction inprofitability of our Energy
Solutions business
MT and LT – Introduction of value-adding energy services. Offering non-generation systems
support and energy management services, such as the provision of
decarbonisation services, including vehicle fleet electrification
– Strategic communications work ongoing to provide better data and transparency
on BECCS and biomass
Metric: Energy Solutions business Adjusted
EBITDA (see page 38)
Conflicting requirements on reporting of
carbon emissions requires us to report
multiple, varying estimates
ST, MT and LT – Establishment of a carbon alignment expert group to document causes of
variance for publication
– Evidence Hub to contain a detailed, public explanation of the different accounting
schemes that we are required to report against
Sustainable development continued
Task Force onClimate-related Financial Disclosures
Climate-related risks continued
36
Drax Group plc Annual report and accounts 2025
Sustainable development continued
Task Force onClimate-related Financial Disclosures
Description Our response (strategy to realise opportunity) Related metrics
Opportunity 3. Drax Power Station site and BECCS
We are considering a range of options for the
Drax Power Station site which could utilise
existing land, grid access, active generation,
location, and skilled workforce to meet the
needs of the transition
ST and MT – Drax is preparing a planning application to support the options for a data centre
ofc.100MW on land identified at Drax Power Station, using existing infrastructure
and transformers previously used to support coal generation. This could support
the operation of a data centre at the site as soon as 2027
– In 2025, we entered into a 20-year joint venture agreement with Power Minerals
Limited for the development of a factory producing low-carbon cement made
from old coal ash from Drax Power Station stored at Barlow Mound. We expect
this project could generate Adjusted EBITDA of c.£5m post 2027 through to 2046
See CEO’s Review, page 8, for further information
Metric: capital expenditure (See page 39)
We continue to evaluate options for BECCS in
the UK, US, and globally, subject to the right
fiscal and regulatory regime
LT – In January 2024, the Secretary of State for Energy and Net Zero awarded
development consent for two BECCS units at Drax Power Station
– In 2024, we launched our carbon removals business, Elimini and arranged offtake
agreements with Ultrabulk, Holborn Trading, Karbon-X, ClimateTrade, and NValue
– In 2025, Elimini signed a joint development agreement with HOFOR to explore the
building ofalarge-scale BECCS facility at Amagerværket Power Station
See CEO’s Review, page 8, for further information
Metric: capital expenditure (See page 39)
Climate-related opportunities continued
37
Drax Group plc Annual report and accounts 2025
Strategic report: Sustainable development
Metrics and targets
Climate related metrics
We have developed our approach to report across the TCFD seven cross-industry climate-related metric categories (see table below). For carbon emissions, energy use, and water data see page 21.
TCFD Metric Category Metric Unit 2025 2024 Link to climate-related risks and opportunities
GHG emissions See Climate table, page 21 Risks 1-3 and Opportunities 1-3.
Transition risks
Amount and extent of assets or
business activities vulnerable to
transition risks
Total non-renewable generation
capacity
(1)
GW 0.4 0 .1 Risk 2: Metric reflects the generation capacity potentially vulnerable to policy,
legal, and/or market-related risks in the context of a transition to a low-carbon
economy. The non-renewable capacity represents gas-fired start-up capacity
atDrax Power Station and a newly constructed Open-Cycle Gas Turbines, which
was not under Drax’s operational control in 2025.
Energy Solutions business Adjusted
EBITDA
£m 49 51 Risk 3: Market factors or reputation leads to a reduction in profitability of the
Customers business.
Physical risks
Amount and extentof assets
FlexGen, Biomass Generation, and Pellet
Production assets, exposure to physical
climate hazards risks: potential financial
impact (absolute risk) as a %of asset
value
(2)
% 1.2 1.1 Risks 1: Proportion of FlexGen, Biomass Generation and Pellet Production asset
value potentially vulnerable to physical climate-related risks. An interruption
tobiomass generation is the most likely way that physical risk could manifest.
Water consumed from areas of water
stress
(3)
m
3
482 248 Risk 1: This metric considers water use across direct operations and sites
classified in areas of baseline (current) “high water stress”. The volume reported
represents water use at our London office. A second site (BMM Energy facility)
was also identified, however was deemed immaterial due to low volume of staff
and associated water use.
Climate-related opportunities Generation business revenue (external)
– Biomass Generation
£m 2,315 1,881 Risk 2 and Opportunity 3: Drax Power Station site and development of BECCS,
subject to the right fiscal and regulatory regime.
Generation business revenue (external)
– Flexible Generation
£m 78 74 Risk 2 and Opportunity 1: FlexGen, flexible renewable energy.
Pellet Production business revenue
(external)
£m 329 340 Opportunity 2: Pellet production.
Generation business Adjusted EBITDA
– Biomass Generation
£m 725 814 Risk 1: An interruption to biomass generation is considered to be the most likely
way that physical risk could manifest.
Opportunity 3: Drax Power Station site and BECCS.
Generation business Adjusted EBITDA
– Flexible Generation
£m 111 138 Risk 2 and Opportunity 1: FlexGen including battery storage. In 2025, the
FlexGen portfolio contributed £111m to Adjusted EBITDA.
Pellet Production business Adjusted
EBITDA
£m 129 143 Opportunity 2: Pellet production. In 2025, the Pellet Production business
contributed £129m Adjusted EBITDA.
Annual total volume of pellets produced Mt 4.2 4 Risk 1: and Opportunity 2: Pellet production.
Sustainable development continued
Task Force onClimate-related Financial Disclosures
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Drax Group plc Annual report and accounts 2025
TCFD Metric Category Metric Unit 2025 2024 Link to climate-related risks and opportunities
Capital deployment Capital expenditure £m 202 332 Risk 2: £23m expenditure on the OCGTS.
Risk 3 and Opportunity 3: Drax Power Station site and development of BECCS,
subject to the right fiscal and regulatory landscape. £0.5m of capital expenditure
related to UK BECCS was recognised in 2025 (2024 £4.3m).
Opportunity 2: Pellet production. £53m capital expenditure on pellet production
was recognised in 2025 (2024: Pellet Production capital expenditure £105m).
Opportunity 1: FlexGen, flexible renewable energy. £123m of capital expenditure
related to Generation was recognised in 2025 (2024: £212.4).
Internal carbon prices Generation Capex process, shadow carbon
price: price used on each tonne of GHG
emissions
GBP/ tonne
CO
2
e
96 94 Opportunities 1-3: We have embedded a shadow carbon price within the
capitalexpenditure decision-making process. Principally, we utilise it to modify
the NPV/IRR models we use to assess new investment cases.
Remuneration Proportion of remuneration linked to
sustainability performance
(4)
% 20 15 The sustainability and compliance element of the 2025 Group Scorecard
(20%weighting) included KPIs on safety, decarbonisation, DEI, and compliance.
See page 106.
Proportion of remuneration linked to climate
performance
(5)
% 5 5 The Safety and ESG element of the 2025 Group Scorecard included
KPIs(5%weighting) relating to three decarbonisation projects (with
corresponding targets). See page 106.
(1) Total operational non-renewable generation capacity as at 31 December in the reporting year.
(2) Data source: S&P Global Climanomics. See page 34 for eight climate hazard types considered. Potential financial impact, as % of FlexGen, Biomass Generation, and Pellet Production asset value, is the presented value for 2025, which represents the annual
average over the period 2020-2029.
(3) Total volume of water from areas of water stress, as classified by the WRI Aqueduct Water Risk Atlas (Aqueduct 4.0), baseline “water stress” indicator.
(4) Total percentage weighting for carbon reduction, HSE, DEI, and compliance element of the Group Scorecard.
(5) Total percentage of sub-weightings for climate-related KPIs within the sustainability and compliance element of the Group Scorecard.
Climate related targets
See page 25 within our Climate positive pillar for our carbon reduction targets and progress in 2025, as well as page 20 for the climate-related targets within our Sustainability Framework.
Sustainable development continued
Task Force onClimate-related Financial Disclosures
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Drax Group plc Annual report and accounts 2025
Strategic report: Sustainable development
Non-financial Reporting Requirement Policies, due diligence processes and outcomes Page
Environmental matters
Our purpose is to enable a zero carbon, lower cost energy
future. Our environmental policy sets out how we will manage,
monitor, and reduce the environmental impacts caused by our
business through improvements of our operations wherever
practical.
Group Environment policy
Group Climate policy
Sustainability policy
Responsible Sourcing policy
Group Nature policy
Indigenous Peoples policy
Climate positive 25
Nature positive 27
Climate-related Financial Disclosures 31
Employees
We operate a number of policies and guidance documents that
encompass aspects of each colleague’s experience at Drax,
including the systems we use, our policies, values, and culture.
We are committed to creating a work environment that
promotes the importance of colleagues’ health, safety, and
wellbeing.
Code of Conduct
Supplier Code of Conduct
Group Safety, Health and Wellbeing policy
Human Rights policy
Gender Pay Reporting
Our people strategy 29
Health and safety 29
Social impact
We aim to create a positive social impact within the communities
we operate. Our internal Community and Charity policy outlines
opportunities for colleague engagement.
Community and charity policy (internal policy)
Community investment 29
Respect for human rights
Our Human Rights policy sets out our commitment to respect
human rights throughout our operations, and our expectation
for suppliers and business partners to do the same.
Supplier Code of Conduct
Human Rights policy
Modern Slavery Act statement
Ethics and integrity 29
Anti-corruption and anti-bribery matters
We do not condone any behaviour that could lead to actual or
perceived bribery or corruption. Our Anti-Bribery and Corruption
Policy sets out our approach to bribery and corruption.
Code of Conduct
Anti-Bribery and Corruption policy (internal)
Ethics and integrity 29
A description of the Company’s business model Business model 2
A description of the principal risks Climate-related Financial Disclosures including
TCFD
31
Principal Risks and Uncertainties 41
A description of the non-financial key performance indicators Remuneration committee report 87
ESG Performance Report
Key Performance Indicators 21
Our ESG-related disclosures are subject to established internal
controls and sign-off prior to publication, ensuring accuracy
andconsistency with our wider reporting standards. We apply
arobust verification process comparable to that used for other
sections of the Annual report and accounts, including cross-
departmental review and evidence based validation of key data
points. In addition, some of our key ESG metrics are subject to
independent third-party assurance from PwC and Bureau Veritas.
Limited assurance PwC
We have engaged PricewaterhouseCoopers LLP (PwC) to
perform an external independent limited assurance engagement
over the ESG metrics denoted with an assurance footnote
earlier in the Sustainable development section.
The full assurance statement with PwC’s independent opinion
iswithin our ESG Performance Report 2025.
Limited assurance, Bureau Veritas
Bureau Veritas UK Ltd has provided independent limited
assurance to Drax Group plc over the ESG metrics denoted with
an assurance footnote earlier in the Sustainable development
section. It conducted the assurance process in accordance with
International Standard on Assurance Engagements (ISAE) 3000
Revised, Assurance Engagements Other than Audits or Reviews
of Historical Financial Information (effective for assurance
reports dated on or after 15 December 2015), issued by the
International Auditing and Assurance Standards Board. Bureau
Veritas’ full assurance statement includes certain limitations,
exclusions, observations, and a detailed assurance methodology
and scope of work.
The full assurance statement with Bureau Veritas’ independent
opinion is within our ESG Performance Report 2025.
Sustainable development continued
Non-Financial and Sustainability Information Statement
40
Drax Group plc Annual report and accounts 2025
Principal Risks and uncertainties
Effective management of risk supports the delivery
ofour strategy
Our approach to risk management
Identifying, assessing, and managing risks across the Group is an
integral part of enabling an informed assessment of the current
and potential challenges in the delivery of our strategy as set out
on page 11.
The Group has a Risk Management Policy, which defines its
approach to risk management. Its implementation through
aRiskManagement Framework is overseen by the Board.
The key elements of the policy and framework are detailed
inthediagram below:
Risk appetite
Risk appetite is the level of risk that the Group is prepared to
tolerate in seeking to realise its business objectives. The Board
determines the Group’s risk appetite with the intention of
increasing the likelihood of achieving its objectives, whilst
minimising the threat of adverse impact to the financial and
operational performance and prospects of the Group from
existing and emerging risks. Where, for example, a risk facing the
business has increased, the risk management process, discussed
further below, will drive the assessment of additional required
mitigating actions to ensure the risk remains within theGroup’s
risk appetite.
Risk appetite therefore informs the expected behaviours of our
Board, senior executives, colleagues, contractors, and partners
and varies given the nature of the risk. For example, the Group
has developed a commercial strategy that is designed to manage
the Group’s exposure to volatility in commodity prices whilst
alsoreflecting the opportunity for commercial gain in this area
byoptimising and locking in any potential upside. Wedeploy
forward hedging strategies which seek to limit the Group’s
exposure to future adverse movements, whilst also
acknowledging that this same market volatility provides an
opportunity for financial returns. However, in contrast we
maintain an averse risk appetite with respect to health and
safetyin order to protect our people, contractors and visitors.
Risk identification and assessment
Risk reviews are undertaken bottom-up by management and
riskowners, through the maintenance of risk registers governed
by risk management committees, as well as top-down, by the
Board and Executive Committee, through identification and
consideration of any external risks facing the Group, such as
those caused by macro-economic factors.
Risks are assessed consistently across all areas of the Group,
using a 5x5 matrix that considers both probability and impact.
Individual risks are scored on both a gross and a net basis, which
takes account of the mitigations and controls that are currently
in place. A target risk rating is also maintained for each risk,
reflecting the Group’s risk appetite. Where the net risk exceeds
the target risk, actions are taken to align these two measures,
such as the introduction of additional mitigating controls or
seeking to reduce the Group’s exposure to the risk.
Governance
The Group’s risk management governance structure includes risk
management committees covering each of the Group’s Principal
Risks. The Committees have responsibility for:
– Assessing and understanding the risks that may impact our
business to ensure any new, current or emerging risks are
identified and managed within the defined risk appetite and
limits of the business
– Driving completion of the actions required to improve the
mitigation of risks and where possible reduce risk exposures
totarget levels
– Enabling an appropriate risk management culture that
promotes and creates balanced risk-taking behaviour and clear
accountability
Risk management committees at the business unit and Group
function level undertake risk reviews on a regular basis, receiving
reports from subject matter specialists and risk owners to inform
these reviews where appropriate.
Monitoring and Reporting
The Executive Committee undertakes deep-dive reviews of each
Principal Risk on an annual cycle and receives reports from the
relevant risk management committees (RMC) and Principal Risk
owners. Each risk has an Executive Committee owner.
The Audit Committee and the Board review the suitability and
effectiveness of risk management processes and controls. They
also review and challenge the proposed risk disclosures prepared
by management to consider whether they are fair, balanced and
understandable, provide adequate links to the Group’s strategy
(including the ability to realise objectives over the near and longer
term) and reflect adequately wider macro and emerging threats.
The Group’s approach to risk management intends to manage,
rather than eliminate, the risk of failure to achieve business
objectives, and provides reasonable, but not absolute, assurance
in accordance with the Group’s risk appetite and the inherent
nature of the risk.
Drax Group’s
Risk Management
Process
Identification
Assessment
Governance
Monitoring
and
Reporting
Risk
Appetite
41
Drax Group plc Annual report and accounts 2025
Strategic Report
Emerging risks
Undertaking a holistic review to identify emerging risks involves
judgement and is undertaken by gathering the views of key internal
stakeholders, including the Executive Committee and Board, who
bring to bear differing perspectives and also levels of technical
knowledge, industry experience and economic awareness. Where
appropriate, management may also seek the views of external
experts or stakeholders, or the Board may receive presentations
ontopics that will help inform their shared knowledge.
The execution of material capital projects to deliver the Group’s
strategic objectives, was identified as an emerging risk for the
first time in 2022.
During 2025, the Group announced it was pausing the
development of the Cruachan II pumped hydro energy storage
project due to rising costs and uncertainty over its commercial
viability. Additionally, it was announced during December 2025,
that plans for pellet capacity expansion had been paused due to
challenging markets. Whilst we remain positive on Drax Power
Station’s potential longer-term role in carbon capture, the UK
BECCS Project continues to be paused awaiting clarity on a
government support framework and market mechanism to
enable a final investment decision. Please see page 157
formoreinformation on the associated impairment.
As a result, the Group is planning a lower level of material capital
projects than previously anticipated and therefore the risks
associated with the planning and execution of significant and
complex programmes of innovative work are not currently
considered to reflect an emerging risk to the business. Whilst the
Group have announced plans for investment in BESS projects,
these are not considered to be material capital projects.
As investment decisions are made in line with the Group’s
strategy, the Board will continue to review for new or emerging
Principal Risks.
Internal control
The Group has a well-defined system of internal control which
has been in place for the year under review and up to the date
ofapproval of the Annual Report.
These internal controls operate as important mitigations of
therisks identified via the Group’s risk management processes.
Therefore, the effective design and operation of these internal
controls is important to the achievement of the Group’s
strategicaims.
Annually, the Audit Committee review and challenge an
assurance map prepared by management detailing the assurance
surrounding each of the Group’s Principal Risks across different
lines of defence, including both internal and independent external
assurance. It considers whether sufficient levels of assurance
arein place to provide confidence in the effective design and
operation of our material controls. See page 77 for further detail.
The Audit Committee also approves and oversees a programme
of internal audits. See page 86 for further information on
thisprogramme of work. During 2025, these internal audits were
performed by KPMG, who provide a fully outsourced internal
audit function to the Group, reporting to the Audit Committee.
The findings and recommendations from each internal audit
aredistributed to members of the Executive Committee and the
Audit Committee. Where weaknesses are identified, these are
investigated and the impact on the business is assessed, with
remediation actions established. See the Audit Committee report
on page 86 for further detail. None of the findings reported during
2025 were individually or collectively material tothe financial
performance, results, operations, or controls ofthe Group.
Principal Risks and uncertainties continued
Drax Group plc Board
Audit Committee
Executive Committee
First line of defence Second line of defence Third/Fourth line of defence
Management of Risk Controls
Development of Risk
Management Framework
Internal Audit
Internal Controls Provide Oversight of Risk External Audit
Management Controls Governance of Risk Controls
Limited or Reasonable
Assurance Engagements
The Committee regularly reviews and challenges the
Group’sRisk Management Framework and its effective
implementation, including the identification of risks and
assessment of risk impact and likelihood. Robust challenge
isapplied to the effectiveness of the Group’s internal
controlenvironment and its ability to adequately mitigate
the identified risks in accordance with the designated
riskappetite.
You can read more about the AuditCommittee’s activities
onpages77 to 86
Rob Shuter
Audit Committee Chair
42
Drax Group plc Annual report and accounts 2025
From 2026, onwards the Directors will be required to issue
aninternal control declaration in line with Provision 29 of the
Corporate Governance Code. Refer to page 77 for further
detailon the preparations being made in advance of this.
Review of effectiveness
The Board is responsible for determining risk appetite and
ensuring the effectiveness of risk management and internal
controls across the Group. As part of this the Board and Audit
Committee robustly challenge the culture and behaviours to risk
management across the business which are important factors
inestablishing and operating an effective response to risks
facing the Group.
The review of the effectiveness of the Company’s risk
management and internal control systems is undertaken by
theAudit Committee and takes account of FRC guidance.
Moreinformation about the Audit Committee’s process of review
and resulting findings can be found on pages 80 to 81. The
effectiveness review is supported by a quarterly Risk and Control
update provided by management to the Committee. These
updates detail any material changes in the Group’s Principal Risks
and the associated controls employed to manage them. They
also summarise the outcome of management’s process of
self-attestations and second line sample testing of material
internal controls, as well as other instances where significant
weaknesses in internal control have been identified. Finally,
updates are provided on the findings from the internal audit plan,
which is reviewed by the Audit Committee for each forthcoming
year in December, and progress on implementing any resulting
actions is reported to the Committee at each subsequent
meeting. Taken together, the Audit Committee forms a view
onthe overall effectiveness of the systems of risk management
and internal control.
During 2025, enhancements to risk management included the
development of a new HSE assurance framework and second
line assurance plan and the continued roll out of a Group-wide
compliance framework including the establishment of a
dedicated second line compliance governance team.
Following the review of effectiveness, there were no instances
in2025 where management identified gaps in risk management
or internal control that would have had a material impact on the
Group’s operational performance, financial performance or results.
As such, the Committee was satisfied that risk management and
control systems continue to operate effectively in all material
respects and there was no need for escalation to the Board.
Overall risk profile
Consistent with the prior year, the Group continues to recognise
nine Principal Risk categories which represent inherent risk areas
with the potential to undermine the delivery of our strategy.
The year-end risk review, as described on page 41, considered
theimplications on the Group’s Principal Risks of signing the low
carbon dispatchable CfD, as well as other external factors such
asthe risk of tariffs and continuing geopolitical conflict. These are
discussed further below.
Signing of the low carbon dispatchable CfD
In November 2025, Drax signed a low carbon dispatchable
CfDagreement with the UK Government to provide c.6TWh
ofbiomass generation pa between April 2027 and March 2031
– equivalent to c.30% of baseload output – with a strike price
of£109.90/MWh (2012 real). The signing of this contract has
various implications on the risks facing the Group as follows:
– Political risk – The signing of the low carbon dispatchable
CfD,with the Low Carbon Contracts Company, a private
limited company, reduces the Group’s risk exposure to future
Government changes that may be less aligned with the
country’s net-zero commitments. Furthermore, the signing of
the low carbon dispatchable CfD for the period to March 2031
enables the Group to focus on development of its FlexGen
portfolio. This will reduce future reliance on Government
support and therefore our political exposure.
– Compliance risk – Additional sustainability driven compliance
obligations introduced under the low carbon dispatchable CfD
framework will potentially increase the Group’s compliance
risk. However, the Group’s level of control and therefore ability
to mitigate the risk is improved by the higher proportion of
biomass self-supply and lower number of third-party suppliers.
An implementation steering committee is in place to ensure
appropriate compliance controls, reporting and governance
are established in advance of the commencement of the
contract period.
– Market risk – Historically, the business has been able to reduce
its market exposure by progressively hedging the output from
its biomass generation units up until the point of delivery,
providing a high degree of earnings certainty. However, beyond
March 2027, a greater proportion of the Group’s earnings will
be volatility driven, while generating under the low carbon
dispatchable CfD. Development of tools and trading strategies
(building on existing approaches where appropriate) will seek
to effectively manage the changing exposures both directly
and indirectly.
Political volatility
In the Group’s 2023 and 2024 Annual Reports, it was concluded
that the political and cyber security risks facing the business
were heightened above their historic norms due to the
uncertainty posed by political volatility in both the UK and US,
and the fact that geopolitical unrest in countries such as Ukraine
and the Middle East, has been known to increase the likelihood
of disruption to operational activities through cyber attacks.
The current geopolitical landscape continues to be complex,
driven by the rise of polarisation in mainstream politics, in
addition to the evolving status of global tariffs which is being
closely monitored to understand possible impacts to the Group.
However, as noted above, the signing of the low carbon
dispatchable CfD reduces the Group’s political exposure and as
aresult, on a net basis, the Board believes the Group’s political
risk remains consistent with the previous year.
Therefore, following discussion of various external risk factors,
inpreparing this report, the Board has concluded that the Principal
Risks have not materially changed from the previous year.
The Group’s nine Principal Risks:
– Strategy
– Health, Safety and Environment
– Biomass Acceptability
– Trading and Commodity
– People
– Climate Change
– Plant Operations
– Information Systems and Security
– Political and Regulatory
Principal Risks and uncertainties continued
43
Drax Group plc Annual report and accounts 2025
Strategic Report
Principal Risks and uncertainties continued
Risk level change from previous year Up/increasing Down/reducing No change
Strategy
Executive Committee owner: Chief Strategy and Transformation Officer
Oversight committee: Executive Committee
Risk statement
The risk that the Group’s strategic aims are materially undermined, thereby preventing the
Group from delivering its stated outcomes and fulfilling its purpose.
Risk environment
The Group’s purpose is to enable a zero carbon, lower cost energy future while delivering
ourcorporate strategic aims, contributing to energy security within the UK, and best use
ofsustainable biomass globally. The Group’s strategy underpins its purpose and ambition
asdetailed in the Group’s business model on page 2.
Within our strategy, we face several market-and asset-related risks, including those associated
with sustaining an optimal asset portfolio amid evolving technologies and market conditions.
Wealso operate within market frameworks that may not adequately support investment in new
assets, including growth opportunities at Drax Power Station. We carry the risk that we fail to
invest in projects that deliver adequate returns in line with those new assets, or fail to develop
aportfolio that adequately balances risks and returns in the growth areas available to us. In
addition, unexpected shifts inelectricity supply and demand could reduce system volatility and
diminish demand for dispatchable renewable generation, thereby limiting market opportunities.
Key mitigations
– The Group Strategy team monitors the delivery of strategic initiatives. The Executive
Committee undertakes a regular review to gauge its confidence in delivery and determine
theactions to be taken, should course correction or additional risk mitigation be required.
– We regularly evaluate current and projected performance of our own portfolio of assets, and
value gained from changing the composition of the asset portfolio in line with the Group’s
view of the outlook for the market and emerging technologies.
– The Group’s capital allocation process provides rigour and consistency in assessing the
technical, financial, and strategic justification of new projects across the Group, in particular
where investment is related to new and emerging technologies.
– The Group’s strategy, including focus on development of its FlexGen portfolio, reduces
reliance on Government support and therefore our political exposure.
– The Group is reviewing growth options to maximise the value of the Drax Power Station
byutilising existing land, grid access and infrastructure. This includes plans for data centres
on the site which would require the establishment of suitable commercial and development
structures including the potential for joint ventures.
Health, Safety and Environment (HSE)
Executive Committee owner: Chief Operating Officer
Oversight committee: Group HSE Committee
Risk statement
The risk of detrimental impact to the health and safety of our employees and contractors,
ornegative impact on the environment as a result of our operations.
Risk environment
The health and safety of our employees and contractors, and effective management of our
environmental impact are priorities for the Group.
Our operations involve a range of potential hazards inherent to the materials and equipment
weuse and the processes we perform. These hazards include the operation of plants at high
temperatures and pressures and the use of highly combustible materials which could affect
colleagues, contractors, others attending our sites, as well as the wider environment.
We therefore seek to respond proactively to emerging legislation and regulatory changes as
wellas industry best practice for both safety and environmental matters. This is reinforced
bythe fact we had no environmental incidents in 2025.
Key mitigations
– Continued investment in safety equipment, environmental mitigation, and plant equipment
and its regular maintenance.
– Maintaining robust management systems which are subject to periodic review.
– An effective governance framework, including an executive-level Group HSE Committee,
chaired by the CEO.
– We report our safety performance including our total recordable incident rate (TRIR) and our
Near Miss & Hazard Incidents Rate (NMHIR) monthly and share this with the Board regularly.
– A HSEQ IT reporting system is used for tracking and reporting events and near misses,
remediation and encouraging continuous improvement.
– Continued efforts to align the Group on key focus areas to drive improvement in our HSE
performance, learn through shared experiences of events and near misses, and a programme
of training to provide colleagues with an appropriate level of competence and awareness.
– Targeted investment at sites coupled with good risk management practices to enable the safe
operation of ageing plant and the safe integration of new assets.
44
Drax Group plc Annual report and accounts 2025
Principal Risks and uncertainties continued
Risk level change from previous year Up/increasing Down/reducing No change
Biomass Acceptability
Executive Committee owner: Chief Sustainability Officer
Oversight committee: Sustainability Council
Risk statement
The Group’s exposure to unfavourable changes to biomass-specific Government policy or
regulation which could be caused by high-profile campaigning by groups opposed to the use
ofbiomass, or non-compliance by parts of the Group’s activities with existing or new regulations
or standards which could cause reputational damage to the Group.
Risk environment
The use of sustainable biomass is important in the delivery of longer-term strategic objectives,
enabling the Group and the UK to meet its net-zero targets. In the short to medium term, the
UKGovernment and other key organisations continue to recognise the importance of biomass
inenabling energy security and tackling climate change. This is seen predominantly within the
supportive UK Biomass Strategy published in 2023 and the recent agreement to extend support
for Drax Power Station until 2031.
Longer term, heightened regulatory standards coupled with geopolitical volatility, scepticism
ofnet zero amid a backdrop of challenging economic conditions, creates ongoing uncertainty
and risk of reduced support for biomass and other renewable technologies.
Key mitigations
– Engagement with stakeholders (including policy makers, regulators and eNGOs) in all regions
in which we operate, to understand concerns, requirements and expectations around
sustainability and environmental compliance in addition to proactive education of
stakeholders on the science of sustainability practices and benefits of sustainable biomass.
– The Biomass Leadership Team perform horizon scanning assessing external changes,
whether related to policy, or potential new feedstocks.
– Develop and maintain appropriate relationships with policymakers in the UK, EU, North
America and Asia via targeted engagement across institutions; whilst tracking implementation
via membership of trade associations Refer also to Political and Regulatory risk on page 48.
– Annual independent audits of pellet mills are conducted through the SBP certification scheme
in addition to representation on SBP’s Board and Technical levels to provide feedback in the
preparation of revised standards. We continue to drive home the stringent requirements for
sustainable biomass, noting these will be enhanced in the low carbon dispatchable CfD.
– The Group’s IAB includes experts in the field of forestry and associated disciplines and
provides Drax with advice on sustainable biomass and its role in our transition to net-zero
emissions. The IAB provides feedback on our approach to sourcing, including feedstock
options, procurement practices, forest science and how Drax can optimise carbon benefits.
Trading and Commodity
Executive Committee owner: Chief Commercial Officer
Oversight committee: Financial RMC, Commodity RMC and Treasury RMC
Risk statement
The risk of negative impact on the Group’s financial performance due to the business’s exposure
to volatility in commodity and foreign exchange markets.
Risk environment
The overall assessment of the principal risk remains consistent year on year, however, the
underlying nature of the exposure will change in coming years as a result of entering into the
low carbon dispatchable CfD and the growth of FlexGen.
Drax will transition from being predominantly exposed to outright power prices in forward
markets (currently driven largely by long-term gas prices) to volatility in shorter-term markets
and out-turn price shape. This shorter-term volatility is driven by fluctuations in, and out-turn
levels of, gas prices, weather forecasts and demand.
Historically, the business has been able to reduce its market exposure by progressively hedging
the output from its biomass generation units up until the point of delivery, providing a high degree
of earnings certainty. However, beyond March 2027, a greater proportion of the Group’s earnings
will be volatility driven, and is unlikely to be hedged in long-term markets in the same way.
Key mitigations
– High hedge levels for power, foreign exchange and biomass through to the end of the current
biomass subsidy regime in March 2027.
– Executed low carbon dispatchable CfD agreement for biomass generation from April 2027
through to March 2031.
– High hedge levels for the low carbon dispatchable CfD agreement where products are liquid,
including foreign exchange, freight and oil.
– Development of tools and trading strategies (building on existing approaches where
appropriate) to effectively manage the changing exposures both directly and indirectly.
– Planning is underway to ensure appropriate biomass production and sourcing to reflect
thechanged running schedule under the Low Carbon dispatchable CfD agreement.
45
Drax Group plc Annual report and accounts 2025
Strategic Report
Risk level change from previous year Up/increasing Down/reducing No change
People
Executive Committee owner: Chief People Officer
Oversight committee: People Risk Review meeting & Executive Committee
Risk statement
The Group is not able to secure a workforce with the right skills and experience to operate
thecurrent business while delivering growth plans and strategic objectives.
Risk environment
Our ongoing performance and the delivery of our strategy is dependent upon having a robust
talent pipeline at all levels of the organisation. Many of the roles across our Pellet Production,
Generation, Customer Services and Core Service require people with specific skills, knowledge
and experience. As the business changes and grows, these needs also evolve.
Key risk exposures include talent attraction and retention, employee health and wellbeing,
workforce engagement, productivity and fostering a high performance culture. These risks are
influenced by internal factors such as leadership capability and consistency, as well as external
pressures from a competitive labour market and evolving stakeholder expectations.
Ongoing transformation and change initiatives may increase people-related risks that could
impact organisational resilience, retention of key talent, attraction of new talent and overall
performance.
Key mitigations
– Comprehensive transformation and change programme providing governance and oversight
as well as the delivery of change leadership training.
– Design and implementation of a Competency framework and Recognition programme, and
Organisation design and implementation to ensure appropriate accountabilities and
capabilities.
– Strategy-aligned objective setting, performance reviews and management development
programmes.
– Embedding hiring criteria and standards at all levels, supported by equity impact assessments
and a strategic approach to attraction and partnerships to widen the talent pool.
– Employee Value Proposition, culture, and values to support retention and engagement across
all workforce segments.
– Formalised succession planning specifically focusing on critical roles including those of the
Executive Committee.
Climate Change
Executive Committee owner: Chief Sustainability Officer
Oversight committee: Sustainability Council
Risk statement
The potential for either physical or transitional climate-related risks, such as extreme weather or
new regulation, to negatively impact on the current operations or the long-term value creation
of the Group. See the TCFD disclosure starting on page 31 for more information on these risks.
Risk environment
Given the potential impact of climate change, the resilience of the Group’s strategy and physical
operations to climate risks is important to the functioning and long-term value creation of the
Group. We identify climate risks in two main categories: physical and transitional.
Physical impacts of climate change include event-driven, acute impacts such as hurricanes and
flooding, and chronic impacts such as drought, sea-level and temperature rises, which may pose
challenges to our operations.
Transitional impacts of climate change include policy, regulatory, technology and market-related
changes associated with the transition to a low-carbon economy that could affect the Group’s
business model and strategy. Changes to carbon accounting frameworks and corporate
emissions standards, for example, may compromise our emissions reduction plans to hit our
2030 SBTi targets or impact markets for pellets and unabated bioenergy.
Key mitigations
– Our Pellet Production business continues to ensure that operational contingencies are in
place to prevent outage periods caused by extreme weather events.
– We are creating formal Climate Adaptation and Mitigation Plans for each of our assets across
the Group.
– The Group’s strategy, our near-term SBTi targets, and our Sustainability Framework targets,
underpin a business strategy consistent with UK and international climate change policies.
– Sourcing pellets from a wide geographical range of third-party biomass suppliers provides
adiversified supply base.
– We continue to engage with eNGOs on carbon accounting and reporting and liaise with the
UK Government on future policies. See Political and Regulatory risk on page 48.
– We track technology advances and the development of new technologies, inorder to ensure
that we continue to stay up to date with emerging trends.
Principal Risks and uncertainties continued
46
Drax Group plc Annual report and accounts 2025
Principal Risks and uncertainties continued
Risk level change from previous year Up/increasing Down/reducing No change
Plant Operations
Executive Committee owner: Chief Operating Officer
Oversight committees: Drax Power Station Risk Review Meeting (RRM), FlexGen RRM,
Pellets-wide RMC
Risk statement
The risk we are unable to ensure the reliability or safe operation of our facilities which could
result in us being unable to fulfil our contracted obligations or achieve our strategic aims.
Risk environment
The reliability and safe operation of our facilities is critical to our ability to create value for the
Group. The Plant Operations risk profile is influenced by a number of key factors, such as the
integrity of ageing assets, obsolescence of plant and equipment, procurement of critical spares,
global supply chain challenges, increased regulatory and compliance obligations and cyber
security threats.
At Drax Power Station, asset decommissioning and ageing assets have the potential to increase
the level of operational risk.
In the FlexGen portfolio, the inclusion of new asset types, such as OCGTs and BESS, to the
FlexGen portfolio introduces new technical challenges, risks and types of potential failure.
The pellets business is operating in a challenging environment due to the risk of fibre supply
disruption and price spikes that erode profit margins.
Severe weather events continue to pose a risk to operations as do port and rail labour strikes.
We operate in litigious jurisdictions where the risk of litigation and regulatory challenge is high.
Refer to note 7.6 Contingencies.
Key mitigations
– Business continuity plans are in place for all plants, ports and other logistics.
– Inventory monitoring for key critical spares, and alternate sourcing strategies have been
established.
– Proactive reliability management focussing on planned, rather than breakdown maintenance
and embedding condition-based monitoring to minimise unplanned outages.
– Maintaining safety and sustainability procedures for sourcing, acceptance and handling of
biomass, as well as the control of dust management from both a respiratory, health, and fire
and explosion perspective. Refer to pages 29 and 44 for more info on our Health & Safety
procedures.
– Insurance is in place to cover potential material losses from significant plant failure, where
commercially possible at a reasonable cost.
– Integration of new assets into the portfolio are being managed by dedicated teams within
theGroup, alongside continued emphasis on safe operation of our ageing assets.
Information Systems and Security
Executive Committee owner: Chief Financial Officer and Group General Counsel
Oversight committee: IT Board
Risk statement
The risk of interruption to business operations whether caused by an internal error or external
attack, or the inability to facilitate the delivery of our growth strategy with the necessary
Information Technology (IT) and Operational Technology (OT) systems.
Risk environment
Our IT and OT systems, along with our data, are vital for daily operations and delivering our
growth strategy. As part of the UK’s critical infrastructure, we must protect our systems and
data, ensuring confidentiality, integrity, availability, and adaptability to emerging threats.
Changes in technology such as AI/machine learning and quantum computing may provide
benefits and efficiencies to the business. However, they could also increase the capabilities
ofthreat actors.
This past year has seen several high-profile cyber incidents in the UK. While we believe we have
appropriate controls to prevent or mitigate similar incidents, we continue to review and improve
our controls. These improvements align to the ongoing programme to deliver the ‘Enhanced
Profile’ of the Security of Network and Information Systems (NIS) Regulations.
Key mitigations
– Drax operates controls which are intended to meet applicable legal and regulatory
requirements such as the security of Network and Information Systems (NIS) Regulations,
including a prevent, detect, respond and recover strategy that prioritises business resilience.
– IT, OT and Security controls are subject to periodic independent assurance.
– Regular campaigns and training events are undertaken to improve cyber security awareness.
– Business continuity, disaster recovery and crisis management plans are regularly refreshed
and exercised.
– Drax works closely with regulatory bodies and other Government agencies to understand
andrespond quickly to changing threats.
47
Drax Group plc Annual report and accounts 2025
Strategic Report
Risk level change from previous year Up/increasing Down/reducing No change
Political & Regulatory
Executive Committee owner: Chief Sustainability Officer and Group General Counsel
Oversight committees: Executive Committee, Ethics & Business Conduct Committee (EBCC),
Financial RMC, Sustainability Council
Risk statement
The risk of changes to external policy and regulation that impact our current operations, the
ability to achieve our strategy and legal/regulatory compliance.
Risk environment
The current geopolitical landscape continues to be complex, driven by the rise of polarisation
inmainstream politics, in addition to geopolitical tensions. The evolving status of global tariffs
isbeing closely monitored and we continue to liaise with appropriate trade bodies, business
groups and governments to understand possible impacts to the Group. Domestically, there is
increasing pressure to reform the energy industry and keep the cost of energy low.
The signing of the low carbon dispatchable CfD reduces the Group’s exposure to political risk,
whilst also introducing enhanced sustainability requirements. Remaining compliant and acting
ingood faith with our regulatory framework maintains our licence to operate, protects our brand
and safeguards access to markets. There continues to be a high level of regulatory scrutiny,
forexample, the current FCA investigation, and the independent audit of Drax Power Limited’s
biomass profiling data for CP22 as referred to on pages 6 and 78 respectively. Adverse
judgments or findings may result in financial liabilities and/or reputational damage and divert
management focus. Refer to note 7.6 Contingencies.
Increasing awareness of the costs and deliverability challenges of UK Clean Power 2030 and
achieving net-zero ambitions, while maintaining security of supply, is starting to give a
heightened focus to energy and climate change policy, which in turn may result in heightened
risk of regulatory, policy and market reform.
Political & Regulatory continued
Key mitigations
– Engaging with politicians, government officials, NGOs, academics and other relevant
stakeholders to both listen to and inform understanding and perception of our business.
– Working with regulators and industry bodies to understand their priorities, provide
constructive feedback that may contribute to their strategic direction, and undertake scenario
planning and commercial impact analysis in response to potential reforms, and in
preparedness for ensuring compliance.
– The signing of the low carbon dispatchable CfD reduces the Group’s political risk exposure.
– The Group’s UK asset base is reasonably diversified both in terms of technology type and
geographic location, and the assets’ operational characteristics are aligned with the needs
ofthe system therefore reducing exposure to any specific political or regulatory change.
– A Group-wide compliance framework which delivers an effective compliance governance,
process and control environment. This includes the creation of a second line Compliance
Governance function and the formalisation of the Compliance Governance Committee
structure. During 2025, the Group implemented a system to house a centralised repository
ofcompliance obligations and automate the governance surrounding them.
Principal Risks and uncertainties continued
48
Drax Group plc Annual report and accounts 2025
Viability Statement
Introduction
In accordance with provision 31 of the UK Corporate
Governance Code 2024, the Directors have formally assessed
the long-term prospects and viabilityof the Group, over a period
offive years to 31December 2030.
The assessment is based on the Group’s current long-term plan
(the “plan”), which is updated and approved annually by the
Board following a comprehensive strategic planning process.
Thisprocess includes input from management, review by the
Audit Committee, and consideration of external assurance where
appropriate. The plan delivers on the Group’s purpose; to enable
azero carbon, lower cost energy future, and is underpinned by a
clear strategic focus on addressing climate change. The Board’s
review covers both principal and emerging risks, considering their
individual and combined impacts over the assessment period.
The updated plan, reflecting refreshed strategy and risk
assessment, was approved by the Board in December 2025.
TheBoard remains actively engaged in overseeing the ongoing
viability assessment and ensuring that the Group’s strategic
objectives are aligned with its risk appetite and long-term
sustainability.
Period of assessment
The Directors have selected a five-year period, ending
31December 2030, as the appropriate timeframe for this viability
assessment.
The five-year period aligns with several key factors:
– The duration of the recently signed low carbon dispatchable
CfD agreement with the UK Government, which runs to
31March 2031
– The maturity profile of the Group’s lending facilities
– The alignment of significant hedging strategies, providing
greater confidence in forecasting assumptions over this period
While the Group’s strategic planning process considers
objectives and the impacts of the Group’s principal and emerging
risks over a 10-year horizon, the Directors believe that a five-year
period offers the most appropriate balance between longer-term
strategic developments and the reliability of financial and
operational forecasts.
Modelling performed
The following factors are considered both in the formulation
ofthe Group’s strategic plan and in the longer-term assessment
of the Group’s prospects:
– Principal and emerging risks, and the Group’s response to
these
– Prevailing economic and geopolitical conditions, including
inflation and global supply chain challenges
– Security of supply and increasing demand for electricity;
– Political commitment to climate change action
– Opportunities for cost reduction through operational
simplification and leveraging technology
– Appraisal of development expenditure and investment
growthopportunities
The viability of the Group has been assessed considering the
Group’s current financial position, including external funding in
place over the assessment period, and after modelling the impact
of certain scenarios arising from the Group’s principal risks and
uncertainties outlined on pages 41 to 48. Six downside
scenarios, along with a severe but plausible combined scenario,
have been modelled (see the table overleaf), which address the
principal risks that the Group has assessed will have the most
direct and material impact on the Group. Furthermore, a reverse
stress test was performed to identify what would be required
inorder for the Group to no longer be viable. These scenarios
aretested against forecast available financial headroom and
compliance with the Group’s banking covenants. For each
scenario, the Group has identified and evaluated potential
mitigating actions, such as re-optimising generation, adjusting
capital expenditure, and receipt of insurance proceeds. The
remaining principal risks were considered and were not deemed
to present a significant threat to viability over the assessment
period. The impact of increased expenditure or a loss of margin
as a result of one of these risks (e.g. a cyber-attack resulting in
disruption to planned generation) can be inferred from the
scenarios already modelled.
The conclusion of the above was that none of the individual stress
tests and sensitivities threatened the viability of the Group. Whilst
the impact of the severe but plausible scenario wassignificant,
the Group remained viable and the combined increases required
under the reverse stress test to reach a scenario where the Group
was not viable were not considered to be plausible. Whilst the
reverse stress test results in a breach of the banking covenants,
this occurs before the Group exceeded its available facilities The
hypothetical scenarios described also inform the cash flows used
in the impairment sensitivity analysis for non-current assets. For
more information, please refer to note 2.4 to the Consolidated
financial statements on pages 150 to 158.
Quantitative climate change risk analysis on our operational
Generation and Pellet Production assets suggested that asset
exposure to impacts arising from physical climate-related risks
remains low over both the viability period and longer-term
horizons, extending to 2050. Therefore, these have not been
explicitly incorporated into the viability modelling but the
potential impact of a climate event within the viability
assessment period can be inferred from the plant availability
scenario in the table overleaf. Further information on risks and
opportunities related to climate change can be found in the
TCFD section on pages 35 to 37.
Liquidity and solvency
The plan assumes repayment of the Group’s borrowings as they
fall due with debt being fully repaid by 2030. In the downside
scenarios, including the severe but plausible combination and
reverse stress test, it is assumed that the Group is able to renew
its external debt and committed facilities at higher rates of
interest but with the same covenant levels. Our committed
facilities remain undrawn at the balance sheet date. Please refer
to note 4.2 to the Consolidated financial statements on page 191
for further details on our borrowings.
49
Drax Group plc Annual report and accounts 2025
Strategic Report
The scenarios set out on the right are hypothetical and
purposefully severe with the aim of creating outcomes that
threaten the viability of the Group. In the case of these scenarios
arising, additional mitigating options are available to the Group
tomaintain liquidity to continue in operation, such as:
– Reducing or deferring capital expenditure
– Reducing or cancelling dividend payments and altering the
timing of share buybacks
– Reducing operating costs, albeit there may be a delay in
realising these savings
– Asset disposals or accessing additional sources of funding
None of these mitigating actions are assumed in our current
scenario planning in order to provide a conservative assessment
of the Group’s financial resilience, however, the Directors have
considered the feasibility, timing, and potential impact of each
action as part of their overall viability assessment.
Conclusion
The Directors confirm that they have carried out a robust
assessment of the principal risks facing the Group, including
those that would threaten its business model, future
performance, solvency or liquidity. Based on this assessment,
and taking into account the Group’s current position, the
principal risks and uncertainties, and the effectiveness of
available mitigating actions, the Directors have a reasonable
expectation that the Group will be able to continue in operation
and meet its liabilities as they fall due over the five-year period
oftheir assessment.
The strategic report is set out on pages 1 to 50, was approved
bythe Board of Directors on 25 February 2026, and is signed
onits behalf by:
Will Gardiner
CEO
Viability Statement continued
Scenario Scenario assumptions
Associated
principal risks
Stress test
or sensitivity?
Impact over viability
period >20% of
opening cash and
committed facilities?
Lower
commodity
prices and lower
volatility
Decrease in power prices by an average of 25%, with
lower volatility in prices as a result of less favourable
weather patterns.
Trading and
commodity
Sensitivity Yes
Mitigated by re-optimisation of generation profile.
Decrease in
pellet sales
margin
Decreased pellet sales margin/tonne in all years, based
on $7pertonne cost increase, equivalent to 4%, over
the viability period.
Plant operations/
climate change
Sensitivity No
This is mitigated by long-term fibre contracts in place.
A potential mitigation available but not modelled is an
increase insales price.
90-day biomass
unit outage
90-day outage on one biomass unit in 2026 under the
Renewables Obligation scheme, which is longer than
any previous unplanned outage experienced at Drax
Power Station.
Plant operations/
climate change
Stress test No
Mitigated by re-optimising generation (to other units).
Potential mitigations not modelled include insurance
proceeds and selling biomass.
Failure of a large
supplier to
deliver
Failure of a large supplier to deliver from 2026 to 2027,
equating to 15% of total delivered volume over this
period. This scenario assumes that the volume is
replaced with a more expensive source of pellets.
Plant operations/
climate change
Stress test No
Other mitigations available but not modelled include
re-optimising generation.
Decrease in
pellet production
volume
Pellet production volume decrease of 7% into
perpetuity, approximating one pellet plant being
unavailable at any given time.
Plant operations/
climate change
Sensitivity No
Mitigations available but not modelled include
re-optimisation ofgeneration.
Severe but
plausible
Combination of the lower commodity prices and lower
volatility scenario, decrease in pellet sales margin
asdescribed above, anddecrease in pellet production
volume as described above.
Combination Sensitivities Yes
Reverse stress
test
Combination of the lower commodity prices and lower
volatility scenario, decrease in pellet sales margin as
described above, and incremental loss of earnings at
Drax Power Station to the point of a covenant breach.
Combination Stress test Yes
50
Drax Group plc Annual report and accounts 2025
Governance
In this section
52 Governance at Drax
54 Corporate governance report
56 Board of Directors
60 Stakeholder engagement
72 Nomination Committee report
77 Audit Committee report
87 Remuneration Committee report
118 Directors’ report
ENABLING A SECURE ENERGY TRANSITION
We provide approximately
6% of the UK’s annual
electricity, contributing to
the energy needs of essential
national infrastructure.
51 Drax Group plc Annual report and accounts 2025Governance
Compliance with the UK Corporate
Governance Code 2024 (Code)
Board leadership and Company purpose
Principles
A. The Board promotes the long-term sustainable success of the
Company, generating value for shareholders and contributing
to wider society
B. The Board sets the purpose and values, and promotes the
desired culture
C. Governance reporting includes Board decisions and their
outcomes in the context of the Company’s strategy and
objectives
D. The Board engages effectively with stakeholders
E. The Board ensures effective workforce engagement and
whistleblowing
Seepage 54
The Board is responsible for leading the Group and ensuring
long-term value creation for shareholders and wider
stakeholders.
It establishes and reviews the Group’s purpose and values,
monitors how the desired culture has been embedded, and takes
responsibility for setting and overseeing the Group’s strategy
andrisk appetite. It also monitors performance, making sure
thenecessary controls and resources are in place to deliver
theGroup’s plans and that the Group meets its responsibilities
toitsstakeholders.
Seepage 54
Division of responsibilities
Principles
F. The Chair provides effective leadership
G. There is clear division of responsibilities and an appropriate
balance of independent Directors
H. Non-Executive Directors provide constructive challenge
and guidance and have sufficient time to meet their
responsibilities
I. The Board has the information, time and resources
tofunction effectively and efficiently
Seepage 67
The Board determines the Group’s purpose, strategy,
and business model for long-term, sustainable value creation.
The Board’s view is that the Company has applied the
Principles and complied with the Provisions of the Code
throughout 2025 with the exception of Provision 23. The
Board ismindful that, following the departure of Nicola
Hodson on 23 May 2025, the Company did not meet the
target set out inUK Listing Rule 6.6.6(9)(a)(i), and the Board’s
Diversity Policy, that requires the Board to comprise ofat
least 40% women. It is important to the Board that all aspects
of diversity are considered when appointing new members to
the Board and its Committees. More information on how the
Board and Committee policy on diversity has been
implemented is available on page 75.
To view the Code, visit the Financial Reporting Council
website at www.frc.org.uk.
Drax Group plc Board
Corporate Governance report: Introduction
Governance at Drax
52
Drax Group plc Annual report and accounts 2025
Composition, succession, and evaluation
Principles
J. Appointments to the Board and succession plans are based
on merit, and promote diversity, inclusion, and equal
opportunity
K. There is an appropriate mix of skills, experience, and
knowledge of the Board and Committees
L. Board evaluation is performed annually
Andrea Bertone
Committee Chair
The Committee reviews and makes recommendations on the
size, structure and composition of the Board (including skills,
diversity, knowledge and experience) so that it is effective in
delivering the Group’s strategic priorities and promoting the
long-term success of the Group. It ensures appropriate
succession planning for the Directors and senior management.
Seepage 72
Rob Shuter
Committee Chair
The Committee oversees: the integrity of financial reporting;
keyaccounting judgements; the systems of risk management and
internal control, including consideration of emerging risks such as
cyber resilience; the relationship with external auditors, including
assessing their independence and objectivity; and monitors and
reviews the effectiveness of the internal audit function.
Seepage 77
Kim Keating
Committee Chair
The Committee oversees: the Group’s approach to
remuneration; ensures remuneration policies support the
purpose and strategy; and sets pay for the Executive Directors
and members of the Executive Committee in alignment with
the shareholder approvedRemuneration Policy. It also
considers the alignment ofreward across the wider business.
Seepage 87
Audit, risk, and internal control
Principles
M. The Board ensures the integrity of the financial statements
and the effectiveness of the internal and external audit
functions
N. Reporting is fair, balanced, and understandable
O. Processes are in place to manage risk and maintain
aneffective internal control framework
Remuneration
Principles
P. Remuneration policies and practices promote long-term
success and are aligned to long-term strategy
Q. There is a formal and transparent procedure for developing
policy on Executive remuneration
R. Directors exercise independent judgement and discretion
when determining remuneration outcomes
Nomination Committee Audit Committee Remuneration Committee
Governance at Drax continued
53
Drax Group plc Annual report and accounts 2025
Governance
wrong. As part of the CEO’s regular reporting to the Board during
2025, Will Gardiner provided health and safety updates. These
included a detailed assessment of reported near miss incidents,
hazards, and total recordable injuries across the Group and the
actions taken for improvement. The Board also received verbal
updates from the Group’s health and safety experts, with progress
updates on how the team had implemented improvements. For a
summary ofour safety and environment performance see the
Sustainable development section from page 18.
A culture of acting with honesty and integrity and in compliance
with all laws and regulations is also a necessary foundation for
how we operate. To emphasise the importance of compliance
aseveryone’s responsibility at Drax, the Board included a
compliance metric as part of the 2025 Group Scorecard. We have
also evolved the governance of compliance by creating a formal
Compliance Framework and a supporting database to centrally
store our compliance programme information. The database will
enhance the Board’s oversight of compliance.
Our values and behaviours, which is a set of guiding principles
andactions, help to shape our culture. They remain central to our
training and development activities and we have included them
inour new Drax Competency Framework. The Competency
Framework will help to develop a culture that supports high
performance and future growth.
Stakeholders
Meaningful feedback is very important to the Board and we aim
to maintain open, collaborative engagement with stakeholders.
For more information on stakeholder engagement and how the
Board considered stakeholders during decision-making in 2025,
see the stakeholder engagement section from page 60.
Andrea Bertone
Chair
25 February 2026
Andrea Bertone
Chair
During 2025, the Board regularly reviewed the Group’s financial
and operational performance and the Group’s financial structure,
rolling forecasts and capital allocation policy. The policy targets
astrong balance sheet, investment in the core business, and
asustainable and growing dividend. To the extent that these
conditions are met, the Board considers the return of residual
capital to shareholders. In July 2025, taking into account the
views of shareholders, the Board announced an additional
£450 million three-year share buyback as an extension of its
ongoing buyback programme. For more information on financial
performance, see the CFO’s financial review from page 13.
Risks
In 2025, the Board regularly considered principal and emerging
risks and believes that robust mitigation processes for material
risks are in place. 2025 saw an unprecedented rise in cyber-
attacks globally, with the aim of causing maximumdisruption.
Drax forms a critical part of the UK energy infrastructure, and the
Board is committed to having procedures designed to prevent
such attacks. Such measures help to maintain energy security
and to implement speedy recovery processes should a bad actor
be successful in breaching our defences. During 2025, the Board
consideredthe Group’s cyber security risk. We engaged with our
internal cyber security experts and considered guidance issued
by the National Cyber Security Centre for directors and
executive management. The Board also received training on
cyber security matters to enhance their understanding of the
fast changing cyber security landscape (see page 69). For more
information on the Company’s Principal Risks and uncertainties,
see from page 41.
Culture and values
The Board recognises the importance of cultivating a culture that
aligns with the Group’s purpose, values, and strategic objectives.
Organisational culture is reflected in behaviours and actions,
setting the tone for effective governance, high ethical standards,
inclusion and compliance. Our values play a critical role in
enabling a high-performance culture, empowering our people to
deliver sustainable results and drive the success of the business.
A key component of our culture is our focus on safety, so that
everyone can go home at the end of every day safe and well.
Apart of this is ensuring that we maintain our assets, operate
safely, and have safeguards in place in the event something goes
Dear Shareholders
I am pleased to present our Corporate Governance report for
2025. Good governance is an essential foundation for the
long-term success of our business and realisation of our goals.
The Board recognises the importance of having governance
structures and practices that support good decision-making,
accountability, and transparency.
Strategy and performance
As part of the framework to enable the Board to make effective
strategic decisions, in October 2025, the Board hosted its
annualstrategy review, attended by members of the Executive
Committee. During the review, the Board considered feedback
from investors and assessed the opportunities and risks,
resources and the capital allocation required to support the
strategy. Following discussions, the Board agreed its long-term
strategic plan, which includes delivering £3 billion of free cash
flow to enable returns to shareholders and invest in growth
areassuch as FlexGen. For more information on the Company’s
strategy, including progress made on the Company’s FlexGen
strategy, see the CEO’s review from page 8.
In November 2025, as part of delivering the strategy, we secured
a low carbon dispatchable CfD with the UK Government that
willallow Drax Power Station to support UK energy security
intothe 2030s. When making such decisions, the Board carefully
considers the need to promote the long-term success of the
company whilst having regard to the needs of the Group’s
stakeholders. More information on the Board’s decision-making
process in respect ofthe low carbon dispatchable CfD, and
whatthis means for our operations, can be found in the case
study on page 64.
Corporate Governance report: Letter from the Chair
54
Drax Group plc Annual report and accounts 2025
Corporate Governance report
Our purpose
Our purpose is to enable a zero carbon,
lower cost energy future.
Our values
Prioritise safety
We all deliver our One Safe Drax vision by caring for ourselves,
ourcolleagues, our assets, our environment and our communities.
Unlock potential
We see challenge as opportunity and push ourselves to grow,
cultivating an environment where continuous development and
holistic wellbeing sit side by side. We value everyone’s differences
andunique contributions.
Deliver our promise
We each play an important role in the delivery of our strategy
andaredriven to give our best every day. We focus on meeting
ourcommitments, listen to feedback, share ideas and celebrate
ourcollective successes.
Shape the future
We seek out everyday improvements to
take steps towards positive outcomes for
the climate, nature and people.
Board leadership and company purpose
Principles of the UK
CorporateGovernance Code
A Promoting the long-term sustainable
success of the Company, generating
value for shareholders and contributing
to wider society
B Purpose, values and culture
C Resources and effective controls
D Engagement with stakeholders
E Policies and practices including
whistleblowing
The Board has clearly articulated the Group’s purpose
(toenable a zero carbon, lower cost energy future) and its
business model focusing on FlexGen and Energy Solutions,
Pellet Production, Drax Power Station and options for
growth. Formore information, see the Strategic report
frompage 2.
The Board promotes a culture of openness and
collaboration, as well as acting with transparency and
integrity, setting a clear and positive tone to promote the
Group’s values. For more information, see page 54.
In 2025, as part of its strategic planning, the Board
considered the resources required to deliver the strategy.
The Board also conducted an assessment of principal and
emerging risks and has established a framework of prudent
and effective controls to manage risk. For more information,
see Principal Risks and uncertainties on page 41 and the
Audit Committee Report on page 77.
The Board values the views of stakeholders and undertakes
extensive engagement with shareholders, colleagues,
Government, regulators, customers and others. For more
information on engagement, and its impact on Board
decision-making, please see from page 60.
Colleagues who have any concerns can raise them using
theGroup’s confidential whistleblowing telephone hotline.
The Board oversees Speak Up and whistleblowing and
receives regular updates. It also discusses findings from
investigations.
55
Drax Group plc Annual report and accounts 2025
Governance
Contribution and experience
Frank brings a wealth of senior finance and risk management
leadership experience in the energy sector to the Drax CFO
position. He spent a 20-year international career with Shell,
aglobal integrated energy company. Frank held the position of
Executive Vice President, Finance of Shell’s flagship Integrated
Gas and Upstream business from 2023 to 2025. From 2020 to
2023, he was Executive Vice President Finance for Integrated
Gas, Renewables and Energy Solutions. In these roles he was,
amongst others, responsible for the development of clear
strategies for long-term sustainable growth and performance,
capital allocation, risk management, and business performance
management. Frank’s previous experience within Shell includes
M&A, Projects & Technology, Upstream Joint Ventures, including
various Board memberships, and Internal Audit.
Prior to Shell, Frank was a civil servant at the Ministry of Finance
in The Netherlands from 1993 to 2003. Frank holds an MBA from
the University of Rochester (US) and the Nyenrode University
(the Netherlands), and an MSc in Monetary Economics from
Erasmus University Rotterdam (the Netherlands).
Appointment to the Board
September 2025
Contribution and experience
Will has developed the vision and strategy of Drax, as well as
driving the operational performance of the Company since
becoming CEO in January 2018, inspiring our transformation
intoa leading UK renewable energy company with a diversified
portfolio of flexible and renewable power generation, as well as
biomass power generation and the associated supply chain. Will
is driven by the challenge of delivering our purpose: to enable a
zero carbon, lower cost energy future, while at the same time
delivering outstanding returns for shareholders. He is currently
spearheading Drax’s strategy to provide more secure, sustainable
and affordable energy to meet growing demand in an
increasingly complex world.
Will is deeply committed to creating a company where everyone
feels valued. Working with stakeholders across the spectrum,
Will is creating a company that delivers for people, nature and
theclimate, as well as shareholders.
Will is a member of the World Economic Forum’s (WEF) Alliance
of CEO Climate Leaders and a member of Conservation
International’s European Council. Will joined Drax in 2015 as
CFOand was appointed as CEO in January 2018. He has a wealth
of experience in finance and technology, having held CFO and
divisional Finance Director roles at a number of major companies,
including CSR plc (acquired by Qualcomm, Inc. in 2015) and Sky.
Appointment to the Board
November 2015
Contribution and experience
Andrea is an experienced leader of large, listed businesses,
having held both Executive and Non-Executive roles at
international energy companies. She has a deep understanding
of global markets, including the US, and their underpinning
regulation.
Andrea is the former President of Duke Energy’s international
division (DEI). She spent 15 years at Duke Energy, including seven
years as President of DEI with executive responsibility for hydro
and thermal assets across countries in Latin America. Prior to her
role as President, Andrea held senior executive legal positions at
DEI, including as associate General Counsel between 2003 and
2009. Andrea also served as Latin America counsel with Baker
McKenzie. Andrea has Non-Executive Director appointments
atWaste Connections, Inc. and Peabody Energy Corporation.
Andrea was also previously a Non-Executive Director at DMC
Global Inc., Yamana Gold Inc. and Amcor plc.
Andrea has dedicated her career to successfully leading
international teams with diverse cultures and backgrounds.
Andrea earned a Bachelor of Law from the University of São
Paulo Law School in Brazil and a Master of Law in International
and Comparative Law from Chicago-Kent College of Law at the
Illinois Institute of Technology. She is a member of the Brazilian
Bar Association.
Appointment to the Board
August 2023
Andrea Bertone
Chair
Will Gardiner
CEO
Frank Lemmink
CFO
Corporate Governance report: Board of Directors
The Board shapes our purpose, strategy, culture and values to generate long-term sustainable value and provide strong stewardship of the Group.
– Nomination
Committee (Chair)
– Remuneration Committee
56
Drax Group plc Annual report and accounts 2025
Frank Lemmink
CFO
Contribution and experience
Kim is a Professional Engineer with over 25 years of broad
international experience in the oil and gas, nuclear, hydropower,
and mining sectors. Most recently, Kim was the Chief Operating
Officer of the Cahill Group, one of Canada’s largest multi-
disciplinary construction companies. Prior to joining the Cahill
Group in 2013, Kim held a variety of progressive leadership roles
from engineering design through to construction,
commissioning, production operations and offshore field
development with Petro-Canada (now Suncor Energy Inc.).
Kim is currently Board chair of Major Drilling International Inc.
and a Non-Executive Director of Pan American Silver Corp. Kim
isalso a founding member of Makwa-Cahill Limited Partnership,
a nuclear qualified indigenous fabrication company. Kim is a
Fellow of the Canadian Academy of Engineering and holds a
Bachelor of Civil Engineering degree and an MBA. She also holds
the Canadian Registered Safety Professional (CRSP) designation
and Diligent Climate Leadership certification. She is a graduate of
the Rotman-Institute of Corporate Directors Education Program
and was awarded her ICD.D designation.
Throughout her career, Kim has made significant engineering
and project management contributions to complex major energy
projects. She has a deep appreciation and insight into the value
of inclusive community partnerships, particularly with indigenous
groups.
Appointment to the Board
October 2021
Contribution and experience
Rob brings a wealth of complex financial, regulatory and
strategic experience gained from over 30 years in the
telecommunications and financial services sectors.
Rob served on the BT Group plc executive committee as the
divisional CEO of BT Enterprise between 2021 and January 2023,
prior to which he served for three years as Group President and
CEO of MTN Group Ltd, a telecommunications company listed on
the Johannesburg Stock Exchange. Rob has also held a number
of senior executive positions within the Vodafone Group between
2009 and 2016, including most recently as CEO, European
Cluster in addition to serving between 2009 and 2011 as CFO of
Vodacom Group Ltd, listed on the Johannesburg Stock Exchange.
Rob worked in the financial services sector between 1992 and
2009, which included executive positions in retail and investment
banking. More recently, Rob served as Non-Executive Director
and Chair of the Audit and Risk Committee for The GSM
Association, the global trade association for mobile network
operators worldwide. Rob is currently a Non-Executive Director
and member of the Supervisory Board of Royal KPN N.V. and a
Non-Executive Director at Boldyn Networks Global Limited. He
holds a Bachelor of Commerce degree from the University of
Cape Town, a Post-graduate Diploma in Accountancy from the
University of Natal and is a Chartered Accountant (South Africa).
Appointment to the Board
June 2024
Contribution and experience
David holds a portfolio of Board appointments, including as Chair
of International Alert and of the Joffe Trust. He also serves as a
member of the Board (Council) of Chatham House, and of the
International Budget Partnership; is President of the Advisory
Council of Transparency International UK; and is a member of
theEthical Investment Advisory Group of the Church of England.
David’s executive career included being the Chief Executive of
The Elders, of WWF-UK, and of Transparency International. He
was previously Finance Director and Deputy CEO of Oxfam, and
CFO of Field Group plc. In a Non-Executive capacity, David has
been Chair of Anthesis Group, Deputy Chair of the International
Integrated Reporting Council, Deputy Chair of Shared Interest
Society, a Non-Executive Director of Low Carbon Accelerator
Limited, and Chair of Traidcraft plc.
David is a Chartered Accountant, and has a Masters in Theology
from both Cambridge and Edinburgh universities, and a Masters
in Finance from London Business School.
David’s extensive experience in international development and
environmental matters, in addition to his prior experience as CFO
of a UK-listed industrial company, is of significant value to Drax
and contributes to the Board’s discussions and understanding
ofthe perspectives of and engagement undertaken with
stakeholders.
Appointment to the Board
August 2017
David Nussbaum
Senior Independent
Non-Executive Director
Rob Shuter
Independent
Non-Executive Director
Kim Keating
Independent
Non-Executive Director
– Audit Committee
– Nomination Committee
– Audit Committee (Chair)
– Remuneration Committee
– Remuneration Committee
(Chair)
Corporate Governance report: Board of Directors continued
57
Drax Group plc Annual report and accounts 2025
Governance
Contribution and experience
Erika’s extensive experience, gained from working for over 30
years in global organisations, enables the delivery of change and
growth in complex, world-leading businesses. Her broad
knowledge has been built serving various parts of the chemicals
industry, across a range of sectors from plastics, petrochemicals,
agriculture and pharma.
Erika previously served as Senior Vice President, Chemical
Intermediates and Oxyfuels, at multi-national chemical company
LyondellBasell. Erika was also previously Senior Vice President at
BASF Corporation, where she led the North American Chemical
Intermediates business. Erika held other senior executive roles
with BASF, covering manufacturing and production, engineering,
strategy, and commercial business management. Passionate
about STEM and DEI, she actively supports community
workforce development programmes, as well as a range of
diversity and inclusion initiatives.
Erika sits on a variety of College of Engineering Advisory Boards,
including those for the University of Houston and the Georgia
Institute of Technology. She serves as a Board Trustee for The
Chatfield Edge, a scholarship foundation based in Cincinnati,
Ohio. She is also a member of the Executive Leadership Council,
a non-profit organisation whose mission is to accelerate the
development of black executives to C-Suite positions. Erika holds
a BSc in chemical engineering from the Georgia Institute of
Technology and an MBA from the University of Houston.
Appointment to the Board
October 2021
Contribution and experience
Mark has extensive public listed company experience in the
consumer service, property/construction, and energy sectors,
particularly in customer-facing businesses including with
Centrica plc and United Utilities Group plc. He is Senior
Independent Director and Chair of the Remuneration Committee
at Wickes Group plc and Non-Executive Director of Premier
Marinas Holdings Ltd. Mark was Chair of Grainger plc from
February 2017 to February 2026 and Chair of Ricardo plc from
November 2022 to October 2025. He was Senior Independent
Director at United Utilities Group plc from 2013 to 2022, Senior
Independent Director at Ladbroke’s Coral Group plc from 2016
until 2018, and Non-Executive Director and Audit Committee
Chair at BAA plc from 2001 until 2006.
Mark’s executive career included Chief Executive for Barratt
Developments plc from 2006 until 2015. He was Managing
Director of Centrica’s retail subsidiary British Gas from 2002 to
2006 and CFO of Centrica plc from 1997 to 2002. He has also
served as a trustee of the Energy Savings Trust, the Green
Building Council and BRE. Mark is a qualified accountant.
Appointment to the Board
February 2026
Erika Peterman
Independent
Non-Executive Director
Mark Clare
Independent
Non-Executive Director
Contribution and experience
John has over 45 years’ experience of working across the
nuclear, electricity, oil and gas sectors. John was previously at
BPplc, most recently as Group Head of Engineering & Process
Safety, prior to which he worked at the UK utility Powergen plc
as Group Engineering Director, as well as roles as a UKAEA Board
member and also as a nuclear submarine engineer officer. John
was also previously a Non-Executive Director of Sellafield Ltd.
He is a Chartered Engineer, and a Fellow of both the Royal
Academy of Engineering and the Royal Society of Edinburgh.
John has served as President of both the Institution of
Mechanical Engineers and The Welding Institute.
John has broad and expert level experience in engineering,
health and safety, and energy generation. He is passionate about
people development, particularly advancing the opportunities
foryoung people in STEM careers, including via apprenticeships.
His dedication to charity work and fundraising to support young
people provides a depth of understanding during Board
discussions on stakeholder engagement and culture matters.
Also, having been born and brought up in Scotland, he brings
important insights to Drax on the local environment and culture
relevant to our business in the west of Scotland.
Appointment to the Board
April 2019
John Baxter CBE
Independent
Non-Executive Director
– Audit Committee
– Nomination Committee
– Audit Committee
– Remuneration Committee
Corporate Governance report: Board of Directors continued
58
Drax Group plc Annual report and accounts 2025
Corporate Governance report: Introducing our new CFO
What attracted you to Drax?
I have a desire to contribute to both the
energy transition and energy security.
Ibelieve that Drax can play a critical role
inhelping the UK energy system as it
transitions to more weather-dependent
renewables. I believe we need to take
action now to address climate change and
this role offers me the opportunity toutilise
my skills and experience in a business that
is making a tangible contribution to that
challenge.
I am also enthused by tackling strategic
puzzles. This business combines strong,
visible cashflows over the medium term
with an exciting range of investment
opportunities, particularly in our FlexGen
portfolio, such as BESS, and maximising
the value from the Drax Power Station site.
My focus is on ensuring we deliver those
cashflows through strong operational and
commercial performance and then seeking
out the opportunities with the most
attractive risk adjusted return on
investment to create value over the short,
medium and long term forthe Group,
through a lens of capital discipline. I’m
excited to be part of the next stage of
Drax’s journey.
What are your initial reflections in the
lastsix months?
The range of opportunities the Group has
available to it are exciting. Filtering those
opportunities is an energising challenge
forme.
I’ve also been impressed by the dedication
and skills of our people. Whilst we need
toensure our operating model reflects the
opportunities the business faces, Ihave
been impressed with the colleagues I’ve
met right across the Group.
Personally, the welcome I have had from
my new colleagues has been warm, helpful
and encouraging, making me feel instantly
at home.
What are the medium-term challenges and
opportunities you see for the business?
In terms of challenges, delivery of our free
cash flow target is key, and one which
Ibelieve we are well positioned to deliver.
We can then deploy this capital to invest
ingrowth and returns to shareholders.
Finding the most appropriate investment
opportunities is both a challenge and an
opportunity – I am committed to
approaching this in a disciplined manner
tocreate value for our stakeholders. Finally,
positioning our portfolio to have the right
mix of structured earnings and upside to
the volatility I anticipate we will see in the
UK power market over the medium term
asthe system decarbonises through
greater use of intermittent renewables.
Can you give us any insight into
yourinduction experience?
Over the past six months I’ve met with
many colleagues at all levels. From initial
meetings with my Board and Executive
Committee colleagues, to briefings on key
projects from subject-matter experts to
meetings with my direct reports and our
key external advisers.
I also had the opportunity to visit a number
of sites in the UK and the US. I enjoyed
those visits a lot. The visits were a big
learning curve but fantastic to see. Our
experts talked me through the entire
pellets and generation processes, which
was absolutely fascinating. What really
stood out to me was the safety. The sites
had a strong safety culture with everybody
taking care of each other. That’s really
important to me, it was really good to see
that in our operations.
I’ve had a comprehensive introduction into
Drax and its culture. I have been impressed
by the outstanding work and welcome
from colleagues. The collaborative and
inclusive culture I’ve witnessed across the
Group makes Drax a great place to work,
and I look forward to working together in
the future.
Introducing our
new CFO
Frank Lemmink
CFO
DRAX Q&A
This business combines strong,
visible cashflows over the
medium term with an exciting
range of investment
opportunities, particularly in our
FlexGen portfolio, such as BESS,
and maximising the value from
the Drax Power Station site.”
59
Drax Group plc Annual report and accounts 2025
Governance
Corporate Governance report: Stakeholder engagement
Understanding the needs of our
stakeholders is important to our
long-term success.
The Board recognises the duty it owes to a range of stakeholders
to safeguard the operational integrity and prospects of the core
business and strategy. We aim to maintain open, collaborative
engagement with our stakeholders.
Effective engagement helps us meet evolving expectations as
we advance our business, fulfil our purpose, deliver our strategy,
and create lasting value and positive outcomes for stakeholders.
Many of our strategic and investment decisions have multi-year
time horizons and we recognise that these decisions can have
animpact far beyond our immediate business and well into the
future. This is why we seek to understand the needs and
perspectives of our stakeholders and consider these views to
improve the quality of our decision-making. The Board
appreciates the opportunity to engage with shareholders and
stakeholders. The Board also receives regular reports from
management of engagement that has taken place across the
business. The following pages describe some of the engagement
that took place during 2025 and how this was considered during
decision-making.
Section 172 matter How the Board considered those matters
A. The likely consequences of any decision
inthe long term
– Business model (page 2)
– Principal Risks and uncertainties (page 41)
B. The interests of the Company’semployees – Workforce engagement (page 61)
– Diversity and inclusion (pages 30 and 75 to 76)
– Safety, health and wellbeing (pages 29 and 54)
C. The need to foster the Company’s
business relationships with suppliers,
customers and others
– Engagement with customers (page 62)
– Engagement with suppliers (page 62)
D. The impact of the Company’s operations
on the community and the environment
– Sustainability Framework (page 20)
– Responsible biomass sourcing (page 22)
– Climate Positive (page 25)
– Nature Positive (page 27)
– People Positive (page 29)
– Task Force on Climate-related Financial Disclosures (TCFD) (page 31)
– Climate change risk (page 46)
– Engagement with communities (page 65)
– Drax Foundation (pages 29 and 65)
E. The desirability of the Company
maintaining a reputation for high
standards of business conduct
– Ethics and integrity (page 29)
– Culture and values (page 54)
– Speak Up (whistleblowing) (page 81)
– Corporate Governance Code (page 52)
F. The need to act fairly as between
members of the Company
– Shareholder engagement (page 62)
– Rights and obligations attaching to shares (page 118)
Section 172 statement
Under Section 172(1) of the Companies Act, the Directors
have a duty to promote the success of the Company, having
regard to a range of matters and stakeholders. The Board is
responsible for ensuring effective engagement with
stakeholders: it recognises that decisions taken today can
have an impact on stakeholders, as well as shape longer-
term business performance. Appropriate consideration
enables Drax to realise positive outcomes for the climate,
nature and people, and deliver sustainable value creation.
During 2025, the Directors were satisfied that the Board’s
discussions and decision-making considered the matters
contained within Section 172 and acted in good faith to
promote the sustainable long-term success of the Company.
60
Drax Group plc Annual report and accounts 2025
Corporate Governance report: Stakeholder engagement continued
Site visits provide Directors with a valuable
opportunity to meet with colleagues to gain
insight into the progress of key projects and
see first-hand how the culture is informing
day-to-day activities.
In June 2025, David Nussbaum, Erika
Peterman and John Baxter visited three
pellet plants in Canada – Entwistle,
Lavington, and Armstrong. At each site the
Directors met the local team and toured
theplant. They heard about the programme
to build a strong safety culture and were
impressed how colleagues at the plants
recognised this. The Directors also took the
opportunity to visit a number of forest sites
indifferent stages of the arboreal lifecycle
and learned more about the arrangements in
place to ensure that material supplied to Drax
Power Station complies with the Company’s
sustainability criteria. Following the visit, the
Directors briefed Board colleagues on the
safety and sustainability discussions they
had during their tour.
In July 2025, Andrea Bertone, David
Nussbaum, and Erika Peterman, visited the
Progress Power OCGT construction site
based in Suffolk, UK. This power plant will
form part of the Group’s FlexGen portfolio,
providing dispatchable power to the grid in
times of high demand, supporting the UK’s
energy transition to intermittent renewables.
They discussed topics including the
commercial and safety challenges of
constructing a new power plant. While in
Key issues
– Strategy and performance
– Health, safety and wellbeing
– Compliance
– Sustainability
– Transformation
– Culture and values
Principal risks
– Safety and compliance
– People
Engagement
Our My Voice Forums continued to play an
important role in facilitating engagement
between the Board and employees. This gave
the Board direct insight into the experiences
and perspectives of colleagues across the
business. This year, a refreshed group of
colleague Co-Chairs stepped into their roles,
supported through tailored training and
regular engagement with Executive
Committee Sponsor, Paul Sheffield. Together,
they helped to ensure that the colleague
voice remains a trusted, constructive
influence on decisions at the highest level.
Colleagues were able to speak openly and
candidly, share sentiments, and ask direct
questions of the Drax Chair and CEO.
In 2025, the My Voice Forums discussed
theimpact of organisational design
announcements and strategic decisions
linked to the transformation of the business
resulting from the new low carbon
dispatchable CfD. The conversation led
totangible actions in three areas. The first
involved improving communications so
colleagues can better understand the
strategy for the short- and long term and how
it potentially shapes their future. The second
involved providing managers with more tools
to support their teams through change.
Thethird involved introducing more
frequentsafety stand downs – even when
nooutages occur – to keep safety front
ofmind for everyone.
The CEO also sent a weekly “Talk to Will” Q&A
to all colleagues that responded to
colleagues’ anonymous questions. The
questions raised covered a range of topics,
including strategy, changes within the
business, climate change, and wellbeing.
Shaping culture
As part of monitoring culture at Drax, the
Board received regular updates on safety,
people strategy, DEI and outcomes from the
quarterly colleague engagement surveys.
Thesurveys give the Board a picture of how
colleagues feel about Drax and how well the
Company isdoing at creating an environment
where everyone feels included. Theyalso
helped the Board to consider how well the
Company managed transformation and
change, and how well we are doing at living
our values.
DEI is also an element in the 2025 Scorecard,
reflecting the importance that the Board
places on embedding an inclusive culture.
Workforce
Suffolk, they also visited the main office of the
Drax Energy Solutions business in Ipswich and
met the Energy Solutions senior leadership
team and colleagues to discuss how Drax can
better support customers through power
purchase agreements and EV services.
In November 2025, John Baxter visited Drax
Power Station and discussed operational
matters, including the proposed operating
regime from 2027 under the newly signed low
carbon dispatchable CfD. John’s comprehensive
tour of the site included the biomass operating
units and former plant areas. This helped
provide a perspective on the range of safety
challenges the plant faces. In his feedback to
the Board, John commended the DPS team on
the good condition of the operational plant and
the preparedness for running through the
winter. He also summarised the discussions
around possible future decommissioning of
redundant plant to help reduce the site’s longer
term risk profile.
In November 2025, Will Gardiner and Frank
Lemmink met with employees at the US
Amite and LaSalle plants, as well as with staff
at the Monroe corporate office. Topics of
discussion included the low carbon
dispatchable CfD, changes to procurement
processes and safety.
Board visits to
Drax operations
The My Voice Forums are a vital bridge
between leadership and colleagues.
They help ushearwhat really matters to
ourpeople, challenge our thinking and shape
actions thatstrengthen trust and culture.”
Andrea Bertone, Chair
CASE STUDY
61
Drax Group plc Annual report and accounts 2025
Governance
Corporate Governance report: Stakeholder engagement continued
Key issues
– Strategy
– Financial and operational performance
– Capital allocation
– Biomass sustainability
– Environmental, Social
and Governance (ESG)
Principal risks
– Strategic
– Biomass acceptability
– Political and regulatory
Engagement
Throughout 2025, the CEO had the
opportunity to meet with some of the Group’s
investors at a number of presentations,
conferences and meetings. The CFO also met
with some of the Company’s investors as part
of his induction. At these meetings investors
are able to share feedback on the Group’s
strategy and performance which helps the
Board understand shareholders’ expectations.
In June 2025, the former CFO, Andy Skelton,
and Director of Investor Relations met with
around ten US and Canadian based investors
as a part of a North American roadshow.
Thediscussions focused on the potential
lowcarbon dispatchable CfD with the UK
Government and the future of Drax Power
Station. They also shared ideas on how to
obtain the most value from the Company’s
assets and capital discipline. Investors were
supportive of the ongoing share buyback
programme and potential future M&A
activity, emphasising the need to be clear
onexpected returns.
Also in 2025, the Chair of the Remuneration
Committee wrote to, and met with,
shareholders and proxy advisers to invite
feedback on our remuneration policy
proposal. For more information, including the
questions raised by stakeholders during the
engagement process, see the Remuneration
Committee report pages 88 and 89.
During 2025, other engagement with
investors in the UK included attendance
toindustry conferences, where we hosted
one-to-one and group investor meetings.
TheInvestor Relations (IR) team attended
these events, sometimes accompanied by
management. TheIR team also hosted visits
toDrax Power Station and Cruachan Power
Station to enable investors to further visualise
our future potential plans for these sites.
The IR team, working with the Chief
Sustainability Officer and the Sustainability
team, also met with investors to discuss
matters such as biomass sustainability and
carbon accounting. Through engagement
with investors, we continue to develop our
sustainability reporting, with a desire to
present clear, consistent, meaningful metrics
in a transparent manner.
Shareholders and investors Customers and suppliers
Key issues
– Energy costs
– Ethical business conduct
– Reducing environmental impact
– Long-term partnerships
Principal risks
– Climate change
– Safety, health and wellbeing,
and environment
– Biomass acceptability
– Plant operations
Engagement
Customers
Throughout 2025, the energy market
continued to navigate regulatory change with
the introduction of a new third party cost and
ongoing implementation of the Market-wide
Half Hourly Settlements Programme, which
isintended to improve billing accuracy and
improve power grid management.
Recognising the need to keep our Energy
Solutions customers informed, we broadened
our range of insight and intelligence services.
We developed a daily wholesale market
report in conjunction with the quarterly
market report, and also provided customers
with policy and regulatory updates in
newsletters, webinars, and in-depth
explainers.
In our Energy Solutions business we further
developed our customer portal, with the
addition of a customer Sustainability Hub,
allowing customers to track their
sustainability journey.
Suppliers
Engagement with suppliers helps us to
understand their needs and also express our
expectations. Our relationships with suppliers
aregoverned by contracts that require
compliance with relevant regulatory and legal
obligations including anti-bribery, corruption
and modern slavery rules. We also expect
suppliers to adhere to our supplier code of
conduct. Drax is also committed to the fair
payment and treatment of its suppliers.
Engagement with biomass suppliers is a key
focus for the Group. In 2025 we had the
opportunity to engage with a number of
suppliers during site visits. Discussions
focussed on compliance with sustainability
criteria and building an understanding of the
UK regulatory reporting framework. For more
information on our biomass sourcing, see
page 22.
62
Drax Group plc Annual report and accounts 2025
Corporate Governance report: Stakeholder engagement continued
Key issues
– Energy security
– Energy costs
– Tackling climate change
– System stability and flexible generation
– Biomass sustainability
Principal risks
– Climate change
– Biomass acceptability
– Political and regulatory
– Strategic
Engagement
Government and political bodies
As part of the UK’s Critical National
Infrastructure, it is vital that we seek to
understand the views of policymakers and
other political representatives. It is also
important that we contribute our experience
and expertise to the relevant areas of policy
development to help shape the regulatory
environment in which we operate. Such
collaboration can support informed decision-
making including on the determination of
future strategy. During 2025, the CEO and
Chief Sustainability Officer provided updates
to the Board on engagement with political
representatives.
In 2025, we engaged with individuals from
across the political spectrum in the UK, EU,
North America and Asia on topics including
energy security, decarbonisation, flexible
generation, energy cost and biomass
sustainability. Drax makes no political
donations, but it is important that we engage
with policymakers and other political
representatives to understand their views and
explain our plans and strategy.
In the UK, we engaged extensively with
representatives from the Department for
Energy Security & Net Zero during the
negotiations of the low carbon dispatchable
CfD. This enabled the Board to understand the
UK Government’s priorities such as delivering
energy security and ensuring biomass used at
Drax Power Station continues to meet
stringent sustainability requirements. Other
topics of engagement in 2025 included the
Government’s Review of Electricity Market
Arrangements and the introduction of an
investment (Cap and Floor) mechanism for
Long Duration Storage. We also engaged with
the NESO on topics including the Strategic
Spatial Energy Plan andreform of the
Connections regime.
In the US and Canada, we engaged with
policymakers at the federal, state, provincial,
and local levels to ensure our sustainability
criteria and supply chains are well understood.
We discussed how the biomass sector can
support healthy forest growth and wildfire
prevention, while also supporting small
landowners and sawmillers. We also discussed
how power from biomass can contribute to
grid stability, economic development, and
therealisation of emissions targets to
combatthe effects of climate change.
In Japan, we continued to engage
constructively with stakeholders on biomass
sustainability. Working with trade associations,
we engaged with the British Columbia Chief
Forester during their visit to Japan and we
engaged with the joint British Columbia and
Alberta Forestry Trade Mission to Japan.
In the EU, we engaged with policymakers
across the institutional landscape, including
officials from the European Commission,
Members of the European Parliament, and
representatives from EU Member States.
Wealso maintained constructive dialogue
with NGOs and think tanks to help support
informed, evidence-based policy development.
In 2025, we contributed to discussions on
theEU Bioeconomy Strategy and the evolving
policy framework for carbon removals,
including discussions on their potential
integration into the EU Emissions Trading
System. As part of our work with trade
associations, we also continued to engage
with the implementation of the Renewable
Energy Directive (REDIII) at national level.
Additionally, we closely followed
developments on the EU Deforestation
Regulation (EUDR), including discussions on
potential simplification and postponement.
Regulators
Meaningful engagement with regulators
suchOfgem and industry bodies helps us to
understand their expectations, enables us to
promote best practice and ensure we align our
compliance programmes to meet the latest
guidance and regulations. Engagement can
also help inform future scenario planning
andimpact analysis in response to potential
reforms. It can also provide us with an
opportunity to give feedback that may help
shape future regulations and guidance.
Government, political bodies, and regulators
63
Drax Group plc Annual report and accounts 2025
Governance
Corporate Governance report: Stakeholder engagement continued
CASE STUDY
Board decision-making and
stakeholder considerations
In 2025, one of the Board’s key decisions was
to enter into a low carbon dispatchable CfD
with the UK Government for the operation
ofDrax Power Station beyond 2027 when
current support regimes expire. The
agreement allows Drax Power Station to step
in to increase generation where there isn’t
enough electricity, potentially avoiding the
need to burn more gas or import power from
Europe. When there’s too much electricity,
Drax can turn down and help to balance the
system. This will help to support the rollout of
intermittent renewable generation across the
UK and provide options to ensure that Drax
Power Station continues to play a long-term
role in the regional economy and UK energy
system. The agreement was a culmination of
extensive negotiations over many months with
the UK Government and is the next step in
operating Drax Power Station beyond 2027.
During the decision-making process, the
Boardconsidered the opportunities and risks
associated with the agreement. The Board
alsoextensively considered the impact the
agreement would have on stakeholders. In
itsdeliberations, the Board recognised the
benefits of concluding the agreement, most
notably the agreement would create
certainty for shareholders, support energy
security, support the UK Government in
meeting its decarbonisation targets, protect
jobs, protect the biomass supply chain, and
create future opportunities for suppliers.
The Board also acknowledged that its cost
base and the way the biomass units operate
from 2027 would need to evolve. This
includes the people skills and organisational
design required for effective operation of
the units and the arrangements that would
need to be in place to support colleagues
affected by such change.
The low carbon dispatchable CfD includes
enhanced biomass sustainability provisions,
requiring that all biomass used at Drax
Power Station is sustainably sourced and
verified through monitoring, reporting,
andverification requirements, including
auditing of the biomass supply chain.
TheBoard welcomed these enhancements
to our existing procedures to help deliver
the Group’s long-term commitment to
achieving positive outcomes for the climate,
nature and people.
The Board of Directors take into account stakeholder
considerations when making impactful strategic decisions.
64
Drax Group plc Annual report and accounts 2025
Communities
Key issues
– Building relationships with the wider
community
– Community-centric social investment
– Community-centric economic development
Principal risks
– Drax impacts on local communities
– Interaction with Indigenous people and
minority groups
– Perceptions of industrial activity
Engagement
Engagement with the communities in which
we operate is integral to how Drax builds
constructive relationships, understands local
perspectives, and identifies opportunities to
contribute positively to local economic and
social outcomes. Community engagement
activities are led by local teams, with oversight
and regular updates provided to senior
management and the Board by the CEO and
Chief Sustainability Officer.
In the US, Drax leadership and site-based
teams maintained engagement with local
stakeholders near our operations.
InNovember 2025, the CEO and CFO met with
the Mayor of Gloster, Mississippi, to discuss
local matters and the ongoing relationship
between Drax and the Gloster community.
There is also an established Community
Advisory Panel that meets regularly. In
Louisiana, our community engagement team
held listening sessions and focus group
meetings with residents and community
leaders in LaSalle and Morehouse Parishes,
supporting open dialogue on community
priorities and informing ongoing engagement
activities. In Alabama, engagement expanded
to include meetings with local schools and
educational institutions focused on education
and workforce development needs.
In Canada, Drax continued engagement with
Indigenous Peoples through its Indigenous
Relations team. During 2025, the team
engaged with the Osoyoos Indian Band and
theNazko First Nation to support relationship-
building and explore potential fibre
procurement opportunities aligned with shared
economic and environmental objectives.
In the UK, we partnered with ‘Up for Yorkshire’
to convene focus groups with members of the
local community to understand their priorities
and concerns. These conversations help us
prioritise local funding and engagement. Also
in2025, following positive feedback from the
community, our teams at our biomass, hydro
and run-of-river plants provided educational
tours to local schools and in-school STEM
education. Some of our colleagues also provided
mentoring for school children interested in
pursuing careers in the energy sector.
Drax Foundation
The Drax Foundation and the Drax Community
Fund support our broader community
investment strategy by providing targeted
funding to non-profit organisations in the
regions where we operate. These programmes
focus on improving equitable access to STEM
education, supporting community and
nature-based green spaces, and addressing
fuel poverty and energy efficiency.
During 2025, Drax provided funding to a
rangeof non-profit organisations, including
scholarship support for four Historically Black
Colleges and Universities in the southern
United States and grants to 17 STEM
education organisations. In Canada, funding
continued for First Nations-led nature
programmes, and in the UK, Drax completed
athree-year, £4 million investment in energy-
efficiency measures in local schools and
continued to support people experiencing fuel
poverty in communities near our operations.
For more information on the Drax
Foundationvisit www.drax.com/about-us/
our-communities/.
Corporate Governance report: Stakeholder engagement continued
65
Drax Group plc Annual report and accounts 2025
Governance
Corporate Governance report: Stakeholder engagement continued
CASE STUDY
Engaging
withexperts
Our Independent Advisory Board (IAB) is
avalued part of our engagement with
scientists and forestry experts.
The IAB Chair and Vice-Chair have an
annualdinner with the Board as well as with
members of the Executive Committee to
share their external perspective on evolving
science and corporate reputational issues.
The IAB advises Drax on the science and
evidence surrounding our three sustainability
outcomes of Climate, People, and Nature
Positive, and in particular the responsible
sourcing of biomass that underpins them.
The IAB provides independent scrutiny,
challenge, and advice. It makes
recommendations on how we can improve
various initiatives within our sustainability
strategy, including best practice on ensuring
that we source biomass sustainably.
In 2025, following discussions in 2024 relating
to our Nature Positive initiatives, the IAB
continued to provide advice on our nature
strategy. The IAB provided suggestions
onhow to enhance the Company’s
understanding of potential risks and
opportunities related to invasive species,
which are a recognised driver of biodiversity
loss by the Intergovernmental Science-
Policy Platform on Biodiversity and
Ecosystem Services, the leading
independent scientific body on biodiversity.
Drax is now exploring this topic in greater
detail through our partnership with Fera.
In 2025, the IAB considered and provided
feedback on the new Drax Biomass Tracker
and Forest Carbon Mapping Tool and
continued reviewing the Evidence Hub.
TheIAB also recommended strengthening
our use of externally commissioned and
third-party authored studies. This input
directly informed new publications,
including two released in late 2025.
For more information, visit www.drax.com/
sustainability/.
Key issues
– Contributing to science
– Operating ethically
Principal risks
– Credibility
Engagement
External experts can help us gain new
insights to evolving science, industry
trends and market dynamics that help us
tobroaden our knowledge and consider
different perspectives. For example, in
February 2025, we announced our new
Sustainability Framework, our enhanced
approach to delivering on sustainability
andmanaging our impact on the climate,
nature and people.
As part of developing this framework,
weconsulted with a wide range of
stakeholders including scientists and
academics, to ensure we grounded the
framework in credible science. We also
liaised with investors and eNGOs
(environmental non-governmental
organisations) and our own colleagues.
For more information see from page 18.
Experts and NGOs
66
Drax Group plc Annual report and accounts 2025
Corporate Governance report continued
Division of responsibilities
Principles of the UK Corporate
Governance Code
F The role of the Chair
G Board composition
H Non-Executive Directors
I The Company Secretary and Board
resources
The Board comprises the Chair of the Board, two Executive Directors and six independent Non-Executive Directors, including one who is appointed
as the Board’s Senior Independent Director. The Chair and the Non-Executive Directors were all considered independent on appointment, and the
Board is satisfied that appropriate independence and objectivity has continued to apply.
The Chair leads the Board and is responsible for its overall effectiveness in directing the Company, promoting a culture of openness and debate.
There is a clear division of responsibilities between the leadership of the Board and the executive leadership of the Group’s business.
Non-Executive Directors routinely scrutinise performance against business objectives (including financial and strategic in addition to other measures
in the Group Scorecard). They hold management to account while providing challenge and guidance in an open and constructive environment.
During regular Board meetings, the Chair and Non-Executive Directors meet without the Executive Directors being present, giving them the
opportunity to consider and discuss matters in a separate forum. The Audit Committee, which the Board Chair attends by invitation, also provides
agenda time to discuss matters in the absence of management. The Audit Committee members also routinely meet with the external and internal
auditors, in the absence of management.
The Board considers additional external appointments involving any Director, taking into account the additional demands on their time. No Executive
Director has a non-executive position in a FTSE company.
All Directors have full access to the services of the Group Company Secretary, who works closely with the Chair. This ensures the Board has the
policies, processes, information, time and resources it needs to function effectively and efficiently. The whole Board approves the appointment or
removal of the Group Company Secretary.
Role of the Board
The Board sets the Group’s purpose, strategy and business
model for long-term value creation and also determines its
appetite for risk and risk management policies, taking into
account stakeholder views on these matters.
The Board assesses and approves the annual business plan
which includes its budget and challenges management on the
skills and resources available to support delivery of the strategy.
The Board is responsible for considering investment in large-
scale projects, proposals for acquisitions, disposals, and other
transactions outside ordinary delegated limits, and the Group’s
capital structure and capital allocation policy.
The Board regularly reviews the Group’s governance structures,
to ensure they are appropriate as the business evolves. Reviews
may also include considering composition and responsibilities
allocated under the relevant terms of reference.
How the Board functions
During the formal meetings of the Board, the Chair and the
Non-Executive Directors meet in private, which allows for the
open exchange of views. As part of the formal process, the CEO
reports on key business and operational matters, starting with
safety, and the CFO reports on financial aspects pertaining to
theGroup. Reports from senior management across the Group
include stakeholder considerations. The Chair is responsible for
ensuring adequate time is allocated to each agenda item, to
support effective discussion and challenge by Directors. The
Board also holds dinners before most of the meetings to allow
more informal consideration of topics. From time-to-time other
members of the executive and management, advisers or external
speakers may contribute to these sessions.
The Board receives updates on macro-economic factors
influencing the markets in which the Group operates and how
these might impact the realisation of the Group’s objectives.
TheBoard also receives industry, regulatory and topical updates
frominternal specialists as well as external experts and advisers.
In 2025, the Board received reports on cyber security risks,
including training modules produced by the National Centre for
Cyber Security. The Board also received training delivered by both
internal and external experts. For more information see page 69.
The core activities of the Board and its Committees are planned
on a forward agenda that the Chairs of each Committee review.
The Group Company Secretary maintains a list of matters arising
from each meeting and reports on how these are being
addressed at subsequent meetings. The Group Company
Secretary also advises the Board on governance matters,
ensuring good information flows within the Board, its
Committees, the Executive Committee and senior management.
The Group Company Secretary assesses and advises the Board
on compliance with the Listing, Prospectus, Disclosure Guidance
and Transparency Rules, the Corporate Governance Code and
the Companies Act. An important part of this is effective
collaboration with other parties across all Group functions.
The Board and Committees are authorised to obtain legal or
other professional advice as necessary to perform their duties.
Thisincludes securing the attendance of external advisers
atmeetings and seeking information from colleagues.
The Company’s Articles of Association (the Articles) give the
Directors power to authorise conflicts of interest when
presented with such matters for their review. The Board has
aneffective procedure to identify potential conflicts of interest,
67
Drax Group plc Annual report and accounts 2025
Governance
Corporate Governance report continued
consider them for authorisation and record them. In 2025, no
conflicts of interest were identified. The Articles also allow the
Board to exercise voting rights in Group companies without
restriction. The Articles are available on the Group’s website at
www.drax.com.
Time commitment
Directors’ commitments outside of Drax are kept under review to
make sure they have sufficient time to dedicate to the business
and effectively perform their role. Under the terms of the Chair’s
letter of appointment, the Chair is expected to commit up to 100
full days a year to this role. Under the Non-Executive Directors’
letters of appointment, each is expected to commit at least 15
full days a year. That includes attendance at Board meetings, the
AGM, one annual Board strategy event, and at least one site visit
each year.
In addition, Non-Executive Directors are expected to devote
appropriate preparation time ahead of each meeting. The time
commitment expected as a member of the Audit, Nomination
and Remuneration Committees is an additional three to four full
days a year in each case. However, in practice, considerably more
time is devoted, particularly by the Chairs of the Committees,
dueto the complexity of matters to be considered.
Executive Directors may, with the prior approval of the Chair,
take on one additional role in an external listed company. Neither
one of the Executive Directors has taken on such a role. Non-
Executive Directors may, with prior approval from the Board, take
on additional roles provided the individual can continue to devote
sufficient time to meet the expectations of their role.
Non-Executive Directors are encouraged to undertake visits
toDrax operations and spend time with management and the
workforce. This is designed to build and then maintain their
knowledge of the developing business and help them to
understand the operational challenges. You can read more
aboutthis on page 61.
Directors’ development and induction
To assist the Board in undertaking its responsibilities, a
programme of training and development is available to all
Directors. Non-Executive Directors also receive an annual
training allowance. Training needs are assessed as part of the
Board evaluation procedure.
Training includes presentations from management, and informal
meetings, that help to develop an in-depth understanding of the
business and sectors in which we operate. Such training is
intended to equip the Non-Executive Directors with insight into
how the Drax approach compares with the practices of its peers.
All new Directors receive a tailored induction programme. It
includes meetings with key managers, international site visits,
briefings on key operational matters and training with external
and internal providers on Board procedures and governance
matters. Following his appointment as CFO in September 2025,
Frank Lemmink undertook an induction programme. For more
information see page 59.
Throughout 2025, the Directors also had access to the advice of
the Group Company Secretary. Directors may take independent
advice at the Company’s expense, when they judge it necessary
to discharge their responsibilities effectively. No such
independent advice was sought in 2025.
Non-Executive Director independence
None of the Non-Executive Directors who served during 2025
had any material business or other relationship with the Group.
Inaddition, there were no other matters likely to affect their
independence of character and judgement. The Board recognises
that length of service is an important factor when considering the
independence of Non-Executive Directors. The Board considers
all theNon-Executive Directors to be independent.
Terms of reference
The Board has a Schedule of Matters Reserved for its decisions,
and formal terms of reference for its Committees. The terms of
reference of the Board Committees are available to view on the
Group’s website at www.drax.com.
Matters not specifically reserved to the Board, and its
Committees under their terms of reference, or to shareholders
inGeneral Meeting, are delegated. Delegation is to the Executive
Committee, or otherwise in accordance with a schedule of
delegated authorities.
Position Role
Chair
Responsible for leading and managing the Board, its effectiveness, and governance. Makes sure Board members are aware of, and understand, the views and objectives of
major shareholders and other key stakeholders. Helps to set the tone from the top in terms of the purpose, goal, vision and values for the whole organisation.
CEO
Responsible for the day-to-day management of the business, developing the Group’s strategic direction for consideration and approval by the Board and implementing the
agreed strategy.
CFO
Supports the CEO in developing and implementing strategy. Responsible for the financial and risk management and performance of the Group.
Senior Independent
Non-Executive Director
Acts as a sounding board for the Chair and a trusted intermediary for other Directors. Available to discuss any concerns with shareholders that cannot be resolved through
the normal channels of communication with the Chair or the Executive Directors.
Independent Non-
Executive Directors
Responsible for bringing sound judgement and objectivity to the Board’s deliberations and decision-making process. Constructively challenge and support the Executive
Directors. Monitor the delivery of the strategy within the risk and control framework set by the Board.
68
Drax Group plc Annual report and accounts 2025
2024 Action Progress during 2025
Enhance the
succession planning
process
In 2025, we evolved our succession planning programme. For more information, see page 73 in the
Nomination Committee report.
Review director
training requirements
Given Drax is a critical part of the UK’s energy infrastructure and acknowledging the increase in
cyber attacks globally, the Board sought training to deepen their knowledge of the current cyber
security landscape. In January 2025, the Board received a presentation delivered by members
fromthe National Cyber Security Centre (NCSC) on geopolitical tensions and the impact on cyber
security. The Board also received a presentation from external experts, including external lawyers,
on matters related to cyber incident response capability.
Directors also received refresher training on the Board’s and Company’s obligations under the
UKand EU Market Abuse Regulations, delivered by the Company’s external lawyers. This covered
Company disclosure and personal obligations under the Market Abuse Regulations. Maintaining
awareness of obligations around determining and disclosing inside information is critical,
particularly when the Company is going through a period of extensive change.
Develop a global
diverse pipeline of
leaders
Throughout 2025, the Board and Nominations Committee continued to focus on ensuring all named
successors are credible and viable whist improving the diversity of our talent pipeline. Atthe
Executive Committee level, there was an increase in the percentage of female leaders, up from
c.33% in 2024 to c.38% in 2025. More broadly, since 2024 we have seen a increase in the portion
ofpeople of colour at the level of Executive Committee and their direct reports, from c.6% to c.8%.
Corporate Governance report continued
Board and Committee performance review
The Board conducts performance reviews annually.
The 2024 review was an internal evaluation supported by each
Board member completing a questionnaire which focused on
areas including culture and values, enabling Board decisions,
sustainability and governance.
In 2025, in accordance with Provision 21 of the Code, an external
board performance review was facilitated by Hanif Barma of
Board Alchemy. Hanif was engaged, for continuity, to evaluate
the performance of the Board, its Committees, the Chair, and
each individual Director. The evaluation was conducted between
July and November 2025 and the results reflected Board
Alchemy’s feedback from interviews and observing the July
Board Meeting.
Since Hanif Barma had also conducted the 2019 and 2022
external evaluations, appropriate safeguards were discussed to
support independence and balance. In that context, Alex Walker
of Board Alchemy, was invited to contribute, ensuring the
evaluation process benefitted from a fresh perspective. Board
Alchemy has noother connection with the Group or its individual
Directors. Overall, the 2025 performance review concluded
thatthe Board is effective. It has adapted well to the evolving
landscape and should continue to elevate discussions on
strategic and operational issues. Asummary of the key
recommendations from the 2025 external performance review,
and proposed actions, isprovided below:
2025 Recommendations 2026 Action Plan
Director induction
process
Activities to be planned as part
of site visits toensure new
Directors are able to gain a
realunderstanding of Drax’s
purpose, culture and strategy.
Board administration
Board Committee memberships
to be reviewed to ensure
continued effective governance
in all aspects.
Cadence of Board and
Committee meetings to be
reviewed and agendas to be
restructured to provide an
optimal mix of strategic,
operational and governance
items.
Deep dives
Topics to be agreed and
scheduled to enable Directors
to explore in detail the areas
ofstrategic focus for the Group.
Stakeholders
Continuous reassessment
ofstakeholder needs and
perspectives, enhancing
engagement inareas requiring
additional attention.
69
Drax Group plc Annual report and accounts 2025
Governance
Corporate Governance report continued
Board attendance 2025
The table below shows the number of meetings held and the Directors’ attendance during 2025.
Director
Date appointed as a Director
and member of the Board
No. of scheduled
meetings
(1)
No. of meetings
attended
% of meetings
attended
John Baxter 17 April 2019 8 8 100%
Andrea Bertone 24 August 2023 8 8 100%
Will Gardiner 16 November 2015 8 8 100%
Nicola Hodson
(2)
12 January 2018 3 3 100%
Kim Keating 21 October 2021 8 8 100%
Frank Lemmink
(3)
1 September 2025 3 3 100%
David Nussbaum 1 August 2017 8 8 100%
Erika Peterman 21 October 2021 8 8 100%
Rob Shuter 11 June 2024 8 8 100%
Andy Skelton
(4)
2 January 2019 5 5 100%
Notes:
(1) The number of scheduled meetings that each individual was invited to attend.
(2) Nicola Hodson stepped down from the Board on 23 May 2025.
(3) Frank Lemmink joined the Board on 1 September 2025.
(4) Andy Skelton stepped down from the Board on 1 September 2025 and retired from the Company on 4 December 2025.
Committee attendance 2025
Director
Audit Committee Nomination Committee Remuneration Committee
No. of scheduled
meetings
(1)
No. of meetings
attended
% of meetings
attended
No. of scheduled
meetings
(1)
No. of meetings
attended
% of meetings
attended
No. of scheduled
meetings
(1)
No. of meetings
attended
% of meetings
attended
John Baxter 4 4 100% 4 4 100% – – –
Andrea Bertone – – – 4 4 100% 4 4 100%
Nicola Hodson
(2)
2 2 100% – – – 1 1 100%
Kim Keating
(3)
– – – 3 3 100% 4 4 100%
David Nussbaum 4 4 100% 4 4 100% – – –
Erika Peterman 4 4 100% – – – 4 4 100%
Rob Shuter 4 4 100% – – – 4 4 100%
(1) The number of scheduled meetings that each individual was invited to attend.
(2) Nicola Hodson stepped down from the Board and its Committees on 23 May 2025.
(3) Kim Keating stepped down from the Nomination Committee on 18 June 2025.
Board statistics (As at 31 December 2025)
Female: 37.5
Male: 62.5
Gender diversity (%)
Non-executive: 62.5
Executive: 25
Chair: 12.5
Composition (%)
0–2: 33
3–4: 33
5+: 33
NED tenure in years (%)
70
Drax Group plc Annual report and accounts 2025
Ethics and Business Conduct Committee
Monitors ethical behaviour and practices
acrossthebusiness.
Financial Risk Management Committee
Provides oversight and challenges the effective
management of all financial risks, including trading,
commodity, treasury and currency.
The Executive Committee is responsible for the execution of the Drax strategy and for
the day-to-day management of the business. The Committees listed below support the Executive
Committee in carrying out its duties.
Executive Committee
IT Board
Provides oversight and co-ordination of IT activities
andstrategy, information systems and security risk.
Operating Review Committees (Pellet
Production, Generation and Energy Solutions)
These committees review the operational and
financialperformance of the business.
Group HSE Committee
Reviews and challenges the management of
process and people safety, health, environment and
wellbeing risks.
Sustainability Council
Provides Group-wide oversight and co-ordination
ofsustainability activities, governance,
andreporting.
Corporate Governance report continued
Role of the Executive Committee
The Executive Committee is led by the CEO and focuses on
thedelivery of the Group’s strategy, assesses the adequacy of
the Group’s financial structure and monitors operational and
financial performance. It also considers culture and diversity
andorganisational development including succession planning.
These activities are informed by engagement with the workforce
and external stakeholders, including Governments, regulatory
agencies, and NGOs. There are more details about stakeholder
engagement from page 60.
The Executive Committee develops and considers policies and
procedures that provide an effective framework for operating in
line with required standards, laws and regulations. These policies
and procedures include our Code of Conduct, Supplier Code of
Conduct and Diversity, Equity and Inclusion Policy.
The Executive Committee considers business performance
against the annual plan, and reviews progress in realising
longer-term objectives. It receives reports on the business,
covering financial and non-financial metrics. The latter include
matters affecting the safety and wellbeing of our workforce,
which is the opening agenda item for each meeting.
In 2025, the Executive Committee completed an in-depth review
of all nine Principal Risks; each of which is the responsibility of
one or more members of the Executive Committee. You can
readmore about our principal risk processes from page 41.
The Executive Committee meets formally most weeks, in
addition to holding eight longer form monthly meetings. Where
relevant to agenda items, Committee members receive briefing
papers in advance of meetings. To support specific discussions,
senior managers from within the business also attend.
The Committee meets with management teams during the year
for deep dives into operational and financial performance
matters. Typically, such meetings are held over the course of two
days and allow for a more detailed review of key programmes and
initiatives, to assess delivery against the Group’s strategy.
Biographies of the Executive Committee members are available
on the website www.drax.com.
Compliance Steering Committee
Supports the implementation of the Group’s
Compliance Framework and wider Compliance
Action Plan activities.
71
Drax Group plc Annual report and accounts 2025
Governance
Nomination Committee report
Introduction
Dear shareholders,
I am pleased to present the Nomination Committee Report for
the year ended 31 December 2025. It highlights how the
Committee seeks to ensure that the Board and its Committees
have the appropriate balance of skills, knowledge, experience,
leadership, and diversity to support the Group and its workforce
in delivering our strategy and long-term sustainable success for
our stakeholders.
Board changes
During 2025, the Committee was busy supporting the business
through a period of significant change at both Board level and
within the senior management team. As previously reported,
inDecember 2024 Andy Skelton notified the Company of his
intention to retire and step down as CFO and Executive Director.
Therefore, a key Committee activity in 2025 was seeking a
replacement for Andy. Following a comprehensive search
process, we were delighted to appoint Frank Lemmink as the
new CFO. You can read more about the selection process on
page 74.
Looking further ahead, and as part of orderly succession
planning, in 2025 the Committee commenced the search for
areplacement for David Nussbaum, our Senior Independent
Director, who will have served on the Board for nine years in
July2026. The Committee selected Audeliss to support with the
process, based on its market leading approach to hiring diverse
talent and its strong track record of delivery for Drax. Audeliss
had no conflict which would impact its role. On 13 February
2026, we successfully concluded the search and were pleased
toappoint Mark Clare asNon-Executive Director. We will report
on the search in more detail in the 2026 Committee report.
The Committee also considered the re-appointment of John
Baxter for a third and final term of three years. John brings a
deep knowledge and understanding of the energy sector,
engineering, and safety, and is a huge asset to the Board.
Composition, succession and evaluation
Principles of the UK Corporate
Governance Code
J Appointments to the Board and
succession planning
K The skills, experience and knowledge
ofthe Board and Committees
L Board evaluation
Appointments to the Board are subject to a formal, rigorous and transparent
procedure. Effective succession planning is in place for the Board and senior
management. Appointments and succession plans are based on merit and seek
to promote diversity, inclusion, and equal opportunity.
All new Directors undergo a thorough induction programme.
The Nomination Committee reviews the Group’s succession plan, identifying
colleagues who have the potential to progress to more senior roles inone to
fiveyears. Based on merit and objective criteria, the review focuses on various
aspects such as technical skills, experience, behaviours, attitudes, and diversity.
This ensures the business has the right leaders in place to deliver our purpose
and strategy. The most recent review was conducted by the Committee in
December 2025.
All directors seek re-election at (or following their initial appointment to the
Board, election at) the Annual General Meeting.
An external performance evaluation of the Board and its Committees was
conducted in 2025.
At a glance
During 2025 the Committee was busy
supporting the business through a period
ofsignificant change at both Board level
andwithin the senior management team.”
Andrea Bertone
Chair
Committee members
– Andrea Bertone (Chair)
– John Baxter
– David Nussbaum
Attending by invitation
CEO, and others as required. The Group Company Secretary
is Secretary to the Committee.
Terms of reference
The Committee’s terms of reference are reviewed annually,
most recently in February 2025. The terms of reference are
available on the Group’s website at www.drax.com/
governance
72
Drax Group plc Annual report and accounts 2025
Nicola Hodson, Remuneration Committee Chair, stood down
asaNon-Executive Director in May 2025, and the Committee
considered finding her replacement as Chair of the Remuneration
Committee. Following a review, we recommended to the Board
that Kim Keating be appointed as the new Committee Chair,
given her experience and knowledge gained as a Remuneration
Committee member since October 2021. The Board approved
the appointment, effective from June 2025. Given the scope of
the role of Chair of the Remuneration Committee, Kim stepped
down as a member of the Nomination Committee in June 2025.
Finally, the Committee considered the appointment of a new
Group Company Secretary, following the retirement of Brett
Gladden in December 2025. The Board and I would like to thank
Brett for his support and guidance over the years. Group General
Counsel, Hillary Berger, has assumed the role of Group Company
Secretary on an interim basis.
Management changes
During 2025 we reviewed the development of talent within our
senior leadership team and received information about changes
of roles and colleagues on the Executive Committee. As reported
in the 2024 Committee report, our Chief People Officer, Karen
McKeever, announced in December 2024 her decision to leave
Drax during 2025 after nearly five years with the Group. Karen
agreed to remain with Drax until we identified a replacement. In
September 2025, we appointed Farnaz Ranjbar as Chief People
Officer. Farnaz joined us from FTSE 250 company Coats Group
plc, where she was Chief Human Resources Officer. Farnaz is a
transformational HR leader with a track record of building great
places to work, has 20 years’ experience at senior level across
arange of industries and geographies, and a background in law
and business. Karen left Drax in October 2025.
In September 2025, our Chief Innovation Officer, Jason Shipstone,
retired and Lee Dawes, Chief Operations Officer, assumed
responsibility for the Innovation function. Also in September
2025, we promoted Hannah Steedman, Chief Strategy and
Transformation Officer, to the Executive Committee. This reflects
the importance, scope, and scale of our transformation and
change management programmes. Finally, Laurie Fitzmaurice,
Elimini President, left the business in October 2025. Following
her departure, we removed the role of Elimini President and the
role no longer has a seat at the Executive Committee, reflecting
the reduction in the Elimini business.
I continue to be impressed by the passion and pride that our
colleagues have in delivering our strategy and, alongside that,
delivering positive outcomes for nature, people, and the climate.
We’re proud of the contribution our colleagues make, and the
Committee and I seek to ensure we have the right people in
leadership roles, with the right mix of skills and experiences,
setting the tone from the top.
Skills and availability
The main focus of the Committee is examining the skills,
knowledge and experience of Board Directors and ensuring
thatthe Company has the appropriate leadership in place to
deliver its long-term strategy. During the year, the Committee
commenced a skills matrix review which captures the
competencies across our Board. The Committee is satisfied
thatDirectors have the right balance of skills, experience, and
diversity across key areas. These include knowledge of the
energy market, government policy, diversity, sustainability,
technology, clean energy, M&A, large capital projects, culture,
and safety. These skills provide for an environment that
encourages thoughtful deliberations, as well as constructive,
challenging, and insightful Board and Committee discussions.
Time commitments
During 2025, the Committee also assessed Directors’ external
commitments. We recognise that active external experience has
value for market context and current best practice. However,
wealso want to be clear that Directors should not assume
commitments which risk impacting their ability to effectively
fulfil their role as a Director at Drax. The Committee is attentive
to such matters and is comfortable that Directors are operating
within the guidelines set by the Code. and general industry
standards for company appointments. Weare also satisfied
thatDirectors are meeting our own expectations of the
demandsof their role in supporting Drax.
Nomination Committee report continued
Succession planning
The Nomination Committee has a regular programme to ensure
we consider orderly succession planning both for the Board
andCommittees and at senior leadership levels. This includes
theidentification of candidates based on merit and objective
criteria, and taking into account the need for diversity such
asgender, social and ethnic backgrounds, cognitive skills,
andpersonal strengths.
The annual reviews include identifying colleagues with the
potential to progress into more senior roles, across a timeframe
of one to five years and incorporates factors such as technical
skills, experience, behaviours and attitudes.
During 2025 we took steps to evolve our succession
programme.We focused on CEO and Executive Committee
succession, ensuring we build and manage development plans
tostrengthen our bench and enhance the readiness ofour
internal talent pipeline.
We also strengthened our leadership talent pipeline in 2025,
through a combination of growth opportunities, external
recruitment, and 360 assessments and feedback against our
newly implemented leadership competencies.
In 2026, we will expand our focus on succession planning and
leadership development on critical roles and the talent pipeline
into them. These critical roles willinclude those that have a
significant strategic importance, directly influencing the success,
financial performance, growth, and sustainability of Drax.
Theywill also include roles that deliver significant reputational
accountabilities, influence the compliance of Drax, enhance
stakeholder value, or oversee the critical functions of our
business in an operational setting, ensuring safety and efficiency.
73
Drax Group plc Annual report and accounts 2025
Governance
Nomination Committee report continued
The search for a new CFO
In December 2024, Andy Skelton announced his intention to
retire from the Board and from his role as CFO. We began the
search process for a new CFO in December 2024. Led byme,
the Nomination Committee assessed potential external firms
with the capability to conduct an international search for a
diverse range of candidates. Following this assessment, we
appointed Egon Zehnder in February 2025. Egon Zehnder is
signed up to The Voluntary Code of Conduct for Executive
Search Firms (which ensures it factors diversity considerations
into its recruitment advice), and has no other engagement with
the Group or any other conflict which would impact its role.
Egon Zehnder supported the refinement of our search criteria
for suitable candidates. This included experience of running
the financial affairs of a business (with revenues of up to £3bn,
for five or more years) in a complex environment, and a deep
understanding of government policy. The criteria also included
experience of the economic environment and energy market
trends, and a strong alignment to our purpose, culture, and
values. The Group continues to undergo significant change,
asan integral part ofimplementing the Group’s strategy, and
the Committee therefore considered carefully the relative
strengths of candidates who could help steer the Group
through a period oftransformation.
From the long list of candidates provided by Egon Zehnder, six
candidates were selected in April 2025 to progress to the next
stage, with the CEO conducting the first interviews. Following
these interviews, three candidates proceeded to the second
stage, which comprised two separate panel interviews: one
with the Transformation Director and Chief Operating Officer,
followed by one with the General Counsel and Chief
Commercial Officer. Following assessment and feedback from
these panel interviews, we selected two candidates to
progress to the final stage.
We completed final interviews in May and June 2025 through
one-to-one meetings with the Senior Independent Director,
Audit Committee Chair, the incumbent CFO, and me. In these
interviews, the candidates presented their perspectives on
theCFO role and had a further opportunity to ask questions.
Inaddition, Egon Zehnder conducted psychometric testing
ofthe candidates for the Committee’s consideration.
Following the conclusion of this process, the Nomination
Committee recommended appointing Frank Lemmink to the
Board. We based this recommendation on Frank’s impressive
academic and professional background including an MBA in
Finance and Economics and more than two decades at Shell.
Most recently he was Executive Vice President Finance
Integrated Gas and Upstream. In addition, we considered
Frank’s experience in leading through change and
transformation, and his people-centric leadership style, to
behighly desirable given our transformation agenda and the
evolution of our strategy. In July 2025, the Board considered
and approved the appointment of Frank as CFO effective
1September 2025. Andy Skelton remained with the Company
until 4 December 2025 to support the succession process.
Youcan read more about Frank’s induction on page 59.
Andrea Bertone
Chair
74
Drax Group plc Annual report and accounts 2025
Nomination Committee report continued
Diversity and Inclusion
We recognise the importance of diversity at Board and Committee level and throughout the Group.
Diversity of background, skills, thought, and perspective, as well as gender and ethnic diversity, are
important to providing an appropriate breadth of insights, debate, and challenge. Ultimately, such
diversity contributes to more effective decision-making and good governance.
The Board and its Committees have a Board Diversity Policy which we review and update annually.
The policy informs the Directors in enabling a rounded Board and Committee structure, comprising
talented and dedicated Directors with a diverse mix of expertise, experience, skills, and
backgrounds. This mix reflects the business environments in which the Group operates. The policy
reflects the FCA Board diversity targets as well as the recommendations by the FTSE Women
Leaders Review and the Parker Review. More information on the skills and backgrounds of the
Company’s Directors is on pages 56 to 58.
How the Board meets the FCA Board diversity targets, as at 31 December 2025 (our chosen
reference date), is set out below. Incollecting the data tomeasure progress against the three
targets, we asked Board Directors toself-report against the gender and ethnicity categories as
defined by the Office for National Statistics.
1. At least 40% of the Board should be women.
Not Met: As at 31 December 2025, 37.5% of the Board were women. The percentage of women
on the Board dropped from c.44% to 37.5% in May 2025, following the departure of Nicola
Hodson.
2. At least one of the senior board positions (Chair, Chief Executive Officer (CEO), Chief Financial
Officer (CFO) or Senior Independent Director (SID) should be a woman.
Met: The Board has one senior board position occupied by a female.
3. At least one member of the Board should be from an ethnic minority background excluding
white ethnic groups (as set out in categories used by the Office for National Statistics).
Met: The Board has one Director from an ethnic minority background.
Gender representation on the Board and Executive Management (1)
Number of
Board members
Percentage
of the Board
Number of senior
positions on the
Board (CEO, CFO,
SID andChair)
Number in
executive
management
Percentage
of executive
management
Men 5 62.5% 3 5 62.5%
Women 3 37.5% 1 3 37.5%
Other categories 0 0% 0 0 0%
Not specified/prefer
not to say 0 0% 0 0 0%
Ethnicity representation on the Board and Executive Management (1)
Number of
Boardmembers
Percentage
of the Board
Number of senior
positions on the
Board (CEO, CFO,
SID andChair)
Number in
executive
management
Percentage
of executive
management
White British or other
White (including
minority white groups) 6 75% 3 7 87.5%
Mixed/Multiple Ethnic
Groups 0 0% 0 0 0%
Asian/Asian British 0 0% 0 0 0%
Black/African/
Caribbean/Black British 1 12.5% 0 0 0%
Other ethnic group 0 0% 0 1 12.5%
Not specified/prefer
not to say 1 12.5% 1 0 0%
(1) As at 31 December 2025
75
Drax Group plc Annual report and accounts 2025
Governance
Nomination Committee report continued
Diversity
The table below shows the gender and ethnicity representation on the Board, and in the wider
workforce, as at 31 December 2025.
Gender diversity of the Board and wider workforce
Gender
Male
No. %
Female
No. %
Total
No. %
Board members 5 62.5 3 37.5 8 100
Senior managers
(1)
41 66 21 34 62 100
All employees
(2)
2,087 72 825 28 2,912 100
Total 2,12 8
(3)
71.5 846 28.5 2,974 100
(1) Direct reports of the Board (i.e. Executive Committee), their reports (not including PA’s and equivalent) and subsidiary entity
directors.
(2) Excluding Board members and senior managers.
(3) Two Executive Directors are also members of the Executive Committee (“Senior Management”). They are included in both
sets of figures to ensure the correct diversity is reflected, but have been removed from the total to ensure the correct
headcount is reflected.
In accordance with Parker Review guidance, during 2024 we set a target of 5% of senior
management positions globally to be occupied by ethnic minority executives by 2027. We are
pleased to report we have achieved an increase in representation from 3% to 8%, We will review
progress in 2026 to decide whether our targets should evolve.
Non-Executive Director re-appointment
Under the Board’s policy, Non-Executive Directors are appointed for an initial term of three years,
which can be renewed by mutual agreement. To recommend that each Director be put forward
forre-election at each annual general meeting, the Board must be satisfied with each Director’s
performance and commitment. The Board will not normally extend the aggregate period of service
of any independent Non-Executive Director beyond nine years. Also, the Board will review any
proposal to extend a Non-Executive Director’s aggregate period of office beyond six years.
In 2025, the Board considered the re-appointment of John Baxter for a third and final term of
threeyears. The Board considered his skills and contribution, together with the feedback from the
evaluations of the Board and Committees. On the recommendation of the Committee, the Board
approved John’s re-appointment, and there are details about his areas of experience on page 58.
Committee evaluation
During 2025, an external Board evaluation was conducted, which included an assessment of the
Committee’s effectiveness. I am pleased to report that the evaluation concluded the Committee
operates effectively providing good support to the Board
Renewal and re-election
Any newly appointed Director may hold office until the first AGM following their appointment.
Atthat meeting, they must submit themselves for election by shareholders.
In accordance with the Company’s Articles of Association, and in line with the recommendations
ofthe Code, each of the Directors will retire annually and offer themselves for re-election by
shareholders at the AGM. The evaluation and review of the Board and its Committees, described
above, concluded that each Director continues to demonstrate commitment to, and management
and business expertise with in their role. They continue to perform effectively.
Accordingly, Andrea Bertone, John Baxter, Will Gardiner, Kim Keating, David Nussbaum, Erika
Peterman, and Rob Shuter will all retire and offer themselves for re-election at the 2026 AGM.
Frank Lemmink and Mark Clare, having joined the Board since the last AGM, will each be seeking
election by shareholders at the 2026 AGM.
The Executive Directors’ service contracts and Non-Executive Directors’ letters of appointment
areavailable for inspection (by prior arrangement) during normal business hours at the Company’s
registered office. They will also be available for inspection at the venue of the AGM, before that
meeting takes place. Details are included in the Notice of Meeting.
During the year, I met regularly with the Non-Executive Directors in the absence of the Executive
Directors. Separately, the Senior Independent Director held a meeting with the Non-Executive
Directors without me being present, as required by Provision 12 of the Code.
This report was reviewed and approved by the Nomination Committee.
Andrea Bertone
Chair of the Nomination Committee
25 February 2026
76
Drax Group plc Annual report and accounts 2025
Audit Committee report
Introduction
Dear shareholders,
On behalf of the Audit Committee, I am pleased to present our
report for the 2025 financial year.
This report sets out the key activities and focus of the Committee
during 2025 as we continue to provide critical oversight and
challenge over the judgements made by management in the
treatment of the Group’s financial reporting, the Group’s internal
controls and risk management processes, oversight of the
external auditors, as well as oversight of our regulatory
obligations, including from our industry regulator (Ofgem) and
under the Network and Information Systems (NIS) Regulations.
Internal controls and Code changes
The Committee regularly reviews and considers the
effectiveness of the Group’s internal controls. We received
updates during the year on the work underway to prepare for
thechanges to the Code, specifically the new requirement in
Provision 29 for the Directors to formally declare that the Group
has appropriate systems to monitor and review the effectiveness
of material internal controls and risk management frameworks.
While the change only applies for financial years commencing
on1 January 2026, during 2025 significant work was undertaken
to define and map the Group’s material controls which are
fundamental to mitigating the Group’s Principal Risks. In July
2025, the Committee was updated on progress on establishing
an assurance map for each material control, and in the second
half of 2025 a ‘dry-run’ of effectiveness testing was undertaken,
the results of which were shared with the Committee in
December 2025, together with an update on preparations for
ourinitial disclosure in the 2026 Annual report and accounts.
TheGroup’s Internal Auditor undertook a review of the business’
preparations for the incoming requirements and communicated
to the Committee in December 2025 that we are on track tobe
able to make the relevant declaration and there was seen to be a
good level of management understanding of the requirements.
Risk Management
The Committee continued to evaluate the appropriateness
ofcontrols and mitigation activities in responding to these
challenges. You can read more about this throughout this report
and in the sections on Principal Risks and Uncertainties and the
Viability Statement. Throughout 2025, the Committee monitored
risks and their potential impact on the Group’s strategy and
viability, such as political uncertainty, biomass acceptability, and
challenges in the global pellet supply market. This included the
assessment of emerging risks, particularly as the Group expands
operationally and geographically.
Audit, risk and internal control
Principles of the UK Corporate
Governance Code
M The effectiveness of internal and
external audit functions
N Fair, balanced and understandable
assessment
0 Risk management and internal control
The Audit Committee comprises four independent Non-Executive Directors.
TheCommittee Chair was considered independent on appointment in that role
and has recent and relevant financial experience.
The Audit Committee provides oversight and challenge of the Group’s financial
statements to ensure they provide a fair, balanced and understandable
assessment of the Group’s financial position and performance.
The Board sets the appetite for the nature and extent of the Principal Risks the
Group is willing to take to achieve its long-term strategic objectives, and the
Audit Committee oversees the risk management and internal control framework
and processes to ensure they are effective. Details of the approach to risk
management, the process controls and principal risks, together with mitigation
strategies, appear on pages 41 to 48.
At a glance
The Committee continues to provide
criticaloversight and challenge over the
efficacy ofgovernance and how that
supportsthe deliveryof the strategy.”
Rob Shuter
Chair
Committee members
– Rob Shuter (Chair)
– John Baxter
– David Nussbaum
– Erika Peterman
The Board is satisfied that the Committee’s membership
hasthe appropriate level of independence, skills, and recent
and relevant financial experience. Rob Shuter is a chartered
accountant (South Africa) and has been a CFO in listed
company environments. His experience in capital allocation,
risk, finance, and M&A is highly relevant given the activities
of the Group and in the performance of his role as Chair of
the Audit Committee. David Nussbaum is a chartered
accountant who has served in several senior financial roles.
Details of the skills and experience of the Committee
members can be found on pages 57 to 58.
Attending by invitation
Chair of the Board, CEO, CFO, Group Financial Controller,
internal auditor (KPMG), external auditor (PwC), Group
General Counsel, and others as required. The Group
Company Secretary is Secretary to the Committee.
77
Drax Group plc Annual report and accounts 2025
Governance
The Committee’s understanding with both the external and
internal auditor is that, if they should at any time become aware
of any matter giving them material concern, they are able to
promptly draw it to the Committee’s attention via the Chair
ofthe Committee. No such issues were raised during 2025.
The Committee believes that the Group has a strong control
andcompliance environment, and has transparent and accurate
reporting. I would like to thank the members of the Committee,
the management team, PwC, and KPMG for their continued
support and commitment throughout the year.
This report was reviewed and approved by the Audit Committee.
Rob Shuter
Chair of the Audit Committee
25 February 2026
The Group continues to strengthen its overall risk management
and internal controls around regulation and compliance. As
reported in 2024, following the closure of the Ofgem investigation
into Drax Power Limited’s biomass profiling data, we committed
to undertake an independent audit of its biomass profiling data
for CP22 (April 2023 to March 2024). During 2025, Ofgem and
Drax engaged closely with a range of prospective auditors to
refine the scope of that audit to best ensure the outputs would
meet Ofgem’s needs. Following a competitive tender process, in
September 2025, Ofgem and Drax announced the appointment
of Forvis Mazars as independent external auditor, and we fully
support this independent external audit process, working with
Forvis Mazars and Ofgem. The Committee will continue to monitor
progress against Drax’s commitment to continued development
and improvement of its activities and overall reporting.
NIS compliance
In common with many other businesses, Drax faces evolving
cyber security threats. During discussions with management,
theCommittee and Board provided challenge on the risk
assessment, adequacy of prevailing systems, investment, and
internal controls, as well as making clear their support for
implementing enhancements where deemed necessary. During
2025, management progressed detailed planning to meet the
NIS Enhanced Profile by 2027. The Committee provides oversight
of progress and challenge on this critical project. At the meetings
in April, July, and December 2025, the Committee received
detailed updates on progress to date, and considered the
appropriateness of the scope, timelines, and resourcing.
Fair, Balanced, and Understandable
The Committee seeks to ensure transparent, robust, and
accurate external reporting that covers financial and operational
performance, future prospects, and the wider business controls
required for the day-to-day conduct of the business. The
Committee assesses whether stakeholders can gain a fair and
balanced understanding of how the Group is performing, its
underlying resilience, and the effectiveness of the governance
and controls applied. Through these assessments, as well as
receiving reports from external experts, the Committee also
considers how the Group’s reporting meets expected standards.
The Committee assessed and challenged management in
respectof their annual impairment assessment, including
changes to cash generating units and the impairment charges
recognised and presented as exceptional in the year. A detailed
assessment is set out within the consideration of significant
accounting matters on pages 82 and 83, and the Committee
were keen to understand the assumptions, including the
recoverable amount of related assets, to ensure the charges
recognised were fair andbalanced, and the disclosure is clear
given the significant amounts involved.
We were pleased to advise the Board that the Committee
believed the 2025 Annual report and accounts were fair,
balanced, and understandable, and that the Directors have
provided the necessary information for our shareholders to
assess the Company’s and the Group’s position, prospects,
business model, and strategy. The review process is described
infurther detail on page 84.
As Chair of the Committee, I report to the Board on the
Committee’s activities and considerations following each
meeting. I hold regular meetings with the CFO, external auditor,
and internal auditor, separate from the formal meetings of the
Committee. I also attend planning meetings with those preparing
for forthcoming Committee meetings, to discuss relevant papers
and key matters.
I am pleased to confirm that the Committee has reviewed the
FRC’s Audit Committees and the External Audit: Minimum
Standard during the financial year, and believes that there are
noareas of non-compliance in respect of 2025.
During 2025, an external Board evaluation was conducted,
which included an assessment of the Committee’s effectiveness.
I am pleased to report that the evaluation concluded the
Committee operates effectively, there is a good balance of
contribution and challenge by the Committee members and the
work of the Committee is supported effectively by management
and the Company Secretariat. Further information on
theevaluation can be found on page 69.
Audit Committee report continued
78
Drax Group plc Annual report and accounts 2025
Committee activities in 2025
The Committee follows a programme of work designed to ensure
that sound risk management processes, a robust system of
internal control, and fair and balanced external reporting are all
inplace. In addition, where relevant to activities in the Group
orto reflect changes in applicable regulations or external
conditions, agenda items are incorporated to ensure members of
the Committee have the opportunity to consider and contribute
to an analysis of material issues. The main areas of work
undertaken by the Committee during 2025 at its routinely
scheduled meetings are set out in the table opposite.
Financial and non-
financialreporting
Risk management, internal
controls andfraud risk External audit matters Governance
– Reviewed the full-year
andhalf-year financial
statements, the associated
verification process and
formal announcements.
– Reviewed the external
auditor’s findings in respect
of the full-year and half-year
financial statements.
– Approved key accounting
issues and judgements.
– Approved long-term viability
and going concern
statements.
– Approved the plan and
timetable for the provision
ofthe annual report and
financial statements.
– Considered the accounting
implications of the Group’s
strategic review.
– Recommended to the Board
that the annual report and
financial statements have
been prepared on a fair,
balanced and understandable
basis.
– Reviewed the Group’s
principal risks, likelihood,
mitigation and risk assurance
framework.
– Reviewed the effectiveness
of the Company’s risk
management and internal
controls framework.
– Approved the annual internal
audit plan and required
resources.
– Considered the findings
ofinternal audit reviews
andmanagement’s
responsiveness to the
findings and
recommendations.
– Received assurance on risk
management and internal
controls around health,
safety and the environment.
– Reviewed the performance
of the internal auditor.
– Recommended to the Board
the reappointment of the
external auditors.
– Approved the remuneration
and terms of engagement
ofthe external auditors.
– Approved the scope of the
external audit plan for the
full-year and half-year.
– Reviewed of the
effectiveness of the external
audit processes.
– Reviewed the external
auditor’s independence and
provision of any non-audit
services.
– Reviewed findings from
external audits.
– Reviewed the Committee’s
Terms of Reference and the
Auditor Independence Policy.
– Received updates from the
Ethics and Business Conduct
Committee.
– Received updates from the
whistleblowing officer.
– Received updates on
compliance with the NIS
regulations.
– Approved plans for
compliance with Provision 29
of the Corporate Governance
Code and reviewed
subsequent progress
updates.
– Approved the Group’s annual
tax strategy.
– Received confirmation of
compliance with Audit
Committee Minimum
Standard.
Audit Committee report continued
79
Drax Group plc Annual report and accounts 2025
Governance
Reviewing the effectiveness of the system of risk
management and internal controls
On behalf of the Board, the Committee monitors and evaluates
the effectiveness of Drax’s internal control system. This
encompasses all key controls including financial, operational,
andcompliance as well as oversight of the financial reporting
process. For further information on the Group’s Risk
Management process and the Committee’s role in reviewing
androbustly challenging this refer to page 41.
During 2025, the Committee received quarterly updates on the
Group’s risk management and internal control environment.
Specific topics of review and challenge by the Committee are
detailed below.
Given the industry in which the business operates, the Group
issubject to a large number of regulations, which are complex,
broad ranging in nature, and the subject of intensifying scrutiny.
At each meeting during 2025, the Committee considered the
robustness of the Group’s compliance control environment and
reviewed progress on the programme of work to design and
implement an updated Group-wide Compliance Framework,
including the systemisation of a business wide compliance
obligation register, automated approval workflows and the
requirement to upload supporting evidence of review. The
Committee was supportive of the progress made by
management and the greater transparency, governance and
consistency this framework will bring.
At all four meetings during 2025, the Committee considered
therobustness of the Group’s Health, Safety and Environment
control environment. This involved reviewing progress made
against previous internal audit findings and the Committee
challenged whether sufficient resource was in place to progress
these actions in line with the agreed target dates. Management
confirmed it was and communicated that all business units had
successfully embedded the Group HSE standards into their local
management systems in line with the end of July deadline. In
December 2025, an enhanced HSE assurance plan utilising
second and third line assurance was approved by the Committee.
The Committee will receive regular updates on its implementation.
As noted on page 77, throughout the year the Committee
received regular updates on the preparations made ahead of the
incoming internal control declaration required by Provision 29 of
the Corporate Governance Code, which will apply from 1 January
2026. This included a deep dive in July 2025 which summarised
the work undertaken to define and identify the Group’s material
controls and document the assurance already in place to support
their effective operation in formalised assurance maps. The
Committee was informed of the planned milestones ahead of the
initial declaration as at 31 December 2026. These included ‘dry
run’ controls testing to be performed by the Group Risk and
Internal Control team during the second half of 2025 and the
preparation of a draft Annual Report disclosure. The Committee
challenged management and the Group’s internal auditor to
place reliance on existing assurance where possible to ensure
this work did not become unnecessarily burdensome given the
high level of confidence the Committee already has over the
Group’s material controls.
In April 2025, the Committee also dedicated time to reviewing
the business’s approach to meeting the Network and Information
Systems Enhanced Profile which is mandatory for operators of
essential services such as Drax by 2027. Management noted
thatas cyber security risk increases, the burden of governance,
including external assurance, adds to the workload and therefore
required resources to enable compliance. The Committee
challenged the speed of recruitment of people with appropriate
skills. Management confirmed that a shortage of skills in the
market along with a systematic approach to role assessment
andcompetences meant that this was taking longer than hoped
but progress was being made.
At its July 2025 meeting, the Committee noted the status of
ongoing work to enhance the governance surrounding capital
investment decision making. The formalised stage gating
mechanism requires specific deliverables and provides explicit
tolerance thresholds before investment decisions can be made
ensuring that decisions are based on a transparent view of all
therelevant risks and rewards. The Committee approved of the
enhancements made and agreed that the Board should be kept
informed on the status of projects requiring capital investment,
including spend and progress against milestones.
At both its July and December meetings, the Committee
recognised that political uncertainty, both in the UK and globally,
remained a risk to the business. The Committee noted the
potential for both direct and indirect adverse effects of US tariffs
including proposed port fees was discussed, as well as the
possible implications of a change in UK Government on the low
carbon dispatchable CfD which the Group signed in November
2025. The Committee requested these scenarios be quantified
for further consideration.
The Committee requested the Group’s internal auditor undertake
a Corporate Affairs review as part of its 2025 internal audit plan.
This review considered the business’s approach to media
relations, ascertaining whether there was an efficient and
cohesive approach to managing corporate affairs. The results of
the review indicated that, whilst the team demonstrated a strong
understanding of the process in practice, this could be further
formalised through robust documentation.
Second line controls functions across the Group regularly
undertake self-assessment and validation exercises to ensure
that the Group’s material controls are operating effectively and
are addressing the business’ Principal Risks. This assurance
workis then utilised by the Group Risk and Internal Control team,
along with other third-party assurance to underpin the incoming
Internal Control Declaration required by Provision 29 of the
Corporate Governance Code as discussed further on Page 77.
Any significant findings from this assurance activity are reported
to the Committee at each meeting.
The review undertaken by the Group Risk and Internal Control
team is undertaken in the context of broader changes in both
theunderlying risks and the environment in which the Group
isoperating, and considers whether prevailing controls remain
appropriate and sufficient. To support this, the Committee
annually reviews a detailed assurance map for the Group,
covering each of the Principal Risks. The assurance map
summarises the controls and assurance in place across the
different lines of defence. It also provides management’s
assessment of whether the level of control and assurance
isappropriate, and highlights ongoing work to address any
opportunities for enhancement.
Audit Committee report continued
80
Drax Group plc Annual report and accounts 2025
Having reviewed the latest assurance map, the Committee was
satisfied that there were no significant gaps in the levels of
assurance. Progress made during 2025 included the continued
implementation of a Group-wide compliance framework as
discussed further on page 80, the inclusion ofAI within the remit
of thedata governance forum and the establishment of
assurance processes to validate metrics included in the People &
Culture scorecard which is fundamental to the measurement of
progress and achievement.
The Committee considered and approved a series of
management actions to be implemented during 2026, including
the work planned as part of the Sustainability Audit Programme
to further automate reporting and enhancement of the second
line assurance underpinning IT controls.
Additional detail on the Group’s Principal Risks and key
mitigations can be found on pages 41 to 48.
The Committee routinely considers information arising from
internal ‘Speak Up’ and whistleblowing reports. It discusses with
management the scope of investigations, providing feedback
and, where relevant, challenge on the appropriateness of the
steps being taken in response. The Committee seeks to
understand how matters identified in incidents inform training
for colleagues to address findings that effect positive change,
and how actions by management can improve culture within the
Group’s operations. The Board was also separately updated on
responses to such reports.
The Committee also works with the Group’s internal auditor to
assess the overall system of risk management and internal control
taking account of key findings and proposed management
responses. Further detail on the role of the internal auditor is
provided on page 86. None of the findings discussed during 2025
were considered individually or collectively to have materially
impacted the financial performance, results or operations of the
business. Taking this into account, The Committee was satisfied
that the overall systems of risk management and internal control
have continued to operate effectively.
Reviewing financial reporting matters
The Committee reviews and reports on the accuracy and clarity
of the half-year and full-year financial statements to ensure the
Annual report and accounts contain the information needed to
assess the Group’s performance and strategy. In undertaking
thisthe Committee reviews and considers the Group’s material
accounting policies, critical accounting judgements, areas of
significant estimation uncertainty and other material financial
reporting matters explained set out in the Consolidated financial
statements and its explanatory notes, with a particular focus
onthe areas it deemed the most complex or subjective, as
highlighted in the table below. In performing its review, the
Committee ensures that disclosures provide appropriate context
and explanation for a reader to sufficiently understand matters.
At each of its meetings, the Committee receives a Financial
Reporting and Accounting Update paper from management,
covering any key accounting topics in the period, as well as
emerging issues. These papers also incorporate any relevant
updated guidance or clarifications issued by bodies such as the
Financial Reporting Council (FRC) or Financial Conduct Authority
(FCA), and management’s assessment of the impact on the
Group and the timing of any planned actions in response. In the
current year this has included the impact of IFRS 18, which is
effective from 1 January 2027.
These updates are discussed with the external auditor in
advance of the Committee meetings, ensuring that they have
theopportunity to consider and provide their own views on the
matters raised. This includes highlighting alternative approaches
or accounting treatments to assist the Committee in its
consideration of management’s conclusions and proposals when
reviewing the half-year and full-year results.
The Committee, as a matter of routine, seeks the views of the
external auditor on the approach being taken by management
and their responsiveness to required standards – whether formal
or through accepted practice. Such discussions also consider
theadequacy of explanations being provided within the Group’s
periodic financial reporting.
Significant financial reporting matters
The Committee considered the following significant financial
reporting matters during the year. The Committee was satisfied
how each of the significant matters discussed were addressed.
Audit Committee report continued
81
Drax Group plc Annual report and accounts 2025
Governance
Accounting for derivative financial instruments
Description
As described on page 215, The Group uses derivative financial
instruments to manage key financial risks, with assets and
liabilities measured at fair value in accordance with IFRS 9.
Judgement is required to determine which contracts fall within
the standard. Biomass contracts remain outside its scope due
to market illiquidity and contract terms and this has been
identified as a critical accounting judgement on page 133.
Determining the fair value of derivative financial instruments
requires management to make significant estimates or use
judgement where multiple sources of information are available.
The accounting and disclosure requirements in relation to
derivative financial instruments are inherently complex and
asaresult this remains an area of focus for the Committee.
Audit Committee review
The Committee confirmed with management that there had
beenno new classes of derivatives, however certain types of
derivatives have been designated for hedge accounting for the
first time. The Committee reviewed management’s assessment
and plans for assessing effectiveness.
The Committee reviewed management’s assessment of Biomass
contracts and its conclusion that they remain outside the scope
of IFRS 9, including the disclosure as a critical accounting
judgement.
The Committee noted the external auditor’s risk assessment
as‘Elevated’ in respect of the valuation and presentation of
derivatives and took on board their views at the planning phase
and their final conclusions and reporting.
Conclusion
The Committee concurred with management’s assessment
that Biomass contracts are outside of the scope of IFRS 9.
The Committee was satisfied that the valuations and
disclosures made in respect of derivatives were appropriate.
For further information see Section 7 in the notes to the
Consolidated financial statements on pages 215 to 240.
Impairment of goodwill and fixed assets
Description
The Group’s impairment assessment of goodwill and fixed
assets is dependent on management’s judgement in identifying
Cash Generating Units (CGUs), the identification of potential
indicators of impairment and the estimates and methodologies
adopted by management in selecting assumptions to calculate
the value of each CGU based on the requirements of IAS 36.
Audit Committee review
The Committee reviewed and challenged management’s
impairment testing. This included the identification of CGUs,
thekey assumptions and methodologies used in both the value
inuse and fair values less costs to dispose models, and the
appropriateness of the impairment charges recognised.
The Committee reviewed management’s assessment of biomass
being an inactive market, resulting in Southern Pellets not being a
separate CGU in its own right, whilst noting the external auditor’s
report, the Committee confirmed it was appropriate to disclose
this as a critical accounting judgement.
The Committee challenged the key inputs into the impairment
calculations, including the projected cash flows, discount rates
used, recoverable amounts and the impact of climate change.
The Committee also reviewed the disclosures, including the
sensitivity to key assumptions.
Conclusion
The Committee agreed with management’s assessment of
CGUs, including the changes in the year in respect of the Pellet
Operations and Drax Power Station CGUs and the reallocation
of goodwill.
Based on its review, the Committee was satisfied that the
impairments recognised were appropriate, including their
classification as exceptional items, and that there were no
further indicators of impairment identified.
Also, the Committee considered that the disclosures presented
were appropriate.
For further information see note 2.4 of the Consolidated
financial statements on pages 150 to 158.
Audit Committee report continued
82
Drax Group plc Annual report and accounts 2025
Calculation and presentation of Alternative Performance Measures (APMs)
Description
As described on page 163, the Group presents Adjusted results
excluding the impact of exceptional items and certain
remeasurements. Adjusted results are consistent with the way
executive management and the Board review and assess the
performance of the Group. The effects of exceptional items and
certain remeasurements are presented separately in a column
on the face of the Group’s Consolidated income statement.
There is judgement required as to the treatment of expenses
asexceptional and the prominence of Adjusted results in the
Annual report and accounts.
Audit Committee review
The Committee reviewed and approved the policy for Exceptional
items and certain remeasurements in the April 2025 meeting.
The Committee reviewed and challenged management’s papers
setting out the transactions that are to be classified as
exceptional and took on board the view of the external auditor.
The Committee reviewed the Group’s APM presentation and
disclosure, including the level of prominence, and the clarity
ofAPM reconciliation.
Conclusion
The Committee concluded that the treatment of exceptional
items was consistent with the approved policy.
The Committee was comfortable with the definition of APMs
and that the presentation and disclosure throughout the
Annual report and accounts was fair and balanced, confirming
there was not undue prominence with clear reference to
reconciliations to IFRS measures.
For further information on the Group’s APMs see note 2.7 to
the Consolidated financial statements on pages 163 to 170.
Review of other significant judgements and estimates
Description
The other areas of significant judgement and key sources of
estimation uncertainty in the Consolidated financial statements
are set out on pages 132 to 134. Management regularly reviews
these other areas to ensure they are kept up to date, and also
considers whether other items should be included.
Where there are changes to critical judgements and significant
estimates disclosed in the Consolidated financial statements
management should adequately explain the changes.
Audit Committee review
The Committee reviewed and challenged management’s
assessment of critical judgements and significant sources of
keyestimation uncertainty. As part of this review, the Committee
considered the rationale for the changes from the prior year and
other areas that are not specifically disclosed.
The Committee reviewed the disclosure, taking into account
reporting from the external auditor.
Also, the Committee considered this taking into account their
review of the wider Annual report and accounts, management
papers received during the year and other discussions held during
the course of Committee meetings throughout the year.
Conclusion
Having considered the other matters raised in management’s
papers, the Committee was satisfied that the items disclosed
as critical accounting judgements and key sources of
estimation uncertainty on pages 132 to 134 are appropriate
and complete. In addition, the Committee was satisfied that
the descriptions clearly and accurately reflect the matters
disclosed and the positions taken.
Audit Committee report continued
83
Drax Group plc Annual report and accounts 2025
Governance
Audit Committee report continued
Financial statements and regulatory reporting
During the year, the Committee considered and recommended
the approval of the Half-Year Report, preliminary financial results
and this Annual report and accounts, taking into consideration
key accounting judgements, exceptional items and certain
remeasurements, as well as monitoring the external audit.
Also, following the update to the Group’s strategy during the
year, the Committee reviewed the accounting and disclosures
inthis context to ensure that this refresh was appropriately
reflected in the Annual report and accounts. In particular
considering the impairment assessment and amounts presented
as exceptional items.
At its meeting in December 2025, the Committee also reviewed
and approved management’s proposed plan for internal and
external assurance over the different parts of the Annual report
and accounts, considering the complexity of the information
andthe key focus areas for stakeholders. This included TCFD
reporting, for which the Committee considered both the
requirements of the disclosure, and the data points that would
beincluded. As in prior years, PwC also provided limited
assurance tothe Board over a selection of ESG metrics, which is
separate from the audit opinion over the Consolidated financial
statements presented on pages 122 to 129. The results of this
assurance were presented by management and evaluated by
theBoard at their meeting in February 2026.
The Committee also reviewed the verification process
undertaken by management around key information included
inthe Annual report and accounts. Having completed this
assessment, the Committee was satisfied that the verification
process was robust and that appropriate assurance had been
obtained over key information and statements included within
the Annual report and accounts.
As part of its review, the Committee also considered the internal
controls, forecasts and relevant assumptions underpinning the
Viability Statement and the ongoing adoption of the going
concern basis in preparing the Consolidated financial
statements. This included assessing a scenario analysis prepared
by management, and reviewed by the external auditor, which
considered the potential future impact of the Group’s Principal
Risks on its financial projections. Particular focus was given to
the scenarios relating to plant operations and commodity price
risks, given the potential medium to long-term impacts they
could have. This is discussed in further detail on page 49. Both
plant operations and commodity price risks are Principal Risks.
More details can be found on pages 45 and 47.
Whilst management and the Board consider longer-term
forecasts for other purposes, including strategic planning
andcapital allocation, the Committee concluded that it was
appropriate for the viability assessment period to remain at five
years, with a key factor being this period to December 2030
covered all but three months of the period covered by the
recently signed CfD agreement.
The Committee was satisfied that the proposed Viability
Statement was robust, fair and balanced, including consideration
of the disclosure around longer-term risks extending beyond
theviability assessment period. This included reviewing the
assumptions and disclosure around long-term biomass
generation at Drax Power Station, and the impact of this on the
viability modelling. In addition, the Committee was satisfied that
the level of challenge from the external auditor was appropriate.
Consequently, it was also concluded that the ongoing use of the
going concern basis of preparation for the Consolidated financial
statements was appropriate.
As a result of the Committee’s review, it advised the Board of
itsconclusion that the 2025 Annual report and accounts, taken
as awhole, are fair, balanced and understandable. This view is
underpinned by the Committee’s discussions with operating
andfinance management regarding the Strategic report, and
with the finance team regarding the Consolidated financial
statements and taking into account any communications from
the external auditor on material inconsistencies. In addition, the
Committee believes that the Annual report and accounts provide
the information necessary for shareholders to assess the
Company’s and the Group’s position and performance, business
model and strategy, and that statements made are supported by
appropriate verification and assurance, including those made
around the systems of risk management and internal control.
External audit
This is PwC’s second year as the Group’s external auditor, having
been reappointed by shareholders at the 2025 AGM for the
current financial year. Matthew Hall continues to be the lead
audit partner.
External audit plan
During the year, the Committee received a comprehensive audit
plan from PwC explaining its risk assessment, the audit timetable
and proposed scope. In developing the external audit plan for
2025, PwC performed a risk assessment to identify the risks of
material misstatement to the Consolidated financial statements.
This considered the nature, magnitude and likelihood of each risk
identified and the relevant controls in place, in order to identify
the audit risks. The key audit matters are referred to in the
independent auditor’s report on pages 122 to 129 and formed
the basis of the plan.
In determining the scope of coverage, consideration was given
tomanagement reporting, the Group’s legal entity structure,
thefinancial results for the year ended 31 December 2024,
andthe forecast for 2025. The audit plan was presented to the
Committee in July 2025, with updates communicated in
December 2025 and February 2026. The details of the coverage
and agreed scope are set out in the independent auditor’s report
on page 122.
The procedures to be performed at a Group level and the planned
components were also reviewed. Materiality was agreed at
approximately 2.5% of Adjusted EBITDA (based on a three-year
average).
Following discussion and challenge, the Committee concluded
that the proposed plan was sufficiently comprehensive for the
purpose of the audit of the Consolidated financial statements
and approved the proposed fee.
84
Drax Group plc Annual report and accounts 2025
Audit Committee report continued
Effectiveness of external audit
The Committee is dedicated to ensuring a high-quality audit is
performed and the Committee reviewed the effectiveness and
quality of the external auditor during the year and does so
annually. In so doing, the Committee considers the quality of
theexternal audit reports presented to the Committee, the
performance both in and outside of Committee meetings and
how they interact with and challenge management.
In addition to this, the Committee feels it is important to
understand management’s opinion of audit quality and
effectiveness and a feedback questionnaire on the external
auditor is completed annually by management and presented
tothe Committee in the April meeting.
The Committee’s review of external auditor performance in
relation to the 2024 audit (which was completed during 2025)
primarily considered the independence and objectivity of PwC,
its professional competence and performance, taking into
account this was their first year as external auditor. The
Committee also considered the robustness of the audit process
including, in particular, the level of rigour and challenge given to
critical management judgements and significant estimates, and
the professional scepticism being applied. This took account of
the reports provided to the Committee, the related discussions
with the external auditor around areas of highest audit risk, and
the basis for the auditor’s conclusions on those areas.
The Committee also reviewed the Financial Reporting Council’s
Audit Quality Inspection and Supervision report issued in July
2025 for PwC, assessing the key matters relevant to audit quality.
The Committee has been satisfied with the level of challenge
applied by PwC, and its consideration and presentation of
possible alternative approaches. This included a particular focus
on the annual impairment review process, including the
assessment of CGUs, the presentation and valuation of
derivatives and the accounting for development projects, in
particular Longview and UK BECCS, along with their respective
presentation and disclosure.
The annual review of effectiveness in April 2025 also
incorporated feedback from members of the finance and wider
management teams. The Committee sought their views on
matters including the quality of audit work and engagement
whilst planning and executing the audit, both at a Group and
business unit level. The feedback reflected the efforts PwC
madeduring the transition period and first-year audit, building
relationships based on constructive challenge and debate, as
wellas highlighting areas where work could be undertaken
earlier inthe process and being more focused in the tracking
andcommunication of reviews of the Annual Report.
The overarching assessment of the Committee was that the
audit was well planned and appropriately resourced.
In addition to completing an annual review, the Committee
considers the effectiveness of the external auditor over the
course of the year and discusses this at each meeting, including
sessions where the auditor is not present. This ongoing review
incorporates any relevant external information, such as the FRC’s
Annual Review of Audit Quality, which was published in July
2025, which contains combined results and themes for all firms
that were inspected during 2024/25.
Schedule of fees paid to PricewaterhouseCoopers LLP
Year ended
31 December
2025
£000
Year ended
31 December
2024
£000
Audit fees:
Statutory audit of Drax Group 1,874.0 2 ,15 3.0
Statutory audit of the Company’s
subsidiaries 144.0 225.0
Total audit fees: 2,018.0 2,378.0
Interim review 174.0 167. 0
Assurance services provided to
non-material affiliates 45.8 70.0
ESG assurance services 132.0 205.0
Other services 9.0 10.0
Total non-audit fees: 360.8 452.0
Total auditor’s remuneration 2,378.8 2,830.0
Based on its review, the Committee is satisfied that the external
auditor and its audit is effective. The Committee agreed that the
external auditor’s work demonstrated an ongoing commitment
to audit quality, that the audit process was robust, and that PwC
had shown strong levels of technical knowledge and appropriate
professional scepticism in its work.
Independence of external audit
The Group has an Auditor Independence Policy (AIP) that defines
procedures and guidance under which the Company’s relationship
with its external auditor is governed. The AIP also facilitates the
Committee being able to satisfy itself that there are no factors
that may, or may be seen to, impinge upon the independence,
objectivity and effectiveness of the external audit process.
TheCommittee reviews the AIP annually and last did so in
December 2025. As part of this annual review, the Committee
considers areas of development in best practice and guidance.
The main features of the current AIP (which is available at
www.drax.com) are:
– A requirement to review the quality, cost effectiveness,
independence and objectivity of the external auditor
– A requirement to rotate the lead Audit Partner every five years,
and processes governing the employment of former external
auditor employees
– A policy governing the engagement of the auditor to conduct
non-audit activities, which is expected to occur only in certain
circumstances and is kept under review at each meeting of the
Committee
The external auditor also reports to the Committee on its own
processes and procedures to ensure independence, objectivity
and compliance with the relevant standards.
The audit for the financial year ended 31 December 2025 is the
second year in which Matthew Hall has been the lead Audit
Partner.
The amounts paid to the external auditor during each of the
financial years ended 31 December 2025 and 2024 for audit and
non-audit services are set out above, and in note 2.3 to the
Consolidated financial statements (page 150).
85
Drax Group plc Annual report and accounts 2025
Governance
Audit Committee report continued
As noted above, the external auditor should not provide non-
audit services where it might impair its independence or
objectivity. Therefore, any engagement for the provision of
non-audit services requires prior approval from the Audit
Committee or Committee Chair. Agreement to allow the external
auditor to perform additional non-audit services is taken only
after considering two key factors. Namely, that the non-audit
services policy has been fully applied, and that any engagements
are in the best interests of the Group and its key stakeholders.
The total audit fee for 2025 includes £93,000 relating to
additional fees in relation to the 2024 Group audit that were
agreed and billed in 2025.
The other services provided in the year by PwC, amounting to
£9,000, relate to a subscription to Viewpoint, PwC’s generic
accounting guidance portal.
In all cases, the Committee was satisfied that the work was most
appropriately handled by the external auditor because of its
knowledge of the Group, and that the services provided did not
give rise to threats to independence, given the nature of the
work and level of fees payable. The Committee was also satisfied
that the overall levels of audit and non-audit fees were not of a
material level relative to the income of PwC as a whole, and
thatthe level of non-audit fees was below the 70% cap, based
onthe average audit fee for the preceding three years.
Auditor appointment
The Group has fully complied with the provisions of The
Statutory Audit Services for Large Companies Market
Investigation (Mandatory Use of Competitive Tender Processes
and Committee Responsibilities) Order 2014. The Committee
discussed the performance and independence of the external
auditor at its meeting in February 2026 and recommended to the
Board that a resolution to re-appoint PwC as the Group’s external
auditor should be put to shareholders at the AGM in April 2026.
Internal audit
Internal Audit delivers objective assurance to management, the
Committee, and the Board regarding the effectiveness of Drax’s
risk management processes and internal control environment.
The Group has adopted a fully outsourced model for internal
audit. KPMG has acted as the Group’s main internal auditor since
2020. Annually, the internal auditor presents a plan to the
Committee for approval. This proposed programme of work is
based on the assessment of the internal auditor, considering
input from interviews with key internal stakeholders across
finance, risk and the wider leadership team. The Committee
considers and where acceptable approves the plan ensuring that
priority is being given to the areas of highest risk for the Group
taking into consideration any new or emerging risks.
The Committee receives updates at each meeting regarding
theinternal audit reviews completed since its last meeting, and
progress against the overall annual plan. Key topics reviewed
bythe internal auditor during 2025 included AI Governance,
Treasury, HR Masterdata, Carbon Reduction and Corporate Affairs.
These reviews each provided an assessment of the robustness
andefficacy of prevailing practices, and recommendations to
theCommittee and management on how tofurther improve the
systems of risk management and internal control.
The recommendations, and suggested timelines, were agreed
between management and the internal auditor before being
presented to Committee for consideration. Where appropriate,
the Committee requests supporting analysis from management
assessing the root cause of any weaknesses.
In conjunction with reports from the internal auditor on reviews
completed during the period, the Committee also receives
reports from management detailing progress on implementing
recommendations from previous reviews. This allows the
Committee to effectively monitor the timeliness of
management’s response to recommended actions.
The Chair of the Committee, independent of management,
maintains direct contact with the internal auditor, allowing
opendialogue and feedback. The Chair normally meets with
theinternal auditor in advance of each meeting to review their
work and discuss material matters.
Effectiveness of internal audit
The Committee reviewed the overall effectiveness of the
approach to internal audit, and in particular the effectiveness of
the internal auditor, at its meeting in December 2025. This review
considered the improvements made in response to the previous
effectiveness review completed in December 2024.
Changes implemented during 2025 included ensuring proactive
communication with audit stakeholders throughout the scoping
phase of each audit as well enabling flexibility in timelines to
accommodate business priorities. The internal auditor also
provided its feedback on interactions and engagement with
management, having updated the Committee on this at each
meeting during the year.
Based on its review, the Committee is satisfied that the approach
to internal audit remains effective, and that the Group’s primary
internal auditor continues to provide the requisite quality,
experience, and expertise in both its work and reporting to
theCommittee.
86
Drax Group plc Annual report and accounts 2025
Remuneration Committee report
Remuneration
Principles of the UK Corporate Governance Code
P Remuneration policies and practices and alignment
to long-term strategy
Q Executive remuneration
R Independent judgement and discretion and
remuneration outcomes
The Remuneration Committee comprises four independent
Non-Executive Directors. The Committee Chair was considered
independent on appointment as Chair and has relevant
experience of serving as a member of a remuneration committee.
Shareholders approved the current Policy at the 2023 AGM
(forthe period 2023–2025) and a new Policy will be put to our
shareholders for approval at the 2026 AGM (for the period
2026–2028).
No Directors are involved in making decisions regarding their
own remuneration.
Annual Statement to Shareholders
Dear shareholders,
On behalf of the Committee, I am pleased to present my first
Directors’ Remuneration Report as Chair of the Remuneration
Committee for the 2025 financial year. In May 2025, Nicola
Hodson stepped down from the Board, having served seven
years as Non-Executive Director and six years as Chair of the
Remuneration Committee (the “Committee”).
At our AGM in 2023, shareholders approved our current
Directors’ Remuneration Policy (the “Policy”) with 97% in favour.
As part of our normal three-year cycle, the Committee undertook
a review of the Policy during 2025 and we are seeking approval
from shareholders for this at our next AGM on 30 April 2026.
New Remuneration Policy
The Policy review has focused on the overall remuneration
package for our Executive Directors, ensuring it appropriately
incentivises and rewards the delivery of our strategic ambitions,
whilst reflecting the interests of our shareholders and
governance expectations. There have been nosubstantive
changes to our Policy since 2020.
In the final quarter of 2025, we wrote to shareholders
representing 54% of Drax’s share capital, and to the Investment
Association, ISS and Glass Lewis, to invite feedback on our
proposal. We were pleased with responses and have
incorporated feedback into our final proposal where appropriate.
Context
Drax plays a critical role in the UK’s energy security andenergy
transition. In November, we announced thesigning ofa new four-
year low carbon dispatchable CfD, covering all biomass units at
Drax Power Station (“DPS”) starting in March 2027, recognising
its important role in providing energy security until 2031.
The Executive Directors and the Board see opportunities to
unlock significant shareholder value from the existing business
and growth in flexible, renewable generation, as well asfrom the
DPS site. This is a view echoed byshareholders who we engaged
with. Across the Group, Drax is targeting a post 2027 Adjusted
EBITDA of £600m-£700m and expects to allocate up to £2bn
toincremental investment, primarily in renewable and flexible
power, as well as opportunities to maximise value from the DPS
site, including options associated with data centres. The Board
believes there isan opportunity to significantly increase Drax’s
share price and deliver attractive TSR for shareholders.
Will Gardiner, CEO, has been on the Board for 10 years and the
CEO since 2018. Between 2017 and 2024, EBITDA grew from
£229m to £1,064m, which supported upper quartile TSR
performance over three consecutive three-year periods and
returned over £1bn to shareholders. Given Will Gardiner’s track
record, unlocking significant shareholder value will depend on
retaining Will Gardiner and his management team.
At a glance
We are proposing a new Remuneration
Policy which rewards the unlocking of
significant shareholder value.”
Kim Keating
Chair
Committee members
– Kim Keating (Chair)
– Andrea Bertone
– Erika Peterman
– Rob Shuter
Attending by invitation
CEO, Chief People Officer, Group Reward Director, David
Nussbaum (Senior Independent Director) and external
remuneration advisers. The Group Company Secretary
istheSecretary to the Committee.
Terms of reference
The Committee regularly reviews its Terms of Reference, as
does the Board. The most recent review was in December
2025. The Terms of Reference are available on the Company
website at www.drax.com/governance
87
Drax Group plc Annual report and accounts 2025
Governance
Shareholder Engagement
I would like to thank those who took the time to engage and
provide feedback on our Policy proposals. We highly value input
from shareholders and their advisers and have taken these into
account. During the engagement process, we received a broad
range of feedback, with the views of individual shareholders
often differing. As aresult, it is not possible to meet preferences
of all shareholders. Despite this, in my conversations with
shareholders there was uniform agreement that there exists a
great opportunity for Drax to unlock significant shareholder
value, and broad support for the Policy proposal. Over the page
isa summary offeedback we received and, for transparency, our
responses and how it has influenced the Committee’s thinking.
Drax CEO:
if stretch LTIP achieved
Drax CEO:
if stretch LTIP not achieved
Market data:
Upper Quartile
Market data:
Median
Market data:
Upper Quartile
0 1,000 2,000 3,000 4,000 5,000
Drax CFO:
if stretch LTIP achieved
Drax CFO:
if stretch LTIP not achieved
Market data:
Upper Quartile
Market data:
Median
Market data:
Upper Quartile
Fixed Pay
0 500 1,000 1,500 2,000 2,500 3,000 3,500
Annual Bonus Core LTIP Stretch LTIP
Total Remuneration: Drax CEO Proposal vs Peer Group
Total Remuneration: Drax CFO Proposal vs Peer Group
Peer Group
As Drax has itsown full value chain, and is very diverse, we do
not feel there is a clear-cut sector peer group. The new peer
group proposed reflects Drax’s market capitalisation today, our
ambitions, the geographic spread of our operations across three
continents, and our developing market for talent.
A peer group consisting of only UK listed companies, with a
12-month average market capitalisation between £1.5bn –
£3.9bn has been adopted. To clarify, this peer group includes
companies ranked between 97 and 201 in the FTSE index (based
on 12-month average market capitalisation to 1 January 2025),
Drax was ranked 141 at this time. As at 2February 2026, Drax
was ranked 121. Within this group only companies that generate
at least 20% oftheir revenues outside of the UK and with a global
spread ofoperations, were included. This is to reflect Drax
hasemployees in four countries across three continents.
The peer group included 28 FTSE listed companies. Against this
peer group, our Executive Directors have total remuneration
opportunity between the lower quartile and median.
The companies in the peer group have not been listed. This is
dueto the dynamic nature of a peer group based on companies
within a market capitalisation range which changes over time.
Proposed Changes – A More for More Approach
The emphasis of our proposed Policy is on long-term pay for
performance. Fixed pay increases for 2026 will be in line with
thewider workforce and the bonus opportunity will not change.
To maintain a competitive package in such a way that rewards
the Executive Directors for the delivery of our strategic ambition,
and for outcomes that fundamentally mirror our shareholder
experience, the proposed changes focus on the LTIP only.
1. Core LTIP Element – a modest increase to the quantum of
thecore element of the LTIP is proposed to maintain the
competitiveness of the core package. This will move LTIP
opportunities more in line with the median of the peer group
(increase from 200% to 250% for the CEO and 175% to 220% for
the CFO). This will continue to reward the delivery of the existing
performance conditions (Relative TSR versus the FTSE 350 and
cumulative adjusted EPS) and the targets will continue to be set
at an appropriate level of stretch. This increase alone means the
total remuneration opportunity for the CEO remains below the
median and for the CFO it is positioned around the median.
2. Stretch LTIP Element – a stretch element is proposed to be
added to the LTIP for the Executive Directors, and other direct
reports of the CEO, which is conditional on unlocking significant
shareholder value. This element will reward the delivery of
stretching Absolute TSR growth targets over the three years and
will only vest if Drax achieves at least upper quartile performance
under the Core LTIP Relative TSR metric also. This will prevent
the Absolute TSR element from rewarding participants for wider
market movements. Absolute TSR was identified as the most
appropriate metric as it clearly aligns with the opportunity for
further transformation across our portfolio and delivery of the
associated growth in long-term value for shareholders. The
proposed stretch LTIP opportunity is 150% ofsalary for the
CEOand 130% for the CFO, which will position their total
remuneration around the upper quartile of the peer group.
Thestretch element is designed so that additional incentive
opportunity is only earned for stretch performance that delivers
significant shareholder value over the longer term and exceeds
upper quartile performance (a more for more proposal). It is
noted whilst the overall LTIP quantum increases, so does the
shareholding requirement.
3. Shareholding Requirement – an increase to the in-
employment and post-employment shareholding requirement to
400% of salary for the CEO and 350% of salary for the CFO
(equal to the overall increase in LTIP opportunity), to further align
their interests toshareholders in and beyond the Policy period.
CEO Current Proposal
Overall LTIP Opportunity 200% 400%
Shareholding Requirement 250% 400%
CFO Current Proposal
Overall LTIP Opportunity 175% 350%
Shareholding Requirement 200% 350%
Non-Executive Directors
The Board also reviewed the remuneration for the Non Executive
Directors. We believe the current fee levels are competitive and
therefore only increased the base fee in line with the wider
workforce in 2026. It is proposed that flexibility is built into the
Policy to allow Drax to be able to deliver a portion of their fees
inshares in the future but there are no immediate plans to do it.
Remuneration Committee report continued
88
Drax Group plc Annual report and accounts 2025
Remuneration Committee report continued
Key Questions We Heard Our Response
1. Could the existing Core LTIP opportunity
be increased with more stretching targets,
rather than adding the Stretch LTIP
element to achieve the same aim?
– The Committee did consider this. The Core LTIP element is based on cumulative adjusted EPS (“EPS”) and Relative TSR to the FTSE 350 (“TSR”)
performance metrics and we concluded that adding further stretch tothe targets would not capture the focus on shareholder returns over the next
Policy period.
– EPS – increased earnings does not necessarily deliver further value creation, which requires broader strategic actions on investments and the
Groupportfolio.
– Relative TSR – the maximum target under the Core LTIP element is upper quartile performance versus the peer group. A target beyond this level could
be subject toexternal volatility and exceptional market movements in other sectors and not necessarily reward the delivery of absolute returns to Drax
shareholders.
2. Why is the Stretch LTIP element
requirednow?
– This Policy period comes at an important time as the final three-year vesting cycle of LTIP awards granted under this Policy will vest in 2031, which
aligns with theend of the CfD agreement for DPS in 2031.
– The additional stretch opportunity will underpin a culture of accountability and high performance, incentivising the delivery of the opportunities
available to transform the business prior to the end of the CfD agreement in 2031. The Stretch LTIP element ensures that the additional incentive
opportunity is only earned forperformance that delivers significant shareholder value over the longer term, and which exceeds upper quartile levels
(it is more for more).
3. What other metrics were considered
forthe Stretch LTIPelement?
– Key for the Committee is selecting a metric that optimises the experience of our shareholders. Absolute TSR was identified as the most appropriate
metric as itclearly aligns with the opportunity for further transformation of the Group across our portfolio, and delivery of the associated growth in
long-term value for shareholders. Delivery of this opportunity is underpinned disciplined cost management and capital deployment.
– For reference, the following metrics were also considered:
– Relative TSR – for the reasons above it is not proposed to be a metric for the Stretch LTIP element but it will be an underpin to ensure the Stretch LTIP
element does not reward market-wide trends.
– Return on Capital Employed (ROCE) – the effective use of capital is an important factor in unlocking significant shareholder value but theeffective
use of capital is captured by Absolute TSR performance. Moreover, setting stretching ROCE targets could risk incentivising behaviours which
arecounter to long-term shareholder value growth. On vesting the Committee will assess whether the formulaic outcome of anyLTIP awards to
ensure they are appropriate, and this will include consideration of ROCE performance over the period.
4. How stretching are the Absolute TSR
targets in the Stretch LTIP element?
– For the 2026 Stretch LTIP element, the proposed Absolute TSR targets are disclosed in this report. If the maximum Absolute TSR target for the 2026
award is achieved, it would mean an investor would see a return equivalent to double the base share price, and Drax would be at the entry point of
theFTSE 100. These targets have been set in context of internal and external factors. Internally, we looked at our strategic ambitions and the scale
ofthe opportunities available through strengthening and investing to grow our core business, ensuring a long-term commercial future for DPS, and
development investment options. Externally, we also considered the historical TSR performance trends of FTSE listed companies.
– The Stretch LTIP element is expected to be granted annually under this Policy period – this is important given the new CfD agreement ends in 2031.
Targets for future grants for the Stretch LTIP element will be set and disclosed at the time of grant, based on our stretch ambitions over the relevant
three-year period and witha commensurate level of stretch as the award granted in 2026.
5. How will events outside of management’s
control impacting Absolute TSR be
considered?
– Vesting of the Stretch LTIP element is subject to Drax being at least upper quartile on Relative TSR under the Core LTIP element – this is intended to
prevent Absolute TSR rewarding management for wider market movements. On vesting the Committee always assess whether the formulaic outcome
of any LTIP awards reflect the original intent of the metric targets that were set and the shareholder experience.
6. Have the interests of the wider workforce
been taken into consideration in
developing thesePolicy proposals?
– Participation in the Stretch LTIP is limited to the Executive Directors and the direct reports of Will Gardiner – the key roles impacting strategic execution.
– Employee share ownership is a key part of our all-employee reward offering – allowing colleagues to benefit as shareholder value is created . Over 70%
of our colleagues in the UK participate in Sharesave and around 20% of colleagues in North America participate in the Employee Stock Purchase Plan.
Itis important forthe Committee that there is fairness and consistency in the reward of our wider workforce. See page 94 for more information.
7. Could the peer group used for
benchmarking remuneration packages also
be used as the peer group for the Relative
TSR metric inthe Core LTIP element?
– The target for the Relative TSR metric is measured against the constituents of the FTSE 350. This is in part due to the lack of direct sector peers who
could be used to assess performance. This approach provides a robust performance assessment versus a market benchmark, and which reflects Drax’s
current status as aFTSE 250 company and our ambition to move into the FTSE 100.
89
Drax Group plc Annual report and accounts 2025
Governance
Summary of changes to the Policy
The table below provides an overview of the proposed changes to the Policy and the associated rationale for these changes. The proposed Policy also includes minor wording changes to provide
flexibility andto support the effective operation of remuneration. The full Policy appears on pages 95 to 104.
Element Current Proposed Change
Salary – Fixed salary with periodic benchmark reviews No change
Pension – Executive Directors receive pension contributions aligned to the UK workforce
rateof10%
No change
Benefits – Standard benefits apply, including car allowance, private medical insurance,
lifeassurance and permanent health insurance
No change
Annual bonus – Maximum opportunity of 175% of salary for the CEO and 150% of salary for CFO
– Weighting of performance metrics primarily focussed on financial outcomes
– 40% of bonus award deferred into shares for three years
No change
LTIP – Maximum award of 200% of salary for the CEO and 175% for CFO
– Relative TSR and EPS, both with a 50% weighting
– Minimum five-year period applies – three-year performance period with a two-year
holding period on vesting shares
– Increase maximum award, including core element of 250% of salary for the CEO and
220% of salary for the CFO, and a stretch element of 150% of salary for the CEO and
130% of salary for the CFO
– For the core element, retain Relative TSR and EPS, both with a 50% weighting
– For the stretch element, stretching Absolute TSR targets, with a relative TSR
underpin (requirement to achieve upper quartile Relative TSR in the core element)
Shareholding
Requirement
– A shareholding requirement applies for the CEO of 250% of salary and for the CFO
of200% of salary.
– A post-shareholding requirement applies for the CEO and CFO, which is equal to the
employment shareholding requirement.
– Increase in the shareholding requirement and post-shareholding requirement
to400% of salary for the CEO and 350% of salary for the CFO
Malus & Clawback – Clawback provisions apply to bonus and LTIP in instances of gross misconduct
ormisstatement
No change
Non-Executive
Directors
– Fee structure reflects the Board members’ responsibilities, with periodic
benchmarkreviews
– Flexibility added to allow the opportunity to deliver fees in part through shares in
thefuture
Remuneration Committee report continued
90
Drax Group plc Annual report and accounts 2025
Committee evaluation
During 2025, an external Board evaluation was conducted, which
included an assessment of the Committee’s effectiveness. I am
pleased to report that the evaluation concluded the Committee
operates effectively providing good support to the Board.
Review of decisions made for 2025
As noted elsewhere in this Annual Report, the Group continued
to deliver strong financial performance. In addition, the Group
made important progress on the Group’s key strategic objectives.
The Committee firmly believes that the remuneration outcomes
must be fair and appropriate in the context of business
performance. The remuneration outcomes for 2025 have been
assessed in line with these principles and the Committee is
comfortable that our current Policy operated as intended in 2025.
Annual assessment of performance
The Committee determines the remuneration of the Executive
Directors, members of the Executive Committee, and wider
workforce against the objectives and priorities of the Group. For
the 2025 Group Scorecard, we assessed performance against a
combination of financial, strategic, people, sustainability, safety
and governance metrics. The FlexGen and Energy Solutions,
Pellet Production and Biomass Generation businesses, all
delivered strong performance in 2025. There is a review of the
achievement against all performance metrics in the 2025 Group
Scorecard on pages 106 to 107.
The final 2025 Group Scorecard score was 1.36 resulting in
68.00% of the maximum bonus being paid to the Executive
Directors. This was lower than the outcome for the wider
workforce of 1.38 as the Committee reduced the outcome of the
Elimini KPI for the Executive Directors following the change in
strategy for the Elimini business. In accordance with our Policy,
40% of the overall bonus award for Executive Directors will be
deferred into shares vesting in three years, and the remaining
60% will be paid in cash in March 2026.
The Committee determined that the overall performance
outcome of the 2025 Group Scorecard represented a fair
reflection of the business performance during 2025. The
Committee also assessed whether the level of pay-out is
commensurate with the experience of both shareholders and
colleagues over this period and concluded that this is the case.
Long-term assessment of performance
Vesting of LTIP awards granted in 2023 was determined based on
performance against two measures over the three-year period
1January 2023 to 31 December 2025. The measures were Total
Shareholder Return, relative to the FTSE 350 (“Relative TSR”), and
Cumulative Adjusted Earnings Per Share (“EPS”). Each accounted
for 50% of the award respectively. TSR over the three-year period
was just 1.5 places short of the median required for threshold
vesting for the TSR performance measure (a rank of 159 out of
the 314 constituents remaining in the FTSE 350). The EPS
outcome was 385.7p, which was strong. Overall TSR and EPS
performance resulted in 45% (of the 100% maximum) formulaic
vesting of the award.
As part of assessing the extent to which the performance targets
were met, the Committee considered the impact of the share
buyback programmes undertaken during the performance period.
Notwithstanding the impact of share buybacks on the outcome
for the EPS element, the Committee concluded that the overall
vesting outcome of 45% was appropriate. This was in the context
of strong returns to shareholders, with the share price as at the
date of this report being considerably higher than the share price
at the time of grant (£5.872). This share price growth was not fully
reflected in the relative TSR outcome, which was just below
median given the six month averaging period used. The
Committee believe that the overall vesting outcome of 45%
maximum is reflective of the shareholder returns over the period.
Key Remuneration Committee activities in 2025
Our workforce Executives and senior management Committee governance
– Received updates on broader remuneration matters relating
tothe wider workforce
– Reviewed the proposed budget and application methodology
of the increases from the 2026 annual pay review process
(effective 1 January 2026)
– Approved the outcome of the 2024Group Scorecard and in
turn the outturn of the 2024 Group Bonus Plan (awards paid
in March 2025)
– Adopted the 2026 Group Scorecard for the purpose of
determining the 2026 Group Bonus Plan
– Approved the operation of theSharesave Share Plan for
UKcolleagues and the ESPP for NorthAmerican colleagues
– Considered and approved the remuneration of Executive
Directors and Executive Committee members, including the
appointments of the Chief People Officer, Chief Strategy &
Transformation Officer and Group Company Secretary
– Approved Executive Director and Executive Committee
members annual bonus awards for 2024
– Approved the grant of the 2025 Deferred Share Plan (DSP)
awards for Executive Directors
– Approved the grant of the 2025 LTIP awards.
– Assessed and approved the vesting ofthe 2022 LTIP awards
– Considered and approved the remuneration concerned with
the retirement of Andy Skelton (former CFO) and the
appointment of Frank Lemmink (current CFO)
– Considered and approved fees paid to NEDs for 2025
– Conducted a review of the Policy, including a comparison
ofthePolicy against the requirements of the Corporate
Governance Code
– Developed the terms of the new Policy and initiated
engagement with shareholders for feedback
– Considered and approved the Committee’s Annual Report
onRemuneration for 2024
– Reflected on feedback received fromshareholders on
remuneration resolutions presented to the 2025AGM
– Reviewed the fees paid to Deloitte, as the Committee’s
remuneration advisers in 2025, together with fees paid
bytheGroup to Deloitte for other HR matters
– Approved the Committee’s Terms ofReference
Remuneration Committee report continued
91
Drax Group plc Annual report and accounts 2025
Governance
Remuneration Committee report continued
Board changes
Departure of Andy Skelton as CFO
In December 2024, we announced Andy Skelton’s intention to
retire as CFO. Following the appointment of Frank Lemmink,
Andy ceased to be an Executive Director on 1 September 2025.
He remained an employee until his departure on 4December
2025, allowing for a smooth and well managed transition of
responsibilities. Full details of the treatment of hisremuneration
on departure are set out on page 110.
Appointment of Frank Lemmink as CFO
On 1 September 2025, Frank Lemmink was appointed CFO.
Onappointment his salary was £495,000. His maximum bonus
opportunity is 150%. For the 2025 financial year he will
receiveapro-rata award for the period 1 September 2025
to31December 2025.
On 2 September, he was granted a 2025 LTIP award of 175%,
vesting of this award will be based on the same performance
conditions as the CEO. Frank elected to receive cash in lieu of a
pension contribution at 10% of salary which is aligned with the
rate for new joiners to the UK wider workforce. As part of his
recruitment terms and transition to a UK-based role, Frank
wasprovided temporary housing support in London until
18December 2025. The remuneration provided to Frank
onappointment is in line with our current Policy.
On 2 September, performance share awards were granted to
Frank as replacement awards for those forfeited upon his
departure from his previous employer (Shell). These awards
weregranted in accordance with the Company’s Directors’
Remuneration Policy and were determined on a value-for-value
basis. Specifically, the value of the forfeited awards was
converted into an equivalent number of shares at the Company,
using the weighted average share price over the three trading
days immediately preceding the grant.
The replacement awards are subject to performance conditions
and are scheduled to vest in line with the original vesting
timelines of the forfeited awards, thereby maintaining continuity
and alignment of incentives. Any adjustments arising from the
final determination of the performance outcomes under the
forfeited awards will be reflected in the 2026 Annual Report.
Further details are provided in the replacement awards granted
in 2025 table on page 109.
Frank will also receive a cash-based replacement award in
respect to a bonus he forfeited on leaving Shell in respect to the
2025 financial year. Frank’s maximum bonus opportunity at Shell
was 140%. This award will be paid to Frank in Q2 2026, and will
be calculated based on Shell’s bonus outturn, pro-rata for the
period for the time worked at his previous employer during the
2025 financial year. The value of the payment will be disclosed
inthe 2026 Annual Report.
Workforce engagement
We place great importance on listening to and engaging with
ourcolleagues, ensuring their views help shape our decisions
andunderstand how those decisions are made. This is achieved
through several established channels of engagement.
Our colleague forums (My Voice Forums) operate across the
business to ensure workforce representation and to support the
Board’s understanding of colleague sentiment and organisational
culture. Co-Chairs meet regularly with the CEO and Chair to
share feedback on key topics affecting colleagues, and in 2025
the UK Chairs met the Board in person.
In line with our listening strategy and commitment to monitoring
culture, quarterly surveys tracked engagement, diversity and
inclusion, health and wellbeing, and transformation and change
across the organisation, providing insight into cultural progress
and highlighting areas for action and improvement.
The Group recognises that its people are our most critical asset
and remains committed to fostering a diverse and inclusive
working environment in which all colleagues are respected and
their contributions valued. Consistent with prior years, colleagues
were provided with opportunities during 2025 to submit questions
directly to the CEO, with responses made available to the wider
workforce to support open communication and accountability.
Application of the Policy
Fixed pay
The 2026 pay review took effect from 1 January 2026, where
3.5% was the average increase for the wider workforce. This was
applicable for all countries where Drax has colleagues. Will
Gardiner and Frank Lemmink also both received a 3.5% increase.
Annual bonus
No changes to the construct of the Group Bonus Plan are
proposed under the new Policy. For 2026, the Group Scorecard will
continue to apply to most colleagues across the Group, including
the Executive Directors. For the 2026 Group Scorecard, there will
only be one financial target, and this is Group Adjusted EBITDA
which will have a 55% weighting. This is to reflect the importance
of this metric in 2026. The remaining 45% will continue to be
subject to the delivery of a range of strategic, people, sustainability,
safety and governance targets. There is more information on the
targets for performance metrics on page 115.
Long-Term Incentive Plan
It is intended that the 2026 LTIP grant is made in May, as soon
aspracticable after the 2026 AGM. As noted earlier in this report,
under the new Policy we are proposing there will be two
elements of the LTIP from 2026.
As noted earlier, for the core element of the LTIP award, TSR and
EPS metrics will be retained. For TSR, performance will continue
to be assessed against the constituents of the FTSE 350, with a
threshold vesting (25% of maximum) for performance in line with
the median and maximum vesting for performance in line with
the upper quartile. The targets for EPS are on page 116.
For the stretch element of the LTIP award, performance will be
assessed against Absolute TSR targets. Those targets are also on
page 116.
Summary
The Committee recognises the strong financial and operational
performance of the Group in 2025. Our colleagues across the
business have contributed to that performance. We believe the
2025 remuneration outcomes for the Executive Directors and
Executive Committee members fairly reflect performance, in
linewith the approach to remuneration across the Group, and
areappropriate to the shareholder experience.
We are confident that the new Policy we are proposing
underpins our purpose and the delivery of our strategy, and
rewards long-term sustainable performance and the unlocking
ofsignificant shareholder value. We hope that having read this
report you will vote in support of the resolutions for the Annual
Report on Remuneration for 2025 and the separate proposed
Policy at the AGM on 30 April 2026. More details on the policy
changes can be found within the appendix to the Notice of AGM.
92
Drax Group plc Annual report and accounts 2025
Implementation of the Policy for 2025
Element Key features of the Policy and implementation for 2025
Will Gardiner (CEO)
000s
Frank Lemmink
(CFO from
1September2025)
000s
Andy Skelton
(CFO to
1September2025)
000s
Base salary – The Committee targets market level, as determined by reference to appropriate comparator companies with
consideration for factors such assector, size and international presence
– An Executive Director in post at the start of the Policy period, and who remains in the same role throughout it,
would normally receive an increase in line with the average annual percentage increase applied to the workforce
in their location of employment.
724 165 303
Pension and other
benefits
– An Executive Director is entitled to acontribution to the Group’s defined contribution pension plan, a cash
payment in lieu of pension, or a combination of pension contribution and cash in lieu of pension
– Pension contribution rates for Executive Directors are aligned to the rates for new joiners to the UK wider
workforce. In 2025 this was 10% of base salary, aligned with the ratefor new joiners to the UK widerworkforce
– Other benefits provided as appropriate, and include a carbenefit, life assurance, income protection, the
opportunity to participate in all-employee share plans, and private medical cover. Temporary housing support
inLondon was provided to Frank Lemmink until December 2025 in respect of his appointment. Will Gardiner also
received professional services support in relation to tax compliance and advisory services in 2025.
224 77 44
Annual bonus – The maximum opportunity is 175% ofbase salary for the CEO and 150% for the CFO.
– Majority weighting of the bonus award was measured on financial metrics and the remaining on strategic,
people,sustainability, safety and governance metrics.
– 40% of the total bonus outcome will be deferred into shares which are subject to a three-year vesting period
– Clawback and malus provisions apply
– The 2025 annual bonus outcome as a percentage of maximum opportunity was 68.00%
– The bonus awards for Frank Lemmink and Any Skelton were pro-rated for their respective time in the CFO role
in2025.
862 168 309
LTIP – For awards made under the LTIP, themaximum award level is 200% ofbase salary for the CEO and175% for the
CFO under the current Policy.
– Vesting was subject to long-term performance measures, assessed over a three-year performance period.
Sharesmust be retained for afurther two years from the date ofvesting and clawback and malus provisions apply
– The 2025 LTIP award is measured over a three-year performance period to 31 December 2027, against TSR
relative to constituents of the FTSE 350, and Cumulative Adjusted EPS
– The 2023 LTIP is scheduled to vest on 31 March 2026 at 45% of theaward
– Frank Lemmink’s LTIP value excludes the replacement awards made under the LTIP for awards he forfeited at
hisprevious employer. Further details of these can be found on page 109.
853 £0 422
Shareholding
requirements
– The requirement is 250% of base salary for the CEO and 200% for the CFO under the current Policy
– A post-cessation shareholding requirement, equal to the employment shareholding requirement, applies for
atwo-year period after cessation. Only shares for awards granted after the 2020 AGM are included
– Will Gardiner and Andy Skelton have met their shareholding requirement (see page 111 for further details).
– Frank Lemmink has not yet met his shareholding requirement as he has five years from the date of appointment
to meet the requirements.
>250% of the
requirement
working towards
his 200%
requirement
>200% of the
requirement
Remuneration Committee report continued
93
Drax Group plc Annual report and accounts 2025
Governance
Alignment of Remuneration of Executive Directors and wider workforce
Many aspects of the remuneration for Executive Directors are also applicable to the wider workforce, such as the basis of the annual bonus award through the Group Scorecard, pension and benefits
entitlements. Below is a summary of the remuneration arrangements broken down by the colleague grouping. In this table as indicated in the key below, specific remuneration elements which are
highlighted in blue represent remuneration which is fully aligned across all colleagues, whilst those not highlighted are not aligned.
Remuneration
element Executive Directors
(1)
Executive Leadership and Senior Management
(2)
Wider workforce
(3)
Base salary Approach To target the appropriate market rate, as determined by comparisons with appropriate companies.
Increases Keep pay for colleagues consistent with market rate and reviewed in line with inflation; base salary increases for Executive Directors will generally be in line with those for the UK workforce.
Pension New hires All UK colleagues have the option to participate in the Company’s defined contribution pension plan, with Company contribution rate for new hires of up to 10% of base salary. Some colleagues
choose to take a cash payment in lieu of their pension, or a combination of pension contribution and cash in lieu of a contribution. All colleagues outside of the UK have the option to participate in
aretirement savings plan with a contribution from the Company.
Benefits Health and
wellbeing
All colleagues, with the exception of those in Japan, receive medical cover, and access to an annual private health assessment or a local equivalent arrangement.
Risk and
protection
All colleagues have Company-funded life assurance and income protection, or a local equivalent arrangement, unless they are covered under alternative collective bargaining arrangements.
Car benefit £12,000 Some colleagues have a car as a job requirement.
Bonus Eligibility Drax colleagues are eligible to take part in the annual bonus programme, unless precluded by alternative arrangements with their respective trade union group or acquisition agreement. The bonus
plan is designed to reward the delivery of targets and objectives directly linked to the financial and strategic performance of the Group set each year and detailed in a Scorecard.
Metrics Bonus awards are conditional on achieving thresholds set in the Scorecard, which combines financial and strategic metrics. These metrics are the same for all Drax colleagues.
Deferral 40% of the total bonus outcome will bedeferred into shares in the form of nil
costoptions or conditional awards under a Deferred Share Plan. Theperiod over
which shares are deferred is normally three years. Vesting is subject to continued
service or “good leaver” termination provisions. Note, under the new Policy we
areproposing that there will only be a requirement to defer bonus into shares for
Executive Directors who have not yet reached their shareholding requirement.
Not applicable, no deferral.
LTIP Eligibility Discretionary annual grant of shares, under the LTIP. Discretionary annual grant of shares, under the LTIP. One Drax Awards are a discretionary grant of share
awards made to certain employees in recognition of
theirperformance and to aid retention of key talent
below senior management.
Metrics For awards made under the LTIP, vesting is subject to long-term performance measures and are typically measured over a three-year
performance period. Vesting is subject to continued employment.
The vesting is not subject to meeting performance
measures. Vesting is subject to continued employment.
Shareholding
requirement
Requirements of 250% and 200% of salary for the CEO and CFO, respectively. A
post-cessation shareholding requirement, equal to the employment shareholding
requirement, applies for a two-year period after cessation. Note, under the new
Policy we are proposing that the shareholding requirements are increased in line
with the proposed increase in opportunity from 2026.
Not applicable. Not applicable.
All-colleague plans All UK colleagues have the option to buy shares in Drax at a discounted price (after a three-year or five-year saving period elapses) under the Sharesave plan. Eligible colleagues across US and
Canada are able to participate in the Employee Stock Purchase Plan (ESPP).
Notes:
(1) The Executive Directors are the CEO and CFO.
(2) Executive Leadership and Senior Management includes all colleagues in the three most senior job grades, excluding the CEO and CFO.
(3) Wider workforce includes all colleagues in job grades below the three most senior job grades.
Remuneration Committee report continued
Key:
Aligned across workforce Unique to a specific colleague group
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Remuneration Committee report continued
Directors’ Remuneration Policy – for approval by shareholders at the 2026 AGM
Below is the proposed Policy which, if approved by shareholders, will be effective immediately
afterthe AGM on 30 April 2026 and will be binding until the close of the 2029 AGM.
Base salary
Base salary helps to attract, reward and retain the right calibre of Executive Director to deliver the
leadership and management needed to execute the Group’s strategy and business plan.
Practical operation Maximum potential value
Base salary reflects the role, the executive’s
skills and experience, and market level. To
determine the market level, the Committee
reviews remuneration data on executive
positions at companies which the Committee
considers to be appropriate comparators.
Thecomparator companies are selected, with
advice from the Committee’s remuneration
advisers, taking into account factors such as,
but not limited to, sector, size, and international
presence.
Where base salary on appointment is below
market level toreflect experience, it will be
increased over time to align withthe market
level, subject to performance.
Base salaries of all Executive Directors are
generally reviewed once each year, with
increases generally applying from January.
Reviews cover individual performance,
experience, development in the role, market
comparisons and pay reviews for the wider
workforce.
Executive Directors are eligible for base
salary increases during the policy period,
normally in line with or below the average
annual percentage increase insalary applied
to all other employees in the Group at the
time ofthe increase.
Exceptions to this, subject to performance
and development, may include:
(i) An Executive Director has been
appointed at below market level to
reflect experience
(ii) An Executive Director has been
promoted internally (orthe scope or
nature of their role has changed)
(iii) There is a change in size and/or
complexity of the Group; and/or
(iv) Significant market movements
Such increases may be implemented over
such time period as the Committee deems
appropriate.
Pension
Pension provision is one of the components to attract, reward and retain the right calibre of
executive, to ensure delivery of the leadership and management needed to execute the Group’s
purpose and strategy.
Practical operation Maximum potential value
Executive Directors are entitled to a
contribution to the Group’s defined contribution
pension plan, a cash payment in lieu of pension
(subject to normal statutory deductions), or a
combination of pension contributions and cash
in lieu of pension.
The contribution rates for existing Executive
Directors are limited to the rate for new
joiners to the UK wider workforce, which is
currently 10% of base salary. This is also the
most common pension contribution rate for
UK-based employees.
The pension contribution rate for any new
Executive Director will also be limited to the
rate for new joiners to the wider workforce.
The Committee retains discretion to
determine the approach and, calculation
ofthe workforce pension level, including
ifrelevant, the methodology for any
Directors based outside the UK.
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Benefits
Benefits are provided to be market competitive as an integral part of Executive Directors’ total
remuneration.
Practical operation Maximum potential value
Executive Directors receive a car benefit, life
assurance, income protection, the opportunity
to participate in all-employee share plans on the
same basis as other employees, annual private
health assessment and annual private medical
cover. Additional benefits may be provided if the
Committee considers them appropriate
(including tax equalisation expenses, and
benefits or allowances which are customarily
provided in the country where an Executive
Director resides).
Relocation expenses are paid, where
appropriate, in individual cases. Executive
Directors’ relocation expenses are determined
on a case-by-case basis. The Policy is designed
to assist the Executive Director to relocate to a
home of similar standing.
Benefits are set at a level appropriate to
theindividual’s role and circumstances.
The maximum opportunity will depend on
the type of benefit and cost of its provision,
which will vary according to the market and
individual circumstances.
Annual bonus
The award of annual bonus will be based on annual performance against financial and operational
metrics linked to the business plan. The aim of the deferred portion of the annual bonus is to
further align Executive Directors to shareholders’ interests, by linking share-based reward to
long-term sustainable performance.
Practical operation Maximum potential value
The Committee will determine the annual bonus
payable after the year-end, based on
performance against targets.
40% of the total bonus outcome will be
deferred into shares in the form of nil cost
options or conditional awards under a Deferred
Share Plan (DSP). The period over which shares
are deferred is normally three years. Vesting is
subject to continued service or “good leaver”
termination provisions.
Deferred shares vest based on continued
employment and lapse other than in defined
good leaver circumstances.
Dividends or dividend equivalents (which may
assume notional reinvestment) are paid on DSP
awards.
In certain circumstances, the Committee can
apply malus and clawback to bonus awards.
Role
Maximum
opportunity
(% of base salary)
CEO 175%
Other Executive Directors 150%
Performance measures
The majority of the annual bonus will
bebased on financial metrics. The
Remuneration Committee reviews and
determines the metrics, weightings and
calibration of targets annually taking into
account business objectives and the
strategic priorities of the business.
There is no payment for below threshold
performance. The outcome for threshold
performance is 0% of maximum. The
outcome for target performance is normally
50% of maximum.
The Committee will review the formulaic
outcome of the bonus award and has the
discretion to amend the final outcome to
make sure that bonus payments reflect
overall performance. The use of such
discretion will be explained fully in the
relevant Annual Report on Remuneration.
In exceptional circumstances such that the
Committee believes the original measures
and/or targets are no longer appropriate,
theCommittee has discretion to amend
performance measures and targets during
the year.
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Long Term Incentive Plan (LTIP)
The LTIP, which includes the Core LTIP and Stretch LTIP elements, provides long-term alignment with shareholders based on the outcome of performance against the conditions set for each award.
Practical operation Maximum potential value
Under both the Core and Stretch LTIP, Executive Directors may at the discretion of the Committee
receive an annual grant of shares subject to performance conditions. Awards may take the form of
nil (or nominal) cost share options or conditional awards.
Dividends or dividend equivalents (which may assume notional reinvestment) may be paid on
LTIPawards.
Shares normally vest on the third anniversary of the grant, based on the Committee’s assessment
of the achievement of performance conditions. Performance conditions are typically assessed over
a period of three years. Awards are then subject to a further holding period of two years.
The holding period, which may be structured as either: (1) the Executive Director being entitled to
acquire the shares once vested, but, other than as regards sales to cover tax or any exercise price,
being prevented from selling shares until the end of the holding period; or (2) the Executive Director
being prevented from acquiring shares until the end of the holding period. If a holding period is
structured on the latter basis, additional shares may be awarded in respect of vested shares to
reflect the value of dividends paid on shares from the start of the holding period until the date on
which the Executive Director is entitled to acquire shares (this payment may assume that dividends
have been reinvested in shares on a cumulative basis.
The Committee will include an override provision in each grant under the LTIP. This will give the
Committee discretion to determine that no vesting shall occur, or to override the formulaic outcome,
if there are circumstances (relating to the Group’s overall performance or otherwise) which make
vesting when calculated by reference to the performance conditions alone inappropriate.
In certain circumstances, the Committee can apply malus or clawback to unvested/vested awards.
Role
Maximum opportunity
(% of base salary)
Core LTIP award Stretch LTIP award
CEO 250% 150%
Other Executive Directors 220% 130%
In exceptional circumstances, the Committee may, on recruitment, grant a percentage of base
salary in excess of these amounts.
Performance measures
Core LTIP Awards will be subject to a combination of long-term measures which are aligned to
the shareholder experience. One of the performance measures will be Relative TSR. Others may
include financial metrics, capital efficiency measures and ESG or strategic measures.
Stretch LTIP Awards will be subject to an absolute TSR measure, with vesting also dependent
onachieving maximum vesting of the Relative TSR performance condition under the Core LTIP
over the same performance period.
There is no payment for below threshold performance for either the Core or Stretch LTIP. The
outcome for threshold performance for the Core LTIP is no more than 25% of maximum and for
the Stretch LTIP is 0% of maximum.
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Shareholding requirement
The shareholding requirement aligns the interests of Executive Directors with shareholders.
Practical operation Maximum potential value
The shareholding requirement for the CEO is 400% of salary, and for the other Executive Directors
it is 350% of salary. This is expected to be achieved within a period five years after the date of the
2020 AGM (or after the date of appointment for new Executive Directors if this is later) from vested
shares derived from awards under the Company’s share plans.
Until this level is reached, Executive Directors who receive shares by virtue of any share plan
awardor who receive DSP awards are expected to normally retain 50% of the shares received
net(i.e. after income tax and national insurance contributions). Shares which have not vested
andare subject to performance conditions will not count towards the requirement. Unvested
awards subject to service only (e.g. DSP awards) will count towards the guideline on a net of tax
basis. TheCommittee retains discretion to vary the application of this requirement in exceptional
circumstances.
Maximum potential value
N/A
Performance measures
N/A
Post cessation shareholding requirement
The Group’s post-cessation shareholding requirement aligns the interests of Executive Directors with shareholders over the longer term beyond their departure from the Group.
Practical operation Maximum potential value
A post-cessation shareholding requirement, equal to the employment shareholding requirement
(orthe shareholding on departure if lower) normally applies for a two year period after cessation
ofemployment.
For clarity, the post cessation shareholding requirement is 400% of salary, and for the CEO and
forthe other Executive Directors it is 350% of salary.
Shares purchased by the Executive Director (including those from all employee share plans),
willnotbe included.
Shares counting towards this requirement will not be released from the Employee Benefit Trust
during the period in which the post-cessation shareholding requirement applies, to support
enforceability. Acceptance of the post-cessation shareholding requirement will be a condition
ofparticipation in all share awards granted, and will be included in the grant documentation for
awards. The Committee retains discretion to vary the application of this requirement in exceptional
circumstances.
Both Will Gardiner and Frank Lemmink have entered into such an agreement.
Maximum potential value
N/A
Performance measures
N/A
Remuneration Committee report continued
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Performance measures and approach to setting targets
The measures for elements of variable pay will be:
– In respect of the annual bonus plan, financial, strategic and
operational measures consisting of targets set by the
Committee each year in conjunction with the Board. The
targets are aligned with key business goals determined at
thestart of each year.
– In respect of share awards granted under the Core LTIP,
targets typically relate to a combination of:
– Relative TSR, which aligns Executive Director remuneration
with creation of long-term shareholder value
– Cumulative Adjusted EPS, which aligns Executive Director
remuneration with the realisation of our earnings growth
plans, which is a major determinant of shareholder value
– In respect of share awards granted under the Stretch LTIP,
targets typically relate to Absolute TSR, which aligns Executive
Director remuneration with creation of long-term shareholder
value.
– The Committee sets targets for the performance measures
each year, taking into account market conditions, the business
plan and other circumstances as appropriate. A summary of
the measures that apply for the following year are disclosed
inthe Annual Report on Remuneration.
– The Committee retains flexibility during the Policy period to
change the weighting and choice of performance metrics
tobetter align with strategy as it evolves.
Circumstances in which malus or clawback may apply
The Committee may, at any time within two years of the LTIP and
DSP vesting or annual bonus payment, determine that malus and/
or clawback provisions should be applied, in circumstances of:
– material financial misstatement;
– fraud or misconduct;
– material failure of risk management and corporate failure;
– if assessment of a performance condition is found to have
been based on an error, inaccuracy or misleading information;
and,
– in other circumstances that the Committee considers
justifying the operation of the clawback provision.
Committee’s judgement and discretion
In addition to assessing and making judgements on the meeting
of performance targets and the appropriate incentives payable,
the Committee has certain operational discretions it can exercise
in relation to Executive Directors’ remuneration. These include,
but are not limited to the following and in all cases any use of
discretion will align with the discretions afforded to the
Committee in the relevant plan rules:
– reviewing the formulaic outcome of the annual bonus, DSP
and LTIP awards and applying discretion to amend the final
outcomes, to ensure that the outcomes reflect overall
performance or an individual executive’s performance;
– deciding whether to apply malus or clawback to an award;
– determining whether a leaver is a “good leaver”; and
– determining the treatment of awards in the event of a
changeof control or other corporate event.
Where such discretion is exercised, it will be explained in the
relevant Annual Report on Remuneration.
Legacy remuneration arrangements
The Committee reserves the right to make any remuneration
payments and/or payments for loss of office (including exercising
any discretions available to it in connection with such payments)
notwithstanding that they are not in line with the Policy set out
above where the terms of the payment were agreed – (i) before
the Policy set out in the 2025 Annual Report and Accounts came
into effect, provided that the terms of payment were consistent
with the Shareholder-approved Directors’ Remuneration Policy
inforce at the time they were agreed, or (ii) at a time when the
relevant individual was not a director of the Company and, in the
opinion of the Committee, the payment was not in consideration
for the individual becoming a Director of the Company. For these
purposes ‘payments’ includes the Committee satisfying awards of
variable remuneration and, in relation to an award over shares, the
terms of the payment are ‘agreed’ at the time the award is granted.
Operation of share plans
The Committee retains discretion to operate the Company’s
share plans in accordance with the plan rules, including the
flexibility to adjust the number of shares subject to awards in the
event of a variation in share capital, or other relevant event and
to settle awards in cash or to grant awards as rights to cash
payments calculated by reference to a notional number of
shares. Although the Committee would only settle an Executive
Directors’ award in cash in appropriate circumstances, such as
where there is a regulatory restriction on the delivery of shares
or as regards the tax liability arising in respect of the award.
Ability to vary or substitute performance measures
ortargets
The Committee may vary or substitute any performance measure
or target where it considers it would be appropriate to do so (for
example, to reflect a change in strategy, a material acquisition
and/or divestment of a Group business, and/or a significant
investment or a change in prevailing market conditions), provided
that any such variation is fair and reasonable and, in the opinion
of the Committee, would not make the measure materially less
demanding. The Committee will assess performance on a fair and
consistent basis from year-to-year. If the Committee was to make
such a variation or substitution, an explanation would be given
inthe next Directors’ Remuneration Report.
Change of control
In the event of a change of control, unvested LTIP awards will be
released to the extent determined by the Committee taking into
account the relevant performance conditions and, unless the
Committee determines otherwise, the extent of vesting so
determined shall be reduced to reflect the proportion of the
vesting or performance period that has elapsed. In the event of
achange of control during the holding period relating to a LTIP
award, that holding period shall come to an end. Deferred bonus
awards will vest in full on a change of control. Awards under
all-employee share plans will vest in accordance with the
relevant plan rules.
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Remuneration scenarios
The composition and value of the Executive Directors’ remuneration packages at below threshold (minimum), target and maximum performance scenarios under the Drax Group Policy are set out in
thecharts below based on current salary and on projected earnings for 2026. The assumptions used in the charts are provided in the following table:
Description Fixed remuneration Annual bonus Core LTIP Stretch LTIP
Minimum Base salary is the rate payable as determined
by the Committee following the annual
review. Benefits and pension entitlement
remain as disclosed in the Policy.
None None None
Target 50% of the maximum opportunity. 62.5% vesting (midpoint between
threshold and maximum).
0% vesting.
Maximum Maximum cash bonus and deferred
shares (175% of salary for CEO and
150% of salary for other Executive
Directors).
Maximum Core LTIP opportunity (250%
ofsalary for CEO and 220% of salary for
other Executive Directors) with no
allowance for share price appreciation
or dividend equivalents.
Maximum Stretch LTIP opportunity
(150% of salary for CEO and 130% of
salary for other Executive Directors)
with no allowance for share price
appreciation or dividend equivalents.
Maximum
(with 50% share
price appreciation)
Maximum cash bonus and deferred
shares (175% of salary for CEO and
150% of salary for other Executive
Directors).
Maximum LTIP opportunity
(250%ofsalary for CEO and 220% of
salary for other Executive Directors)
with allowance for 50% share price
appreciation over the three-year
performance period and no allowance
for dividend equivalents.
Maximum LTIP opportunity (150%
ofsalary for CEO and 130% of salary
forother Executive Directors) with
allowance for 50% share price
appreciation over the three-year
performance period and no allowance
for dividend equivalents.
Minimum
Will Gardiner (CEO) £’000s
Target Maximum Maximum (with 50%
share price appreciation)
25%
21%
41%
36%
41%
19%25%
23%
14%19%35%100%
£6,779
£2,796
£968
£5,279
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
Minimum
Frank Lemmink (CFO) £’000s
Target Maximum Maximum (with 50%
share price appreciation)
25%
£3,145
£4,042
£1,672
£583
21%
42%
36%
42%
19%24%
23%
14%
19%
35%
100%
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
Fixed remuneration
Annual Bonus
Core Long term incentive
Stretch Long term incentive
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Approach to recruitment remuneration
The Committee will apply the components of this Policy to
determine the remuneration of newly appointed Executive
Directors.
Base salary will be set at a level appropriate to the role and the
experience of the Executive Director being appointed. Where
this is below the market level, it will be adjusted over time to
alignwith the market level, subject to good performance.
A new Executive Director would be eligible to receive an annual
bonus of up to 150% of salary, or 175% for a new CEO, in each
case with financial and strategic elements as set out in the Policy
table above.
In addition, a newly appointed Executive Director would be
eligible to receive a Core LTIP award of up to 220% of salary, or
250% in the case of a new CEO, (in exceptional circumstances
the Committee may on recruitment grant a percentage of salary
in excess of these amounts but in such circumstances it would
be capped at 300% of salary) and a Stretch LTIP award of up to
130% of salary for a new Executive Director, or 150% in the case
of a new CEO.
In the event that an Executive Director is recruited at a time in
the year when it would be inappropriate to provide a bonus or
long-term incentive award for that year as there would not be
sufficient time to assess performance; subject to the limits on
variable remuneration set out above, the opportunity in respect
of the months employed during the year may be transferred to
the subsequent year so that reward is provided on a fair and
appropriate basis. The Committee may also alter the performance
measures, performance period, vesting period and holding period
of the annual bonus or long-term incentive if the Committee
determines that the circumstances of the recruitment merit such
alteration. The rationale will be clearly explained.
In the event that an interim appointment is made to fill an
Executive Director role on a short-term basis, or the Chair or
aNon-Executive Director takes on an executive function on a
short-term basis, the Committee retains the discretion to set
remuneration on an appropriate basis for the nature of the role,
including but not limited to the use of interim cash allowances.
The Committee may also determine it appropriate to honour
prevailing contract commitments for an individual in the event
they are promoted to an Executive Director position.
In relation to Directors appointed from outside the Group, where
the Committee considers it to be necessary to secure the
appointment, the Committee may:
– make an award in respect of hiring to ‘buy-out’ remuneration
arrangements forfeited on leaving a previous engagement.
Indoing so the Committee will take account of relevant factors
regarding the forfeited arrangements, which may include any
performance conditions attached to awards forfeited (and the
likelihood of meeting those conditions), the time over which
they would have vested and the form of the awards (e.g. cash
or shares). It will generally seek to structure buy-out awards on
a comparable basis to remuneration arrangements forfeited.
These payments or awards are excluded from the maximum
level of variable remuneration referred to above, and the
Committee retains the discretion to use the exception under
the Listing Rules for the purpose of making such an award.
However, the Committee’s intention is that the value awarded
would be no higher than the expected value of the forfeited
arrangements. Where considered appropriate, buy-out awards
will be subject to forfeiture or clawback on early departure
– agree a rate for employer pensions contributions, or salary
supplements in lieu of pension contribution, which reflects
thecontribution rate for the wider workforce at the date of
appointment
– make appropriate payments in circumstances where an
individual is relocated from outside the UK, for example, travel,
relocation and subsistence costs; and/or
– approve the inclusion in the service contract of any terms
required by mandatory law in the jurisdiction where the
Executive Director is resident
Service agreements and termination
Executive Directors’ service agreements are of indefinite duration,
terminable at any time by either party giving 12 months’ notice.
They are available for inspection at the Group’s registered office.
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Element Details
Notice periods Executive Directors may be required to work during the notice period or may be provided with pay in lieu of notice if not required to work the full notice period.
Under each of the Executive Directors’ service agreements, the Group has the right to make a payment in lieu of notice of termination, the amount of that payment
beingthe salary and benefits that would have accrued to the Executive Director during the contractual notice period. For the avoidance of any doubt this excludes any
performance bonus (or cash equivalent) for the relevant period of unworked notice.
Compensation for loss
of office
If an Executive Director’s employment is brought to an end by either party, and if the Committee considers that it is necessary to pay the Executive Director a termination
payment, the Committee’s policy, in the absence of a breach of the service agreement by the Executive Director, is to determine an Executive Director’s termination
payment in accordance with his/her service agreement. The termination payment will be calculated based on the value of base salary and contractual benefits that would
have accrued to the Executive Director during the contractual notice period. The Committee will seek mitigation to reduce the amount of any termination payment to
aleaving Executive Director when appropriate to do so, having regard to the circumstances and the law governing the agreement. It may, for example, be appropriate
toconsider mitigation if the Executive Director has secured another job at a similar level. Mitigation would not apply retrospectively to a contractual payment in lieu of
notice.
In addition, the Executive Director may be entitled to a payment in respect of his/her statutory rights (including, where necessary to comply with the mandatory laws
ofthe jurisdiction in which the Executive Director is resident, a remuneration payment or payment for loss of office in excess of the Executive Director’s pre-established
contractual terms).
Other payments The Group may pay reasonable fees for a departing Executive Director to obtain independent legal advice in relation to their termination arrangements and appropriate
consideration for agreement to any contractual terms protecting the Group’s rights following termination. Moreover, reasonable fees in respect of outplacement support,
insurance for a period following termination of office and repatriation assistance, which may include relocation back and tax advisory support. In appropriate
circumstances, the Committee may agree that certain benefits (such as medical insurance) may be continued for a reasonable period following termination of
employment. Directors may receive accrued holiday pay at the time of departure. No service agreement includes any provision for the payment of compensation upon
termination. Any compensation payable in those circumstances would need to be determined at the time and in the light of the circumstances.
Any awards under the Group’s all-employee share plans be treated in accordance with the relevant plan rules, which do not allow for discretionary treatment.
Remuneration Committee report continued
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Element Details
Treatment of annual
bonus on termination
All bonus payments are discretionary. The Committee will consider whether a departing Executive Director should receive a cash bonus and deferred share award in
respect of the financial year in which, and/or immediately preceding which, the termination occurs, normally pro-rated to reflect the period of the performance year
completed to the date on which the Executive Director ceases active service. The Committee will take into account performance; the reason for termination; cooperation
with succession; any breach of goodwill; adherence to contractual obligations/restrictions; and any other factors which they believe should be taken into account.
Theservice contract for Will Gardiner as CEO, does not entitle him to any payment of bonus on termination of employment.
If the employment ends in any of the following circumstances, the Executive Director will normally be treated as a “good leaver” and the Executive Director would be
eligible for an annual bonus:
– redundancy;
– retirement;
– ill-health or disability, proved to the satisfaction of the Group; or,
– death.
If the termination is for any other reason, an award will be at the Committee’s discretion and it is the Committee’s policy to ensure that any such award properly reflects
the departing Executive Director’s performance and behaviour towards the Group.
If an award is made, it will normally be paid/granted at the normal time once performance has been determined for the relevant period. Any bonus award will be paid in
such proportions of cash and shares, and subject to such deferral arrangements as the Committee may determine. There may be circumstances in which the Committee
considers it appropriate for the award to be made earlier, for example, on termination due to death or ill-health, in which case, on-target performance may be assumed.
Treatment of unvested
long-term incentive
and deferred share
awards on termination
The Committee will consider the extent to which deferred and conditional share awards held by the Executive Director under the DSP and LTIP should lapse or vest.
Anydetermination by the Committee will be in accordance with the rules of the relevant plan.
In summary, the rules of the LTIP provide that awards will be retained if employment ends for any of the following reasons (“long-term good leaver reasons”):
– redundancy;
– retirement;
– ill-health or disability, proved to the satisfaction of the Company;
– death; and,
– change of control.
If employment ends for any other reason, the participant may be deemed a “good leaver” at the Committee’s discretion.
Awards which vest subject to satisfaction of performance conditions, will normally be time pro-rated, and will ordinarily vest on the normal vesting date subject to the
post-vesting shareholding period.
The rules of the DSP provide that deferred bonus awards will vest (in full) if employment ends for any of the good leaver reasons detailed above. If employment ends for
any other reason, the participant may be deemed a “good leaver” at the Committee’s discretion. In doing so it will take account of all relevant circumstances, in particular,
the Group’s performance; the Executive Director’s performance and behaviour towards the Group during the performance cycle of the relevant awards, and a range of
other relevant factors, including the proximity of the award to its maturity date.
The rules of the DSP and LTIP also provide that in circumstances where awards vest, they do so at the normal vesting date, unless the Committee exercises discretion
tovest awards earlier. Vested LTIP awards will remain subject to any post-vesting holding period unless the Committee exercises its discretion to allow for earlier release.
Remuneration Committee report continued
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Remuneration of Non-Executive Directors and Chair
Remuneration
component and
link to strategy Practical operation
Fees
To attract a Chair and
independent Non-
Executive Directors
who, together with the
Executive Directors,
form a Board witha
broad range of skills
and experience.
The Chair’s remuneration is determined by the Committee whilst that of the other Non-Executive
Directors is determined by the Chair and the Executive Directors. These are determined in the light of:
– fees of the Chair and Non-Executive Directors of other listed companies selected for comparator
purposes, on the same basis asfor Executive Directors;
– the responsibilities and time commitment; and,
– the need to attract and retain individuals with the necessary skills and experience.
Chair and Non-Executive Director fees may be paid in cash and/or shares, which may include non-
performance based on a nil or a nominal cost award over Company shares (which may incorporate
aright to dividend equivalents over any applicable vesting period). Non-Executive Directors’ fees may
be paid in GBP or the currency ofthe location of the individual Non-Executive. Fees are reviewed
annually and will typically be increased by up to the rate of increase awarded to the wider workforce.
Non-Executive Directors receive an annual base fee. Additional annual fees may be paid for additional
Board responsibilities or time commitments, including Senior Independent Director, the Chair and
members of any Board Committees.
Non-Executive Directors are not entitled to participate in any pension or performance related
remuneration arrangements.
Benefits
Reimbursed role-based
expenses incurred
during performance of
the duties of the role,
and other benefits if
applicable.
Non-Executive Directors may be eligible to receive benefits as appropriate, including the
reimbursement of any reasonable travel expenses or business-related expenses, support with the
completion of tax returns for international Non-Executive Directors. If tax or social security is payable
in respect of any benefit provided, the Company may make a further payment to cover the tax liability.
Travel allowance
To recognise the
additional time
commitment
associated with travel
onCompany business.
A travel allowance may be structured as appropriate from time totime, taking into account market
practice, the location of the Non-Executive Director and travel commitments, including but not limited
to an annual allowance, an allowance per meeting and different allowances payable for Non-Executive
Directors based in different countries or continents.
Remuneration Committee report continued
The Chair’s notice period is six months whilst the other Non-
Executive Directors have a notice period of up to 6 months.
Further information on the service agreements of the Non-
Executive Directors can be found on page 111 of the Annual
Report and Accounts.
Remuneration arrangements elsewhere in the Group
Wider employee population
In determining Executive Director remuneration, the Committee
also takes into account the level of general pay increases within
the Group. Employees are not directly consulted on the Policy,
but there are a number of existing channels designed to capture
the views of the workforce on remuneration, including the
MyVoice forums.
The Committee’s policy is that annual salary increases for
Executive Directors should not exceed the average annual salary
increase for the wider employee population unless there is a
particular reason for a higher increase, such as a change in the
nature or scope of responsibilities or if an Executive Director
hasbeen appointed at a salary below market level reflecting
experience in the role.
The Committee also considers external market benchmarking
toinform executive remuneration decisions. External market
benchmarking is also considered in relation to remuneration
decisions of the wider workforce.
Environmental, social and governance issues
The Committee is able to consider corporate performance on
environmental, social and governance issues when setting the
remuneration of Executive Directors. Specific measures can
beincluded in the strategic element of the annual bonus. The
Committee is also able to consider these issues in determining
whether to exercise its discretion to adjust formulaic outcomes
of the annual bonus and LTIP.
104
Drax Group plc Annual report and accounts 2025
Remuneration Committee report continuedRemuneration Committee report continued
Annual Report on Remuneration
The relevant sections of this Report have been audited as required by the Regulations.
Single total figure of remuneration – Executive Directors (audited information)
The table below sets out the single figure of remuneration and the breakdown for each Executive Director for the financial year ending 31 December 2025, together with comparative earnings for the
financial year ending 31 December 2024.
Director Year
Salary
(£000)
Benefits
(3)
(£000)
Bonus
(4)
(£000)
Long-Term
Incentives
(5)
(£000)
Pension
(£000)
Other
(6)
(£000)
Total
Remuneration
(£000)
Total
Fixed Pay
(£000)
Total
Variable Pay
(£000)
Will Gardiner 2025 724 143 862 853 72 8 2,663 940 1,723
2024 690 23 839 1,107 69 0 2,728 782 1,946
Frank Lemmink
(1)
2025 165 60 168 – 17 – 410 242 168
2024 – – – – – – – – –
Andy Skelton
(2)
2025 303 11 309 422 30 3 1,078 344 734
2024 439 16 457 616 44 0 1,572 499 1,073
Notes:
(1) Frank Lemmink joined Drax as an Executive Director on 1 September 2025. The remuneration for Frank in this table is reflective of the period 1 September 2025 to 31 December 2025.
(2) Andy Skelton stepped down from the Board on 1 September 2025. The 2025 remuneration for Andy in this table is reflective of the period 1 January 2025 to 1 September 2025.
(3) Benefits include car allowance, private medical insurance, life assurance and permanent health insurance. For Frank Lemmink, his benefits also include a temporary housing support from his appointment until the 18 December 2025, associated with him
accepting a UK-based role from the Netherlands. Will Gardiner has been in receipt of international health coverage since September 2024 due to his regular overseas business travel. The figure reported for 2024 includes the pro-rated international
healthcare compared to full year coverage for 2025. Will Gardiner also received professional services support in relation to tax compliance and advisory services in 2025.
(4) Bonus is the value of the award from the 2024 and 2025 annual bonus plans. It includes the value of bonus deferred and paid in shares after three years subject only to continuous service. 40% of the overall bonus for 2024 was deferred and 40% of the
overall bonus for 2025 will be deferred. In addition to the 2025 bonus, Frank Lemmink will also receive a cash-based replacement award in respect to a bonus he forfeited on leaving his previous employer. The value of this award will be disclosed in the 2026
annual report. Please see pages 92 for more information.
(5) The 2025 numbers represent the indicative value of the 2023 LTIP award which is scheduled to vest on 31 March 2026, together with the dividend equivalent shares in relation to those vested shares. The value of the award is calculated based on the
average share price over the last quarter of 2025, which was £7.458. The 2024 numbers (for the 2022 LTIP award which vested in March 2025) are restated to reflect the actual share price on vesting of £5.739 on 18 March 2025. This had been calculated in
the 2024 Annual Report on Remuneration based on the average share price over the last quarter of 2024, which was £4.891. As a result, the Total Remuneration and Total Variable Pay for 2024 have been updated. For Frank Lemmink, the first tranche of his
replacement award in shares (Award 1) will vest in Q2 2026 and after the publication of the 2025 Annual Report. The value of shares vesting for Award 1 will be disclosed in the 2026 Annual Report. Further details on Frank’s replacement awards can be
found on page 109.
(6) Represents the value of the Sharesave Awards granted in 2025. The value is based on the share price on grant (£5.660) less the exercise price (£4.528) i.e. the discount of £1.132 per share multiplied by the number of shares.
105
Drax Group plc Annual report and accounts 2025
Governance
Annual bonus outcome
The targets for the 2025 Group Scorecard metrics aligned with the Group’s strategy and 2025 business plan and no adjustment to the targets was made during 2025. The Committee completed an in-depth
review of the score for each of the metrics to ensure that the result was appropriate and in aggregate. The Committee believes that the outcome reflected the strong financial, strategic, people, sustainability,
safety and governance performance, as well as wider employee and shareholder experiences. No discretion was exercised by the Committee in determining the final 2025 Group Scorecard outcome.
Plan Targets Scoring
Key
Performance
Indicator Measure Weighting
Threshold (low target)
(0% of max earned)
Target
(50% of max earned)
Stretch (high target)
(100% of max earned) Outturn Score (out of 2)
Financial
Group Adjusted EBITDA (£m) 40.00% 810 900 990
947 1.53
Net Cashflow (£m) 15.00% 237 287 337
399 2.00
Strategic
FlexGen Business Model 6.25%
Partially Achieved Achieved Strongly Achieved
Partially Achieved 0.38
Pellets Business Model: Production Costs
6.25%
Low Target Target High Target
Above high target
1.08
Pellets Business Model: Third-Party Sales
Partially Achieved Achieved Strongly Achieved
Partially Achieved
Future of DPS 6.25%
Partially Achieved Achieved Strongly Achieved
Strongly Achieved 2.00
Elimini 6.25%
Partially Achieved Achieved Strongly Achieved
Achieved
(capped at target)
1.00
People &
Sustainability
Carbon Reduction 5.00%
Partially Achieved Achieved Strongly Achieved
Between Partially
Achieved & Achieved
0.50
DEI 5.00%
Benchmark -0.2% Benchmark Benchmark +0.2%
Below Benchmark 0.00
Safety &
Compliance
HSE: Total Recordable IncidentRate (TRIR)
5.00%
0.23 0.20 0 .17
0.33
1.00
HSE: Near Miss & Hazard Incidents Rate (NMHIR) 150 175 200
209
Compliance 5.00%
Partially Achieved Achieved Strongly Achieved
Strongly Achieved 2.00
100.00%
2025 Bonus Outturn: 1.36
(68.00% of maximum)
Remuneration Committee report continued
106
Drax Group plc Annual report and accounts 2025
Remuneration Committee report continued
Financial
Group Adjusted EBITDA – This was the principal financial metric. The outturn for 2025 was
£947 million, which was above the target of £900m (score of 1.53)
Net Cashflow – Net movement in cash and cash equivalents is adjusted for cash flows relating
to acquisitions and disposals, refinancing activities and share buybacks. The target was
£50 million more than the 2025 business plan and the high target was £100 million more. The
outturn for 2025 was £399 million, which was above the high target (score of 2.00). It was
exceeded due to strong EBITDA (net of tax and working capital performance.
Progress on Strategic Objectives
There were four strategic objectives included for 2025. The choice and assessment of performance
of these strategic objectives in 2025, was subject to the Committee’s scrutiny and approval.
Progress on FlexGen business model (overall score of 0.38)
This objective included three sub-components:
– 1. Drax Energy Solutions: Over achievement of I&C sales targets and strong progress
developing growth areas (score of 1.15)
– 2. Cruachan 3&4 upgrade: Full completion of milestone objectives reflecting technical and
engineering progress on Cruachan 3&4, however some were later than planned and impacted
EBITDA (score of 0.00).
– 3. OCGTs: Owing to a number of delays, many of which were due to external parties, we now
forecast takeover of the three plants to occur during 2026 (score of 0.00).
Progress on Pellet Production (score of 1.08)
– 1. Production cost: Strong cost control across fibre, utilities, operations and maintenance and
port costs represented a significant reduction versus 2024 and meant the outturn for 2025
was ahead of the high target (score of 2.00).
– 2. Third party sales: Heads of terms, extensions and renewals of fuel supply agreements were
signed with various customers in 2025, but performance was below target (score of 0.16)
Progress on Future of DPS – In November 2025 we signed a new four-year low carbon
dispatchable CfD, covering all biomass units at Drax Power Station starting in March 2027.
Strong progress was also made on critical readiness activities for when it takes effect (score
of2.00).
Progress on Elimini – in 2025 we moved from delivering a large-scale BECCS project, largely due
to evolving political landscape in the US, to seeking opportunities as a development partner.
Good progress was also made in developing the brand and building relationships with NGOs.
Thescore was 1.21 but was reduced to 1.00 for Executive Directors.
People & Sustainability
Carbon Reduction – Projects were identified that collectively would deliver a significant reduction
in the Group’s carbon emissions. Two projects were started but changes in the business meant it
was not appropriate to complete them. The third was a solar hydro installation project on which
good progress was made and is scheduled to be completed in 2026 with a material carbon
reduction benefit. Other decarbonisation projects were completed in 2025. (score of 0.50).
DEI Score – This was measured against an independent rating intended to provide an
understanding of the extent to which colleagues considered Drax to provide a culture of
inclusivity. The rating is derived through a subset of the quarterly all-employee survey. Drax’s
average score of this subset of questions for every survey run in 2025 was 7.8 which was below
the industry sector benchmark (score of 0.00).
HSE & Compliance
HSE – The assessment of our safety performance continued to focus on one leading and one
lagging indicator. The first was TRIR, measured at a Group level and included the performance of
employees and contractors. At the end of 2025, Drax had a TRIR of 0.33, relative to a target of 0.20
(score of 0.00). The second was near miss and hazard identification reporting rate (NMHIR), as a
positive culture of reporting can reduce the likelihood of actual incidents taking place. At the end of
2025, Drax had a NMHIR of 209, relative to a target of 175 (score of 2.00).
Compliance – Strong progress was made on initiatives intended to improve our compliance
standards and reporting capability. In 2025 we established a framework clarifying internal
accountabilities for delivering on our obligations, we implemented a software system intended
to drive an improvement in our safety reporting and we implemented a comprehensive plan for
managing environmental emissions. We also made significant progress on further automating
the reporting of compliance and sustainability metrics (score of 2.00).
107
Drax Group plc Annual report and accounts 2025
Governance
Remuneration Committee report continued
Bonus earned for 2025 (audited information)
The table below sets out the bonuses earned for the 2025 financial year and the split between cash
and deferred elements.
Director
Max bonus
opportunity
(as %
base salary)
Total bonus
outcome
(as % of
maximum)
Total bonus
outcome
(as % base
salary)
Total bonus
outcome
(£000)
Amount paid
in cash
(£000)
Amount
deferred in
shares
(£000)
Will Gardiner 175% 68.00% 119.00% 862 517 345
Frank Lemmink
(1)
150% 68.00% 102.00% 168 101 67
Andy Skelton
(2)
150% 68.00% 102.00% 309 185 124
Notes:
(1) Frank Lemmink joined Drax as an Executive Director on 1 September 2025. For the 2025 bonus year, he was eligible for
apro-rata bonus (for the period 1 September 2025 to 31 December 2025).
(2) Andy Skelton stepped down from the Board on 1 September and left Drax on 4 December 2025. In line with the bonus plan
rules, he was eligible for a pro-rata bonus for the 2025 bonus year (for the period 1 January 2025 to 12 November 2025,
which is the date he went on garden leave). The above table show the bonus earned in respect of services as a Director,
from 1 January 2025 to 1 September 2025. Further details of his arrangements on departure are provided on page 110.
40% of the total bonus award for 2025 will be deferred into shares for a period of three years and
the remaining 60% will be paid in cash in March 2026. The deferral element will in ordinary
circumstances vest in March 2029, subject to the Executive Director being employed by Drax at
that time. If the Executive Director leaves, other than as a “good leaver”, the deferred element will
be forfeited. Andy Skelton is leaving through retirement and was given “good leaver” status under
the bonus rules.
LTIP incentive outcomes (audited information)
The vesting outcome for awards granted in 2023 under the LTIP, which were subject to
performance conditions over the three-year period from 1 January 2023 to 31 December 2025,
and scheduled to vest on 31 March 2026, is provided in the tables below.
Performance Condition Weighting
Performance for
threshold vesting
(25% vesting)
Performance for
maximum vesting
(100% vesting)
Actual
performance
Relative TSR vs FTSE 350
constituents
50% Median Upper Quartile 24.8
(159 of 314
constituents)
Cumulative Adjusted EPS 50% 322.8p 394.6p 385.7p
The Committee considered the Group’s overall performance for 2025 and felt no discretion to
adjust the 2023 LTIP outcome was required. The share buyback programmes which operated in
2024, 2025 and 2026 were not envisaged when the targets for the 2023 LTIP grant were set and
itdid have a benefit to the EPS outturn. Notwithstanding the impact of share buybacks on the
outcome for the EPS element, the Committee concluded that the overall vesting outcome of 45% (of
the 100% maximum) was appropriate. Please refer to page 91 for further explanation.
Director
Awards granted
(as % of base
salary)
Number
of awards
granted
Number
of awards
vesting
Number
ofdividend
shares
earned
Number
of shares
due to vest
Total value
(£000)
(1)
Will Gardiner 200% 225,830 101,623 12,798 114,421 853
Andy Skelton
(2)
175% 125,698 50,278 6,330 56,608 422
Notes:
(1) Represents the value of the 2023 LTIP award which should vest on 31 March 2026, together with the dividend shares in
relation to those vested shares. The value of the award is calculated based on the average share price over the last quarter
of 2025, which was £7.458. The share price has increased over the vesting period and the value attributable to share price
appreciation is £161k for Will Gardiner and £80k for Andy Skelton. (share price on grant was £5.872). The value of dividend
shares earned on the awards vesting for Will Gardiner is 95k and for Andy Skelton is 47k based on the average share price
over the final quarter of 2025.
(2) For Andy Skelton, the number of vesting shares is pro-rata for the number of whole months he worked during the three year
performance period.
108
Drax Group plc Annual report and accounts 2025
LTIP awards granted in 2025 (audited information)
The table below shows the conditional awards granted under the LTIP to Executive Directors in
2025. The awards for Will Gardiner and Andy Skelton were granted on 20 March 2025 and the
award for Frank Lemmink was granted on 2 September 2025.
Director
Award granted
(as % of salary) Number of shares granted
Face value of awards granted
(£000)
(1)
Will Gardiner 200% 251,621 1,449
Frank Lemmink 175% 133,577 866
Andy Skelton
(1)
175% 138,089 795
Note:
(1) The number of shares awarded was based on the average share price in the three-day period prior to grant, which was
£5.757 for Will Gardiner and Andy Skelton, and was £6.485 for Frank Lemmink. In accordance with the LTIP rules, dividend
shares are awarded at the time and in the event that awards actually vest. No dividend shares are awarded where the initial
awards lapse.
(2) Andy Skelton’s LTIP award will be subject to time pro-rating as per the arrangements of his termination on page 110.
The performance conditions that apply to the LTIP awards granted in 2025 are set out below.
Performance Condition Weighting
Performance for
threshold vesting
(25% vesting)
Performance for
maximum vesting
(100% vesting)
Relative TSR vs FTSE 350 constituents 50% Median Upper Quartile
Cumulative Adjusted EPS 50% 252.5p 308.7p
Vesting occurs on a straight-line basis between performance levels for both conditions. The
performance of both performance conditions is measured over three financial years from 1 January
2025 to 31 December 2027.
DSP awards granted in 2025 (audited information)
The table below shows the deferred conditional share awards granted under the DSP to Executive
Directors on 20 March 2025 in respect of bonus earned for performance in the financial year
ending 31 December 2024. These shares will vest on 20 March 2028.
Director
Value of
deferred bonus
(£000)
Number of
shares granted
(1)
Will Gardiner 336 58,291
Andy Skelton 183 31,782
Note:
(1) The number of shares awarded was based on the average share price in the three-day period prior to grant, which was
£5.757. In accordance with the DSP rules, dividends in respect of the deferred shares are reinvested in additional shares,
which vest when the deferred shares vest.
Replacement awards granted in 2025 (audited information)
The table below shows the share awards granted to Frank Lemmink in respect of his recruitment
during the year, replacement performance share awards forfeited on departure from his previous
employer. These awards were granted on 2 September 2025.
Award
Number of
shares granted
Face value of
awards granted
(£000)
(1)
Award 1 – scheduled to vest on 31 March 2026 114,417 742
Award 2 – scheduled to vest on 15 March 2027 108,866 706
Note:
(1) The number of shares awarded was based on the average share price in the three-day period prior to grant, which was
£6.485.
Award 1 will vest in accordance with the final performance vesting outcome of Shell’s 2023 LTIP
award as confirmed in Shell’s 2025 annual report. The vesting of the award is likely to be delayed
bya few weeks in order for this information to become available. Award 2 is subject to the same
performance conditions, and their respective targets, as Drax’s 2024 LTIP award, as set out in the
2024 annualreport.
Remuneration Committee report continued
109
Drax Group plc Annual report and accounts 2025
Governance
Sharesave options granted in 2025 (audited information)
In 2025, Will Gardiner entered into a five-year 2025 Sharesave contract and Andy Skelton entered
into a three-year 2025 Sharesave contract (6,879 and 4,063 options, respectively). The exercise
price is £4.528, which represents a 20% discount to the prevailing share price at the time of offer,
and is the same for all employees who elected to participate in the Sharesave. Both save the
maximum permitted monthly savings of £500. The face value of the awards was £38,935 for Will
Gardiner and £22,997 for Andy Skelton, which is based on the 3 day average share price of £5.660.
Frank Lemmink joined Drax after the annual enrolment for the 2025 Sharesave programme.
Pension entitlements for defined contribution schemes (audited information)
Executive Directors are entitled to receive a contribution to the Group’s defined contribution
pension plan, cash in lieu of pension contributions or a combination of both. In 2025, the employer
contributions for Will Gardiner, Frank Lemmink and Andy Skelton were 10% of base salary; this is
aligned with the rate of contributions provided to new joiners to the UK wider workforce. Will
Gardiner’s and Frank Lemmink’s pension benefit was delivered as cash in lieu of pension. From the
1 January to 1 September, part of Andy Skelton’s pension benefit was delivered as contributions
tothe Group defined contribution pension plan (£6,666) and the remaining part as cash in lieu
(£23,358). No Executive Director was a member of a defined benefit pension scheme.
Payments to former Directors (audited information)
There were no payments to former Directors.
Payments for loss of office (audited information)
In December 2024, we announced Andy Skelton’s intention to retire as CFO. Following the
appointment of Frank Lemmink, Andy ceased to be an Executive Director of Drax on 1 September
2025. He went on garden leave on 12 November and remained an employee until his termination
date on 4 December 2025 to allow a smooth and well managed transition of responsibilities.
Andy was paid in accordance with the terms of his service agreement and the current Policy. He
continued to receive his salary (£118k), benefits (£5k) and pension (£12k) in the normal way up to
his termination date. For private medical insurance, Andy will continue to be eligible until 30 June
2026, in line to the end of the policy period for private medical insurance.
Andy remained eligible for a pro rata annual bonus in respect of 2025, which is due to be paid in
March 2026. The value of his bonus earned as a Director (from 1 January 2025 to 1 September
2025) is included in the single figure table on page 105. For the period 1 September to 12
November 2025 (the date he went on garden leave), his bonus (£93k) was calculated on the same
basis. 40% of the total bonus will, in accordance with the current Policy, be deferred as an award
under the DSP and will vest in accordance with the rules of the DSP in March 2029.
Andy was treated as a “good leaver” for the purposes of the DSP and LTIP awards. All unvested
DSPawards will vest in line with normal timescales. Unvested LTIP awards will be pro-rated based
on the proportion of the relevant vesting period employed and remain subject to the original
performance conditions and time horizons including the post-vesting holding period. Following his
departure, Andy will continue to comply with the post-cession shareholding requirement of 200%
of base salary for two years.
Andy received £6,000 plus VAT for the reimbursement of legal costs associated with his departure.
Recovery provisions
The Committee may, at any time within two years of the LTIP and DSP vesting or annual bonus
payment, determine that malus and/or clawback provisions should be applied, in circumstances of:
– material financial misstatement;
– fraud or misconduct;
– material failure of risk management and corporate failure;
– if assessment of a performance condition is found to have been based on an error, inaccuracy
ormisleading information; and,
– in other circumstances that the Committee considers justifying the operation of the clawback
provision.
The Committee considers the above time horizons as appropriate as they provide sufficient time
forany potential circumstances in which malus or clawback may be used to arise, and are aligned
tothe LTIP holding period.
The Committee is comfortable that malus and clawback provisions are effective and appropriate
taking into account the nature of the business and its business cycle. The Committee can confirm
that malus and/or clawback have not been operated during the year.
Statement of Directors’ shareholding and share interests (audited information)
The shareholding guidelines under the current Policy require Executive Directors who receive
shares by virtue of share plan awards, or who receive deferred bonus share awards under the DSP,
to retain 50% of the shares received net (i.e., after income tax and National Insurance
contributions) until the value of shares held is equal to at least 250% of salary for the CEO and
200% of salary for other Executive Directors. Only shares that are not subject to performance
conditions count towards the shareholding requirement (shares owned by the Director and
unvested awards subject to service only – DSP awards – on a net of tax basis). As noted on page
93, both Will Gardiner and Andy Skelton satisfy this requirement however Frank Lemmink has
yetto satisfy this as he has five years from his date of appointment to meet this.
Remuneration Committee report continued
110
Drax Group plc Annual report and accounts 2025
Directors’ interests in shares (audited information)
The table below shows the shareholdings of the Directors, and their connected persons, as at
31December 2025. The value is based on the mid-market quotation on 31 December 2025
of£8.378. There was no movement in share interests between 31 December 2025 and the
lastpracticable date for recording changes prior to the date of publication.
Director
Number of
beneficially
owned
(1)
Number
of
LTIP
awards
(2)(3)
Number
of DSP
awards
(3) (4)
Number of
SAYE
options
(5)
Shareholding
requirement
as a % of
salary
Shareholding
as a % of
salary at
31December
2025
(6)
Shareholding
requirement
met at
31December
2025
(7)
Executive Directors
Will Gardiner 1,275,295 769,666 192,892 6,879 250% 1,593% Yes
Frank Lemmink – 356,860 – – 200% 0% No
Andy Skelton 672,917 232,777 105,17 9 4,063 200% 1,343% Yes
Non-Executive Directors
Andrea Bertone – – – – – – –
John Baxter 17,50 0 – – – – – –
Nicola Hodson
(8)
– – – – – – –
Kim Keating – – – – – – –
David Nussbaum – – – – – – –
Erika Peterman – – – – – – –
Rob Shuter 80,000 – – – – – –
Notes:
(1) The figures include 316,281 shares subject to a post-vesting holding period for Will Gardiner and 178,259 shares subject
toapost-vesting holding period for Andy Skelton.
(2) LTIP awards are conditional share awards subject to ongoing performance conditions. For Andy Skelton, the number
reflects the pro-rated number of shares following his retirement on 4 December 2025.
(3) Shares representing dividend equivalents are added on vesting.
(4) A proportion of annual bonus is deferred into shares which are not subject to further performance conditions.
(5) The 2025 five-year SAYE option is due to mature on 1 June 2030 and the 2025 three-year SAYE option is due to mature on
1 June 2028 with an option price of £4.528.
(6) The calculation for Will Gardiner includes 1,275,295 shares owned, plus 102,233 unvested DSP shares on a net of tax basis.
The calculation for Andy Skelton includes 672,917 shares owned, plus 55,745 unvested DSP shares on a net of tax basis.
(7) Under the Policy, Frank Lemmink has five years from the date of appointment to meet the shareholding requirement
(8) Nicola Hodson stepped down from the Board on 23 May 2025.
Service agreements or contracts for services
The following table shows, for each Director of the Company as at the date this Annual Report and
Accounts is published, or those who served as a Director of the Company at any time during the
year ended 31 December 2025, the start date and term of the service agreement or contract for
services, and details of the notice periods. A new service agreement was agreed during 2025 for
John Baxter in April for an extension of his term in office.
Director
Date appointed as a Director
and member of the Board
Contract start date/
renewal date
Permitted contract
term (years)
Notice
period by
theCompany
(months)
Notice
period by
theDirector
(months)
Will Gardiner 16 November 2015 – Indefinite term 12 12
Frank Lemmink 01 September 2025 – Indefinite term 12 12
Andy Skelton
(1)
02 January 2019 – Indefinite term 12 12
Andrea Bertone 24 August 2023 24 August 2023 3 years 6 6
John Baxter 17 April 2019 17 April 2025 3 years 1 1
Nicola Hodson
(2)
12 January 2018 12 January 2024 3 years 1 1
Kim Keating 21 October 2021 21 October 2024 3 years 1 1
David Nussbaum 01 August 2017 01 August 2023 3 years 1 1
Erika Peterman 21 October 2021 21 October 2024 3 years 1 1
Rob Shuter 11 June 2024 11 June 2024 3 years 6 6
Notes:
(1) Andy Skelton stepped down from the Board on 01 September 2025 and left Drax on 4 December 2025.
(2) Nicola Hodson stepped down from the Board on 23 May 2025.
Remuneration Committee report continued
Relative importance of spend on pay
The table below illustrates the relative importance of spend on pay compared to distributions to
shareholders. At the AGM on 30 April 2026, the Board will recommend to shareholders that a
resolution is passed to approve payment of a final dividend for the year ended 31 December 2025.
The cost with respect to dividends for 2025 in the table below relates to the interim dividend, which
was paid in October 2025, and the final dividend to be paid in May 2026, subject to approval by
shareholders at the AGM.
£331.1m
£337.5 m
Remuneration: 2025
Remuneration: 2024
£98.9m
£95.5m
Dividends: 2025
Dividends: 2024
0 £50m £100m £150m £350m£300m£200m £250m
111
Drax Group plc Annual report and accounts 2025
Governance
Drax 10-year Total Shareholder Return performance to 31 December 2025
The graph below shows how the value of £100 invested in both Drax and the FTSE 350 Index (Index) on 31 December 2015 has changed. This Index has been chosen as a suitable broad comparator
against which Drax’s shareholders may judge their relative returns given that Drax is a member of the Index. The graph reflects the TSR for Drax and the Index referred to on a cumulative basis over
theperiod from 31 December 2015 to 31 December 2025.
0
100
200
300
400
500
Dec 25Dec 24Dec 23Dec 22Dec 21Dec 20Dec 19Dec 18Dec 17Dec 16Dec 15
Drax FTSE 350
CEO’s pay – last 10 financial years
Year 2016 2017 2018
(1)
2019 2020 2021 2022 2023 2024
(2)
2025
Group CEOs total single figure (£000) 1,581 1,236 1,885 1,121 2,013 3,226 5,540 3,002 2,728 2,663
Bonus % of maximum awarded 88.00% 53.00% 53.00% 45.00% 45.00% 80.50% 87.5 0% 70.00% 69.50% 68.00%
LTIP award % of maximum vesting 15.43% 0.00% 57.63% 18.00% 57. 20% 7 7. 28% 100.00% 100.00% 100.00% 45.00%
Notes:
(1) Dorothy Thompson stood down as CEO on 31 December 2017 and was replaced by Will Gardiner. The information reported from in 2016 and 2017 relates to the remuneration Dorothy Thompson earned. From 2018, this information relates to the
remuneration of Will Gardiner.
(2) The 2024 Group CEO total single figure, which includes LTIP, has been restated to reflect the actual share price on vesting of £5.739 on 18 March 2025.
Remuneration Committee report continued
112
Drax Group plc Annual report and accounts 2025
Remuneration Committee report continued
Percentage change in Directors’ remuneration compared with the wider employeepopulation
The tables below show how the percentage change in the Directors’ salary/fees, benefits and bonus between 2021 and 2025
(1)
, compared to the percentage change in the average of each of those
components of pay for a group of employees. There are several employer entities but no employees who are specifically employed by Drax Group plc. As a result, the Committee has selected all Group
employees below Executive Director level based in the UK, as the majority of employees are based in the UK and this provides the most appropriate comparison.
Salary/fees (percentage increase) Taxable benefits (percentage increase) Bonus (percentage increase)
2021 2022 2023 2024 2025 2021 2022 2023 2024 2025 2021 2022 2023 2024 2025
(8)
Will Gardiner
(2)
2.0% 10.7% 4.0% 4.0% 5.0% 0.0% 0.0% 0.0% 19.5% 521.7% 82.9% 20.3% -15.9% 3.3% 2.7%
Frank Lemmink
(3)
– – – – – – – – – – – – – – –
Andy Skelton 2.0% 8 .1% 4.0% 4.0% 3.5% 0.0% 0.0% 0.0% 0.0% N/A
(7)
82.9% 17.5% -15.9% 3.3% N/A
Andrea Bertone
(4)
– – – – 3.5% – – – – 16.7% – – – – –
John Baxter
(5)
2.0% 4.5% 4.1% 4.0% 73.4% – – – – – – – – – –
Nicola Hodson
(5)
2.0% 4.5% 6.5% 3.3% 6 4.1% – – – – – – – – – –
Kim Keating
(4) (5) (6)
– 4.5% 4 .1% 4.0% 97.0% – – N/A – 80.0% – – – – –
David Nussbaum
(5)
2.0% 4.5% 6.5% 3.3% 77.2% – – – – – – – – – –
Erika Peterman
(4) (5)
– 4.5% 4 .1% 4.0% 73.4% – – N/A – 66.7% – – – – –
Rob Shuter
(5)
– – – – 64.1% – – – – – – – – – –
Average for UK employees 2.0% 4.5% 8.0% 5.0% 3.5% 0.0% 0.0% 0.0% 0.0% 0.0% 78.9% 8.7% -13.6% 4.2% 2.8%
Notes:
(1) Commentary on prior year data for the percentage change in Directors’ remuneration can be found in the relevant year’s annual report.
(2) Effective 1 September 2024, Will Gardiner received health insurance for coverage outside of the UK due to his regular overseas business travel. The figure reported for 2024 includes the pro-rated international healthcare compared to full year coverage
for2025 (£36k). Will Gardiner also received professional services support in relation to tax compliance and advisory services in 2025 (£88k).
(3) Frank Lemmink joined Drax as an Executive Director on 1 September 2025 and therefore the percentage change in fees has not been provided for previous years.
(4) From January 2025, Travel allowances for the overseas NEDs were increased to recognise the additional time incurred attending Board meetings in the UK. These continue to be set in local currency.
(5) Effective 1 January 2025, the fees for NEDs (excluding the Chair) were increased to reflect the market and to recognise the increased time commitment of the role.
(6) Effective 18 June 2025, Kim became a Chair of the Remuneration Committee and received a fee for chairing the committee to reflect her additional responsibilities. The % change for Kim shows the difference between her fee as at 31 December 2024 vs
31December 2025.
(7) Andy Skelton’s benefits based on his time as an Executive Director in 2025 is smaller due to the pro-ration therefore this is disclosed as N/A.
(8) The bonus Scorecard outcome for 2025 for the Executive Directors (1.36) is lower than it was for 2024 (1.39). For the 2025 pay review, Will Gardiner received a higher increase than the wider UK wider workforce (5.0% vs 3.5%). This has resulted in a slightly
lower difference in the overall bonus % change compare to the average UK employee (even though the scorecard for the wider workforce was higher (1.38). For Andy Skelton, based on his time as an ED in 2025, the overall bonus is smaller due to the
pro-ration therefore this is disclosed as N/A.
113
Drax Group plc Annual report and accounts 2025
Governance
CEO pay ratio
The table below sets out the CEO pay ratio for 2025, along with the comparative ratios since 2019.
The pay ratios have been calculated using actual earnings for the CEO and UK employees. The CEO
total single figure remuneration is given on page 105 of this report.
Financial Year Methodology
25th Percentile
Pay Ratio (P25)
50th Percentile
Pay Ratio (P50)
75th Percentile
Pay Ratio (P75)
2025 Option A 52:1 34:1 26:1
2024 Option A 62:1 38:1 29:1
2023 Option A 76:1 46:1 30:1
2022 Option A 114:1 79:1 57:1
2021 Option A 84:1 52:1 34:1
2020 Option A 65:1 38:1 25:1
2019 Option A 42:1 25:1 16:1
The methodology used for calculating all pay ratios was the same. For 2025, the total remuneration
of all UK employees of the Group on 31 December 2025 has been calculated on a full-time (and
full-year) equivalent basis using the single figure methodology and reflects their actual earnings for
2025. The only exception is for employees with Defined Benefit (DB) pensions, where the employer
contribution to the respective schemes has been used in the calculation (rather than the single
figure methodology) to reduce the administrative complexity. This is likely to undervalue the DB
pension value. No adjustments, other than to achieve full-time and full-year equivalent rates, were
made and no components of remuneration have been omitted. Of the three options permitted to
calculate the percentiles, the Committee has chosen option A (the calculation of the total pay and
benefits for 2025 for all UK employees on an FTE basis), as we believe it is the most robust and
most statistically accurate method of the options permitted. Set out in the table below is the base
salary and the total pay and benefits for each of the identified employees in respect of 2025.
Element
25th Percentile
(P25)
50th Percentile
(P50)
75th Percentile
(P75)
Base Salary £39,626 £54,850 £ 7 3,16 4
Total Pay and Benefits £51,297 £78,831 £104,001
Base salaries of all employees, including Executive Directors, are set with reference to a range of
factors including market practice, experience and performance in role. The CEO has a larger portion
of his pay based on the performance of the business than the individuals at P25, P50 and P75. The
Committee believes that our senior executives should have a significant portion of their pay directly
linked to the performance of the business but recognise that this does mean the pay ratios will
fluctuate each year depending on business performance and associated outcomes of incentive plans.
The pay ratio reports a narrower gap between actual earnings of the CEO and UK employees (than
compared to 2024 CEO pay ratios). This is primarily due to the impact of the bonus outturn and LTIP
award vesting. In terms of the bonus, the outturn for 2025 was lower than the outturn for 2024.
Interms of the LTIP, the outcome of the 2023 LTIP (which is scheduled to vest in March 2026) was
45% of the maximum, whereas the 2022 LTIP (which vested in March 2025) vested in full. These
impacts have resulted in a lower reported figure for the total CEO remuneration for 2025.
The Group is comprised of different business units and teams with different levels of pay, including
call centre staff, support staff and engineers. The Committee reviews information about employee
pay, reward and progression policies of the Group and (given the relative differences in
responsibilities of the roles, the pay relativities between grades within the organisation, and the
positioning of pay versus the wider market) is comfortable that the median pay ratio is consistent
with these policies.
Single total figure of remuneration – Non-Executive Directors (audited information)
The existing fees for the Chair and Non-Executive Directors were independently reviewed by
Deloitte at the end of 2024. They were benchmarked against other UK-listed companies with
significant global operations. Changes to their fee structure and quantum took effect from
1January 2025, the changes and rationale for those changes was outlined 2024 annual report.
Through a routine audit undertaken by KPMG in 2025, a clerical error was identified in the
deduction of tax for each of the three Non-Executive Directors based outside the UK. This occurred
over the period December 2022 to August 2025, which impacted UK tax years 2022/23, 2023/24,
2024/25 and 2025/26. It has subsequently been agreed with each of the Directors that they will
repay Drax the respective UK tax amount, concluding by December 2026. The total amount for Kim
Keating and Erika Peterman is £38,578, respectively, and they both repaid these amounts to Drax
before the end of 2025. Andrea Bertone’s total amount is £92,676, of which £79,436 isoutstanding
at 31 December 2025, and this will be repaid before the end of 2026.
The table on the following page is the single figure of remuneration for each Non-Executive
Director for 2025, together with comparative figures for 2024. The figures are rounded up to the
nearest £1,000.
Remuneration Committee report continued
114
Drax Group plc Annual report and accounts 2025
Director Year
Base fee
(£000)
Travel
allowance
(£000)
Additional fee
for Senior
Independent
Director
(£000)
Additional fee
for chairing
a Committee
(£000)
Additional fee
for being a
Committee
Member
(£000)
Total
(£000)
Andrea Bertone
(1)
2025 299 27 – – – 326
2024 289 24 – – – 312
John Baxter 2025 90 – – – 20 110
2024 64 – – – – 64
Nicola Hodson
(2)
2025 36 – – 10 4 50
2024 64 – – 13 – 77
Kim Keating
(3)
2025 90 20 – 15 14 138
2024 64 12 – – – 75
David Nussbaum
2025 90 – 25 – 20 135
2024 64 – 13 – – 77
Erika Peterman
(4)
2025 90 19 – – 20 129
2024 64 12 – – 76
Rob Shuter
(5)
2025 90 – – 25 10 125
2024 36 – – 8 43
(1) As Andrea is based in the US, her fee was paid in US dollars. Her base fee was in line with the fee structure in the Policy
andwas converted into US dollars based on the exchange rate £1=$1.37.
(2) Nicola Hodson stood down as a Director in May 2025 and received a pro-rated payment of her fees up until her date of departure.
(3) Kim Keating is based in Canada and her fee was paid in Canadian dollars. Her base fee was in line with the fee structure in
the Policy and was converted into Canadian dollars based on the exchange rate £1=C$1.72. From June 2025, Kim received
apro-rated additional fee for chairing the Remuneration Committee.
(4) Erika Peterman is based in the US and her fee was paid in US dollars. Her base fee was in line with the fee structure in the
Policy and was converted into US dollars based on the exchange rate £1=$1.37.
(5) Rob Shuter joined the Board as a Non-Executive Director in June 2024 and received a pro-rated base fee and additional fee
for chairing the Audit Committee.
Statement of Implementation of the Remuneration Policy in 2026
This section sets out the proposed implementation of the Policy in 2026. No deviations from the
procedure for the implementation of the Policy are proposed.
Base salary
Below are the base salaries of the Executive Directors which took effect from 1 January 2026.
There are no further planned increases for 2026. These increases are 3.5%, which are in line with
the average increase of the wider workforce as part of the 2026 pay review process.
Base salary as at
1 January 2025/joining
(000)
Base salary as at
1January 2026
(000)
Percentage
increase
Will Gardiner £724 £750 3.5%
Frank Lemmink £495 £513 3.5%
Benefits and pension
There are no changes intended to the benefits provided to the Executive Directors. The employer
contributions for Will Gardiner and Frank Lemmink will remain at 10% of base salary, which is
aligned with the rate of new joiners to the UK wider workforce.
Annual bonus
The targets for the 2026 Group bonus scorecard was approved by the Committee in December
2025. The bonus awards for colleagues across the Group in 2026, including the two Executive
Directors, will be subject to the performance against the 2026 Group Scorecard.
The delivery of Group EBTIDA budget makes up the majority weighting of the 2026 Group
Scorecard (55%).
The delivery of critical strategic milestones is essential to Drax advancing its strategic aims. For
2026, there will be two. The first will focus on reducing third-party spend which is a key factor in
reducing Drax’s cost base by the end of 2026. The second will focus on delivering key strategic
projects which will be disclosed in the 2026 annual report. Both will have a 12.5% weighting.
HSE and ESG performance will continue to have a 20% weighting in the 2026 Group Scorecard.
HSE performance will continue to be assessed against one leading indicator and one lagging
indicator. The leading indicator is the Near Miss and Hazard Identification Rate (NMHIR) which is
measured based on the number of environmental, safety and process safety observations across all
operations and locations. The lagging indicator is Total Recordable Incident Rate (TRIR), measured
at a Group level with the overall target built up based on local business area targets.
ESG will be represented by three measures. The first is a carbon reduction measure, which is based
on a total tonnes of carbon reduction in 2026. This performance measure is the Environmental
dimension of ESG. The second focuses on improving diversity, equity and inclusion (DEI) and this
will take the form of a DEI target, derived from an all-employee opinion survey administered by
Workday Peakon. The DEI target is the Social dimension of ESG and also aligns with our People
Positive element of the Group’s strategy. Compliance is the Governance dimension of ESG, which
isintegral to our business and that the Board regards as a core part ofour licence to operate.
Finally, underpinning the bonus plan is a modifier which can be applied to reduce the overall
formulaic bonus outcome, if the Committee considers it appropriate. The Committee has discretion
to apply the modifier if any of the following events were to occur: a major breach in safety; a major
environmental, community or biomass sourcing event; or a major compliance breach or failure.
The performance metrics, targets and outturns of the 2026 Group Scorecard will be disclosed
inthe 2026 Annual Report on Remuneration.
Remuneration Committee report continued
115
Drax Group plc Annual report and accounts 2025
Governance
LTIP
The Committee will grant LTIP awards to Executive Directors of 400% of salary for the CEO and
350% of salary for the CFO, made up of a core LTIP opportunity of 250% and 220% and a stretch
LTIP opportunity of 150% and 130% of salary, respectively, as soon as practicably possible in May,
following Drax’s 2026 AGM.
For the core element, TSR performance will be assessed versus the constituents of the FTSE 350
with threshold vesting (25% of maximum) for performance in line with the median and maximum
vesting for performance in line with upper quartile. TSR performance will be measured over the
period 1 January 2026 to 31 December 2028. For the EPS element, targets for the 2026 grant have
been agreed by the Committee at the meeting in February. The targets were considered similarly
challenging to those set in prior years having had regard to current commercial circumstances.
TheEPS target was set after considering the Company’s internal forecasts, market expectations
and sector peers. The EPS target is “Adjusted EPS”, derived from Adjusted Results as reported
inthe Company’s audited financial statements. Instances where such adjustments might apply
include acquisition and restructuring costs, asset obsolescence charges and certain
remeasurements on derivative contracts. EPS performance will be measured over the period
1January 2026 to 31December 2028 and vesting will be in accordance with the following
schedule. Note, vesting between the threshold and maximum will be on a straight-line basis.
Performance Target
% of Award
Vesting (for EPS
performance)
Below threshold <170.3p 0%
Threshold 170.3p 25%
Maximum 230.3p 100%
For the stretch element, performance will be assessed on the delivery of stretching Absolute
TSRtargets. The performance period will run from 1 January 2026 to 31 December 2028. Vesting
is also conditional on Drax achieving upper quartile TSR to the FTSE 350 over the same period.
TheAbsolute TSR targets have been calculated based on share price growth plus dividends, divided
by a base share price. The base share price used is the average share price between 1 July 2025
and 31 December 2025, which aligns with the base period for the Relative TSR performance metric
inthe core element. Share price growth is the average share price between 1 July 2028 and
31December 2028, less base share price.
An achievement of the 100% maximum Absolute TSR target would mean an investor would see
areturn equivalent to double the base share price.
Performance Target
% of Award
Vesting (for Absolute TSR
performance)
Below threshold <50% 0%
Threshold 50% 0%
Maximum 100% 100%
The Committee retains discretion to restate or make adjustment to those targets in appropriate
circumstances. This would take account of the importance of such performance targets fulfilling
their original intent ensuring that they are not more or less challenging than intended when set,
and considering the impact of relevant events in the performance period. Any amendments would
be disclosed in the Remuneration Report at the relevant time.
Non-Executive Directors’ fees
The annual fee structure for the Non-Executive Directors for 2026 is shown in the table below.
Thebase fee for the Chair and Non-Executive base fee was increased by 3.5%, effective 1 January
2026. This is consistent with the average increase of the wider workforce as part of the 2026
annual pay review process.
There was no change to the additional fees for chairing a committee, committee membership or
forthe Senior Independent Director. There is also no change to the travel allowance provided.
Director
Fees at
1January 2025 (£)
Fees at
1January 2026 (£)
Chair
(1)
298,500 309,000
Non-Executive Director base fee
(1)
90,000 93 ,150
Supplemental fee for Committee membership 10,000 10,000
Senior Independent Director 25,000 25,000
Audit Committee Chair 25,000 25,000
Remuneration Committee Chair 25,000 25,000
Nomination Committee Chair 25,000 25,000
Notes:
(1) The 2026 fees for the Chair and the two Non-Executive Directors based outside of the UK are paid in their local currency.
Remuneration Committee report continued
116
Drax Group plc Annual report and accounts 2025
Shareholder voting
The table below shows the voting outcome at the 2025 AGM on the 2024 Annual Report on
Remuneration. The votes cast represent 70.68% of the issued share capital. In addition,
shareholders holding 18,829 shares withheld their votes.
Voting on the 2024 Annual Report on Remuneration For Against
Number of votes 242,773,772 9,450,240
Proportion of votes 96.25% 3.75%
The table below shows the voting outcome for the Directors’ Remuneration Policy at the 2023
AGM. In addition, shareholders holding 563,770 shares withheld their votes.
Voting on the 2023–2025 Directors’ Remuneration Policy For Against
Number of votes 287,599,357 7,97 8 ,420
Proportion of votes 97.3 0% 2.70%
Adviser to the Committee
The adviser to the Committee for the year was Deloitte. Deloitte are an independent remuneration
adviser and were appointed by the Committee in October 2024. Deloitte were paid fees in 2025
inrelation to advising the Committee and on broader HR matters. Deloitte were paid £130,300
excluding VAT, during 2025 in respect of advice given to the Committee determined on a time
andmaterial basis.
Deloitte are members of the Remuneration Consultants Group and are signatory to its Code of
Conduct. The Committee is satisfied that the advice it received from Deloitte was, and remains,
objective and independent. Deloitte has no other connection with the Company other than stated
here, or individual Directors, and Deloitte have confirmed that there are no conflicts of interest.
This report was reviewed and approved by the Remuneration Committee.
Kim Keating
Chair of the Remuneration Committee
25 February 2026
Remuneration Committee report continued
117
Drax Group plc Annual report and accounts 2025
Governance
Directors’ report
The Directors present their Annual Report on the affairs of the Group, together with the audited
Consolidated financial statements and Auditor’s report for the year ended 31 December 2025. The
Directors’ report required under the Companies Act 2006 (the Act) is comprised of this report, the
Corporate Governance report, and the Audit, Nomination and Remuneration Committee reports.
Information about the use of financial instruments by the Company and its subsidiaries is given in
note 7.1 to the consolidated financial statements on page 215.
Directors
The names of those who served as a Director during the period can be found in the Board Meeting
Attendance table on page 70.
The appointment and replacement of Directors is governed by the Company’s Articles of
Association (Articles), the UK Corporate Governance Code, the Act and related legislation. See
Articles 77 to 86 of the Company’s Articles, available on the Company’s website at www.drax.com/
about-us/corporate-governance/compliance-and-policies/.
Annual General Meeting (AGM)
The AGM will be held at 10am on Thursday 30 April 2026 at 200 Aldersgate, St. Paul’s, London
EC1A 4HD. A separate document contains the notice convening the AGM and includes an
explanation of the business to be conducted at the meeting.
Dividends
Details of dividends in respect of the 2025 financial year can be found under section 2.9 of the
financial statements. Details of past dividends can be found on the Company’s website at www.
drax.com/investors/shareholder-information/dividends/.
Share capital, substantial shareholdings and the authority to purchase own shares
Drax Group plc is listed on the London Stock Exchange and currently trades as part of the FTSE-
250 Index, under the symbol DRX and with the ISIN number GB00B1VNSX38.
The Company has only one class of equity shares, being ordinary shares of 11
16
⁄29 pence each,
witheach ordinary share having one vote. Shares held in treasury do not carry voting rights. Details
of movements in the Company’s issued share capital can be found in note 4.4 to the consolidated
financial statements on page 197.
Authority to purchase own shares
At the 2025 AGM, shareholders authorised the Company to make market purchases of up to 10% of
the issued ordinary share capital. At the 2026 AGM, shareholders will be asked to renew the authority
to make market purchases of up to 10% of the issued ordinary share capital. More details on
Resolution 20 can be found in the Notice of Meeting. During 2025, the Company purchased a total
of34,073,669 ordinary shares across both the Company’s £300 million share buyback programme,
which completed on 8 October 2025, and the current £450 million three-year buyback extension.
Shares in issue
At 1 January 2025 427,770,766
Issued in period 4,400,997
At 31 December 2025 432,171,763
Treasury shares at 31 December 2025 91,788,405
Total voting rights at 31 December 2025 340,383,358
Issued between 1 January and 24 February 2026 89,977
At 24 February 2026 432,261,740
Treasury shares at 24 February 2026 94,255,867
Total voting rights at 24 February 2026 338,005,873
Interests in voting rights
As at 24 February 2026, the following information had been received in accordance with DTR5
from holders of notifiable interests in the voting rights of the Company. The information provided
below was correct at the date of notification. However, investors are only obliged to notify the
Company when a notifiable threshold is crossed and therefore it should be noted that the holdings
below may have changed but without crossing a threshold.
Date last
notification
made
Number of
voting rights
directly held
Number of
voting rights
indirectly held
Number of
voting rights
in qualifying
financial
instruments
Total number
of voting
rights held
% of the issued
share capital
held
(1)
Invesco Limited 22 Oct 2020 – 38,578,024 – 38,578,024 9.71%
Schroders plc 24 Sept 2024 – 18,741,922 – 18,741,922 4.90%
Orbis Holdings
Limited 10 Mar 2025 – 17,067,417 – 17,0 6 7,417 4.70%
Notes:
(1) As at the date of the last notification made to the Company by the investor, in compliance with DTR.
Rights and obligations attaching to shares
The rights attaching to the Company’s ordinary shares are set out in the Articles, available on the
Company’s website at www.drax.com/uk/compliance-and-policies/. The Articles may only be
changed by shareholders by special resolution.
Colleague engagement
Details of how the Company has engaged with employees during 2025 can be found in Stakeholder
Engagement on page 61. Details of how the Board has considered the interests of employees in key
decision making can be found in the section 172 statement from page 60.
118
Drax Group plc Annual report and accounts 2025
Disabled employees
The Company gives full consideration to applications for employment by disabled persons, bearing
in mind the aptitudes of the applicant concerned. If an employee becomes disabled, every effort
ismade to ensure their employment with the Group continues, and that appropriate training is
arranged. It is the policy of the Group that the training, career development, and promotion
ofdisabled persons should, so far as possible, be identical to that of other employees.
Political donations
Drax is a politically neutral organisation and did not make any political donations or incur any
political expenditure (within the ordinary meaning of those words) in 2025. The Company regularly
engages with regulators and policymakers (including those associated with political parties and
governments) to listen and contribute to discussions on a wide range of matters. Our Political
Engagement Policy can be found on the Company’s website at: www.drax.com/about-us/
corporate-governance/compliance-and-policies/drax-political-engagement-policy/.
Due to the broad definition of political donations under the Act, and as amatter of good
governance and transparency, we have provided information on areas of expenditure incurred as
aresult of this engagement which may be regarded as falling within the scope of the Act.
During 2025, Drax attended conferences organised by political parties, spending a total of £15,777
(2024: £20,817). This included the purchasing of attendance passes to the Labour Annual Party
Conference (£12,340), Conservative Annual Party conference (£2,837), and the Reform UK Annual
Party Conference (£600). Drax also attended an event at the Liberal Democrat Party Conference,
but it was not necessary to purchase an attendance pass. These events allow Drax to present its
views on a non-partisan basis to politicians from across the political spectrum and non-political
stakeholders such as NGOs and other listed and non-listed companies. These payments do not
indicate support for any political party. Overall, the recipients were the Conservative Party (£2,837),
the Labour Party (£12,340), and Reform UK (£600).
At the 2026 AGM, Drax will be seeking renewal from shareholders of the existing authority
approved at the 2025 AGM. More details are contained in the Notice of Meeting.
Other significant agreements and change of control
Other significant agreements that the Group has entered into include the borrowings facilities
described in section 4.2 on page 192 of the financial statements, the receivables monetisation
facility described in section 4.3 on page 195, and the sustainability-linked revolving credit facility
(RCF) described in section 4.2 on page 192.
As at 31 December 2025, the Company had agreements for committed credit facilities, loan notes,
private placements, collateral, and a receivables monetisation facility, with a number of
counterparties, which, on a change of control of the Company following a takeover bid, may alter or
terminate. No other agreements that take effect, alter, or terminate upon a change of control of the
Company following a takeover bid are considered to be significant in terms of their potential impact
on the business as a whole.
Directors’ interests and indemnity arrangements
Other than a service contract between the Executive Directors and a Group company, no Director
had a material interest at any time during the year in any significant contract with the Company or
any of its subsidiary undertakings. There are no agreements between the Group and its Directors
providing for compensation for loss of office or employment because of a takeover bid. The
Company has appropriate indemnity insurance cover in place in respect of legal action against
Directors of the Company and its subsidiaries.
The Company also indemnifies the Directors under deeds of indemnity for the purposes of section
236 of the Companies Act 2006. Such indemnities contain provisions that are permitted by the
Director liability provisions of the Companies Act 2006 and the Company’s Articles of Association.
Strategic report
The Strategic report on pages 1 to 50 contains disclosures in relation to workforce engagement,
stakeholder engagement, diversity, Greenhouse Gas emissions, streamlined energy and carbon
reporting requirements (SECR), future development and research activities.
Post balance sheet events
None to report.
Auditors and the disclosure of information to the auditor
So far as each person serving as a Director at the date of approving this report is aware, there is no
relevant audit information, being information needed by the auditor in connection with preparing
the report, of which the auditor is unaware. Having made enquiries of fellow directors, each
Director has taken all steps that they ought to have taken as a Director to ascertain any relevant
audit information and to establish that the auditor is aware of that information. This information is
given and should be interpreted in accordance with the provisions of Section 418 of the Companies
Act. Further details on the work of the auditor and the Audit Committee are set out in the Audit
Committee report on pages 77 to 86.
Disclosures required under Listing Rule 6.6.4
The information required to be disclosed in accordance with Listing Rule 6.6.4 of the Financial
Conduct Authority’s Listing Rules can be located in the following pages of this Annual Report
andAccounts:
Section Information to be included Location
1 Statement of the amount of interest
capitalised
Note 2.5 on page 159
2, 4 – 13 Not applicable
The Directors’ report was approved by the Board on 25 February 2026 and is signed by order of the
Board by:
Hillary Berger
Group Company Secretary
Directors’ report continued
119
Drax Group plc Annual report and accounts 2025
Governance
The Directors are responsible for preparing the Annual Report and the Financial Statements in
accordance with applicable law andregulations.
Company law requires the Directors to prepare financial statements for each financial year. Under
that law the Directors are required to prepare the group financial statements in accordance with
United Kingdom adopted international accounting standards in conformity with the requirements
of the Companies Act 2006 and United Kingdom adopted International Accounting Standards
andhave elected to prepare the ParentCompany financial statements in accordance with United
Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and
applicable law), set out in FRS 101 – Reduced Disclosure Framework. Under company law the
Directors must not approve the accounts unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and of the profit or loss of the Company for that period.
In preparing the Parent Company financial statements, the Directors are required to:
– select suitable accounting policies and then apply them consistently;
– make judgements and accounting estimates that are reasonable and prudent;
– state whether applicable UK Accounting Standards have been followed, subject to any material
departures disclosed and explained inthe financial statements; and
– prepare the financial statements on the going concern basis unless it is inappropriate to presume
that the Company will continue inbusiness.
In preparing the Group financial statements, International Accounting Standard 1 requires that
Directors:
– properly select and apply accounting policies;
– present information, including accounting policies, in a manner that provides relevant, reliable,
comparable and understandableinformation;
– provide additional disclosures when compliance with the specific requirements in IFRS are
insufficient to enable users tounderstand the impact of particular transactions, other events
andconditions on the entity’s financial position and financialperformance; and
– make an assessment of the Company’s ability to continue as a going concern.
The Directors are responsible for keeping adequate accounting records that are sufficient to show
and explain the Company’s transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that the financial statements comply
with the Companies Act 2006. They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention and detection of fraud and
other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial
information included on the Company’s website. Legislation in the United Kingdom governing
thepreparation and dissemination of financial statements may differ from legislation in
otherjurisdictions.
Responsibility statement
We confirm that to the best of our knowledge:
– the financial statements, prepared in accordance with the relevant financial reporting
framework, give a true and fair view of the assets, liabilities, financial position, and profit or
lossofthe Company and the undertakings included in the consolidation taken as a whole;
– the Strategic report includes a fair review of the development and performance of the business
and the position of the Company and the undertakings included in the consolidation taken as
awhole, together with a description of the principal risks and uncertainties that they face; and
– the Annual Report and financial statements, taken as a whole, are fair, balanced and
understandable and provide the information necessary for shareholders to assess the Company’s
position, performance, business model, and strategy.
This responsibility statement was approved by the Board of Directors on 25 February 2026 and
issigned on its behalf by:
Will Gardiner
CEO
Directors’ responsibilities statement
120
Drax Group plc Annual report and accounts 2025
Financial
statements
We’re committed to being
agoodneighbour in the
communities where we operate.
ENABLING A SECURE ENERGY TRANSITION
In this section
Financial statements
122 Independent Auditor’s report to the
members of Drax Group plc
130 Financial statements
Section 1
Consolidated financial statements
135 Consolidated income statement
136 Consolidated statement of
comprehensive income
137 Consolidated balance sheet
138 Consolidated statement of changes
inequity
139 Consolidated cash flow statement
Section 2
Financial performance
140 2.1 Segmental reporting
144 2.2 Revenue
149 2.3 Operating and administrative
expenses
150 2.4 Impairment review of non-current
assets
159 2.5 Net finance costs
159 2.6 Current and deferred tax
163 2.7 Alternative performance measures
171 2.8 Earnings per share
171 2.9 Dividends
172 2.10 Retained profits
Section 3
Operating assets and working capital
173 3.1 Property, plant and equipment
178 3.2 Leases
180 3.3 Renewable certificate assets
181 3.4 Inventories
182 3.5 Trade and other receivables and
contract assets
186 3.6 Contract costs
186 3.7 Trade and other payables and
contractliabilities
188 3.8 Climate change
Section 4
Financing and capital structure
191 4.1 Cash and cash equivalents
191 4.2 Borrowings
194 4.3 Notes to the Consolidated cash flow
statement
197 4.4 Equity and reserves
198 4.5 Non-controlling interests
Section 5
Other assets and liabilities
201 5.1 Goodwill and intangible assets
203 5.2 Provisions
Section 6
People costs
206 6.1 Employee costs
206 6.2 Share-based payments
210 6.3 Retirement benefit obligations
Section 7
Risk management
215 7.1 Financial instruments and their
fairvalues
219 7.2 Financial risk management
236 7.3 Hedge reserve
238 7.4 Cost of hedging reserve
239 7 .5 Offsetting financial assets and
financial liabilities
240 7.6 Contingencies
240 7.7 Commitments
Section 8
Reference information
241 8.1 General information
241 8.2 Adoption of new and revised
accounting standards
242 8.3 Related party transactions
Drax Group plc
243 Company financial statements
244 Notes to the Company financial
statements
121 Drax Group plc Annual report and accounts 2025
Financial statements
Independent Auditor’s report to the members of Drax Group plc
Report on the audit of the financial statements
Opinion
In our opinion:
– Drax Group plc’s group financial statements and company financial statements (the “financial
statements”) give a true and fair view of the state of the group’s and of the company’s affairs as at
31 December 2025 and of the group’s profit and the group’s cash flows for the year then ended;
– the group financial statements have been properly prepared in accordance with UK-adopted
international accounting standards as applied in accordance with the provisions of the
Companies Act 2006;
– the company financial statements have been properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards,
including FRS 101 “Reduced Disclosure Framework”, and applicable law); and
– the financial statements have been prepared in accordance with the requirements of the
Companies Act 2006.
We have audited the financial statements, included within the Annual report and accounts
(the“Annual Report”), which comprise:
– the Consolidated balance sheet as at 31 December 2025;
– the Company balance sheet as at 31 December 2025;
– the Consolidated income statement for the year then ended;
– the Consolidated statement of comprehensive income for the year then ended;
– the Consolidated statement of changes in equity for the year then ended;
– the Company statement of changes in equity for the year then ended;
– the Consolidated cash flow statement for the year then ended; and
– the notes to the financial statements, comprising material accounting policy information
andother explanatory information.
Our opinion is consistent with our reporting to the Audit Committee.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”)
and applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors’
responsibilities for the audit of the financial statements section of our report. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the group in accordance with the ethical requirements that are
relevant to our audit of the financial statements in the UK, which includes the FRC’s Ethical
Standard, as applicable to listed public interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s
Ethical Standard were not provided.
Other than those disclosed in Note 2.3, we have provided no non-audit services to the company
orits controlled undertakings in the period under audit.
Our audit approach
Context
The Drax Group produces biomass in the US and Canada, generates energy in the UK and sells
energy to corporate customers in the UK. The Group is headquartered in the UK. As we undertook
each phase of the audit, we regularly reconsidered our risk assessment to reflect audit findings,
including our assessment of the Group’s control environment, and the impact on our planned audit
approach. We considered the following areas to be of most significance in our audit of the financial
statements and therefore we have included these as key audit matters: Recoverability of assets in
the Northern Pellets CGU (group), reflecting challenges in the performance of this business;
Recoverability of assets in the Biomass CGU (group), reflecting reduced expected future cash flows
predominantly as a result of new tariff arrangements from 2027; and Recoverability of the carrying
value of investments in subsidiary undertakings (parent), reflecting the relative significance of the
investment value to the Company financial statements.
Overview
Audit scope
– We tailored the scope of our audit in order to perform sufficient work to enable us to provide
anopinion on the consolidated financial statements as a whole, taking into account the structure
ofthe Group, the accounting processes and controls, the industry in which the Group operates,
and our assessment of audit risk.
– We identified six components within the Group which, in our view, required an audit of their
complete financial information, either due to their size or risk characteristics. We also audited
material consolidation journals.
– This covered approximately 98% of the Group’s revenue and approximately 96% of the Group’s
Adjusted EBITDA. These coverages are based on absolute values.
– Audit procedures were also carried out over specific balances of a further seven components,
either due to their size or risk characteristics.
– The Company has one reporting component which was subject to a full scope audit for the
purposes of the Company financial statements.
122
Drax Group plc Annual report and accounts 2025
Independent Auditor’s report to the members of Drax Group plc continued
Key audit matters
– Recoverability of assets in the Northern Pellets CGU (group)
– Recoverability of assets in the Biomass CGU (group)
– Recoverability of the carrying value of investments in subsidiary undertakings (parent)
Materiality
– Overall group materiality: £24.8m (2024: £23.3m) based on approximately 2.5% of the last three
years’ average Adjusted EBITDA.
– Overall company materiality: £11.0m (2024: £10.9m) based on approximately 1% of total assets.
– Performance materiality: £18.6m (2024: £17.5m) (group) and £8.3m (2024: £8.2m) (company).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material
misstatement in the financial statements.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most
significance in the audit of the financial statements of the current period and include the most
significant assessed risks of material misstatement (whether or not due to fraud) identified by the
auditors, including those which had the greatest effect on: the overall audit strategy; the allocation
of resources in the audit; and directing the efforts of the engagement team. These matters, and any
comments we make on the results of our procedures thereon, were addressed in the context of our
audit of the financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
Valuation and presentation of derivative financial instruments (Group), which was a key audit
matter last year, is no longer included because of changes previously agreed to the presentation
ofderivative financial statement in the prior year, and the findings of our audit work over valuation
of derivative financial instruments in the prior year which supported the view that management’s
valuation processes are effective. Otherwise, the key audit matters below are consistent with
lastyear.
123
Drax Group plc Annual report and accounts 2025
Financial statements
Independent Auditor’s report to the members of Drax Group plc continued
Key audit matter How our audit addressed the key audit matter
Recoverability of assets in the Northern Pellets CGU (group)
At 31 December 2025, the carrying value of Northern Pellets
CGU was £84.2m after recording an impairment charge of
£194.1m (see note 2.4).
An impairment indicator was identified in the Northern Pellets
CGU. This reflected a challenging trading environment for the
business both with respect to legacy contracts at low margins
and high overhead costs leading to losses in the business. An
impairment test was performed using fair value less costs of
disposal which resulted in an impairment of £194.1 million.
Assessing the fair value less costs of disposal involved significant
estimation due to the inherent uncertainty in forecasting future
cash flows a market participant could realise which included
assumptions over future sales prices, fibre supply costs and
overhead costs. Determining a discount rate which incorporated
an appropriate risk premium a market participant would expect
also involved significant estimation.
To address this key audit matter, the following audit procedures were performed:
– Understanding and testing of relevant controls: We obtained an understanding of the design and implementation of key controls
relating to the calculation of fair value less costs of disposal, including key assumptions used in the impairment model.
– Assessment of methodology: We evaluated management’s assessment of the appropriate basis for determining the recoverable
amount in accordance with IAS 36, including consideration of both value in use and fair value less costs of disposal. Based on this
assessment, we evaluated the appropriateness of management’s use of a fair value less costs of disposal model and tested the
integrity and mathematical accuracy of the model.
– Testing of assumptions: We tested key assumptions in the cash flow forecasts, including future sales prices, fibre supply costs
andoverhead costs, volume growth, and reduced cost of production, as well as the discount rate. Our work was supported by
ourvaluation experts to assess the calculation of the discount rate and to compare this against external data sources.
– Sensitivity analysis: We assessed management’s sensitivity analysis as well as performing our own sensitivities to evaluate the
impact of reasonably possible changes in key assumptions on the recoverable amount of goodwill.
– Historical accuracy: We compared past cash flow forecasts to actual results to assess the historical accuracy of management’s
forecasting.
– Disclosure review: We reviewed the disclosures in note 2.4 of the financial statements to ensure they appropriately describe the
key assumptions and areas of estimation uncertainty related to the carrying value of the Northern Pellets CGU, as well as the
disclosure of management’s sensitivities in accordance with IFRS requirements.
These procedures provided sufficient appropriate audit evidence to conclude that the impairment in the Northern Pellets CGU and
the carrying value of assets in the CGU at 31 December 2025 is not materially misstated, and the related disclosures were appropriate.
Recoverability of assets in the Biomass CGU (group)
At 31 December 2025, the Group reported a carrying value of
£1,412.3m, including goodwill of £156.7m, related to the Biomass
CGU (see note 2.4).
An impairment indicator was identified in the Biomass CGU
reflecting the lower future expected cashflows under the bridge
mechanism from 2027 to 2031, and the continued uncertainty over
cashflows beyond the end of the bridge mechanism after 2031.
An impairment test was performed using a value in use model
which resulted in no impairment in value. Value in use models
involve significant estimation due to the inherent uncertainty in
forecasting future discounted cash flows. The assumptions
identified which had the most significant impact on the value in
use related to the discount rate, output, energy prices, optimisation
revenues, and the impact of climate transition risks, including
future Government policy on Biomass generation which may
impact the nature of any future pricing mechanism beyond 2031.
To address this key audit matter, we performed the following audit procedures:
– Understanding and testing of relevant controls: We obtained an understanding of the design andimplementation of key controls
relating to the calculation of value in use, including key assumptions used in the impairment model.
– Assessment of methodology: We evaluated the appropriateness of the Group’s value in use methodology in accordance with IAS
36 and tested the integrity and mathematical accuracy ofthe model.
– Testing of assumptions: We tested key assumptions used in the cash flow forecasts, including output, energy prices, optimisation
revenues, the discount rate, and pricing mechanisms beyond 2031. Our work was supported by our valuation and energy experts to
assess the discount rate, future energy price curves, optimisation revenues and to evaluate likely pricing mechanisms beyond 2031.
– Sensitivity analysis: We assessed management’s sensitivity analysis as well as performing our ownsensitivities to evaluate the
impact of reasonably possible changes in key assumptions on the recoverable amount of the Biomass CGU.
– Historical accuracy: We compared past cash flow forecasts to actual results to assess the historical accuracy of management’s
forecasts.
– Disclosure review: We reviewed the disclosures included in the key sources of estimation uncertainty and notes 2.4 and 3.1 to the
financial statements, to ensure they appropriately describe the key assumptions and areas of estimation uncertainty related to the
carrying value ofthe Biomass CGU, as well as the disclosure of management’s sensitivities in accordance with IFRS requirements.
These procedures provided sufficient appropriate audit evidence to conclude that the carrying value of the Biomass CGU as at
31December 2025 is not materially misstated, and we found the related disclosures to be appropriate.
124
Drax Group plc Annual report and accounts 2025
Key audit matter How our audit addressed the key audit matter
Recoverability of the carrying value of investments in subsidiary undertakings (parent)
As at 31 December 2025, the Company reported investments in
subsidiary undertakings of £785.1m (see note 5 to the Company
financial statements). Management are required to evaluate
whether there are any indicators of impairment of investments
atthe balance sheet date, and if any indicators are identified an
impairment test is performed to evaluate if there is an impairment
in value. No indicators of impairment were identified and
therefore no impairment was recorded in respect of the carrying
value of investments in subsidiary undertakings.
The assessment of impairment indicators involves significant
judgment. It requires management to assess the performance
ofsubsidiary undertakings, as well as evaluating other relevant
factors including, but not limited to, market conditions, regulatory
changes, impact of climate change, market capitalisation of the
Group, and operational performance.
To address this key audit matter, we performed the following audit procedures:
– Assessment of management’s paper: We obtained and read management’s assessment of impairment indicators and confirmed
that the considerations set out in their paper supported the conclusion that there were no indicators of impairment.
– Evaluation of potential impairment triggers: We evaluated management’s considerations set out within their paper to ensure that
the facts they had considered were consistent with our understanding of the Group, and that all relevant factors we would expect
to be considered were reflected in their considerations. Our work was informed based on our knowledge and understanding of the
Group obtained during the course of our audit, as well as our consideration ofwider impacts on the industry in which the Group
operates, for example climate change.
– Evaluation of other evidence: We also independently assessed the risk of impairment by comparing the carrying value of the
investments in subsidiary undertakings to the market capitalisation of the Group to confirm that the investment carrying value
didnot exceed the market capitalisation as at 31 December 2025.
– Disclosure review: We reviewed the disclosures included within note 5 of the Company accounts and assessed these to confirm
that they were consistent with management’s impairment trigger assessment and our audit work in this area.
Based on the audit work performed we found that the assessment of the recoverability of the carrying value of investments in
subsidiary undertakings and the related disclosures in the financial statements were appropriate.
125
Drax Group plc Annual report and accounts 2025
Financial statements
Independent Auditor’s report to the members of Drax Group plc continued
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial statements as a whole, taking into account the structure of the group and
the company, the accounting processes and controls, and the industry in which they operate.
The Group has four key segments – Pellet Production, Biomass Generation, Flexible Generation
andEnergy Solutions, as well as certain centralised functions, and these segments are comprised
of a number of individual reporting components. The Group’s financial statements are a
consolidation of these reporting components and consolidation journals.
In determining our overall scope for the Group audit, we first obtained a comprehensive
understanding of the Group and its environment, including the evaluation of group-wide controls,
assessed risks of material misstatement at the Group level, and evaluated the relative size and
complexity of individual components to the Group audit and the reportable segments.
The reporting components vary in size, and we identified six reporting components that required
an audit of their complete financial information due to their individual risk and/or size
characteristics.
We performed further audit procedures on specific financial statement balances that were
identified due to their size and/or risk profile at a further seven components. We also audited
material consolidation journals.
The work over the Northern and Southern Pellet Operations components was performed by a PwC
component team in Canada, under the supervision and direction of the Group audit team. The
involvement of the Group audit team included attending component clearance meetings, review of
their supporting working papers, together with additional procedures performed at group level, to
obtain the evidence required for our opinion on the financial statements as a whole. All audit work
over the remaining components and consolidation journals was performed by the Group audit team.
The Company has one reporting component which was subject to a full scope audit for the
purposes of the Company financial statements.
The impact of climate risk on our audit
We made enquiries with management to understand the processes they adopted to assess the
impact of climate risk on the Group’s financial statements and disclosures made within the Annual
Report.
The key areas of the financial statements where management evaluated that climate risk could
have a significant impact are set out in note 3.8.
We assessed management’s evaluation of the areas most impacted by climate risk in the financial
statements and concluded that management’s evaluation was appropriate. The most significant
climate related risk we identified related to government policies and regulations in respect of
biomass energy generation. This risk was incorporated into our audit work over impairment of
non-current assets (including challenging assumptions within management’s cash flow forecasts
to ensure these appropriately reflected climate related risks); and evaluating the useful economic
life of property, plant and equipment. We also read other disclosures included within the Annual
Report, including the Sustainable Development section, the Group’s TCFD disclosures and the
Viability statement to ensure that these were fair, balanced and understandable in the context of
how climate risks may impact the Group in the future, and that they complied with relevant laws
and regulations with respect to disclosure requirements by listed companies.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative
thresholds for materiality. These, together with qualitative considerations, helped us to determine
the scope of our audit and the nature, timing and extent of our audit procedures on the individual
financial statement line items and disclosures and in evaluating the effect of misstatements, both
individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as
awhole as follows:
Financial statements – Group Financial statements – Company
Overall
materiality
£24.8m (2024: £23.3m). £11.0m (2024: £10.9m).
How we
determined it
Approximately 2.5% of the last three
years’ average Adjusted EBITDA.
Approximately 1% of total assets.
Rationale for
benchmark
applied
We have selected Adjusted EBITDA as
our benchmark for materiality because
it is a key performance measure
disclosed to users of the financial
statements which features prominently
in the Annual Report and other
shareholder communications. Adjusted
EBITDA is also a key metric used in
determining executive remuneration,
accounting for 40% of the annual bonus
outcome. To account for volatility due to
recent fluctuations in energy prices, we
have used a three year average of
Adjusted EBITDA as our benchmark.
We believe that total assets is the primary
measure used by the shareholders in
assessing the performance of a holding
Company, and is a generally accepted
auditing benchmark.
126
Drax Group plc Annual report and accounts 2025
Independent Auditor’s report to the members of Drax Group plc continued
For each component in the scope of our group audit, we allocated a materiality that is less than
ouroverall group materiality. The range of materiality allocated across components was £3.2m to
£22.3m. Certain components were audited to a local statutory audit materiality that was also less
than our overall group materiality.
We use performance materiality to reduce to an appropriately low level the probability that the
aggregate of uncorrected and undetected misstatements exceeds overall materiality. Specifically,
we use performance materiality in determining the scope of our audit and the nature and extent of
our testing of account balances, classes of transactions and disclosures, for example in determining
sample sizes. Our performance materiality was 75% (2024: 75%) of overall materiality, amounting
to£18.6m (2024: £17.5m) for the group financial statements and £8.3m (2024: £8.2m) for the
company financial statements.
In determining the performance materiality, we considered a number of factors – the history of
misstatements, risk assessment and aggregation risk and the effectiveness of controls – and
concluded that an amount at the upper end of our normal range was appropriate.
We agreed with the Audit Committee that we would report to them misstatements identified
during our audit above £1.2m (group audit) (2024: £1.2m) and £0.55m (company audit) (2024:
£0.55m) as well as misstatements below those amounts that, in our view, warranted reporting
forqualitative reasons.
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the group’s and the company’s ability to continue
toadopt the going concern basis of accounting included:
– Obtaining management’s assessment and related cash flow and covenant forecast model that
support their conclusions with respect to the going concern basis of preparation of the financial
statements;
– Assessing the integrity and testing the mathematical accuracy of management’s forecast model;
– Evaluating the historical accuracy of the budgeting process to assess the reliability of forecasts;
– Evaluating management’s base case forecast and severe but plausible downside scenario,
challenging the appropriateness of the underlying assumptions, including corroborating these
toappropriate sources of audit evidence, verifying the opening cash position within the forecast,
and confirming the level of committed borrowing facilities available to the Group;
– Assessing the appropriateness of management’s severe but plausible downside scenario by
reference to our knowledge obtained of the Group during our audit and consideration of wider
industry and macro-economic factors;
– Reviewing the terms of the Revolving Credit Facility (“RCF”) and other borrowing and working
capital arrangements to assess the terms of the available facilities, including covenant
requirements;
– Evaluating management’s analysis of both liquidity and covenant compliance to ensure that no
breaches in covenants are anticipated over the assessment period, to confirm that the Group
maintains sufficient liquidity headroom, and testing the calculation of covenant forecasts to
confirm these are accurate;
– Reviewing management accounts for the financial period from the year end to the end of
January 2026 to confirm that performance in January 2026 is in line with forecasts used in the
going concern assessment; and
– Reading the disclosures made in respect of going concern included in the financial statements to
ensure that these are consistent with management’s going concern assessment and the findings
from our going concern procedures.
Based on the work we have performed, we have not identified any material uncertainties relating
toevents or conditions that, individually or collectively, may cast significant doubt on the group’s
and the company’s ability to continue as a going concern for a period of at least twelve months
from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going
concern basis of accounting in the preparation of the financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a
guarantee as to the group’s and the company’s ability to continue as a going concern.
In relation to the directors’ reporting on how they have applied the UK Corporate Governance
Code, we have nothing material to add or draw attention to in relation to the directors’ statement
inthe financial statements about whether the directors considered it appropriate to adopt the
going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are
described in the relevant sections of this report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial
statements and our auditors’ report thereon. The directors are responsible for the other
information. Our opinion on the financial statements does not cover the other information and,
accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated
in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent
withthe financial statements or our knowledge obtained in the audit, or otherwise appears to be
materially misstated. If we identify an apparent material inconsistency or material misstatement,
weare required to perform procedures to conclude whether there is a material misstatement of
thefinancial statements or a material misstatement of the other information. If, based on the work
wehave performed, we conclude that there is a material misstatement of this other information,
we are required to report that fact. We have nothing to report based on these responsibilities.
With respect to the Strategic report and Directors’ report, we also considered whether the
disclosures required by the UK Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us
alsoto report certain opinions and matters as described below.
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Drax Group plc Annual report and accounts 2025
Financial statements
Independent Auditor’s report to the members of Drax Group plc continued
Strategic report and Directors’ report
In our opinion, based on the work undertaken in the course of the audit, the information given in
the Strategic report and Directors’ report for the year ended 31 December 2025 is consistent with
the financial statements and has been prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the group and company and their environment
obtained in the course of the audit, we did not identify any material misstatements in the Strategic
report and Directors’ report.
Directors’ Remuneration
In our opinion, the part of the Annual Report on Remuneration to be audited has been properly
prepared in accordance with the Companies Act 2006.
Corporate governance statement
The Listing Rules require us to review the directors’ statements in relation to going concern,
longer-term viability and that part of the corporate governance statement relating to the
company’s compliance with the provisions of the UK Corporate Governance Code specified for
ourreview. Our additional responsibilities with respect to the corporate governance statement
asother information are described in the Reporting on other information section of this report.
Based on the work undertaken as part of our audit, we have concluded that each of the following
elements of the corporate governance statement, included within the Corporate Governance
Report is materially consistent with the financial statements and our knowledge obtained during
the audit, and we have nothing material to add or draw attention to in relation to:
– The directors’ confirmation that they have carried out a robust assessment of the emerging and
principal risks;
– The disclosures in the Annual Report that describe those principal risks, what procedures are in
place to identify emerging risks and an explanation of how these are being managed or mitigated;
– The directors’ statement in the financial statements about whether they considered it
appropriate to adopt the going concern basis of accounting in preparing them, and their
identification of any material uncertainties to the group’s and company’s ability to continue to do
so over a period of at least twelve months from the date of approval of the financial statements;
– The directors’ explanation as to their assessment of the group’s and company’s prospects, the
period this assessment covers and why the period is appropriate; and
– The directors’ statement as to whether they have a reasonable expectation that the company
will be able to continue in operation and meet its liabilities as they fall due over the period of its
assessment, including any related disclosures drawing attention to any necessary qualifications
or assumptions.
Our review of the directors’ statement regarding the longer-term viability of the group and company
was substantially less in scope than an audit and only consisted of making inquiries and considering
the directors’ process supporting their statement; checking that the statement is in alignment
withthe relevant provisions of the UK Corporate Governance Code; and considering whether
thestatement is consistent with the financial statements and our knowledge and understanding
ofthegroup and company and their environment obtained in the course of the audit.
In addition, based on the work undertaken as part of our audit, we have concluded that each
ofthefollowing elements of the corporate governance statement is materially consistent with
thefinancial statements and our knowledge obtained during the audit:
– The directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced
and understandable, and provides the information necessary for the members to assess the
group’s and company’s position, performance, business model and strategy;
– The section of the Annual Report that describes the review of effectiveness of risk management
and internal control systems; and
– The section of the Annual Report describing the work of the Audit Committee.
We have nothing to report in respect of our responsibility to report when the directors’ statement
relating to the company’s compliance with the Code does not properly disclose a departure from
arelevant provision of the Code specified under the Listing Rules for review by the auditors.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Directors’ responsibilities statement, the directors are responsible
forthe preparation of the financial statements in accordance with the applicable framework and
for being satisfied that they give a true and fair view. The directors are also responsible for such
internal control as they determine is necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and
the company’s ability to continue as a going concern, disclosing, as applicable, matters related to
going concern and using the going concern basis of accounting unless the directors either intend
to liquidate the group or the company or to cease operations, or have no realistic alternative but
todo so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We
design procedures in line with our responsibilities, outlined above, to detect material misstatements
in respect of irregularities, including fraud. The extent to which our procedures are capable of
detecting irregularities, including fraud, is detailed below.
Based on our understanding of the group and industry, we identified that the principal risks of
non-compliance with laws and regulations related to Ofgem regulations applicable to energy
generators and energy suppliers in the UK, including biomass sustainability requirements, and
environmental and health and safety regulations applicable in the UK, US and Canada, and we
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Drax Group plc Annual report and accounts 2025
Independent Auditor’s report to the members of Drax Group plc continued
considered the extent to which non-compliance might have a material effect on the financial
statements. We also considered those laws and regulations that have a direct impact on the
financial statements such as the Listing Rules, the Companies Act 2006 and tax legislation in the
UK, US and Canada. We evaluated management’s incentives and opportunities for fraudulent
manipulation of the financial statements (including the risk of override of controls), and determined
that the principal risks were related to the overstatement of Adjusted EBITDA through posting
manual journal entries to manipulate financial performance, or the exercise of management bias
inmaterial accounting judgements and estimates, including the accounting for significant one-off
or unusual transactions. The group engagement team shared this risk assessment with the
component auditors so that they could include appropriate audit procedures in response to such
risks in their work. Audit procedures performed by the group engagement team and/or component
auditors included:
– Discussions with management, including Group Legal Counsel and the Group Regulation and
Compliance Director, to understand and evaluate known or suspected instances of non-
compliance with laws and regulations or fraud;
– Read correspondence with Ofgem in respect of regulatory investigations;
– Understood and evaluated management’s controls designed to prevent and detect non-
compliance with laws and regulations and fraud;
– Reviewed board minutes and internal audit reports throughout the year and subsequent to the
year end, up to the date of our audit opinion;
– Identified and tested unusual journal entries which increased reported Adjusted EBITDA, and
could represent a heightened risk of manipulation of the financial performance of the business,
to ensure the journal entries are appropriate;
– Tested period end adjustments, with specific focus on any adjustments that increase reported
Adjusted EBITDA; and
– Assessed material accounting judgements and estimates including those applicable to significant
one-off or unusual transactions that could increase reported Adjusted EBITDA to ensure that
these are appropriate and do not indicate any evidence of management bias.
There are inherent limitations in the audit procedures described above. We are less likely to become
aware of instances of non-compliance with laws and regulations that are not closely related to
events and transactions reflected in the financial statements. Also, the risk of not detecting a
material misstatement due to fraud is higher than the risk of not detecting one resulting from error,
as fraud may involve deliberate concealment by, for example, forgery or intentional
misrepresentations, or through collusion.
Our audit testing might include testing complete populations of certain transactions and balances,
possibly using data auditing techniques. However, it typically involves selecting a limited number of
items for testing, rather than testing complete populations. We will often seek to target particular
items for testing based on their size or risk characteristics. In other cases, we will use audit
sampling to enable us to draw a conclusion about the population from which the sample is selected.
A further description of our responsibilities for the audit of the financial statements is located on
the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our
auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the company’s members as a
body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose.
We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any
other person to whom this report is shown or into whose hands it may come save where expressly
agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
– we have not obtained all the information and explanations we require for our audit; or
– adequate accounting records have not been kept by the company, or returns adequate for our
audit have not been received from branches not visited by us; or
– certain disclosures of directors’ remuneration specified by law are not made; or
– the company financial statements and the part of the Annual Report on Remuneration to be
audited are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
We were first appointed by the company for the financial year ended 31 December 2024.
Ouruninterrupted engagement covers two financial years.
Other matter
The company is required by the Financial Conduct Authority Disclosure Guidance and Transparency
Rules to include these financial statements in an annual financial report prepared under the
structured digital format required by DTR 4.1.15R – 4.1.18R and filed on the National Storage
Mechanism of the Financial Conduct Authority. This auditors’ report provides no assurance over
whether the structured digital format annual financial report has been prepared in accordance with
those requirements.
Matthew Hall (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Leeds
25 February 2026
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Drax Group plc Annual report and accounts 2025
Financial statements
Financial statements
Introduction
The Consolidated financial statements provide detailed information about the financial
performance (Consolidated income statement and Consolidated statement of comprehensive
income), financial position (Consolidated balance sheet), reserves (Consolidated statement
of changes in equity), and cash flows (Consolidated cash flow statement) of Drax Group plc
(the Company) together with all entities controlled by the Company (collectively, the Group).
The notes to the Consolidated financial statements provide additional information on the items
in the Consolidated income statement, Consolidated statement of comprehensive income,
Consolidated balance sheet, Consolidated statement of changes in equity and Consolidated
cash flow statement. The notes include explanations of the information presented. In general,
the additional information in the notes to the Consolidated financial statements is required by law,
International Financial Reporting Standards (IFRS) or other regulations to facilitate increased
understanding of the primary statements set out on pages 135 to 139 as well as voluntary
information which management believes users of the accounts may find useful, in line with the
principles of IFRS.
Basis of preparation
The Consolidated financial statements have been prepared in accordance with the United Kingdom
adopted International Accounting Standards (IAS) in conformity with the requirements of the
Companies Act 2006.
The Consolidated financial statements have been prepared on the historical cost basis, except
for certain assets and liabilities that are measured at fair value (principally derivative financial
instruments) and the assets and liabilities of the Group’s defined benefit pension scheme
(measured at fair value and using the projected unit credit method respectively).
The Consolidated financial statements are presented in pounds sterling, the functional currency
of the Company and the Group’s presentational currency, rounded to the nearest million to one
decimal place unless stated otherwise.
Foreign currency transactions
Each entity in the Group determines its own functional currency and items included in the results
of each entity are measured using that functional currency. Transactions in currencies other than
an entity’s functional currency are initially recorded in the transaction currency and translated
into the entity’s functional currency at the average monthly exchange rate to the extent that this
approximates the exchange rate prevailing at the date of the transaction. If the average monthly
exchange rate is not a reasonable approximation of the cumulative effect of the rates prevailing
on the transaction dates, income and expenditure are translated at the rates prevailing at the date
of the transaction.
At each reporting date, monetary assets and liabilities that are denominated in foreign currencies
are translated at the exchange rates prevailing at that date. Non-monetary items measured at
historical cost are translated at the date of the transaction using the average monthly exchange
rate to the extent that this approximates the exchange rate prevailing on the date the transaction
occurred. Non-monetary items that are measured at fair value are translated at the exchange rate
at the date when the fair value was determined. Foreign exchange gains and losses arising on such
translations are recognised in the Consolidated income statement within foreign exchange gains
or losses. Foreign exchange gains or losses on qualifying cash flow hedges are recognised in other
comprehensive income (OCI) within the Consolidated statement of comprehensive income and
deferred within equity to the extent the hedges are effective, until the hedged item occurs.
Foreign operations
The assets and liabilities of foreign operations with a functional currency other than sterling are
translated into sterling using the exchange rates prevailing at the reporting date. The income and
expenditure of such operations are translated into sterling using the average monthly exchange
rate to the extent that this approximates the exchange rates prevailing at the date of the
transactions. If the average monthly exchange rate is not a reasonable approximation of the
cumulative effect of the rates prevailing on the transaction dates, income and expenditure are
translated at the rates prevailing at the date of the transaction. Foreign exchange gains and losses
resulting from the retranslation of the foreign operation’s net assets, and its results for the year,
are recognised in OCI within the Consolidated statement of comprehensive income.
Climate change
The impact of climate change has been considered throughout the preparation of the Annual
report and accounts. In particular, and in compliance with the FCA Listing Rules 9.8.6(8), the Task
Force on Climate-related Financial Disclosures (TCFD) section of the Strategic report contains
information on the four recommendations and 11 recommended disclosures of the TCFD.
Consideration in respect of the Consolidated financial statements focused on:
– Critical accounting judgements and key sources of estimation uncertainty
– Impairment of non-current assets
– Going concern and viability
– Useful economic lives of non-current assets
– Present value of decommissioning provisions
– Fair value of contingent consideration
– Defined benefit pension scheme
– Renewable certificates
– Sustainable financing
– Deferred tax assets
Further information on these considerations can be found in note 3.8 to the Consolidated financial
statements.
130
Drax Group plc Annual report and accounts 2025
Financial statements continued
Going concern
The Group’s business activities, along with future developments that may affect its financial
performance, financial position and cash flows, are discussed on pages 1 to 50 of this Annual
report and accounts. The current market conditions and financial performance of the Group are
considered in the Financial review starting on page 13.
In assessing going concern the Directors have considered the period up to April 2027, which
reflects a period of 14 months from the date of authorising the Consolidated financial statements
for issue, as this extends beyond the Group’s scheduled debt repayments in January and April 2027
totalling £140.0 million. There are no further debt maturities following these repayments until
December 2027. See note 4.2 for further details on the Group’s borrowings. The Directors have also
considered any significant events, including any committed outflows beyond this period, in forming
their conclusion.
The going concern assessment considers 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 49 and 50. The scenarios modelled included a
decrease in power prices and an increase in biomass costs. At 31 December 2025, the Group had
cash and committed facilities of £942.1 million (see note 2.7) and borrowings of £979.0 million (see
note 4.2). Under all scenarios modelled, the Group maintained sufficient liquidity and continued to
remain in compliance with its banking 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 financial statements
and have adopted the going concern basis in preparing these Consolidated financial statements.
See the Viability statement on pages 49 and 50 for details of the Directors’ assessment that
they have a reasonable expectation that the Group will be able to continue in operation and meet
its liabilities as they fall due over the next five years based on forecasts and projections that take
into account reasonably possible changes in trading performance and other key assumptions.
Basis of consolidation
These Consolidated financial statements incorporate the financial results of the Company and
of all its subsidiaries made up to 31 December each year. Subsidiaries are entities controlled by the
Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability to affect those returns through its power over
the entity. Subsidiaries are fully consolidated from the date on which the Group obtains control
to the date control ceases. Accounting policies of subsidiaries have been aligned where necessary
to ensure consistency with the policies adopted by the Group.
All intra-group assets and liabilities, equity, income, expenses, unrealised profits and cash flows
relating to transactions between the members of the Group are eliminated on consolidation.
Unrealised losses are also eliminated unless the transaction provides evidence of an impairment
of the transferred asset.
Non-controlling interests in subsidiaries are identified separately from the Group’s equity.
The interests of non-controlling shareholders that are current ownership interests, entitling their
holders to a proportionate share of net assets upon liquidation, may initially be measured at fair
value or at the non-controlling interests’ proportionate share of the fair value of the acquiree’s
identifiable net assets. Subsequent to acquisition, the carrying amount of non-controlling interests
is the amount of those interests at initial recognition plus the non-controlling interests’ share of
subsequent changes in equity.
Profit or loss and each component of OCI are attributed to the owners of the parent company
and to the non-controlling interests even if this results in the non-controlling interests having
a deficit balance.
The Group has an Employee Benefit Trust (EBT), primarily for the purpose of satisfying employee
share plan awards. The Group is deemed to control the EBT in accordance with IFRS 10 and
therefore the EBT is consolidated within the results of the Group. The assets and liabilities of the
EBT are included in the Consolidated balance sheet.
See note 4.4 for the accounting policy and further details on the Group’s accounting for shares
purchased by the EBT, note 4.5 for the accounting policy and further details on the Group’s accounting
for non-controlling interests and note 6.2 for further details on employee share plan awards.
Joint arrangements are contractual arrangements where two or more parties have joint control
over the arrangement. Joint arrangements are classified as either a joint operation or a joint
venture based upon an analysis of the rights and obligations of the parties in the normal course
of business. If the parties to the joint arrangement have direct rights to the assets, and direct
obligations for the liabilities, relating to the arrangement, then it is a joint operation. If the parties
to the joint arrangement have rights to the net assets of the arrangement, then it is a joint venture.
The Group currently has one joint operation and no joint ventures. The Group recognises its direct
right to assets, liabilities, revenue and expenses of the joint operation, as well as its share of any
jointly entitled assets, liabilities, income and expenditure.
Associates are those entities in which the Group has significant influence, but not control or joint
control, over the financial and operating policies. This is generally the case where the Group holds
between 20% and 50% of the voting rights of an entity.
Associates are accounted for using the equity method. Investments in associates are initially
recognised at cost, which includes transaction costs. Goodwill is not separately recognised in
relation to associates. Subsequent to initial recognition, the carrying amount of investments in
associates is adjusted to recognise the Group’s share of after-tax profit or loss and each component
of OCI of equity-accounted associates that are recognised in the Consolidated income statement
and Consolidated statement of comprehensive income respectively. Dividends received or receivable
from associates are recognised as a reduction in the carrying amount of the investment. If the
carrying amount of an associate reaches £nil, the Group only recognises its share of losses from
the associate to the extent it has incurred obligations or made payments on behalf of the associate.
131
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Financial statements
Financial statements continued
Unrealised gains on transactions between the Group and its associates are eliminated against the
investment to the extent of the Group’s percentage ownership in these entities. Unrealised losses
are also eliminated unless the transaction provides evidence of impairment. Accounting policies
of equity-accounted associates have been aligned where necessary to ensure consistency with
the policies adopted by the Group.
Associates are tested for impairment whenever there are any indicators of impairment. An
impairment loss is recognised to the extent that the carrying amount of the investment exceeds
its recoverable amount. Impairment losses on associates are recognised within impairment of
non-current assets in the Consolidated income statement.
Accounting policies
The material accounting policies for the measurement of an individual item in the Consolidated
financial statements are described in the note to the Consolidated financial statements relating
to the item concerned (see contents on page 121).
The accounting policies adopted in the preparation of the Consolidated financial statements are
consistent with those followed in the preparation of the Group’s Consolidated financial statements
for the year ended 31 December 2024, except for the adoption of new standards and amendments
effective as of 1 January 2025. The Group has not early-adopted any standard, interpretation or
amendment that has been issued but is not yet effective.
A full listing of new standards, interpretations and pronouncements under IFRS applicable
to these Consolidated financial statements is presented in note 8.2. The application of these
new requirements has not had a material effect on the Consolidated financial statements.
Judgements and estimates
The preparation of these Consolidated financial statements requires judgement to be made in
selecting and applying the Group’s accounting policies. It also requires the use of estimates and
assumptions that affect the reported amounts of assets, liabilities, income and expenditure.
Actual results may subsequently differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis, with revisions recognised
in the period in which the estimates are revised and in any future periods affected.
In accordance with IAS 1, the judgements which have the most significant effect on the amounts
recognised in the Consolidated financial statements, and the key estimates and assumptions that
have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year, are set out below. Further detail, including sensitivity
analyses where appropriate for the key estimates and assumptions, is included in the related notes.
Critical accounting judgements
The critical judgements made in the process of applying the Group’s accounting policies during the
year that have the most significant effect on the amounts recognised in the Consolidated financial
statements are set out below.
Offsetting of financial assets and financial liabilities
IAS 32 requires financial assets and financial liabilities to be offset and the net amount presented
in the Consolidated balance sheet when the Group currently has both the legally enforceable
right to offset the recognised amounts, and the intention to settle on a net basis. The offsetting
requirements and relevant guidance is based on the principle of reflecting the entity’s expected
future cash flows and there is judgement as to whether the offsetting criteria should be applied
to derivative financial instruments that will be settled through physical delivery of a non-financial
asset. Judgement is also required around the appropriate unit of account where there are a number
of both physical deliveries and cash flows that collectively settle financial instruments, and how
the offsetting requirements should be applied to each of these settlements, either individually
or at a contract level. The Group has determined that the offsetting criteria should be applied to
physically settled derivatives and has applied the offsetting criteria at a contract level rather
than a cash flow level.
If the Group had not applied offsetting on physically settled derivative contracts in the current year
then a number of derivative balances that are currently presented net in the Consolidated balance
sheet would have been presented gross resulting in an additional £35.1 million of derivative assets
and liabilities. See note 7.5 for further details on the Group’s offsetting of all financial assets and
financial liabilities.
Gross presentation of power purchase and sale contracts
The Group enters contracts to sell power. The Group fulfils these sales contracts through the
output of its generation assets, but the Group may also fulfil these sales contracts by purchasing
power from third parties.
The Group presents sales of power within the revenue line and purchases of power within the cost
of sales line in the Consolidated income statement. This reflects the fact that the sale and purchase
contracts are entered into at separate times, are independent contracts and are not entered into in
contemplation of one another. The Group’s Biomass Generation and Flexible Generation businesses
enter sales contracts to sell their generation output. If the Group subsequently chooses to fulfil a
sales contract through purchasing power from a third party, that does not change the substance
of the original sales contract or the Group’s obligations under the sales contract.
The Group believes gross presentation of power sales and purchase contracts reflects the
substance of the Group’s operations as a generation business and not a trading business. Had the
Group presented external purchases of power net within external revenue this would have reduced
external revenue by £1,044.8 million with a corresponding decrease in external cost of sales.
See note 2.2 on page 144
132
Drax Group plc Annual report and accounts 2025
Financial statements continued
Biomass not being an active market
The Group buys and sells biomass for operational requirements in its Pellet Production and Biomass
Generation segments. The Group’s risk management policies also permit some flexibility in activity
to optimise the overall portfolio position and potentially release value in certain circumstances. As
such, the Group has undertaken an assessment of whether the biomass market is an active market
as defined by IFRS 13. If the biomass market was considered to be an active market this could result
in the contracts it holds to buy and sell biomass being within the scope of IFRS 9 and potentially
being recognised at fair value as derivative financial instruments from inception. In addition, this may
result in Southern Pellets being classified as a separate cash-generating unit (CGU) under IAS 36.
The Group assessed the biomass market, including both purchase and sale contracts, and
concluded that the nature of these contracts means they cannot be readily net settled in cash or
other financial instruments and, as a result, they remain outside of the scope of IFRS 9. Contractual
terms do not include net settlement provisions and the biomass market is highly illiquid meaning
biomass cannot be readily converted into cash. The lack of an active spot market means market
participants cannot readily seek to make trading profits from short-term price fluctuations as prices
and contracts are negotiated bilaterally with no active market price and no guarantee there will be
a willing buyer or seller to trade with.
Accordingly, biomass contracts are not recognised as derivative assets or liabilities in the
Consolidated balance sheet prior to delivery, consistent with the accounting in prior years, and
Southern Pellets is not designated as a separate CGU and is instead included within the Biomass
CGU as explained in note 2.4.
The Group continues to assess developments in the biomass market on an ongoing basis to identify
any impact on this assessment.
Key sources of estimation uncertainty
The following are the key sources of estimation uncertainty that carry a significant risk of resulting
in a material adjustment to the carrying values of assets and liabilities within the next financial year.
These are the items where actual outcomes in the next 12 months could vary materially from the
estimates made in determining the reported amount of an asset or liability within the Consolidated
financial statements.
Impairment of non-current assets
An impairment assessment is conducted annually on cash-generating units (CGUs) or groups
of CGUs, with associated goodwill or intangible assets with an indefinite life.
In 2025, an impairment assessment has been completed on six of the Group’s CGUs. All six of these
CGUs have been assessed as they had allocated goodwill (Northern Pellets, Biomass, Drax Energy
Solutions, Lanark, Galloway and Cruachan). No CGUs have intangibles with an indefinite life.
The future cash flows that underpin the impairment reviews are based on management’s best
estimate and include a number of assumptions (see note 2.4 for further details of these key
assumptions).
Biomass CGU
The Biomass CGU has a carrying value at 31 December 2025 of £1,412.3 million. Reasonably
possible changes in certain assumptions used in the value in use model could lead to a material
adjustment to this carrying value.
These include: an average 27% decrease in power prices over the period of the low carbon
dispatchable CfD agreement from April 2027 to March 2031, combined with a 90-day outage
of one of the units under the Renewables Obligation scheme in 2026, an increase in biomass
production costs of US$7 per tonne, an increase in the pre-tax discount rate from 11.5% to 23.7%
(equivalent to an increase in the post-tax discount rate from 7.5% to 8.3%), and operations to cease
in March 2031 at the end of the low carbon dispatchable CfD agreement. This combination of
reasonably possible changes in the key inputs to the value in use model would lead to an
impairment of £650.1 million.
Northern Pellets CGU
During 2025, impairment losses of £194.1 million have been recognised relating to the Northern
Pellets CGU, reducing the carrying value to its recoverable amount of £84.2 million, based on its
fair value less costs of disposal (FVLCD).
Reasonably possible changes in certain assumptions could lead to a material adjustment to the
carrying value of the Northern Pellets CGU as at 31 December 2025.
The assessment of FVLCD for the Northern Pellets CGU is sensitive to reasonably possible changes
to the key inputs to the valuation model and assumptions relating to the fair value of individual
assets. Reasonably possible downside changes in assumptions from those used in the FVLCD
calculation include a 50% reduction in assumed central cost savings, combined with a 7% decrease
in pellet sales contract renewal prices, an increase in the pre-tax discount rate from 19.3% to
30.8% (equivalent to an increase in the post-tax discount rate from 15.0% to 18.0%), and a
reasonably possible 30% decrease in the fair value determined for the individual assets that were
not allocated an impairment loss. This combination of reasonably possible changes would result
in an increase in the impairment recognised of £27.1 million and a corresponding reduction in the
carrying value of the Northern Pellets CGU.
Reasonably possible upside changes in assumptions from those used in the FVLCD calculation
include a 7% increase in pellet sales contract renewal prices, combined with a decrease in the
pre-tax discount rate from 19.3% to 15.0% (equivalent to a decrease in the post-tax discount rate
from 15.0% to 12.0%). This combination of reasonably possible changes would result in a reduction
in the impairment recognised of £72.6 million and a corresponding increase in the carrying value
of the Northern Pellets CGU.
Impairment assessments are performed as required for other assets and CGUs where an indicator
of possible impairment exists.
133
Drax Group plc Annual report and accounts 2025
Financial statements
Financial statements continued
Longview
During 2025, an impairment loss of £108.8 million has been recognised relating to the Group’s
Longview pellet plant development project (Longview). Due to reduced expectations around global
pellet demand in the short to medium term, in part as a result of the reduced volumes of biomass
generation agreed under the low carbon dispatchable CfD contract, the decision has been taken
to pause this development and no development of the site is expected in the near term.
The capitalised Longview assets have been impaired to their recoverable amount of £13.7 million
(principally the value of the land at the site). This recoverable amount has been estimated after
considering the level of customisation and general market conditions. If the Group is able to return
assets to suppliers; or achieve third-party sales; or find internal use for parts and spares at the
Group’s other pellet plants; or if any scrap value achieved exceeds the costs of disposal, then the
recovery value could be higher. If an average recovery value of 40% on plant and equipment had
been assumed, this would result in a decrease in the impairment recognised of £29.5 million and
a corresponding increase in the carrying value of the Longview assets.
See note 2.4 on page 150
Pension liabilities
The Group records a net surplus or liability in its Consolidated balance sheet for the fair value of assets
held by the defined benefit pension scheme, less its obligation to provide benefits under the scheme.
The actuarial valuations of the scheme’s liabilities are performed annually by a third-party actuary and
contain assumptions regarding interest rates, inflation, future salary and pension increases, mortality,
and other factors, all of which are subject to future change. Three of the key estimates within the
valuation are the discount rate, inflation rate, and life expectancy. Sensitivities in the valuation are
presented in note 6.3. The total value of the pension liabilities at 31 December 2025 amount to
£184.8 million and the net pension surplus recognised by the Group at this date is £23.8 million.
See note 6.3 on page 210
Alternative performance measures (APMs)
The Group uses APMs throughout the Annual report and accounts that are not defined within
IFRS but provide additional information about the Group’s financial performance and position that
is used by the Board and executive management to evaluate the Group’s performance. These
measures have been defined internally and may therefore not be comparable to similar APMs
presented by other companies. Additionally, certain information presented is derived from amounts
calculated in accordance with IFRS but is not itself a measure defined by IFRS. Such measures
should not be viewed in isolation or as an alternative to the equivalent IFRS measure.
Each year management reviews the list of APMs and confirms the judgements made regarding the
Group’s definitions of its APMs, including exceptional items, certain remeasurements and Net debt.
The assessment as to whether a transaction or group of transactions should or should not be
classified as an exceptional item or a certain remeasurement can have a significant impact on the
Adjusted results of the Group. Deciding which items to include or exclude from an APM’s definition
can have a significant impact on the APM presented. An internal policy governs the judgements
made by management and in all instances, these judgements are approved by the Audit Committee
as set out on page 77.
See note 2.7 for details of the APMs used by the Board and executive management to assess
financial performance, including each APM’s closest IFRS equivalent, the reason why the APM
is used by the Group and a definition of how each APM is calculated.
Adjusted results
The Group’s financial performance for the period, measured in accordance with IFRS, is shown
in the Total results column on the face of the Consolidated income statement. Exceptional items
and certain remeasurements are deducted from the Total results in arriving at the Adjusted results
for the year. The Group’s Adjusted results are consistent with the way the Board and executive
management assess the performance of the Group. Adjusted results are intended to reflect the
underlying trading performance of the Group’s businesses and are presented to assist users of the
Consolidated financial statements in evaluating the Group’s trading performance and performance
against strategic objectives.
Exceptional items and certain remeasurements
Exceptional items are those transactions that, by their nature, do not reflect the trading
performance of the Group in the period. For a transaction to be considered exceptional,
management considers the nature of the transaction, the frequency of similar events, any related
precedent, and commercial context. The application guidance for this policy includes de minimis
thresholds for classifying items as exceptional. Presentation of a transaction as exceptional is
approved by the Audit Committee in accordance with an agreed policy.
The policy is reviewed by the Audit Committee biennially, with the last review taking place in
April 2025. This review did not result in any significant changes to the policy.
Certain remeasurements comprise fair value gains and losses on derivative contracts to the extent
those contracts do not qualify for hedge accounting (or hedge accounting is not effective) which,
under IFRS, are recorded in revenue, cost of sales, interest payable and similar charges or foreign
exchange gains or losses.
See note 2.7 on page 163
134
Drax Group plc Annual report and accounts 2025
Section 1: Consolidated financial statements
Consolidated income statement
Year ended 31December 2025
Year ended 31December 2024
ExceptionalExceptional
items anditems and
AdjustedcertainTotalAdjustedcertainTotal
results
(1)
remeasurementsresults
results
(1)
remeasurementsresults
Notes£m£m£m£m£m£m
Revenue
2.2
5,355 .4
35. 3
5 ,3 9 0 .7
6, 0 8 1. 2
81. 3
6 ,1 6 2 . 5
Cost of sales
(3,7 93 . 8)
(8 4 . 0)
( 3 , 8 7 7. 8)
( 4 ,1 3 0 .1)
4 .9
( 4 ,1 2 5 . 2)
Electricity Generator Levy
–
–
–
(16 0 . 8)
–
(16 0 . 8)
Gross profit/(loss)
1,5 61.6
(4 8 .7)
1, 512 . 9
1,7 9 0 . 3
86.2
1, 876 . 5
Operating and administrative expenses
2.3
(61 4 . 6)
(23.3)
(637 .9)
(69 8 . 5)
( 2 2 .1)
(720.6)
Impairment of financial assets
3.5
0.5
(3 . 8)
(3.3)
(2 7. 3)
(12 . 7)
(4 0 . 0)
Depreciation
3.1
(2 28 .9)
–
(2 28 .9)
(224 . 8)
–
(2 24 . 8)
Amortisation
5.1
(14 . 2)
–
(14 . 2)
( 1 7. 0)
–
(1 7. 0)
Impairment of non-current assets
2.4
( 2 7. 2)
(350.5)
( 3 7 7. 7)
(11 . 8)
(2. 6)
(14 . 4)
Other (losses)/gains
(4 . 4)
(3.6)
(8 . 0)
(8. 5)
1. 2
(7. 3)
Share of losses from associates
(1. 6)
–
(1 . 6)
(2. 2)
–
(2. 2)
Operating profit/(loss)
671. 2
(4 2 9 . 9)
2 41. 3
80 0.2
5 0.0
85 0. 2
Foreign exchange gains/(losses)
2.5
8.2
(2 . 4)
5. 8
(9.4)
–
(9. 4)
Interest payable and similar charges
2.5
(7 3 . 9)
(1. 5)
(75 .4)
(10 6 . 9)
(0 .6)
(1 0 7. 5)
Interest receivable and similar gains
2.5
1 7. 8
–
1 7. 8
20. 1
–
20. 1
Profit/(loss) before tax
623.3
(4 3 3. 8)
18 9. 5
70 4.0
49.4
7 53.4
Total tax (charge)/credit
2.6
(1 3 7. 6)
16 . 3
(1 2 1. 3)
(213 . 0)
(1 4 . 9)
( 2 2 7. 9)
Profit/(loss) for the period
4 8 5.7
( 4 1 7. 5)
68.2
49 1. 0
3 4 .5
525. 5
Attributable to:
Owners of the parent company
4 85. 8
(412 . 8)
73.0
4 9 2 .1
3 4.5
526 .6
Non-controlling interests
4.5
( 0 .1)
(4 .7)
(4 . 8)
(1 .1)
–
(1 .1)
Earnings per share
Pence
Pence
Pence
Pence
For net profit for the period attributable to owners of the parent company
– Basic earnings per share
2.8
1 3 7. 7
20 .7
12 8 . 4
1 3 7. 5
– Diluted earnings per share
2.8
13 4 . 5
20.2
12 6 . 0
13 4 . 8
(1) Adjusted results are stated after adjusting for exceptional items and certain remeasurements. See note 2.7 for further details.
135
Drax Group plc Annual report and accounts 2025
Financial statements
Section 1: Consolidated financial statements continued
Consolidated statement of comprehensive income
Year ended 31 December
20252024
Notes£m£m
Profit for the period
68.2
52 5.5
Items that will not be subsequently reclassified to profit or loss:
Remeasurement of defined benefit pension surplus
6.3
(2 . 8)
5.5
Deferred tax on remeasurement of defined benefit pension surplus
2.6
0 .7
(1 . 3)
Items that may be subsequently reclassified to profit or loss:
Exchange differences on translation of foreign operations attributable to owners of the parent company
4.4
(6 6 . 8)
(6 . 6)
Exchange differences on translation of foreign operations attributable to non-controlling interests
(0 . 2)
(0 . 8)
Net fair value losses on financial assets at fair value through other comprehensive income
(1 8 . 5)
(25.5)
Net fair value losses on financial assets at fair value through other comprehensive income reclassified to profit or loss
18 .5
2 5.5
Net fair value (losses)/gains on cost of hedging
7.4
(21. 9)
6.8
Deferred tax on cost of hedging
2.6
5.4
(1 .7)
Net fair value gains/(losses) on cash flow hedges
7.3
39.6
(4 9. 0)
Net losses on cash flow hedges reclassified to profit or loss
7.3
(1 4 5 .1)
(24 2 .9)
Deferred tax on cash flow hedges
2.6
26 .4
7 3.0
Other comprehensive expense
(16 4 . 7)
(2 1 7. 0)
Total comprehensive (expense)/income for the year
(9 6 .5)
30 8 .5
Attributable to:
Owners of the parent company
(91. 5)
31 0 . 4
Non-controlling interests
(5 .0)
(1 . 9)
136
Drax Group plc Annual report and accounts 2025
As at 31 December
20252024
Notes£m£m
Non-current liabilities
Borrowings
4.2
(9 1 7. 7 )
(1,057 .7)
Lease liabilities
3.2
(70 . 4)
(9 0 .5)
Provisions
5.2
(8 5. 0)
(7 5 .7)
Deferred tax liabilities
2.6
(2 61 . 3)
(2 8 0 . 4)
Derivative financial instruments
7.1
(75.6)
(26 2 . 2)
(1, 41 0 . 0)
(1,766 . 5)
Net assets
1 ,7 13 . 2
2 , 0 8 7.1
Shareholders’ equity
Issued equity
4.4
49.9
49. 4
Share premium
4.4
4 4 8.5
4 43 . 8
Hedge reserve
7.3
(6 3 .1)
(7. 9)
Cost of hedging reserve
7.4
(1 2 . 8)
6.9
Other reserves
4.4
17 9 . 8
4 6 7. 0
Retained profits
2.10
1 ,1 1 0 . 9
1 ,11 8 .1
Total equity attributable to owners of the parent company
1, 713 . 2
2 , 0 7 7. 3
Non-controlling interests
4.5
–
9. 8
Total shareholders’ equity
1 ,7 13 . 2
2 , 0 8 7.1
The Consolidated financial statements of Drax Group plc, registered number 5562053, were
approved and authorised for issue by the Board of Directors on 25 February 2026.
Signed on behalf of the Board of Directors:
Frank Lemmink
CFO
Consolidated balance sheet
As at 31 December
20252024
Notes£m£m
Assets
Non-current assets
Goodwill
5.1
396 . 2
4 1 5 .1
Intangible assets
5.1
42 .7
6 8 .1
Property, plant and equipment
3.1
2 , 4 2 7. 2
2,8 02.0
Right-of-use assets
3.2
69.6
10 0 .9
Investments
–
3.6
Retirement benefit surplus
6.3
23. 8
24 .7
Deferred tax assets
2.6
3 7. 0
4 8.6
Derivative financial instruments
7.1
24. 4
8 1.7
3,020.9
3 ,5 4 4 .7
Current assets
Inventories
3.4
223. 8
302.0
Renewable certificate assets
3.3
5 4 2 .1
54 0.0
Trade and other receivables and contract assets
3.5
3 3 7. 8
47 0. 3
Derivative financial instruments
7.1
68.6
17 5. 6
Current tax assets
0 .1
–
Cash and cash equivalents
4.1
3 0 2 .1
35 6 . 0
1 , 4 74 . 5
1, 8 43 .9
Liabilities
Current liabilities
Trade and other payables and contract liabilities
3.7
(1, 0 9 0 . 9)
( 1 , 2 8 9 .1)
Lease liabilities
3.2
(28.2)
(2 6 . 0)
Current tax liabilities
–
(9 .6)
Borrowings
4.2
(61. 3)
(11 9 . 0)
Provisions
5.2
(1 7. 6)
(20.2)
Derivative financial instruments
7.1
(174 . 2)
( 7 1 .1)
(1, 3 7 2 . 2)
(1 ,535.0)
Net current assets
102 .3
30 8 .9
Section 1: Consolidated financial statements continued
137
Drax Group plc Annual report and accounts 2025
Financial statements
Consolidated statement of changes in equity
Non-
IssuedShareHedgeCost ofOtherRetainedcontrolling
equitypremiumreservehedgingreservesprofitsinterestsTotal
£m £m £m £m £m £m£m£m
At 1 January 2024
4 9 .1
4 41. 2
2 0 7. 4
18 .7
588.2
666.4
12. 0
1, 9 83 .0
Profit/(loss) for the year
–
–
–
–
–
526 .6
(1 .1)
525. 5
Other comprehensive (expense)/income
–
–
(2 18 . 9)
5 .1
(6 . 6)
4.2
(0. 8)
(2 1 7. 0)
Total comprehensive (expense)/income for theyear
–
–
(2 18 . 9)
5 .1
(6 . 6)
530 .8
(1. 9)
3 08 .5
Equity dividends paid (note 2.9)
–
–
–
–
–
(93.5)
–
(93.5)
Issue of share capital (note 4.4)
0.3
2.6
–
–
–
–
–
2 .9
Distributions to non-controlling interests
–
–
–
–
–
–
(0 . 3)
(0 . 3)
Repurchase of own shares through share buyback programmes (note 4.4)
–
–
–
–
(115 . 4)
–
–
(115 . 4)
Total transactions with the owners in their capacity as owner
0.3
2.6
–
–
(115 . 4)
(93 .5)
(0 .3)
(2 0 6 .3)
Movements on cash flow hedges released directly from equity (note 7.3)
–
–
4.8
–
–
–
–
4.8
Deferred tax on cash flow hedges released directly from equity (notes 2.6 and 7.3)
–
–
(1 . 2)
–
–
–
–
(1 . 2)
Movements on cost of hedging released directly from equity (note 7.4)
–
–
–
(2 2 .6)
–
–
–
(2 2. 6)
Deferred tax on cost of hedging released directly from equity (notes 2.6 and 7.4)
–
–
–
5.7
–
–
–
5.7
Movement in equity associated with share-based payments
–
–
–
–
0.8
13 . 0
–
13 . 8
Deferred tax on share-based payments released directly from equity (note 2.6)
–
–
–
–
–
1.4
–
1. 4
At 1 January 2025
49.4
4 43 . 8
(7. 9)
6 .9
4 6 7. 0
1 ,1 1 8 .1
9. 8
2 , 0 8 7.1
Profit/(loss) for the year
–
–
–
–
–
7 3.0
(4 . 8)
68.2
Other comprehensive expense
–
–
( 7 9 .1)
(16 . 5)
(6 6 . 8)
( 2 .1)
(0 . 2)
(1 6 4 .7)
Total comprehensive (expense)/income for theyear
–
–
( 7 9 .1)
(16 . 5)
(6 6 . 8)
70 .9
(5. 0)
(9 6 . 5)
Equity dividends paid (note 2.9)
–
–
–
–
–
(9 5.7)
–
(9 5.7)
Issue of share capital (note 4.4)
0.5
4 .7
–
–
(0 . 2)
–
–
5.0
Movement in equity associated with forward contracts to purchase own shares to satisfy
share-based payment arrangements (note 2.10)
–
–
–
–
–
( 7. 2)
–
( 7. 2)
Own shares utilised to satisfy share-based payment arrangements (note 4.4)
–
–
–
–
0 .9
(0 . 9)
–
–
Distributions to non-controlling interests
–
–
–
–
–
–
(1. 2)
(1 . 2)
Acquisition of non-controlling interests without a change in control
–
–
–
–
–
2 .9
(3.6)
(0 .7)
Repurchase of own shares through share buyback programmes (note 4.4)
–
–
–
–
(2 2 1 .1)
–
–
(2 2 1 .1)
Total transactions with the owners in their capacity as owner
0.5
4 .7
–
–
(220.4)
(1 0 0 . 9)
(4 . 8)
(3 2 0 .9)
Movements on cash flow hedges released directly from equity (note 7.3)
–
–
31. 8
–
–
–
–
31 . 8
Deferred tax on cash flow hedges released directly from equity (note 2.6)
–
–
( 7. 9)
–
–
–
–
(7. 9)
Movements on cost of hedging released directly from equity (note 7.4)
–
–
–
(4 . 3)
–
–
–
(4 . 3)
Deferred tax on cost of hedging released directly from equity (note 2.6)
–
–
–
1 .1
–
–
–
1 .1
Movement in equity associated with share-based payments (note 6.2)
–
–
–
–
–
15 .7
–
15 .7
Deferred tax on share-based payments released directly from equity (note 2.6)
–
–
–
–
–
7.1
–
7.1
At 31 December 2025
49.9
4 4 8.5
(6 3 .1)
(12 . 8)
17 9 . 8
1 ,1 1 0 . 9
–
1 ,7 13 . 2
Section 1: Consolidated financial statements continued
138
Drax Group plc Annual report and accounts 2025
Section 1: Consolidated financial statements continued
Consolidated cash flow statement
Year ended 31 December
20252024
Notes £m£m
Cash generated from operations
4.3
999.5
1 ,1 3 5 .1
Income taxes paid
(10 9.5)
(193 . 6)
Interest paid
(9 6 .4)
(9 9. 5)
Interest received
16 . 4
1 7. 5
Net cash from operating activities
810. 0
859.5
Cash flows from investing activities
Purchases of property, plant and equipment
(28 2 . 0)
(3 79 . 8)
Purchases of intangible assets
(12 . 2)
( 7. 7)
Proceeds from the sale of property, plant and equipment
9.0
0 .5
Contributions to associates
(2 .0)
(2 . 9)
Net cash used in investing activities
(2 8 7. 2)
(3 8 9. 9)
Cash flows from financing activities
Equity dividends paid
2.9
(95 .7)
(93 .5)
Distributions to non-controlling interests
(1. 2)
( 0 .1)
Proceeds from issue of share capital
5.0
2.7
Repurchase of own shares through share buyback programmes
4.4
(2 2 1 .1)
(115 . 4)
Drawdown of borrowings
4.2
–
7 31. 8
Repayment of borrowings
4.2
(23 3. 6)
(9 4 9. 2)
Gross receipt of financing derivatives
2 33.2
19 8 . 3
Gross payment of financing derivatives
( 2 3 7. 2)
(2 29 . 8)
Payment of principal of lease liabilities
( 2 8 .1)
(27.4)
Other financing costs paid
(0 . 2)
(9. 0)
Net cash absorbed by financing activities
(57 8 .9)
(4 9 1. 6)
Net decrease in cash and cash equivalents
( 5 6 .1)
(2 2 .0)
Cash and cash equivalents at 1 January
35 6 .0
37 9.5
Effect of changes in foreign exchange rates
2.2
(1. 5)
Cash and cash equivalents at 31 December
4.1
3 0 2 .1
356 . 0
Non-cash transactions recognised in the Consolidated income statement are reconciled to
operating cash flows as part of the disclosure provided in note 4.3. Further details of the cash flow
impact of exceptional items can be found in note 2.7.
139
Drax Group plc Annual report and accounts 2025
Financial statements
Section 2: Financial performance
The Financial performance section gives further information about the items in the Consolidated
income statement. It includes a summary of financial performance by each of the Group’s
businesses (note 2.1), analysis of certain Consolidated income statement items (notes 2.2 to 2.6),
and information regarding Total and Adjusted results, earnings per share, dividends and retained
profits (notes 2.7 to 2.10). Further commentary on the Group’s trading and operational
performance during the year can be found in the Strategic report on pages 1 to 50, 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 Executive Committee. The Group
is organised into four businesses. The Executive Committee reviews the performance of each of
these businesses separately, and each represents a reportable segment:
– Pellet Production: production and subsequent sale of biomass pellets from the Group’s
processing facilities in North America
– Biomass Generation: generation and sale of electricity from the Group’s biomass assets in the
UK Flexible Generation: generation and sale of electricity from pumped storage, run-of-river
hydro and OCGT assets, and the processing and sale of waste-derived pellets, in the UK
– Energy Solutions: supply of electricity to non-domestic customers in the UK
Operating costs that can be reasonably allocated to the activities of a reportable segment are
included within the results of that reportable segment. Central corporate and commercial functions
provide certain specialist and shared services, including optimisation of the Group’s positions.
Central corporate and commercial function costs that cannot be reasonably allocated to the
activities of a reportable segment are included within Innovation, capital projects and other.
Innovation, capital projects and other is not a reportable segment as it provides central support
function activities to the Group, however it is included in the information presented below to enable
reconciliation of the segmental amounts presented to the consolidated IFRS results recognised in
these Consolidated financial statements.
Given the principal activity of the Group is a generator and seller of electricity, the Consolidated
income statement includes all revenue from sales of electricity during the period. Where the Group
is acting as the principal in a sales transaction and electricity is purchased rather than generated to
fulfil that sale, either due to operational or other requirements, the cost of this purchase is recorded
within cost of sales.
When defining gross profit within the Consolidated financial statements, the Group follows the
principal trading considerations applied by its Pellet Production, Biomass Generation, Flexible
Generation and Energy Solutions businesses when making a sale. In respect of the Pellet
Production business, this reflects the direct costs of production, being fibre, fuel and drying costs,
direct freight and port costs, or third-party pellet purchases. In respect of the Biomass Generation
and Flexible Generation businesses, this reflects the direct costs of the commodities required to
generate power or the direct cost of purchasing power, the relevant grid connection costs that
arise, and the Electricity Generator Levy (EGL) arising on applicable renewable and low-carbon
generation. In respect of the Energy Solutions business, this reflects the direct costs of supply,
being the costs of the power or gas supplied, together with costs levied on suppliers such as
network costs, broker costs and renewables incentive mechanisms.
Accordingly, cost of sales excludes indirect overheads and staff costs (presented within operating
and administrative expenses), and depreciation (presented separately on the face of the
Consolidated income statement). See note 3.4 for details of the costs included within inventories.
The accounting policies applied for the purpose of measuring the reportable segments’ profits or
losses, assets and liabilities are the same as those used in measuring the corresponding amounts
in the Consolidated financial statements.
EGL applies to the Group’s three biomass units operating under the Renewables Obligation (RO)
scheme and its run-of-river hydro operations. It does not apply to the Group’s Contract for Difference
(CfD) biomass unit or its pumped storage hydro operations. The EGL applies at a rate of 45% to
receipts from in-scope forms of wholesale electricity generation that exceed a defined benchmark
level, after the deduction of certain allowable costs, from 1 January 2023 to 31 March 2028.
The Group determined that EGL should be treated as a levy under IFRIC 21 ‘Levies’, rather than
as a tax under IAS 12 ‘Income taxes’. Therefore, the cost is recognised above gross profit. A liability
for a levy is recognised once the obligating event, being the activity that triggers the payment of
the levy, has occurred. EGL is triggered based on average generation receipts for in-scope revenue
schemes over a reporting period being higher than the threshold set in the legislation. A liability
is recognised if the average actual generation receipts to date in a financial period are above the
threshold. The threshold rises annually in April, in line with the UK Consumer Price Index (CPI). The
threshold at 31 December 2025 was £79.95 per MWh (2024: £77.94 per MWh). The assessment is
based on receipts above this threshold after adjusting for allowable costs. No expense for EGL has
been recognised in the current period due to the average actual generation receipts in the period
being below the threshold.
Seasonality of trading
The primary activities of the Group are affected by seasonality. Demand in the UK for electricity is
typically higher in the winter period (October to March) when temperatures are lower, which drives
higher prices and higher levels of generation. Conversely, demand is typically lower in the summer
months (April to September) when temperatures are milder, and therefore prices and levels of
generation are generally lower.
This trend is experienced by all of the Group’s UK-based businesses, as they operate within the
UK electricity market. It is most notable within the Biomass Generation business due to its scale
and the flexible operation of its thermal generation plant.
The Pellet Production business incurs certain costs that are higher in winter months due to the
impact of weather conditions, such as fibre drying costs and heating costs. Production volumes
and margins are typically higher in the summer months. The business is protected from demand
fluctuations due to seasonality by regular production and dispatch schedules under its contracts
with customers, both intra-group and externally.
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Drax Group plc Annual report and accounts 2025
2.1 Segmental reporting continued
Segment revenues and results
The following is an analysis of the Group’s performance by reportable segment and any other information necessary to enable reconciliation to the Group’s total IFRS results recognised for the year
ended 31 December 2025. Revenue for each segment is split between sales to external parties and inter-segment sales. Inter-segment sales are eliminated in the intra-group eliminations column along
with any adjustments required for unrealised profits (primarily inventory purchased by the Biomass Generation segment from the Pellet Production segment that is still held as inventory at the reporting
date).
Adjusted EBITDA by reportable segment is presented in note 2.7.
Year ended 31 December 2025
Innovation, Exceptional
capital items
Pellet Biomass Flexible Energy projects and Intra-group Adjusted and certain Total
Production Generation Generation Solutions other eliminations results remeasurements results
£m £m £m £m £m £m £m £m £m
Revenue
External sales
329.3
2,314.7
78 .1
2,633.3
–
–
5,355.4
35.3
5,390.7
Inter-segment sales
574.1
2,090.4
93.4
–
–
(2,757.9)
–
–
–
Total revenue
903.4
4 ,4 05.1
171.5
2,633.3
–
(2,757.9)
5,355.4
35.3
5,390.7
Cost of sales
(550.9)
(3,453.6)
(24.5)
(2,524.6)
(6.9)
2,766.7
(3,793.8)
(84.0)
( 3, 877.8)
Gross profit/(loss)
352.5
951.5
147.0
108.7
(6.9)
8.8
1,561.6
(48.7)
1,512.9
Operating and administrative expenses
(222.2)
(225.8)
(3 6 .1)
(60.8)
(67.4)
(2.3)
(614.6)
(23.3)
(637.9)
Impairment of financial assets
–
(0.3)
–
0.8
–
–
0.5
(3.8)
(3.3)
Depreciation
(95.7)
(105.3)
(19.2)
(0.9)
( 7.0)
(0.8)
(228.9)
–
(228.9)
Amortisation
(4.3)
(3.9)
–
(4.2)
(1.8)
–
(14.2)
–
(14.2)
Impairment of non-current assets
(25.6)
–
–
–
(1.6)
–
(27. 2)
(350.5)
( 377.7 )
Other (losses)/gains
(7.0)
(0.2)
(0.8)
–
3.6
–
(4.4)
(3.6)
(8.0)
Share of losses from associates
(1.6)
–
–
–
–
–
(1.6)
–
(1.6)
Operating (loss)/profit
(3.9)
616.0
90.9
43.6
(81.1)
5.7
671.2
(429.9)
241.3
Further information on the main revenue streams of each segment is presented in note 2.2.
Section 2: Financial performance continued
141
Drax Group plc Annual report and accounts 2025
Financial statements
2.1 Segmental reporting continued
The following is an analysis of the Group’s performance by reportable segment for the year ended 31 December 2024:
Year ended 31 December 2024
Innovation, Exceptional
capital items
Pellet Biomass Flexible Energy projects and Intra-group Adjusted and certain Total
Production Generation Generation Solutions other eliminations results remeasurements results
£m £m £m £m £m £m £m £m £m
Revenue
External sales
3 4 0.1
1,880.7
74.3
3,786 .1
–
–
6,081.2
81.3
6 ,16 2 . 5
Inter-segment sales
602.0
3,040.0
148.5
–
–
(3,790.5)
–
–
–
Total revenue
9 4 2 .1
4,920.7
222.8
3,7 8 6 .1
–
(3,790.5)
6,081.2
81.3
6 ,16 2 .5
Cost of sales
(562 .1)
(3,685.5)
(46.2)
(3,625.0)
–
3,788.7
(4,13 0.1)
4.9
(4 ,125. 2)
Electricity Generator Levy
–
(150.2)
(10.6)
–
–
–
(160.8)
–
(160.8)
Gross profit/(loss)
380.0
1,085.0
166.0
161.1
–
(1.8)
1,790.3
86.2
1,876.5
Operating and administrative expenses
(236.7)
(268.6)
(28.4)
(85.5)
( 7 8 .1)
(1.2)
(698.5)
(2 2.1)
(720.6)
Impairment of financial assets
–
(2.9)
–
(24.4)
–
–
(27.3)
(12.7)
(40.0)
Depreciation
(102.7)
(97.7 )
(17.1)
(0.7)
(5.8)
(0.8)
(224.8)
–
(224.8)
Amortisation
(4.5)
(2.9)
–
( 7.3)
(2.3)
–
(17. 0)
–
(17.0)
Impairment of non-current assets
(3.3)
(0 .1)
–
–
(8.4)
–
(11.8)
(2.6)
(14.4)
Other (losses)/gains
(4.1)
(4.6)
0.2
–
–
–
(8.5)
1.2
( 7. 3)
Share of losses from associates
(1.3)
–
–
–
(0.9)
–
(2.2)
–
(2.2)
Operating profit/(loss)
27.4
708.2
120.7
43.2
(95.5)
(3.8)
800.2
50.0
850.2
Section 2: Financial performance continued
142
Drax Group plc Annual report and accounts 2025
Section 2: Financial performance continued
2.1 Segmental reporting continued
Assets and working capital are monitored on a consolidated basis; however, capital expenditure is
monitored by segment.
Capital expenditure on intangible Capital expenditure on property,
assets plant and equipment
Restated
(1)
2025 2024 2025 2024
As at 31 December £m £m £m £m
Pellet Production
–
–
54.5
100.2
Biomass Generation
–
0.5
38.3
67.9
Flexible Generation
–
–
84.8
137. 0
Energy Solutions
3.3
3.8
1.0
0.3
Innovation, capital projects and other
9.6
2.6
10.3
8.5
Total
12.9
6.9
188.9
313.9
(1) The definition of capital expenditure has been updated in the current period to align with the way the information is
presented to the Executive Committee. Capitalised interest and plant spares are now excluded from the definition of capital
expenditure. In the year ended 31 December 2024 there was £1.7 million of capitalised interest (Pellet Production
£0 .1 million and Flexible Generation £1.6 million) and £9.9 million of capitalised plant spares (Pellet Production £4.5 million,
Biomass Generation £4.6 million and Flexible Generation £0.8 million) that were included in the amounts presented in the
2024 Consolidated financial statements. Comparative amounts in the table above have been restated to exclude capitalised
interest and capitalised plant spares.
Total cash outflows in relation to capital expenditure during the year were £294.2 million
(2024: £387.5 million). In the current year, the cash outflow in relation to property, plant and
equipment is higher than the cost capitalised, predominantly as a result of a decrease in creditors
relating to capital expenditure within the year.
Intra-group trading
Intra-group transactions are carried out at management’s best estimate of arm’s-length,
commercial terms that, where possible, equate to market prices. The impact of all intra-group
transactions, including any unrealised profit arising, is eliminated on consolidation.
Analysis of revenue from intra-group trading is provided in the table below:
Intra-group trading revenue
Year ended 31 December
2025 2024
£m £m
Pellet Production segment sale of biomass pellets and provided
associated services to the Biomass Generation segment
574.1
602.0
Biomass Generation segment sale of electricity, gas and renewable
certificate assets to the Energy Solutions segment
2,0 07. 0
2,928.7
Biomass Generation segment sale of electricity to the Flexible
Generation segment
16.2
36.5
Biomass Generation segment sale of biomass pellets to the Pellet
Production segment
67. 2
74.8
Flexible Generation segment sale of electricity and renewable
certificate assets to the Biomass Generation segment
90.1
145.9
Flexible Generation segment sale of electricity to the Energy
Solutions segment
3.3
2.6
Total inter-segment sales (note 2.2)
2,757.9
3,790.5
Major customers
There was no individual customer, in either the current or previous financial year, that represented
10% or more of total revenue.
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Drax Group plc Annual report and accounts 2025
Financial statements
Section 2: Financial performance continued
Geographical analysis of revenue and non-current assets
The geographic information analyses the Group’s revenue and non-current assets by the entity’s
country of domicile. In presenting the geographic information, segment revenue has been based
on the geographic location of customers and segment assets were based on the geographic
location of the assets.
The Group’s external revenue and non-current assets for the Biomass Generation, Flexible
Generation and Energy Solutions segments are all UK-based. The Pellet Production segment has
third-party pellet sales to both the UK and other locations around the world. The Pellet Production
segment’s non-current assets are located in North America, in both Canada and the US.
Revenue
(based on location of customer)
Year ended 31 December
2025 2024
£m £m
North America (Canada and US)
8.4
7.9
Europe (excluding UK)
7.5
25.8
Asia
251.2
242.5
UK
5,123.6
5,886.3
Total
5,390.7
6,162 . 5
Non-current assets
(1)
(based on asset’s location)
As at 31 December
2025 2024
£m £m
Canada
84.2
356.5
US
541.6
698.9
Asia
0.2
0.2
UK
2,309.7
2,33 4.1
Total
2,935.7
3,389.7
(1) Non-current assets comprise goodwill, intangible assets, property, plant and equipment, right-of-use assets and
investments.
2.2 Revenue
Accounting policy
Revenue represents amounts receivable for goods or services provided to customers in the
normal course of business, net of trade discounts, VAT and other sales-related taxes and excludes
transactions between Group companies. Revenue is presented gross in the Consolidated income
statement when the Group controls the specified good or service prior to the transfer to the
customer. When the Group is acting primarily as an agent, revenue is recognised on a net basis.
A summary of the Group’s principal revenue streams, along with the nature and timing of
performance obligations, payment terms, methods of recognising revenue, and any estimation
uncertainties, is given in the table below.
The majority of the Group’s revenue is within the scope of IFRS 15. The other sources of the
Group’s revenue outside the scope of IFRS 15 comprise gains and losses on certain non-hedge
accounted derivatives, the ineffective portion of certain hedge accounted derivatives, amounts
reclassified to revenue for gains and losses on hedge accounted UK inflation swaps, Contract for
Difference (CfD) income, and income from the UK Government’s Energy Bills Discount Scheme
(EBDS). See note 2.7 for further details on gains and losses on derivatives and note 7.2.3 for
inflation risk management. Gains and losses recognised in the Consolidated income statement
on derivative contracts that are entered to hedge a revenue item are presented within the same
revenue stream line as the revenue item they are intending to hedge.
Year ended 31 December 2025
Year ended 31 December 2024
Exceptional Exceptional
items and items and
Adjusted certain Total Adjusted certain Total
results remeasurements results results remeasurements results
£m £m £m £m £m £m
Revenue from
contracts with
customers
5,163. 0
(25.9)
5,137.1
5,918.2
(6.9)
5,911.3
Other revenue
192.4
61.2
253.6
163.0
88.2
251.2
Total revenue
5,355.4
35.3
5,390.7
6,081.2
81.3
6 ,16 2 .5
2.1 Segmental reporting continued
144
Drax Group plc Annual report and accounts 2025
2.2 Revenue continued
Revenue stream (Segment)
Nature and timing of performance obligations, including significant payment terms
Method of recognising revenue, including any estimation uncertainties
Pellet sales (Pellet Production)
The Group’s Pellet Production business produces biomass pellets which are sold
Revenue is recognised at the point that the pellets are loaded onto the shipping
to external customers. Customers generally obtain control of the pellets at the vessel. The amount of revenue recognised is based on the contracted price and
point the pellets are loaded onto the shipping vessel. volume of the pellets.
Where freight is also arranged for the customer, these sales are known as cost, For CIF sales, revenue for the freight portion is recognised over the period the
insurance and freight (CIF) sales. The freight component is considered a separate vessel sails.
performance obligation.
Invoices are raised in line with contractual terms and are usually payable within
4–10 days.
Electricity sales (Biomass The Group’s Biomass Generation and Flexible Generation businesses have Revenues from sales contracts fulfilled through generation are recognised at
Generation and Flexible contracts for wholesale electricity sales. Performance obligations, being the a point in time based upon metered output at rates specified under contractual
Generation) supply of electricity, are met either via generation or through the procurement of terms.
electricity from counterparties. The performance obligations for these contracts Revenue from sales contracts fulfilled through procured electricity is recognised
are deemed to be a series of distinct goods that are substantially the same at the point at which this electricity or gas is supplied to the counterparty in
and transfer consecutively. Control is deemed to have transferred to the customer accordance with the contractual terms at rates specified under the contract.
at the point that the electricity has been supplied in accordance with the
contractual terms. These are recognised under the output method, whereby revenue is recognised
Invoices for electricity are typically raised on the fifth banking day following the based on the value transferred to the customer.
month of supply, in line with the Grid Trade Master Agreement (GTMA) contractual
terms, and are payable on the fifth banking day following the date of invoice.
Renewable certificate sales Renewables Obligation Certificates (ROCs) and Renewable Energy Guarantees External ROC and REGO sales are recognised at the point the relevant renewable
(Biomass Generation, Flexible of Origin (REGOs) are sold to counterparties at a point in time. certificates are transferred to the counterparty.
Generation and Energy ROCs sold are invoiced in line with contractual terms and are usually payable See note 3.3 for further details on how the renewable certificate schemes
Solutions) within two to five days. operate.
Invoices for REGOs are raised in line with contractual terms and are usually
payable within 7–30 days.
CfD income (Biomass The Group’s Biomass Generation business is party to a CfD with the Low Carbon The Group recognises the income arising from the CfD in the Consolidated income
Generation) Contracts Company (LCCC), a UK Government-owned entity responsible for statement as a component of revenue at the point the Group meets its
delivering elements of the UK Government’s Electricity Market Reform performance obligation under the CfD agreement. This is considered to be the
programme. Under the contract, the Group receives income in respect of point at which the relevant generation is delivered.
electricity dispatched from a specific biomass-fuelled generating unit. See CfD income section below for further details.
Invoices are raised 7–10 days following the date of supply and are settled within
28 days.
Section 2: Financial performance continued
145
Drax Group plc Annual report and accounts 2025
Financial statements
Revenue stream (Segment)
Nature and timing of performance obligations, including significant payment terms
Method of recognising revenue, including any estimation uncertainties
Ancillary services (Biomass Ancillary services refer to the provision of a range of system support services Revenue is recognised over time for ancillary services as the Group provides the
Generation and Flexible to National Grid. Most contracts are for the delivery of a specific service either service of either being available and ready to support the UK Electricity Grid or
Generation) continually or on an ad-hoc basis over a period of time. providing a service when called upon to support the UK Electricity Grid.
Invoices are raised and subsequently settled in line with the National Grid Revenue is recognised over time by reference to the stage of completion of
company ancillary services settlement calendar, typically monthly. the contractual performance obligations, which for stand ready performance
obligations are calculated by reference to the amount of the contract term that
has elapsed.
Revenue recognised for providing services when called upon are recognised over
the time the service is being provided to support the UK Electricity Grid.
Depending on contract terms, this approach may require judgement in estimating
probable future outcomes when the amount of consideration the Group is entitled
to is variable based on its performance over a period of time.
Electricity and gas sales The Group’s Energy Solutions business sells electricity and gas directly to Revenue is recognised on the supply of electricity or gas when a contract exists,
(Energy Solutions) non-domestic customers. Energy supplied is measured based upon metered supply has taken place, a quantifiable price has been established or can be
consumption and contractual rates. determined, and the amounts receivable are expected to be recovered.
The Energy Solutions business also has long-term contracts for the sale of Where supply has taken place but has not yet been measured or billed, revenue
electricity and gas, which are a series of distinct goods or services that are is estimated based on consumption statistics and selling price estimates and is
substantially the same and have the same pattern of transfer and are a recognised as accrued income. This estimate is not considered to be a key source
performance obligation that is deemed as being satisfied over time in line with of estimation uncertainty because historical experience has demonstrated that
the progress of the contracts. these estimates are materially accurate based on the subsequent billings
Invoices are raised in line with contractual terms which for most customers is and settlements.
monthly. Payment is generally due between 28–90 days. Where contracts for the sale of electricity and gas are held, revenue is recognised
in line with the progress of the contracts.
Revenue recognised for fixed price contracts is based on the input method.
Revenue is recognised based on the costs incurred and the estimated margin
to be obtained over the life of the contract. For variable price contracts revenue
is recognised based on the output method. Revenue is recognised based on the
volume supplied and the contracted price. Assumptions are applied consistently
but third-party costs can vary, therefore actual outcomes may vary from initial
estimates.
Section 2: Financial performance continued
2.2 Revenue continued
146
Drax Group plc Annual report and accounts 2025
Revenue stream (Segment)
Nature and timing of performance obligations, including significant payment terms
Method of recognising revenue, including any estimation uncertainties
EBDS income (Energy The UK Government introduced the EBDS running from 1 April 2023 to 31 March The discounted price of electricity and gas supplied under EBDS was recognised
Solutions)
202
4. Under this scheme, energy supplied to eligible non-domestic customers
in revenue as it was supplied. The amount claimed back from the UK Government
had a discount applied to each unit of electricity and gas. Certain customers was recognised within revenue over the same period as the underlying discounted
were eligible for higher levels of support dependent on the sector in which they revenue it related to was recognised.
operated. The discount provided was then able to be claimed back from the The revenue received from the UK Government is included in the EBDS income
UK Government by the supplier. line in the table on page 148. The Group did not recognise any additional revenue
Payment was due 10 days post submission of a claim, which typically occurred from the scheme than it would have done had it not been introduced.
monthly.
Other income (All segments)
Other income is derived from the sale of goods. The customer obtains control
Revenue is recognised at the point the control of the goods is transferred to
typically at the point of delivery to their premises or upon collection. the customer.
Invoices are raised in line with contractual terms. The majority of invoices
are raised quarterly and are payable within 30 days.
Renewable certificate sales
The generation and sale of renewable certificates, primarily ROCs and REGOs, is a key driver of the Group’s financial performance.
During the year, the Group made sales and related purchases of ROCs to help optimise its working capital position. External sales of ROCs in the table below includes £237.5 million of such sales
(2024: £50.8 million), with a similar value reflected in cost of sales. The renewable certificate sales revenue in the Biomass Generation business of £931.0 million has increased compared to the prior year
(2024: £739.3 million) primarily as a result of the increase in these ROC sales.
See note 3.3 for further details of how the renewable certificate schemes operate, the renewable certificates generated and sold by the Biomass Generation and Flexible Generation businesses,
and those utilised by the Energy Solutions business during the year.
CfD income
The income 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 2025 was £142.24 per MWh (2024: £138.16 per MWh).
When market prices (based on average traded prices in the preceding season) are above or below the strike price, the Group makes an additional payment to or receives additional income from LCCC
equivalent to the difference between that market power price and the strike price, for each MWh produced from the relevant generating unit. Such payments or receipts are in addition to amounts
received from the sale of the associated power in the wholesale market.
Section 2: Financial performance continued
2.2 Revenue continued
147
Drax Group plc Annual report and accounts 2025
Financial statements
Further analysis of revenue for the current and prior year is provided in the table below:
Year ended 31 December 2025
Year ended 31 December 2024
External Inter-segment Total External Inter-segment Total
£m £m £m £m £m £m
Pellet Production
Pellet sales
320.1
574.1
894.2
329.6
597.5
927.1
Other income
9.2
–
9.2
10.5
4.5
15.0
Total Pellet Production
329.3
574.1
903.4
3 4 0 .1
602.0
9 42 .1
Biomass Generation
Electricity and gas sales
1,582.8
1,599.6
3,182.4
1,426.6
2,510.7
3,937.3
Renewable certificate sales
507.4
423.6
931.0
284.8
454.5
739.3
CfD income
192.4
–
192.4
148.6
–
148.6
Ancillary services
18.0
–
18.0
18.7
–
18.7
Other income
14.1
67. 2
81.3
2.0
74.8
76.8
Total Biomass Generation
2,314.7
2,090.4
4 ,405.1
1,880.7
3,040.0
4,920.7
Flexible Generation
Electricity sales
28.8
83.8
112.6
2 2.1
141.2
163.3
Renewable certificate sales
–
9.6
9.6
–
7.3
7.3
Ancillary services
21.2
–
21.2
24.2
–
24.2
Other income
28 .1
–
28 .1
28.0
–
28.0
Total Flexible Generation
78 .1
93.4
171.5
74.3
148.5
222.8
Energy Solutions
Electricity and gas sales
2,619.5
–
2,619.5
3,734.0
–
3,734.0
EBDS income
–
–
–
14.4
–
14.4
Renewable certificate sales
13.8
–
13.8
37.4
–
37.4
Other income
–
–
–
0.3
–
0.3
Total Energy Solutions
2,633.3
–
2,633.3
3,786.1
–
3,78 6 .1
Elimination of inter-segment sales
–
(2,757.9)
(2 ,757.9)
–
(3,790.5)
(3,790.5)
Total consolidated revenue in Adjusted results
5,355.4
–
5,355.4
6,081.2
–
6,081.2
Certain remeasurements
35.3
–
35.3
81.3
–
81.3
Total consolidated revenue in Total results
5,390.7
–
5,390.7
6 ,16 2.5
–
6,162.5
Section 2: Financial performance continued
2.2 Revenue continued
148
Drax Group plc Annual report and accounts 2025
Year ended 31 December
2025 2024
£m £m
Amounts expected to be recognised as revenue:
Within one year
105.8
127.0
Within one to two years
28.5
18.4
Within two to three years
4.9
1.2
Transaction price allocated to performance obligations that are
unsatisfied at the end of the reporting period
139.2
146.6
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’s external
auditor, PricewaterhouseCoopers LLP, in respect of services provided to the Group during the year.
The following expenditure has been charged in arriving at operating profit:
Year ended 31 December
2025 2024
£m £m
Staff costs (note 6.1)
316.9
322.8
Repairs and maintenance expenditure on property, plant and
equipment
141.9
159.6
Other operating and administrative expenses
17 9.1
238.2
Total operating and administrative expenses
637.9
720.6
Revenue recognised in Adjusted results of £5,355.4 million (2024: £6,081.2 million) differs from
revenue recognised in Total results of £5,390.7 million (2024: £6,162.5 million) due to certain
remeasurement gains of £35.3 million (2024: £81.3 million), comprised of gains and losses on
derivative contracts that are used to manage risk exposures associated with the Group’s revenue
not designated into hedge accounting relationships under IFRS 9, and hedge ineffectiveness on
hedge accounting relationships reclassified to profit or loss. See note 2.7 for further details on
certain remeasurements included within revenue.
Revenue recognised in the period that was included within contract liabilities at the start of the
year was £23.1 million (2024: £16.8 million). See note 3.7 for further details on contract liabilities.
Revenue recognised in the period from performance obligations satisfied or partly satisfied in the
previous period was £nil (2024: £nil).
The Group’s Biomass Generation and Flexible Generation segments have contracts for wholesale
electricity sales. Performance obligations, being the supply of electricity, are met either via
electricity generation or through the procurement of electricity from counterparties. Where
electricity is procured from counterparties to meet this obligation, the electricity sale is presented
on a gross basis with the cost of buying the electricity presented in cost of sales and the sale of
this electricity presented in revenue. If external purchases of power were presented net within
external revenue this would have reduced external revenue by £1,044.8 million to £4,345.9 million
(2024: by £1,072.9 million to £5,089.6 million) with a corresponding decrease in external cost of sales.
For most customer contracts the Group is eligible for, and applies, the practical expedient available
under IFRS 15 and has not disclosed information related to the transaction price allocated to
remaining performance obligations. This applies to revenue where either the right to receive
consideration from the customers is at an amount that corresponds directly with the value
transferred to the customer for the Group’s performance completed to date, or the contract’s
original expected duration is less than one year. For the Group’s fixed price energy supply contracts
that have an original expected duration of more than one year, the aggregate amount of the
transaction price allocated to performance obligations that are unsatisfied at the end of the
reporting period is shown in the table below.
Section 2: Financial performance continued
2.2 Revenue continued
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Financial statements
2.4 Impairment review of non-current assets
Accounting policy
Goodwill is tested for impairment at least annually. For the purpose of impairment testing, goodwill
is allocated to each of the Group’s cash-generating units (CGUs) or group of CGUs expected to
benefit from the synergies of the business combination.
A CGU is the smallest identifiable group of assets that generates cash inflows that are largely
independent of the cash inflows from other assets or groups of assets. CGUs are identified
consistently from period to period unless there is a change in the period that would impact the
Group’s CGUs. The Group’s CGUs are reassessed should any such changes occur.
The Group reviews its non-current assets (and, where appropriate, groups of assets combined into
a CGU) whenever there is an indication that an impairment loss may have been suffered. The Group
assesses the existence of indicators of impairment at the end of each reporting period.
If an indication of potential impairment exists, the recoverable amount of the asset or CGU in
question is assessed with reference to the present value of the future cash flows expected to be
derived from the continuing use of the asset or CGU (value in use), or the expected price that would
be received if the asset or CGU were sold to a market participant (fair value less costs of disposal).
The recoverable amount of an asset or CGU is the higher of its fair value less costs of disposal
(FVLCD) and its value in use (ViU). The initial assessment of the recoverable amount is normally
based on ViU unless FVLCD is considered more appropriate.
The future cash flows used in ViU calculations are based on the approved long-term forecasts
that support the Board and executive management’s strategic planning process and include all
expected costs necessary to generate the cash inflows from the CGU’s assets in their current state
and condition, including an allocation of centrally managed costs. Future cash flows include, where
relevant, contracted cash flows arising from the Group’s forward hedging activities and as a result
the carrying amount of each CGU includes the fair value of those hedges.
Assessments of future cash flows consider relevant environmental and climate change factors.
In particular, macro-economic, commodity price and third-party cost assumptions reflect
considerations in respect of the impact of climate change, growth in renewable technologies,
electrification and the impact of relevant policies on longer-term supply and demand profiles.
As required by IAS 36, the additional value that could be obtained from enhancing the Group’s
assets and the potential benefit of any future restructuring or reorganisation that the Group is
not yet committed to, is not reflected in the ViU calculation.
Auditor’s remuneration
Year ended 31 December
2025 2024
£000 £000
Audit fees:
Fees payable for the audit of the Group’s Consolidated financial
statements
1,874.0
2 ,153. 0
Fees payable for the audit of the Company’s subsidiaries’ statutory
accounts
144.0
225.0
Total audit fees
2,018.0
2,378.0
Other fees:
Review of the Group’s half-year Condensed consolidated financial
statements
174.0
167. 0
Assurance services provided to non-material affiliates
45.8
70.0
Other assurance services
132.0
205.0
Other services
9.0
10.0
Total non-audit fees
360.8
452.0
Total auditor’s remuneration
2,378.8
2,830.0
Included in the fees payable for the audit of the Group’s Consolidated financial statements for 2025
is £ 0 .1 million relating to additional fees in relation to the 2024 Group audit that were agreed and
billed in 2025. In the prior year fees payable included £0.3 million relating to the transition phase
of the 2024 audit, which was undertaken and invoiced in 2023.
Other assurance services provided in the current and prior years consist of ESG assurance fees.
See the Audit Committee report on page 85 for further details.
Section 2: Financial performance continued
2.3 Operating and administrative expenses continued
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Drax Group plc Annual report and accounts 2025
CGUs
As at 31 December 2025
Goodwill
Segment name
CGUs contained within segment
£m
Pellet Production
Northern Pellets
–
Biomass (Southern Pellets)
156.7
Biomass Generation
Biomass (Drax Power Station)
–
Flexible Generation
Lanark
11.3
Galloway
4 0.1
Cruachan
26.9
Hirwaun
–
Millbrook
–
Progress
–
Daldowie
–
Energy Solutions
Drax Energy Solutions
161.2
Opus Energy
–
396.2
Previously, the Group’s pellet production activities in Canada and the US formed a single CGU
(Pellet Operations), reflecting management's integration of the Group's Canadian and US pellet
plants into one combined business following the Pinnacle acquisition in 2021, with pellets from the
Canadian pellet plants (Northern Pellets) and the US pellet plants (Southern Pellets) being used
interchangeably to fulfil third-party customer contracts and internally at Drax Power Station, with
biomass generation forming a separate CGU (Drax Power Station). During 2025, market conditions
changed significantly. Expected future demand for biomass pellets declined following changes to
the UK support schemes, with reduced volumes under the low carbon dispatchable CfD agreed in
November 2025, despite this agreement providing greater certainty over the future of Drax Power
Station. At the same time, global pellet supply increased, particularly from Southeast Asia, and
Canadian fibre availability was affected by tariffs. In the second half of 2025, the Group
restructured its pellet operations, with its US pellet plants now dedicated to supplying Drax Power
Station and its Canadian pellet plants focused on third-party customers. This operational change
required a reassessment of the Groups CGUs and resulted in Northern Pellets and Southern Pellets
being assessed separately, as their cash flows are now independent.
2.4 Impairment review of non-current assets continued
In determining ViU, the estimated future cash flows are discounted to present value using a pre-tax
nominal discount rate reflecting the specific risks attributable to the asset or CGU in question.
When calculating FVLCD, the method most appropriate for an individual asset or CGU is
considered. This is generally either based on available market information on prices or comparable
transactions, or a discounted cash flow method, similar to ViU, but including the impact of all
relevant factors a market participant would consider.
If the recoverable amount is less than the carrying amount in the Consolidated financial
statements, an impairment charge is recognised to reduce the carrying amount of the asset or
CGU to the estimated recoverable amount. Any impairment loss is recognised immediately in the
Consolidated income statement.
Individual assets are considered for impairment where possible. If individual assets do not generate
cash inflows that are largely independent, the recoverable amount is determined for the CGU to
which the asset belongs. Where possible, corporate assets are allocated to an individual CGU on a
reasonable and consistent basis. Where corporate assets cannot be allocated to an individual CGU
on a reasonable and consistent basis, they are included in the carrying amount of the smallest
group of CGUs to which they can be allocated on a reasonable and consistent basis.
An impairment loss relating to a CGU is allocated first to the carrying amount of any goodwill
allocated to the CGU and then to the other assets pro-rata on the basis of the carrying amount of
each asset. When allocating an impairment loss to the other assets in the CGU, if the recoverable
amount of an individual asset within that CGU is determinable, the impairment loss allocated to the
individual asset is limited to reducing the asset’s carrying value to its individual recoverable amount.
If this results in the impairment loss allocated to an asset being less than its pro-rata share, the
excess is allocated on a pro-rata basis to the remaining assets in the CGU. An impairment loss
recognised for goodwill is not reversed in a subsequent period. Non-financial assets other than
goodwill that have an impairment loss recognised are reviewed in subsequent reporting periods
for possible reversal of the impairment. Where an impairment reversal is identified, this is reversed
immediately in the Consolidated income statement.
The table below details the Group’s reportable segments, the CGUs within those segments and
the value of any goodwill allocated to them. See note 5.1 for further details on goodwill.
Section 2: Financial performance continued
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Financial statements
Assessment of indicators of impairment for CGUs to which no goodwill is allocated
Full impairment reviews were performed on all CGUs to which goodwill had been allocated (see
Impairment review section below). For CGUs to which no goodwill is allocated, impairment reviews
are only performed if impairment indicators are identified.
In determining whether impairment indicators existed in respect of these CGUs, the Group
considered changes in market prices for commodities, foreign currency exchange rates, changes
in macro-economic conditions, potential impacts of climate change and regulatory requirements
since the previous reporting date, and their potential impact on the Group’s long-term planning
models and future forecast cash flows. Given the relatively consistent macro-economic conditions
compared to the prior year end, as well as falling interest rates, these are not considered to be
impairment indicators. Commodity prices have been relatively stable (e.g. power and gas) since the
prior year end. The Group’s generation activities in CGUs to which no goodwill is allocated are less
sensitive to power price changes due to generation activities being more dependent on the spread
between gas and power prices. Further, a high proportion of the Group’s income is not linked to
power prices, such as income from renewable certificates, system support and ancillary services.
From the factors considered above, no impairment indicators were noted.
Whilst the commissioning date for the assets in the Hirwaun, Millbrook and Progress CGUs have
been delayed, this was not considered an impairment indicator as the cash flow impact of these
delays is not significant.
There were no impairment indicators present for the Opus Energy, Hirwaun, Millbrook, Progress
or Daldowie CGUs and accordingly no impairment review was performed for these CGUs in the
current year.
The Group’s US pellet plants now operate solely to supply Drax Power Station, and therefore do
not generate cash inflows independently from Drax Power Station. Due to their whole output being
used internally, and the absence of an active external market for their output, from 2025, the US
pellet plants and the biomass generation activities at Drax Power Station are assessed together
as a single Biomass CGU.
Goodwill arising from the 2021 Pinnacle acquisition was previously allocated to the Pellet
Operations CGU. Following the change in CGU structure, this goodwill has been reallocated
between Northern Pellets and Southern Pellets using a relative fair value approach, in accordance
with IAS 36. This resulted in C$15.7 million (£8.4 million based on exchange rates at the time of
reallocation) being allocated to Northern Pellets and US$210.8 million (£156.7 million based on
exchange rates at the time of reallocation) being allocated to Southern Pellets. As Southern Pellets
is within the Pellet Production segment but forms part of the Biomass CGU, goodwill allocated to
Southern Pellets is also tested at the Southern Pellets level to ensure allocation and testing of
goodwill does not take place at a level higher than an operating segment.
There are no changes to any other CGUs from the prior year.
In respect of the Flexible Generation segment, 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.
In respect of the Energy Solutions segment, the smallest groups of assets that generate
independent cash inflows are the operating entities within the business, Drax Energy Solutions
and Opus Energy.
The Group’s Innovation, capital projects and other operations provides central support functions
to the Group’s main business activities and does not earn revenues and therefore does not meet
the definition of a CGU. However, as explained above, corporate assets are considered for
impairment individually where possible or as part of a CGU, and relevant centrally managed costs
are allocated to each CGU on a reasonable and consistent basis.
Section 2: Financial performance continued
2.4 Impairment review of non-current assets continued
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Drax Group plc Annual report and accounts 2025
Impairment review
For the purpose of impairment reviews, the recoverable amounts of the CGUs, or groups of CGUs, are measured using ViU or FVLCD. ViU is calculated based on a discounted cash flow method
using the Group’s established planning models. FVLCD uses a market price or comparable recent market transaction where possible. Where this information is not available FVLCD is also based on
a discounted cash flow method using the Group’s established planning models as a base, but adjusting for impacts or changes that a market participant would factor in. These calculations depend
on a broad range of assumptions, the most significant of which are outlined below for each CGU, or group of CGUs, to which an impairment test has been performed in the current year. The bases
of these estimates are outlined below.
Calculation
method used to
determine
recoverable Significant assumptions for ViU or FVLCD
CGU amount
calculation
Management’s bases for determining estimates used in ViU or FVLCD calculation
Northern
FVLCD
– Production costs
 – Future production costs are estimated based on a combination of current and historical costs, inflation expectations and
Pellets – Production volumes maintenance/operating assumptions
– Sales volumes – Production volumes are estimated based on the sales volumes agreed under contractual pellet supply arrangements entered into
– Sales prices with third parties as well as forecast sales volumes, taking into account planned and unplanned downtime provisions, and fibre
– Central costs availability
– Discount rate – Sales volumes are estimated based on contractual pellet supply arrangements entered into with third parties and assumed further
contracted volumes after current contracts expire based on third-party market demand forecasts and current contract
negotiations
– Sales prices are forecast based on contractual sales agreements and an assumed market price after current contracts expire based
on third-party market forecasts and current contract negotiations
– Central costs are estimated based on historical costs and adjustments that a third-party market participant could reasonably
expect to implement
– See below for details of the basis used to estimate discount rates
Biomass
ViU
– Power prices
 – Power revenue is derived from hedged power sales, future wholesale energy price estimates and an assumption of additional value
– Biomass support mechanisms added through the balancing market and optimisation
– Post-March 2031 income – Future wholesale energy price estimates are based on market traded power prices for around three years (the period they are
– Pellet costs (self-supply and liquid), gas market prices as a proxy for power for another two years, then the Group’s long-term power price forecast, which is
third-party) prepared using externally provided gas price forecasts and demand inputs
– Pellet production volumes – Biomass support mechanism income is based on the terms of existing biomass support schemes applicable to Drax Power Station
– Ancillary income for the period up to March 2027 and for the period April 2027 to March 2031 are based on the agreed terms of the low carbon
– Volume of generation dispatchable CfD agreement with the UK Government
– Discount rate – Post-March 2031 biomass generation income is based on the assumption that the levels of income forecast under the low carbon
dispatchable CfD agreement for the period April 2027 to March 2031 will continue at a similar level of value up to 2039
– Self-supply pellet production costs are estimated based on a combination of current and historical costs, inflation expectations
and maintenance/operating assumptions
– Third-party pellet costs are based on historical third-party pellet supply contracts, current pricing and offers, and ongoing
negotiations
– Pellet production volumes are estimated based on a combination of the capacity of the plant, current and historical volumes
produced, planned and unplanned downtime provisions, and fibre availability
– Ancillary income assumptions are based on past performance and current agreed prices with National Grid
– Volume of generation is based on renewable support scheme terms and power price forecasts
– See below for details of the basis used to estimate discount rates
Section 2: Financial performance continued
2.4 Impairment review of non-current assets continued
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Financial statements
Lanark,
ViU
– Power prices
 – Power revenue is derived from hedged power sales, future wholesale energy price estimates and an assumption of additional value
Galloway and – Ancillary income added through the balancing market and optimisation
Cruachan – Volume of generation – Future wholesale energy price estimates are based on market traded power prices for around three years (the period they are
– Discount rate liquid), gas market prices as a proxy for power for another two years, then the Group’s long-term power price forecast, which is
prepared using externally provided gas price forecasts and demand inputs
– Ancillary income assumptions are based on past performance and current agreed prices with National Grid
– Volume of generation for the run-of-river hydro assets is derived from historical rainfall averages
– Volume of generation for Cruachan is based on forecast volatility in power prices and assumed weather patterns
– See below for details of the basis used to estimate discount rates
Drax Energy
ViU
– Customer margins
 – Customer margins are estimated based on current contracted prices and on current and previously achieved profitability
Solutions – Supply volumes – The expectation of future organic supply volumes is based on past performance and management’s expectations of market
– Third-party cost estimates developments
– Renewables services growth – Third-party cost estimates are based on a combination of externally published rates, management analysis of key market input
rates assumptions, and forecasts from external experts
– Discount rate – Renewables services growth is based on assumptions about the growth of relevant markets, such as electric vehicles
– See below for details of the basis used to estimate discount rates
Section 2: Financial performance continued
2.4 Impairment review of non-current assets continued
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The discount rates used for each CGU are calculated with input from third-party experts and reflect
the weighted average cost of capital derived using the Capital Asset Pricing Model (CAPM). The
estimations use a risk-free rate based on Government bonds, market participant capital structures
and beta estimates adjusted for the specific circumstances and risk factors affecting the industry
and markets in which the CGU operates (taking into account relevant peer data sets). The CAPM
calculates a post-tax discount rate which is applied to post-tax cash flows. An iterative computation
using pre-tax cash flows is then performed to derive an equivalent pre-tax discount rate.
Further details on the assessments for each group of CGU as well as sensitivities for reasonably
possible changes in key assumptions at the date of the impairment test are given below. Where
reasonably possible changes in key assumptions would result in a material adjustment to the
carrying value of a CGU, these are disclosed as a key source of estimation uncertainty.
The carrying amount, length of detailed cash flows, pre-tax discount rate and the perpetuity
growth rate, where applicable, used in the calculation of each CGU’s recoverable amount are set
out in the table below:
Carrying
amount
including Length of
allocated detailed Pre-tax
goodwill cash flows discount Perpetuity
CGU £m £m rate growth rate
Northern Pellets
84.2
15 years
19.3%
2.0%
Biomass
1,412.3
14 years
11.5%
n/a
Drax Energy Solutions
178.2
5 years
9.2%
2.0%
Lanark
44.3
15 years
8.0%
2.0%
Galloway
174.2
15 years
8.0%
2.0%
Cruachan
298.6
15 years
8.0%
2.0%
For the Northern Pellets CGU, FVLCD was higher than ViU. FVLCD was determined by discounting
the post-tax cash flows that a third-party market participant would be expected to be able to
generate from the CGU, less any costs of disposal. The cash flows used in calculating the FVLCD
were based on management’s detailed cash flows in the Group’s established planning models, but
adjusted for changes, primarily to reduce central costs, that a market participant with a different
structure and requirements would be able to achieve.
For the Drax Energy Solutions CGU, management has projected detailed cash flows based on
a period of five years, with cash flows beyond the five-year period taken into perpetuity using a
long-term growth rate of 2%. For all other CGUs, management has projected detailed cash flows
based on a period of 15 years, except for the Biomass CGU whose cash flows are forecast for
14 years in line with the useful economic life of Drax Power Station, which is to 2039. Whilst these
periods are longer than the five-year period specified by IAS 36, and the period the Group assesses
viability over in the Viability statement, they align with the Group’s long-term strategic planning and
takes into account future structural changes forecast within the generation and pellet production
industries, as well as expected developments in the pellet production industry. These longer-term
structural changes are mainly linked to climate change and the impact of changing weather
patterns (including increased rain fall from storms and drier summer months for the run-of-river
hydro CGUs and the impact on plant downtime and supply chains due to extreme weather events
for the Northern Pellets and Biomass CGUs), the impact of decarbonisation and the transition to
more renewable forms of energy and Net Zero, the impact of subsidy and support regimes, and
the impact of repairs and maintenance expenditure which is not uniform across the lives of assets.
Using a period of only five years for detailed cash flow forecasts could materially overstate or
understate the recoverable amounts of these CGUs as the impact of these factors in periods after
five years can be significant. The Northern Pellets CGU also has long term contracts that can be
in excess of 10 years which further supports using a period greater than five years.
Where possible, for relevant commodities, forecasts are based on either contracted prices,
particularly for the Northern Pellets and Biomass CGUs where the Group has a number of longer-
term contracts to support the prices used, or observable market curves. Beyond the liquid portion
of forward curves, internally constructed price curves are benchmarked against third-party market
analysis to validate the reasonableness of the assumptions used. Management continually
reassesses forecasting accuracy, considering changes in circumstances and whether forecasting
differences were as a result of events that could not reasonably be foreseen at the date of the
forecast. These reviews support the accuracy of management’s forecasts. This supports the use
of detailed forecast periods of longer than five years.
Where management has projected detailed cash flows based on a period of 15 years (Northern
Pellets, Lanark, Galloway and Cruachan), cash flows beyond the 15-year period are taken into
perpetuity using a long-term growth rate of 2%. The long-term growth rate is based on prudent
expectations of market share and profitability along with more general macro-economic factors
which were obtained from the Group’s established planning model along with external macro-
economic forecasts. The long-term growth rate does not exceed the relevant long-term average
growth rate for each of the industries in which the Group operates.
Section 2: Financial performance continued
2.4 Impairment review of non-current assets continued
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Financial statements
Biomass
The Biomass CGU is principally focused on renewable biomass electricity generation, including
its integrated pellet supply chain. Given the allocated goodwill, a full impairment assessment has
been performed. The cash flows between April 2027 and March 2031 reflect management’s best
estimate of earnings based on the terms of the low carbon dispatchable CfD agreement signed in
November 2025. The expected income beyond March 2031 to the cessation of operations in 2039,
in line with the current end of station life of Drax Power Station, is based on the assumption that
earnings will continue at a similar level to those under the low carbon dispatchable CfD. No value
has currently been included in the ViU calculation for disposing of the site and assets in 2039 due
to the uncertainty over the value that could be achieved as a result of a lack of comparable
transactions for a large-scale generation site with a live grid connection. If a value was included this
would further increase the headroom.
The ViU of the Biomass CGU was in excess of its carrying amount. The ViU of Southern Pellets was
also in excess of its carrying amount when testing the goodwill allocated to Southern Pellets at a
segment level or below.
The Biomass CGU has a carrying value at 31 December 2025 of £1,412.3 million. A combination
of reasonably possible changes in certain assumptions used in the value in use model could lead
to a material adjustment to this carrying value.
These include: an average 27% decrease in power prices over the period of the low carbon
dispatchable CfD agreement from April 2027 to March 2031, combined with a 90-day outage
of one of the units under the Renewables Obligation scheme in 2026, an increase in biomass
production costs of US$7 per tonne, an increase in the pre-tax discount rate from 11.5% to 23.7%
(equivalent to an increase in the post-tax discount rate from 7.5% to 8.3%), and operations to cease
in March 2031 at the end of the low carbon dispatchable CfD agreement. This combination of
reasonably possible changes in the key inputs to the value in use model would lead to an
impairment of £650.1 million. Therefore, reasonably possible assumptions in the ViU calculation
of the Biomass CGU have been identified as a key source of estimation uncertainty.
Drax Energy Solutions
This segment is principally focused on renewable electricity sales to industrial and commercial (I&C)
customers and providing other renewables services.
The ViU of the Drax Energy Solutions CGU was in excess of its carrying amount. A reasonably
possible increase in the pre-tax discount rate to 12.5% combined with factoring in a reduction
in forecast gross margin by 10%, 0% perpetuity growth rate and a reduction in growth of forecast
income from the electric vehicles business, equivalent to a 50% reduction in future forecast
earnings, would reduce the headroom by £331.0 million. This would not result in an impairment.
Whilst reasonably possible changes in assumptions would reduce the headroom, they would not
result in the recoverable amount being lower than the carrying value. As such management 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.
Northern Pellets
The Northern Pellets CGU produces and sells biomass pellets to third-party customers. Market
conditions during 2025 significantly reduced expected future demand, driven by changes and
expiries in UK and Dutch support schemes, including lower contracted volumes under the low
carbon dispatchable CfD effective from April 2027. Global supply has also increased, particularly
from Southeast Asia, and fibre availability in Canada has been affected by tariffs. As a result,
Northern Pellets has refocused on third-party sales, and expectations for its future growth have
reduced.
The recoverable amount of the CGU, based on FVLCD, was less than its carrying value of
£278.3 million, resulting in an impairment charge of £194.1 million. Assets for which ViU
is determinable or FVLCD is measurable have not been impaired below these values. Goodwill was
written down to £nil, with the remaining impairment allocated across other assets on a pro-rata
basis. This resulted in an impairment of £8.5 million being allocated to goodwill and £185.6 million
to other assets.
Following the impairment, the CGU’s carrying value equals its recoverable amount. Assets with
determinable fair values above their carrying value were not impaired, while assets without a
measurable recoverable amount were written down to £nil. The carrying value remains sensitive
to key assumptions in the FVLCD model.
Reasonably possible downside changes in assumptions from those used in the FVLCD calculation
include a 50% reduction in assumed central cost savings, combined with a 7% decrease in pellet
sales contract renewal prices, an increase in the pre-tax discount rate from 19.3% to 30.8%
(equivalent to an increase in the post-tax discount rate from 15.0% to 18.0%), and a reasonably
possible 30% decrease in the fair value determined for the individual assets that were not allocated
an impairment loss. This combination of reasonably possible changes would result in an increase
in the impairment recognised of £27.1 million and a corresponding reduction in the carrying value
of the Northern Pellets CGU.
Reasonably possible upside changes in assumptions from those used in the FVLCD calculation
include a 7% increase in pellet sales contract renewal prices, combined with a decrease in the
pre-tax discount rate from 19.3% to 15.0% (equivalent to a decrease in the post-tax discount rate
from 15.0% to 12.0%). This combination of reasonably possible changes would result in a reduction
in the impairment recognised of £72.6 million and a corresponding increase in the carrying value
of the Northern Pellets CGU.
Accordingly, the FVLCD assumptions for this CGU have been identified as a key source of
estimation uncertainty.
Section 2: Financial performance continued
2.4 Impairment review of non-current assets continued
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Lanark, Galloway and Cruachan
These CGUs are engaged in run-of-river hydro and pumped storage power generation. The ViU for
all three CGUs (Lanark, Galloway and Cruachan) were in excess of their carrying amounts.
For the Cruachan CGU, a reasonably possible 25% average power price reduction combined with
an increase in the pre-tax discount rate to 8.7%, and less favourable weather patterns, resulting in a
reduction in value from market volatility, would reduce the headroom by £758.2 million. This would
not result in an impairment. For the Lanark CGU, a reasonably possible 25% average power price
reduction combined with an increase in the pre-tax discount rate to 8.7% and a low rainfall year,
based on historical lows, every one in three years, would reduce the headroom by £26.3 million.
This would not result in an impairment. Whilst reasonably possible changes in assumptions for the
Lanark and Cruachan CGUs would reduce the headroom, they would not result in the recoverable
amounts being lower than the carrying values. As such the Group does not believe that any
reasonably possible changes in the key assumptions would result in an adjustment to the carrying
values of either the Lanark or Cruachan CGUs.
For the Galloway CGU, a reasonably possible 25% average power price reduction combined with an
increase in the pre-tax discount rate to 8.7% and a low rainfall year, based on historical lows, every
one in three years, would result in an impairment of £5.9 million. The Galloway CGU is sensitive to
reasonably possible changes in the key assumptions. Whilst reasonably possible changes to
assumptions would result in an adjustment to the carrying value of the Galloway CGU, they would
not result in a material adjustment to its carrying value and so it is not considered a key source of
estimation uncertainty as defined by IAS 1.
Impairment of non-current assets
Longview
During 2025, an impairment loss of £108.8 million has been recognised relating to the Group’s
Longview pellet plant development project (Longview). Due to reduced expectations around global
pellet demand in the short to medium term, in part as a result of the reduced volumes of biomass
generation agreed under the low carbon dispatchable CfD contract, the decision has been taken
to pause this development and no development of the site is expected in the near term.
The capitalised Longview assets have been impaired to their recoverable amount of £13.7 million
(principally the value of the land at the site). This recoverable amount has been estimated after
considering the level of customisation and general market conditions. If the Group is able to return
assets to suppliers; or achieve third-party sales; or find internal use for parts and spares at the
Group’s other pellet plants; or if any scrap value achieved exceeds the costs of disposal, then the
recovery value could be higher. If an average recovery value of 40% on plant and equipment had
been assumed, this would result in a decrease in the impairment recognised of £29.5 million and
a corresponding increase in the carrying value of the Longview assets.
As such the assumptions regarding the recoverable amount of Longview plant and equipment have
been identified as a key source of estimation uncertainty.
A separate onerous contract provision for the Longview fibre purchase contracts has been
recognised. See note 5.2 for further details.
Section 2: Financial performance continued
2.4 Impairment review of non-current assets continued
UK BECCS
Given the current political environment and the lack of development of an appropriate regulatory
framework to support the investment required for UK BECCS, the Group has refocused its
investment priorities on nearer term opportunities with more balanced risk-return profiles and
therefore has rationalised its level of investment in carbon capture opportunities. Whilst UK BECCS
is still an attractive option for the Group long term and management still believes that the
development of BECCS at Drax Power Station is important to the UK’s Net Zero strategy, the full
carrying amount of the development project of £47.6 million has been impaired due to the reduced
likelihood of the project proceeding in the short to medium term. Although not expected in the near
term, if an appropriate regulatory framework were to be developed and the political environment
was to become more supportive of large-scale capital investment in UK BECCS, increasing the
likelihood of the project progressing, a reversal of the impairment of certain UK BECCS costs may
be required.
157
Drax Group plc Annual report and accounts 2025
Financial statements
Section 2: Financial performance continued
Year ended 31 December 2025
Year ended 31 December 2024
Longview UK BECCS Northern Pellets Other assets Total Opus Energy Other assets Total
Impairment £m £m £m £m £m £m £m £m
Investment in associate
–
–
3.6
–
3.6
–
4.6
4.6
Goodwill – cost (note 5.1)
–
–
8.5
–
8.5
–
–
–
Property, plant and equipment – accumulated depreciation and impairment (note
3.1)
108.8
47.6
139.3
26 .1
321.8
–
6.1
6 .1
Right-of-use assets – accumulated depreciation and impairment (note 3.2)
–
–
20.1
–
20 .1
–
0 .1
0.1
Intangible assets excluding goodwill – accumulated amortisation and impairment
(note 5.1)
–
–
22.6
1.1
23.7
2.6
–
2.6
Other receivables
–
–
–
–
–
–
1.0
1.0
Total impairment of non-current assets
108.8
47. 6
194.1
27.2
37 7.7
2.6
11.8
14.4
The total non-current asset impairment charge for the year of £377.7 million (2024: £14.4 million) is recognised in the impairment of non-current assets line in the Consolidated income statement.
£350.5 million (2024: £2.6 million) of impairment directly relating to Longview, UK BECCS and Northern Pellets (2024: Opus Energy transaction and related restructuring) was treated as exceptional.
See note 2.7 for further details.
2.4 Impairment review of non-current assets continued
158
Drax Group plc Annual report and accounts 2025
Section 2: Financial performance continued
In the year the Group capitalised interest of £26.0 million relating to the construction of the OCGTs,
the Cruachan upgrade and the acquisition of the BESS assets at a weighted average rate of 5.43%,
which is included within the cost of qualifying assets during the year.
Changes in the Group’s financing structure during 2025 are described in note 4.2.
Foreign exchange gains and losses in net finance costs arise on the retranslation of non-derivative
balances denominated in foreign currencies to prevailing rates at the reporting date and gains and
losses on derivative contracts hedging foreign exchange risk on borrowings.
The Group has a number of intercompany loans denominated in the functional currencies of certain
foreign subsidiaries, that are receivable from a sterling functional currency entity. Due to the
strengthening of GBP against USD during the year, the Group has recognised a foreign exchange
gain of £8.1 million (2024: £1.3 million) on the retranslation of intercompany loans in the sterling
functional currency entity. This gain is recognised within the Consolidated income statement and
within the foreign exchange gains or losses included in the Adjusted results line in the table above.
Conversely, within the net gain or loss on translating the net assets of the foreign subsidiaries into
the Group’s sterling presentational currency there is a foreign exchange loss relating to the
translation of the foreign subsidiaries’ intercompany loans. This impacts the translation reserve,
with the movement recognised in other comprehensive income.
2.6 Current and deferred tax
The tax charge of £121.3 million (2024: £227.9 million) includes both current and deferred tax. It
reflects the estimated tax on the profit before tax for the Group for the year ended 31 December
2025 and the movement in the deferred tax balance in the year, so far as it relates to items
recognised in the Consolidated income statement, in line with IAS 12.
Accounting policy
Current tax includes UK corporation tax, corporate income tax in Canada and US income tax.
It is based on the taxable profit or loss for the year in the relevant jurisdiction. Taxable profit or
loss differs from profit or loss before tax as reported in the Consolidated income statement because
it excludes items of income or expenditure that are either taxable or deductible in other years or
never taxable or deductible. The Group’s liability (or asset) for current tax is provided at amounts
expected to be paid (or recovered) using the tax rates and laws that have been enacted or
substantively enacted by the reporting date.
A provision is made for those matters for which the tax determination is uncertain, but it is
considered probable that there will be a future outflow of funds to a tax authority. The provisions
are measured at the best estimate of the amount expected to become payable. The assessment
is based on the judgement of tax professionals within the Group supported by previous experience
in respect of such activities and in certain cases is based on specialist third-party tax advice.
No uncertain tax provisions have been recognised in the current or prior year.
2.5 Net finance costs
Net finance costs reflect expenses incurred in managing the capital structure (such as interest
payable on borrowings) as well as foreign exchange gains and losses, the unwinding of discounts
on provisions for reinstatement of the Group’s sites at the end of their useful economic lives (see
note 5.2), and interest on lease liabilities (see note 3.2). These are offset by interest income that
the Group generates through use of short-term cash surpluses, for example through investment in
money market funds, and interest income on the Group’s defined benefit pension scheme surplus
(see note 6.3).
A reconciliation of net finance costs is shown in the table below:
Year ended 31 December
2025 2024
£m £m
Interest payable and similar charges:
Interest payable
(97.0)
(105.9)
Unwinding of discount on provisions (note 5.2)
(2.9)
(2.7)
Capitalised interest
26.0
1.7
Total interest payable and similar charges included in
Adjusted results
(73.9)
(106.9)
Interest receivable and similar gains:
Interest income on bank deposits
16 .1
17.1
Net interest income on defined benefit pension surplus (note 6.3)
1.4
0.9
Other interest income
0.3
0.4
Gain on repurchase of loan notes (note 4.2)
–
1.7
Total interest receivable and similar gains included in
Adjusted results
17. 8
20.1
Foreign exchange gains/(losses) included in Adjusted results
8.2
(9.4)
Net finance costs included in Adjusted results
(47.9)
(96.2)
Certain remeasurements on financing derivatives
(3.0)
(0.6)
Interest expense included within exceptional items (note (2.7)
(0.9)
–
Net finance costs included in Total results
(51.8)
(96.8)
159
Drax Group plc Annual report and accounts 2025
Financial statements
Section 2: Financial performance continued
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying
amounts of assets and liabilities in the Consolidated financial statements and the corresponding tax
bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for
all taxable temporary differences and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which deductible temporary differences can
be utilised.
Current and deferred taxes are credited or charged against profit or loss in the Consolidated income
statement, except when they relate to items that are recognised in other comprehensive income or
directly in equity, in which case the current and deferred taxes are recognised in the Consolidated
statement of comprehensive income or directly in the Consolidated statement of changes in equity
respectively.
In accounting for tax, the Group makes assumptions regarding the treatment of items of income
and expenditure for tax purposes. The Group believes that these assumptions are reasonable,
based on prior experience and consultation with third-party advisers where deemed necessary.
These assumptions are consistent with other assumptions used in these Consolidated financial
statements. Full provision is made for deferred tax at the rates of tax prevailing at the reporting
date unless future rates have been substantively enacted. Deferred tax assets are recognised
where it is considered more likely than not that they will be recovered. The recoverability of the
deferred tax asset is considered an estimate as it relies on the future profitability of the Group’s
businesses. See table on page 162 for a breakdown of the net deferred tax asset or liability position
for each jurisdiction.
Year ended 31 December
2025 2024
£m £m
Total tax charge comprises:
Current tax
– UK tax
(9 9.1)
(182.2)
– Overseas tax
(0.8)
–
– Adjustments in respect of prior periods
2.3
(2.4)
Deferred tax
– Before impact of tax rate changes
(14.3)
( 37.6)
– Adjustments in respect of prior periods
(9.4)
(5.7)
Total tax charge
(121.3)
(2 27.9)
Year ended 31 December
2025 2024
£m £m
Tax credited/(charged) on items recognised in other comprehensive income:
Deferred tax on remeasurement of defined benefit pension surplus
0.7
(1.3)
Deferred tax on cash flow hedges
26.4
73.0
Deferred tax on cost of hedging
5.4
(1.7)
Total tax credit
32.5
70.0
Year ended 31 December
2025 2024
£m £m
Tax credited/(charged) on items released directly from equity:
Deferred tax on cash flow hedges
(7.9)
(1.2)
Deferred tax on cost of hedging
1.1
5.7
Deferred tax on share-based payments
7.1
1.4
Total tax credit
0.3
5.9
UK corporation tax is the main income tax applicable on the Group’s taxable profits and is
calculated at 25.0% (2024: 25.0%) of the assessable profit or loss for the year. Due to the Group’s
overseas operations, the US income tax rate of 25.1% (2024: 21.0%), including provision for State
income tax, and the Canadian corporate income tax rate of 27.0% (2024: 27.0%) are also relevant
to the Group’s total tax charge.
The effective tax rate of 64.0% (2024: 30.2%) for the full year is higher (2024: higher) than the
standard corporation tax rate applicable in the UK, principally due to the effects of non-deductible
impairment of non-current assets in Canada (see note 2.4) and the resulting write off of deferred
tax assets (2024: due to the non-deductible Electricity Generator Levy).
Drax Power Limited was granted a patent to protect certain intellectual property it owns and which
attaches to the technology developed to manage the combustion process in generating electricity
from biomass. Under UK tax legislation, the company is entitled to apply a lower tax rate of 10.0%
to profits derived from utilisation of the patented technology.
2.6 Current and deferred tax continued
160
Drax Group plc Annual report and accounts 2025
Section 2: Financial performance continued
The Group tax charge for the year can be reconciled to the profit before tax as follows:
Year ended 31 December 2025
Year ended 31 December 2024
Exceptional Exceptional
items items
Adjusted and certain Total Adjusted and certain Total
results remeasurements results results remeasurements results
£m £m £m £m £m £m
Profit before tax
623.3
(433.8)
189.5
704.0
49.4
753.4
Profit before tax multiplied by the rate of corporation tax in the UK of 25.0% (2024: 25.0%)
155.9
(108.5)
47.4
176.0
12.4
188.4
Effects of:
Adjustments in respect of prior periods
7.1
–
7.1
5.6
2.5
8 .1
Expenses not deductible for tax purposes
7.3
8 9.1
96.4
5.4
–
5.4
Electricity Generator Levy
–
–
–
40.2
–
40.2
Deferred tax asset unwind on US interest
–
–
–
10.9
–
10.9
Difference in overseas tax rates
(7.7)
3.1
(4.6)
(1.7)
–
(1.7)
UK Patent Box benefit
(24.4)
–
(24.4)
(23.4)
–
(23.4)
Partnership income allocation
(0.6)
–
(0.6)
–
–
–
Total tax charge
137.6
(16.3)
121.3
213.0
14.9
2 27.9
2.6 Current and deferred tax continued
161
Drax Group plc Annual report and accounts 2025
Financial statements
Section 2: Financial performance continued
The movements in deferred tax assets and liabilities during each year are shown below.
Accelerated
Financial capital Intangible Trade Other Other
instruments allowances assets losses liabilities assets Total
£m £m £m £m £m £m £m
At 1 January 2024
(39.2)
(310.5)
(1.9)
56.6
(26.8)
57.6
(264.2)
(Charged)/credited to the income statement
(29.7)
(38.4)
1.1
( 7. 0)
14.7
16.0
(43.3)
Charged to other comprehensive income in respect of actuarial gains
–
–
–
–
(1.3)
–
(1.3)
Credited to other comprehensive income in respect of cash flow hedges
73.0
–
–
–
–
–
73.0
Charged to other comprehensive income in respect of cost of hedging
(1.7)
–
–
–
–
–
(1.7)
Charged to equity in respect of cash flow hedges
(1.2)
–
–
–
–
–
(1.2)
Credited to equity in respect of cost of hedging
5.7
–
–
–
–
–
5.7
Credited to equity in respect of share-based payments
–
–
–
–
–
1.4
1.4
Effect of changes in foreign exchange rates
–
(0.9)
(0.1)
0.6
–
0.2
(0.2)
At 1 January 2025
6.9
(349.8)
(0.9)
50.2
(13.4)
75.2
(231.8)
Credited/(charged) to the income statement
7.4
(33.2)
(0.2)
6 .1
24.3
(28 .1)
(23.7)
Credited to other comprehensive income in respect of actuarial gains
–
–
–
–
0.7
–
0.7
Credited to other comprehensive income in respect of cash flow hedges
26.4
–
–
–
–
–
26.4
Credited to other comprehensive income in respect of cost of hedging
5.4
–
–
–
–
–
5.4
Charged to equity in respect of cash flow hedges
(7.9)
–
–
–
–
–
(7.9)
Credited to equity in respect of cost of hedging
1.1
–
–
–
–
–
1.1
Credited to equity in respect of share-based payments
–
–
–
–
–
7.1
7.1
Effect of changes in foreign exchange rates
–
0.7
0 .1
(2.3)
0.1
(0.2)
(1.6)
At 31 December 2025
39.3
(382.3)
(1.0)
54.0
11.7
54.0
(224.3)
Deferred tax balances (after offset) for financial reporting purposes:
Net Canadian deferred tax asset at 31 December 2025
–
–
–
–
–
–
–
Net US deferred tax asset at 31 December 2025
–
(22.6)
–
53.5
–
6 .1
37.0
Net UK deferred tax liability at 31 December 2025
39.3
(359.7)
(1.0)
0.5
11.7
47.9
(261.3)
Net Canadian deferred tax asset at 31 December 2024
–
(9.4)
0.3
20.3
(0.3)
25.1
36.0
Net US deferred tax asset at 31 December 2024
–
(22.3)
–
29.5
–
5.4
12.6
Net UK deferred tax liability at 31 December 2024
6.9
( 318 .1)
(1.2)
0.4
(13.1)
44.7
(280.4)
2.6 Current and deferred tax continued
162
Drax Group plc Annual report and accounts 2025
Section 2: Financial performance continued
The Group has a policy and framework for the determination of transactions to be presented as
exceptional. Exceptional items are excluded from Adjusted results as they are transactions that are
deemed to be one-off or unlikely to reoccur in future years due to their nature, size, the expected
frequency of similar events, or the commercial context. By excluding these amounts, this provides
users of the Consolidated financial statements with a more representative view of the results of the
Group and enables comparisons with other reporting periods as it excludes amounts from activities
or transactions that are not likely to reoccur. All transactions presented as exceptional are approved
by the Audit Committee. See the Audit Committee report on page 77 for further details.
In these Consolidated financial statements, the following transactions have been designated as
exceptional items and presented separately:
– Opus Energy sale of meter points and restructuring: Costs and credits arising as a result of the
transaction to sell the majority of the non-core Opus Energy SME customer meter points and
related strategic restructuring to reflect the reduced size of the Opus Energy SME business and
Energy Solutions’ focus on core I&C customers and renewables services (Energy Solutions, 2024
and 2025). See below for further details.
– Impairment of Longview and related costs: Asset impairment charges of £108.8 million (see note
2.4), the recognition of provisions for onerous fibre contracts of £22.0 million (see note 5.2) and
£8 .1 million of other costs relating to the Group’s decision to pause the Longview development
project (Pellet Production, 2025).
– Impairment of UK BECCS: Impairment of capitalised development costs relating to the Group’s
UK BECCS development project (Biomass Generation, 2025). See note 2.4 for further details.
– Impairment of Northern Pellets CGU and related costs: Asset impairment charges of
£19 4.1 million (see note 2.4) and related costs of £3.7 million within the Group’s Northern Pellets
business (Pellet Production, 2025). See note 2.4 for further details on the impairment of the
Northern Pellets CGU.
– Change in the fair value of contingent consideration (Flexible Generation, 2025). See note 7.1
for details.
– Transformation and restructuring (all segments, 2025). See below for further details.
Certain remeasurements comprise fair value gains and losses on derivative contracts to the extent
that those contracts do not qualify for hedge accounting, or hedge accounting is not effective,
and those gains or losses are either i) unrealised and relate to derivative contracts with a maturity
in future periods, or ii) are realised in relation to the maturity of derivative contracts in the current
period. Management believes adjusting for fair value gains and losses recognised on derivative
contracts provides users of the Consolidated financial statements with useful information, as this
removes volatility caused by movements in market prices over the life of the derivative contracts.
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.
Deferred tax assets and liabilities are offset where they are levied by the same taxation authority
and the Group has a legally enforceable right to offset the current taxes, otherwise they are shown
separately in the Consolidated balance sheet. Within the above deferred tax asset on trade losses
of £54.0 million (2024: £50.2 million) there is £53.5 million (2024: £29.5 million) in relation to losses
in the US Pellet Production business, and the remaining £0.5 million relates to UK operations
(2024: £0.4 million). Losses relating to the Canadian Pellet Production business were derecognised
in 2025, following the impairment of that business, resulting in a balance of £nil
(2024: £20.3 million).
The future expected reversal of accelerated capital allowances and other timing differences,
coupled with the profitability (inclusive of the impact of transfer pricing adjustments), stable output
and forecast improvement in operational performance, mean that the US business expects to
generate sufficient profits in the short to medium term against which to utilise the deferred tax
asset. The estimates used when assessing the future profitability of the US business have been
approved by the Board and executive management, and are consistent with estimates used in the
going concern assessment and the impairment assessments. The impairment assessment factors
in climate change risks in the forecasts. See note 2.4 for further details on how climate change has
been considered as part of the impairment assessments.
As at 31 December 2025, the Group held £78.5 million (2024: £78.5 million) of gross UK capital
losses available for offset against future chargeable gains. These losses are unrecognised for
deferred tax purposes as the Group does not currently expect UK taxable gains to arise that would
be eligible to offset against these losses.
The Group is within Pillar 2 in all of the jurisdictions in which it operates. The Group is expected to
be within the safe harbour provisions for 2025 and there is no exposure to any top up taxes. The
Group continues to monitor developments, particularly in the US, and the transitional safe harbour
provisions. The Group continues to assess the position and the latest forecasts confirm that there
is no exposure to Pillar 2.
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 2 rules, so that the Group neither
recognises nor discloses information about deferred tax assets and liabilities related to Pillar 2.
2.7 Alternative performance measures
This note provides details of all APMs used, each APM’s closest IFRS equivalent, the reason why the
APM is used by the Group and a definition of how each APM is calculated (see pages 169 to 170).
The Group presents Adjusted results in the Consolidated income statement. Management believes
that this approach is useful as it provides a clear and consistent view of underlying trading
performance. Exceptional items and certain remeasurements are excluded from Adjusted results
and are presented in a separate column in the Consolidated income statement. The Group believes
that this presentation provides useful information about the financial performance of the business
and is consistent with the way the Board and executive management assess the performance of
the business.
2.6 Current and deferred tax continued
163
Drax Group plc Annual report and accounts 2025
Financial statements
Section 2: Financial performance continued
Year ended 31 December
2025 2024
£m £m
Exceptional items:
Opus Energy sale of meter points and restructuring
(1.1)
(59.5)
Impairment of Longview and related costs
(138.0)
–
Impairment of UK BECCS
(47.6)
–
Impairment of Northern Pellets CGU and related costs
(197. 8)
–
Change in fair value of contingent consideration
(9.4)
–
Transformation and restructuring
(9.4)
–
Exceptional items included within operating profit
(403.3)
(59.5)
Interest expense relating to Longview
(0.9)
–
Exceptional items included within profit before tax
(404.2)
(59.5)
Tax on exceptional items
8.9
14.8
Exceptional items after tax
(395.3)
(44.7)
Certain remeasurements:
Net derivative fair value remeasurements included in revenue
24.9
11.9
Net derivative remeasurements realised on maturity included in revenue
8.4
7 7.6
Net hedge ineffectiveness recognised in revenue
2.0
(8.2)
Net derivative fair value remeasurements included in cost of sales
(55.4)
45.3
Net derivative remeasurements realised on maturity included in cost of sales
(6.5)
(17.1)
Certain remeasurements included within operating profit
(26.6)
109.5
Net derivative remeasurements realised on maturity included in interest payable
and similar charges
0.3
(0.6)
Net amounts reclassified due to the hedged cash flows no longer expected to
occur included in interest payable and similar charges
(0.9)
–
Net derivative fair value remeasurements included in foreign exchange gains
1.2
–
Net hedge ineffectiveness recognised in foreign exchange losses
(3.6)
–
Certain remeasurements included in profit before tax
(29.6)
108.9
Tax on certain remeasurements
7. 4
(29.7)
Certain remeasurements after tax
(22.2)
79.2
Reconciliation of profit for the period:
Adjusted profit for the period
485.7
491.0
Exceptional items after tax
(395.3)
(44.7)
Certain remeasurements after tax
(22.2)
79.2
Total profit for the period
68.2
525.5
The Group regards all of its forward contracting activity to represent economic hedges to secure
prices and rates, and lock in value for its future expected pellet production, generation or energy
supply activities. The contracted price is therefore deemed relevant and representative of the
Group and its performance, rather than how the contracted price compares to prevailing market
prices, as the Group is not seeking to make trading profits on these derivative contracts through
market price movements. The effect of excluding certain remeasurements from Adjusted results
is that commodity sales and purchases are recognised in Adjusted results in the period they are
intended to hedge at their contracted prices i.e. at the all-in-hedged amount paid or received in
respect of the delivery of the commodity in question. It also results in the total impact of financial
contracts being recognised in Adjusted results on maturity, being the period they are intended to
hedge. Management believes this better reflects the performance of the business as it more
accurately represents the intention for entering derivative contracts.
Movements on derivative financial instruments which do not qualify for hedge accounting, or
where hedge accounting is ineffective, are shown in the table below. During 2025 the amounts
recognised were predominantly due to fair value gains recognised on foreign exchange contracts
on matured trades, due to GBP weakening against USD when compared to the original trade dates,
and the realisation of losses on maturity of inflation and commodity hedges.
Further details on the Group’s derivative financial instruments are provided in Section 7.
The effective tax rate on exceptional items of 2.2% during the current year is lower than the
standard corporation tax rate applicable in the relevant jurisdictions as a result of the non-
deductibility of the impairment of non-current assets within the Northern Pellets CGU, and the
related derecognition of deferred tax assets in Canada as a result of this. The Group does not
believe tax deductions will be recognised for these items in the future.
2.7 Alternative performance measures continued
164
Drax Group plc Annual report and accounts 2025
Section 2: Financial performance continued
Opus Energy sale of meter points and restructuring
In May 2025 the Group completed the sale of its non-core SME customer meter points, a process
which commenced in 2024 with the sale of the majority of its SME customer meter points to EDF
Energy Customers Limited and concluded with the sale of the residual SME customer supply meter
points and related receivables to Pozitive Energy Limited. All SME supply meter points have now
been disposed of. An employee consultation process has also been completed resulting in a
reduction in headcount to reflect a focus on core industrial and commercial (I&C) and renewables
services. The Group incurred costs of redundancies in order to reduce the headcount in the Opus
Energy business and holds a redundancy provision at 31 December 2025 in respect of in scope
colleagues who had not yet left the Group. See note 5.2 for further details.
The gains and losses described above that have been recognised in the period on the transaction
and related restructuring have been classified as exceptional. Further details of the amounts
recognised as exceptional are detailed below:
Year ended 31 December
2025 2024
£m £m
Consideration received for customer meter points
3.6
9.6
Net liabilities/(assets) disposed of directly related to the transferred
customers
2.2
(8.4)
Profit on disposal of customer meter points – included in other
gains and losses
5.8
1.2
Other losses incurred as a direct result of the transaction and
restructuring
Redundancy, transaction and migration costs – included in
operating and administrative expenses
(2.6)
(9.2)
Onerous contracts provision, impairment of prepaid commissions
and final commission settlement on retained customers – included
in cost of sales
–
(23.3)
Fair value movements on receivables relating to customers
transferred to EDF (note 3.5) – included in operating and
administrative expenses
(0.5)
(12.9)
Impairment of trade receivables – included in impairment losses on
financial assets
(3.8)
(12.7)
Impairment of non-current assets (note 2.4) – included in
impairment of non-current assets
–
(2.6)
Net loss recognised as a result of the transaction
(1.1)
(59.5)
During the current year the Group had a net cash outflow of £1.1 million in respect of the Opus
Energy transaction. This comprised a cash inflow of £3.6 million of consideration received and a
cash outflow of £4.7 million in respect of redundancy, transaction and migration costs paid out in
the year. The cash flows relating to the transaction have been recognised within operating cash
flows in the Consolidated cash flow statement.
Transformation and restructuring
The Group has commenced a significant transformation programme (“Future Focus”) centred
around growth, efficiency and performance culture. As part of this programme, the organisational
structure has been redesigned in order to deliver an appropriate cost base under the low carbon
dispatchable CfD agreement from April 2027. This transformation programme commenced in 2025
and is expected to run through to the end of 2026. The costs incurred in the year primarily relate
to employee severance costs and related consultancy costs.
For each item designated as exceptional or as a certain remeasurement, the table below
summarises the impact of the item on Adjusted and Total profit after tax, Basic EPS and Net cash
from operating activities.
2.7 Alternative performance measures continued
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Drax Group plc Annual report and accounts 2025
Financial statements
Section 2: Financial performance continued
Year ended 31 December 2025
Profit/(loss) Basic Net cash from
Operating Profit for the earnings operating
Revenue Gross profit profit before tax Tax (charge)/credit period per share activities
£m £m £m £m £m £m Pence £m
Total results IFRS measure
5,390.7
1,512.9
241.3
189.5
(121.3)
68.2
20.7
810.0
Certain remeasurements:
Net fair value remeasurement on derivative contracts
(35.3)
26.6
26.6
29.6
(7.4)
22.2
6.3
–
Exceptional items:
Opus Energy sale of meter points and restructuring
–
–
1.1
1.1
–
1.1
0.3
1.1
Impairment of Longview and related costs
–
22.0
138.0
138.9
(34.7)
104.2
29.5
0.9
Impairment of UK BECCS
–
–
47.6
47.6
(11.9)
35.7
10 .1
–
Impairment of Northern Pellets CGU and related costs
–
0 .1
197. 8
197. 8
42.5
240.3
66.8
0.5
Change in fair value of contingent consideration
–
–
9.4
9.4
(2.4)
7.0
2.0
–
Transformation and restructuring
–
–
9.4
9.4
(2.4)
7. 0
2.0
5.8
Total
(35.3)
48.7
429.9
433.8
(16.3)
417.5
117.0
8.3
Adjusted results totals
5,355.4
1,561.6
671.2
623.3
(137. 6)
485.7
137.7
818.3
Year ended 31 December 2024
Profit/(loss) Basic Net cash from
Operating Profit for the earnings/(loss) operating
Revenue Gross profit profit before tax Tax (charge)/credit period per share activities
£m £m £m £m £m £m Pence £m
Total results IFRS measure
6,162.5
1,876.5
850.2
753.4
(2 27.9)
525.5
137.5
859.5
Certain remeasurements:
Net fair value remeasurement on derivative contracts
(81.3)
(109.5)
(109.5)
(108.9)
29.7
(79.2)
(20.7)
–
Exceptional items:
Opus Energy sale of meter points and restructuring
–
23.3
59.5
59.5
(14.8)
44.7
11.6
(9.6)
Total
(81.3)
(86.2)
(50.0)
(49.4)
14.9
(34.5)
(9.1)
(9.6)
Adjusted results totals
6,081.2
1,790.3
800.2
704.0
(213.0)
491.0
128.4
849.9
2.7 Alternative performance measures continued
166
Drax Group plc Annual report and accounts 2025
Section 2: Financial performance continued
Year ended 31 December
2025 2024
£m £m
Segment Adjusted EBITDA:
Pellet Production
129.4
143.0
Biomass Generation
725.4
813.5
Flexible Generation
110.9
137.6
Energy Solutions
48.7
51.2
Innovation, capital projects and other
(74.3)
(78 .1)
Intra-group eliminations
6.5
(3.0)
Total Adjusted EBITDA
946.6
1,064.2
Net debt
The below table reconciles the Group’s Net debt:
As at 31 December
2025 2024
£m £m
Borrowings (note 4.2)
(979.0)
(1,176.7)
Lease liabilities (note 3.2)
(98.6)
(116.5)
Cash and cash equivalents
302 .1
356.0
Net cash, borrowings and lease liabilities
(775.5)
(937.2)
Non-controlling interests’ share of cash and cash equivalents in
non-wholly owned subsidiaries
(0.6)
(0.8)
Non-controlling interests’ share of lease liabilities in non-wholly
owned subsidiaries
0.4
0.5
Impact of hedging instruments
( 7.9)
(54.2)
Net debt
(783.6)
(991.7)
Adjusted EBITDA
Adjusted EBITDA is a key measure of financial performance for the Group. A reconciliation from
Adjusted operating profit from the Consolidated income statement is shown below:
Year ended 31 December 2025
Attributable to
Owners of the Non-controlling
parent company interests Total
£m £m £m
Adjusted operating profit/(loss)
671.3
(0 .1)
671.2
Depreciation and amortisation
24 2.1
1.0
243.1
Other losses
4.4
–
4.4
Share of losses from associates
1.6
–
1.6
Impairment of non-current assets
27.2
–
27. 2
Adjusted EBITDA
946.6
0.9
947.5
Year ended 31 December 2024
Attributable to
Owners of the Non-controlling
parent company interests Total
£m £m £m
Adjusted operating profit/(loss)
801.3
(1.1)
800.2
Depreciation and amortisation
240.4
1.4
241.8
Other losses
8.5
–
8.5
Share of losses from associates
2.2
–
2.2
Impairment of non-current assets
11.8
–
11.8
Adjusted EBITDA
1,064.2
0.3
1,064.5
2.7 Alternative performance measures continued
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Drax Group plc Annual report and accounts 2025
Financial statements
Section 2: Financial performance continued
The table below reconciles Net debt in terms of changes in these balances across the year:
Year ended 31 December
2025 2024
£m £m
Net debt at 1 January
(991.7)
(1,219.7)
Decrease in cash and cash equivalents
(53.9)
(23.5)
Decrease/(increase) in non-controlling interests’ share of cash and
cash equivalents in non-wholly owned subsidiaries
0.2
(0.5)
Decrease in borrowings
197.7
248.6
Decrease in lease liabilities
17.9
19.3
(Decrease)/increase in non-controlling interests’ share of lease
liabilities in non-wholly owned subsidiaries
(0.1)
0.5
Movement in the impact of hedging instruments
46.3
(16.4)
Net debt at 31 December
(783.6)
(991.7)
A reconciliation of the change in borrowings during the year is set out in the table in note 4.2.
As explained in the Basis of preparation, the Group has a long-term target for Net debt to Adjusted
EBITDA of around 2.0 times.
As at 31 December
2025
2024
Adjusted EBITDA (£m)
946.6
1,064.2
Net debt (£m)
(783.6)
(991.7)
Net debt to Adjusted EBITDA ratio
0.8
0.9
Cash and committed facilities
The below table reconciles the Group’s available cash and committed facilities:
As at 31 December
2025 2024
£m £m
Cash and cash equivalents (note 4.1)
302 .1
356.0
RCF available but not utilised
(1)
450.0
450.0
Term loan agreed but not drawn
190.0
–
Total cash and committed facilities
94 2.1
806.0
(1) The Group holds a £450.0 million RCF facility. As at 31 December 2025, the Group had no cash or non-cash drawings under
the RCF (31 December 2024: no cash or non-cash drawings). See note 4.2 for further information on the Group’s facilities.
Capital expenditure
The Group’s definition of capital expenditure was updated in the year to exclude capitalised
borrowing costs and capital plant spares (see note 2.1 for further details of this change). The table
below shows the reconciliation between capital expenditure in note 2.1 and the additions shown
in notes 3.1 and 5.1:
Year ended 31 December
2025 2024
£m £m
Capital additions (notes 3.1 and 5.1)
232.5
332.4
Capitalised borrowing costs in period (note 2.5)
(26.0)
(1.7)
Capital plant spares additions (note 3.1)
(4.7)
(9.9)
Total capital expenditure (note 2.1)
201.8
320.8
2.7 Alternative performance measures continued
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Drax Group plc Annual report and accounts 2025
Section 2: Financial performance continued
APM
Closest IFRS equivalent measure
Purpose
Definition
Adjusted results
Total result s
The Group’s Adjusted results are consistent with the way the Board and
Total results measured in accordance with IFRS excluding the impact
executive management assess the performance of the Group. Adjusted of exceptional items and certain remeasurements.
results are intended to reflect the underlying trading performance of Exceptional items and certain remeasurements are defined above.
the Group’s businesses and are presented to assist users of the
Consolidated financial statements in evaluating the Group’s trading
performance and performance against strategic objectives on a
consistent basis.
Adjusted results excludes 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.
Certain remeasurements comprise fair value gains and losses that do
not qualify for hedge accounting (or hedge accounting is not effective).
The Group regards all of its forward contracting activity to represent
economic hedges and therefore by excluding the volatility caused by
recognising fair value gains and losses prior to maturity of the
contracts, the Group can reflect these contracts at the contracted
prices on maturity, reflecting the intended purpose of entering these
contracts and the Group’s underlying performance.
Adjusted results are the metrics used in the calculation of Adjusted
basic EPS and Adjusted diluted EPS.
Adjusted EBITDA
Operating profit
(1)
Adjusted EBITDA is the primary measure used by the Board and Earnings before interest, tax, depreciation, amortisation, other gains
executive management to assess the financial performance of the and losses and impairment of non-current assets, excluding the impact
Group as it provides a more comparable assessment of the Group’s of exceptional items and certain remeasurements.
year-on-year trading performance. It is also a key metric used by Adjusted EBITDA excludes any earnings from associates or attributable
the investor community to assess the performance of the Group’s to non-controlling interests.
operations.
Adjusted basic EPS
Basic EPS
Adjusted basic EPS represents the amount of Adjusted earnings
Adjusted basic EPS is calculated by dividing the Group’s Adjusted
(Adjusted profit after tax) attributable to each ordinary share earnings attributable to owners of the parent company (Adjusted profit
outstanding. after tax) by the weighted average number of ordinary shares
outstanding during the period.
Adjusted diluted EPS
Diluted EPS
Adjusted diluted EPS demonstrates the impact upon the Adjusted basic
Adjusted diluted EPS is calculated by dividing the Group’s Adjusted
EPS if all outstanding share options, that are expected to vest on their earnings (Adjusted profit after tax) attributable to owners of the parent
future maturity dates and where the shares are considered to be company by the weighted average number of ordinary shares
dilutive, were exercised and treated as ordinary shares as at the outstanding during the period and dilutive potential ordinary shares
reporting date. outstanding under share plans during the period.
(1) Operating profit is presented in the Group’s Consolidated income statement; however, it is not defined per IFRS. It is a generally accepted measure of profit.
2.7 Alternative performance measures continued
169
Drax Group plc Annual report and accounts 2025
Financial statements
Section 2: Financial performance continued
APM
Closest IFRS equivalent measure
Purpose
Definition
Borrowings
n/a
(2)
Borrowings provides information relating to the Group’s use of debt. Borrowings includes external financial debt, such as loan notes, term
It is a key measure of leverage and provides information on the sources loans and amounts drawn in cash under revolving credit facilities (RCFs)
of liquidity for the Group. (see note 4.2). Borrowings does not include other financial liabilities
such as pension obligations (see note 6.3), trade and other payables
including supply chain finance (see note 3.7), lease liabilities calculated
in accordance with IFRS 16 (see note 3.2), and working capital facilities
linked directly to specific payables (such as credit cards and deferred
letters of credit) that provide a short extension of payment terms of less
than 12 months (see note 4.3).
Net debt
Borrowings and lease
Net debt is a key measure of the Group’s liquidity and its ability to Borrowings (as defined above) including the impact of hedging
liabilities less cash and manage its financial obligations. instruments, and lease liabilities calculated in accordance with IFRS 16
cash equivalents Net debt is used as a basis by debt rating agencies to assess credit risk, less cash and cash equivalents.
and in the calculation of the Group’s financial covenant requirements. Net debt excludes the proportion of cash, lease liabilities and
The impact of hedging instruments included within Net debt shows borrowings in non-wholly owned entities that would be attributable to
the economic substance of the Net debt position, in terms of actual the non-controlling interests.
expected future cash flows to settle that debt. Net debt includes the impact of foreign currency hedging instruments,
meaning that any borrowings that have associated hedging instruments
in place are adjusted to reflect those borrowings at the hedged rate.
Net debt includes the impact of any cash collateral receipts from
counterparties or cash collateral posted to counterparties.
Net debt to Adjusted Borrowings and lease The Net debt to Adjusted EBITDA ratio is a debt ratio that gives an Net debt divided by Adjusted EBITDA for the last twelve months
EBITDA ratio liabilities less cash and indication of how many years it would take the Group to pay back its expressed as a multiple.
cash equivalents debt if Net debt and Adjusted EBITDA are held constant.
divided by operating
(1) The Group has a long-term target for Net debt to Adjusted EBITDA
profit
of around 2.0 times.
Cash and committed Cash and cash This is a key measure of the Group’s available liquidity and the Group’s Total cash and cash equivalents plus the value of the Group’s
facilities equivalents ability to manage its current obligations. committed but undrawn facilities (including the Group’s RCF, loan
It shows the value of cash available to the Group in a short period facilities and the Energy Solutions non-recourse trade receivables
of time. monetisation facility, to the extent that there are eligible receivables
available to utilise undrawn amounts).
Capital expenditure
(3)
Property, plant and Used to show the Group’s total spend on PPE and intangible assets PPE additions plus intangible asset additions, excluding capitalised
equipment (PPE) in a year. borrowing costs and capital plant spare additions.
additions and
intangible asset
additions
(1) Operating profit is presented in the Group’s Consolidated income statement; however, it is not defined per IFRS. It is a generally accepted measure of profit.
(2) Borrowings are presented in the Group’s Consolidated balance sheet; they are a commonly used balance sheet line item heading; however, borrowings are not defined by IFRS, therefore the Group’s borrowings may not be comparable to borrowings
presented by other companies.
(3) During 2025, the definition of Capital expenditure has been updated to align with the way the information is currently presented to the Board and executive management. The definition now excludes capitalised borrowing costs and capital plant spare
additions. See the capital expenditure by segment table in note 2.1 for further details of this change.
2.7 Alternative performance measures continued
170
Drax Group plc Annual report and accounts 2025
Section 2: Financial performance continued
2.9 Dividends
Year ended 31 December
2025 2024
Pence per share £m £m
Amounts recognised as distributions to equity
holders in the year (based on the number of ordinary
shares outstanding at the record date):
Interim dividend for the year ended 31 December
2025 paid on 24 October 2025
11.6
40.0
Final dividend for the year ended 31 December 2024
paid on 16 May 2025
15. 6
55.7
Interim dividend for the year ended 31 December
2024 paid on 25 October 2024
10.4
39.8
Final dividend for the year ended 31 December 2023
paid on 17 May 2024
13 .9
53.7
Total distributions
95.7
93.5
At the forthcoming Annual General Meeting, the Board will recommend to shareholders that a
resolution is passed to approve payment of a final dividend for the year ended 31 December 2025
of 1 7. 4 pence per share (equivalent to approximately £5 9 million) payable on 15 May 2026. The final
dividend has not been included as a liability as at 31 December 2025. This would bring total
dividends payable in respect of the 2025 financial year to approximately £99 million.
The Trustee of the Employee Benefit Trust (EBT) waived dividends paid in the year on shares held
by the EBT. The counterparty that holds shares as part of the Group’s forward contracts to
purchase its own shares (see note 4.4) has waived dividends paid in the year on shares they hold.
The Group has a long-standing capital allocation policy. This policy is based on a commitment to
robust financial metrics that underpin the Group’s strong credit rating: investment in the core
business; paying a sustainable and growing dividend; and returning surplus capital to shareholders.
The Board is confident that the dividend is sustainable and expects it to grow as the
implementation of the Group’s strategy generates an increasing proportion of stable earnings and
cash flows. In determining the rate of growth in dividends, the Board will take account of future
investment opportunities and the less predictable cash flows from the Group’s commodity-linked
revenue streams.
In future years, if there is a build-up of capital in excess of the Group’s investment needs, the Board
will consider the most appropriate mechanism to return this to shareholders.
Consideration of sustainability, including a link to the Group’s dividend, can be found in the Market
context section on pages 4 and 5.
2.8 Earnings per share
Earnings per share (EPS) represents the amount of earnings (post-tax profits or losses) attributable
to the weighted average number of ordinary shares outstanding in the year. Basic EPS is calculated
by dividing the Group’s earnings attributable to owners of the parent company (profit or loss after
tax, excluding amounts attributable to non-controlling interests) by the weighted average number
of ordinary shares that were outstanding during the year. Diluted EPS demonstrates the impact of
all outstanding share options that would vest on their future maturity dates if the conditions at the
end of the reporting period were the same as those at the end of the vesting period (such as those
to be issued under employee share schemes – see note 6.2), and the options were exercised and
treated as ordinary shares as at the reporting date. The 91.8 million of repurchased shares
(2024: 57.8 million) held in treasury are shown in the own shares reserve and are not included in
the weighted average calculation of shares. See note 4.4 for details of the shares repurchased
in the current year as part of the £300 million and £450 million share buyback programmes and for
further details on the own 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
2025
2024
Number of shares (millions):
Weighted average number of ordinary shares for the purposes of
calculating Basic earnings per share
352.8
383.2
Effect of dilutive potential ordinary shares under share plans
8.5
7.6
Weighted average number of ordinary shares for the purposes of
calculating Diluted earnings per share
361.3
390.8
Year ended 31 December
2025
2024
Adjusted results
Total results
Adjusted results
Total results
Earnings per share attributable to
owners of the parent company
Earnings – profit after tax (£m)
485.8
73.0
4 92.1
526.6
Earnings per share – Basic (pence)
137.7
20.7
128.4
137.5
Earnings per share – Diluted (pence)
134.5
20.2
126.0
134.8
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Drax Group plc Annual report and accounts 2025
Financial statements
Section 2: Financial performance continued
Distributable reserves
The capacity of the Group to make dividend payments is primarily determined by the availability
of retained distributable profits and cash resources.
The parent company’s financial statements, set out on pages 243 to 249 of these Annual report
and accounts, disclose the basis of the parent company’s distributable reserves.
The majority of the Group’s distributable reserves are held in holding and operating subsidiaries.
Management actively monitors the level of distributable reserves in each company in the Group,
ensuring adequate reserves are available for upcoming dividend payments and any share buyback
transactions, and that the parent company has access to these reserves.
The immediate cash resources of the Group of £302.1 million are set out in note 4.1 and the recent
history of cash generation within note 4.3. The majority of these cash resources are held centrally
within the Group by Drax Corporate Limited for treasury management purposes and are available
for funding the working capital and other requirements of the Group.
The Group’s financing facilities (see note 4.2) place customary conditions on the amount of
dividend payments that can be made in any given year. The Group expects to be able to make
dividend payments, in line with its policy, within these conditions for the foreseeable future.
See note 4.2 for further details on the covenants relating to the financing facilities.
2.10 Retained profits
Retained profits are a component of equity reserves. The overall balance reflects the total profits
the Group has generated over its lifetime that are attributable to the equity holders of the parent
company, reduced by the amount of that profit distributed to shareholders. The table below sets
out the movements in retained profits during the year:
Year ended 31 December
2025 2024
£m £m
At 1 January
1,118 .1
666.4
Profit for the year attributable to the owners of the parent company
73.0
526.6
Remeasurement of defined benefit pension surplus (note 6.3)
(2.8)
5.5
Deferred tax on remeasurement of defined benefit pension surplus
(note 2.6)
0.7
(1.3)
Equity dividends paid (note 2.9)
(95.7)
(93.5)
Movement in equity associated with forward contracts to purchase
own shares to satisfy share-based payment arrangements
( 7. 2)
–
Own shares utilised to satisfy share-based payment arrangements
(note 4.4)
(0.9)
–
Movement in equity associated with share-based payments
15.7
13.0
Deferred tax on share-based payments (note 2.6)
7.1
1.4
Acquisition of non-controlling interests without a change in control
2.9
–
At 31 December
1,110.9
1,118.1
The movement in equity associated with forward contracts to purchase own shares to satisfy
share-based payment arrangements is described under the own shares reserve section in note 4.4.
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Drax Group plc Annual report and accounts 2025
Section 3: Operating assets and working capital
Freehold land held at cost is considered to have an indefinite UEL and is not depreciated. The value
of freehold land held at 31 December 2025 is £32.5 million (2024: £35.5 million).
Electricity generation assets are grouped according to the fuel type of the relevant plant.
Pellet production plant includes the US and Canada based assets of the Group’s Pellet Production
business and the assets at the Daldowie fuel plant near Glasgow.
Plant spare parts are depreciated over the remaining UEL of the relevant power station or plant,
or shorter if a shorter UEL is more appropriate.
Plant spare parts can be used within maintenance projects, which are operating in nature, and
capital projects. Where plant spares are used for capital projects they are included within the cost
of the asset and movements are presented in the transfer between PPE categories in the table
below. Where plant spares are used for maintenance projects 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 movements
are reflected in the issues to maintenance projects line in the table below.
Costs relating to major inspections, overhauls and upgrades to assets are included in the carrying
amounts of existing assets or recognised as separate assets, as appropriate, if the recognition
criteria are met; namely, when it is probable that future economic benefits associated with the
expenditure will flow to the Group and the cost can be measured reliably. Assets that are replaced
as part of any overhauls or upgrades are disposed of. All other repairs and maintenance costs are
expensed as incurred.
General and specific borrowing costs are capitalised as part of the cost of an asset if they are
directly attributable to the acquisition, construction or production of a qualifying asset. A qualifying
asset is one that takes a substantial period to get ready for intended use. The Group defines this
period to mean 12 months or more. Capitalisation of borrowing costs ceases once substantially all
the activities necessary to prepare the asset for its intended use or sale are complete. See note 2.5
for details of the borrowing costs capitalised during the year.
Estimated UELs and residual values are reviewed as a minimum at the end of each reporting period,
taking into account regulatory changes, climate change (see note 3.8 for further details) and
commercial and technological obsolescence, as well as normal wear and tear. Residual values are
based on prices prevailing at the reporting date. Any changes to estimated UELs or residual values
are applied prospectively.
At each reporting date the Group reviews its property, plant and equipment to determine whether
there is any indication that these assets may be impaired. The Group’s accounting policy in respect
of impairment, along with details of the impairment review conducted during the year are set out in
note 2.4.
This section gives further information on the operating assets the Group uses to generate revenue
and the short-term assets and liabilities, managed during day-to-day operations, that comprise the
Group’s working capital balances. This section also includes the considerations relating to the
impact of climate change.
3.1 Property, plant and equipment
This note shows the cost, accumulated depreciation and impairment, and net book value of the
physical assets controlled by the Group.
Accounting policy
Property, plant and equipment is stated at net book value, which is its cost less any accumulated
depreciation and any accumulated impairment losses, if required, charged to date. Property, plant
and equipment assets are initially measured at cost.
Cost comprises: the purchase price (after deducting trade discounts and rebates); any directly
attributable costs of bringing the asset to the location and condition necessary for it to be capable
of operating in the manner intended by management; and an estimate of the present value of the
costs of dismantling and removing the item and restoring the site, where required. Depreciation
reflects the usage of the asset over time and is calculated by taking the cost of the asset, net of any
expected residual value, and charging it to the Consolidated income statement on a straight-line
basis from the date that the asset is available for use and over its useful economic life (UEL). Where
relevant, this is limited to the estimated decommissioning date of the site where the asset is located.
The Group constructs many of its assets as part of long-term development projects. Assets that are
under the course of construction are not depreciated until they are ready for use in the manner
intended by management .
The table below shows the weighted average remaining UELs of the main categories of assets held
at the reporting date:
Average UEL
remaining 2025
(years)
Freehold buildings
18
Plant and equipment:
Pellet production plant
8
Electricity generation assets:
Biomass plant
12
Hydro plant (including pumped storage)
34
Other plant, machinery and equipment
11
Reinstatement assets
18
Plant spare parts
15
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Drax Group plc Annual report and accounts 2025
Financial statements
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. If options, such as UK BECCS or data
centres, are deployed at Drax Power Station this could result in an extension of the end of station
life beyond the current assumed end date of 2039. If the UELs of Drax Power Station assets that
are currently limited to 2039 were to increase by a further 10 years, the annual depreciation charge
would decrease by approximately £18.0 million. If the assumed end of station life of 2039 were to
decrease by 8 years to 2031, in line with the end of the low carbon dispatchable CfD, the annual
depreciation charge would be increased by approximately £59.4 million, excluding the impact of
any potential impairment.
The UEL of Drax Power Station is not considered a key source of estimation uncertainty as there is
not a significant risk of a material adjustment to the carrying amounts and the annual depreciation
charge within the next financial year, as it is not anticipated that any new information will be
available within the next financial year that would result in a change to this UEL and lead to a
material adjustment to the depreciation charge.
An impairment charge is recognised immediately if the net book value of an asset exceeds its
recoverable amount, which is the higher of an asset’s value in use and its fair value less cost
of disposal. The Group’s policy is to recognise an impairment charge through accumulated
depreciation and impairment in the Consolidated income statement if the asset will continue to
be used or retained by the Group. Cost and any accumulated depreciation and impairment are
removed when an asset is disposed. Gains and losses on disposals are determined by comparing
net proceeds with the asset’s carrying amount.
During the year, the Group has impaired costs capitalised relating to its UK BECCS project,
Longview pellet plant development project and non-current assets within the Northern Pellets
CGU. See note 2.4 for further details of these impairments.
The Group has continued construction of the three OCGT projects that have obtained Capacity
Market contracts. The amount capitalised up to the reporting date relating to these projects totals
£466.6 million (2024: £420.7 million). Of this, £45.9 million (20 24: £ 97. 2 million) was capitalised
during the year.
On 29 October 2025, the Group signed an agreement with Apatura Limited (Apatura) to acquire
three battery energy storage system (BESS) projects across three sites in England and Scotland.
Completion of these acquisitions is contingent on certain conditions precedent relating to all
relevant planning permissions, construction and purchase contracts, and any other necessary
contracts or agreements, being in place for the construction of these BESS assets. Completion
of two of the sites occurred in 2025 with the remaining site expected to complete in 2026. For the
two sites that completed in 2025, the total consideration was £22.8 million, however this amount
is contingent based on the total construction costs. Apatura will manage the construction of the
sites, with the amount of consideration due reducing (or increasing) if total construction costs
exceed (or are less than) the agreed construction budget. The amount capitalised up to the
reporting date relating to these projects totals £26.6 million which is presented in the assets
under the course of construction category in the table below.
The Group’s total commitment for future capital expenditure is disclosed in note 7.7.
The Group has made an estimate regarding the UEL of Drax Power Station. Given the continued
focus on climate change, renewable sources of energy and transitioning to a Net Zero economy,
the power generation industry is going through a period of transformation, which can impact on
the UELs of assets. As the UK Government’s Net Zero strategy becomes clearer, particularly in
relation to biomass and BECCS, the Group will continue to assess any potential impact of these
developments on the UEL of Drax Power Station.
Section 3: Operating assets and working capital continued
3.1 Property, plant and equipment continued
174
Drax Group plc Annual report and accounts 2025
Assets under the
Freehold land Plant and Plant spare course of
and buildings equipment parts construction Total
£m £m £m £m £m
Cost:
At 1 January 2024
49 4.1
3,506.2
83 .1
656.1
4,739.5
Additions at cost
–
0.3
9.9
315.3
325.5
Disposals
(0.3)
(20.2)
–
(4 .1)
(24.6)
Movement in reinstatement asset
–
0.7
–
–
0.7
Issues to maintenance projects
–
–
(3.3)
–
(3.3)
Transfers from/(to) intangibles (note 5.1)
0.2
–
–
(3.4)
(3.2)
Transfers to right-of-use assets
–
(1.5)
–
–
(1.5)
Transfers from inventories
–
–
3.3
–
3.3
Transfers between PPE categories
20.4
231.7
2.2
(254.3)
–
Effect of changes in foreign exchange rates
(0.3)
(4.2)
0.2
2.8
(1.5)
At 1 January 2025
514.1
3,713.0
95.4
712.4
5,034.9
Additions at cost
0.1
1.1
4.7
213.7
219.6
Disposals
(16.7)
(44.9)
(2 .1)
(5.6)
(69.3)
Movement in reinstatement asset (note 5.2)
–
(9.6)
–
–
(9.6)
Issues to maintenance projects
–
–
(3.3)
–
(3.3)
Transfers to intangibles (note 5.1)
–
–
–
(0.3)
(0.3)
Transfers from right-of-use assets
–
1.9
–
–
1.9
Transfers to inventories
–
–
(1.2)
–
(1.2)
Transfers between PPE categories
3.9
84.0
–
(87.9)
–
Effect of changes in foreign exchange rates
(11.7)
(45.0)
(0.6)
(10.4)
(67.7)
At 31 December 2025
489.7
3,700.5
92.9
821.9
5,105.0
Section 3: Operating assets and working capital continued
3.1 Property, plant and equipment continued
175
Drax Group plc Annual report and accounts 2025
Financial statements
Assets under the
Freehold land Plant and Plant spare course of
and buildings equipment parts construction Total
£m £m £m £m £m
Accumulated depreciation and impairment:
At 1 January 2024
167.9
1,815.6
35.4
21.8
2,040.7
Depreciation charge for the year
23.8
168.2
5.5
–
197.5
Impairment (note 2.4)
2.8
–
0.1
3.2
6 .1
Disposals
(0 .1)
(12.8)
–
–
(12.9)
Issues to maintenance projects
–
–
(1.1)
–
(1.1)
Transfers to right-of-use assets
–
1.1
–
–
1.1
Effect of changes in foreign exchange rates
0.5
1.0
–
–
1.5
At 1 January 2025
194.9
1,973 .1
39.9
25.0
2,232.9
Depreciation charge for the year
24.3
173.8
2.4
–
200.5
Impairment (note 2.4)
13.6
138.9
4.9
164.4
321.8
Disposals
(12.3)
(37.6)
(2.0)
(2.8)
(54.7)
Issues to maintenance projects
–
–
(0.5)
–
(0.5)
Transfers to inventories
–
–
(0.2)
–
(0.2)
Transfers from right-of-use assets
–
1.9
–
–
1.9
Effect of changes in foreign exchange rates
(4.3)
(19.3)
(0.1)
(0.2)
(23.9)
At 31 December 2025
216.2
2,230.8
44.4
186.4
2,67 7.8
Net book value:
At 31 December 2024
319.2
1,739.9
55.5
6 87.4
2,802.0
At 31 December 2025
273.5
1,469.7
48.5
635.5
2 ,427.2
Freehold land and buildings and plant and equipment, with a carrying amount of £1,429.6 million (2024: £1,580.7 million), have been pledged as security over the Group's secured borrowings.
See note 4.2 for details of the Group’s secured borrowings.
See note 2.4 for further details of the Group’s accounting policy and presentation of impairments of non-current assets.
Section 3: Operating assets and working capital continued
3.1 Property, plant and equipment continued
176 Drax Group plc Annual report and accounts 2025
Pellet Biomass Hydro OCGT Total plant
production plant plant plant
plant
(1)
Other
(1)
and equipment
£m £m £m £m £m £m
Cost:
At 1 January 2024
730.8
2,278.5
479.4
–
17. 5
3,506.2
Additions at cost
–
–
–
–
0.3
0.3
Disposals
(10.2)
(10.0)
–
–
–
(20.2)
Movement in reinstatement asset
–
(6.9)
–
7.6
–
0.7
Transfers between PPE categories
71.9
13 8 .1
9.3
–
12.4
231.7
Transfers (to)/from right-of-use assets
(1.6)
–
–
–
0 .1
(1.5)
Effect of changes in foreign exchange rates
(4.2)
–
–
–
–
(4.2)
At 1 January 2025
786.7
2,399.7
488.7
7. 6
30.3
3,713.0
Additions at cost
–
–
–
–
1.1
1.1
Disposals
(35.0)
(7.9)
(0.9)
–
(1.1)
(44.9)
Movement in reinstatement asset (note 5.2)
–
(9.3)
–
(0.3)
–
(9.6)
Transfers between PPE categories
68.8
4.2
4.9
–
6 .1
84.0
Transfers from right-of-use assets
1.9
–
–
–
–
1.9
Effect of changes in foreign exchange rates
(45.0)
–
–
–
–
(45.0)
At 31 December 2025
777.4
2,386.7
492.7
7.3
36.4
3,700.5
Accumulated depreciation and impairment:
At 1 January 2024
250.4
1,483.5
66.2
–
15.5
1,815.6
Depreciation charge for the year
75.3
7 5.1
12.9
–
4.9
168.2
Disposals
(6.7)
(6 .1)
–
–
–
(12.8)
Transfers from right-of-use assets
1.1
–
–
–
–
1.1
Effect of changes in foreign exchange rates
1.0
–
–
–
–
1.0
At 1 January 2025
321.1
1,552.5
7 9.1
–
20.4
1,973.1
Depreciation charge for the year
71.3
83.4
13.0
–
6 .1
173.8
Impairment
138.9
–
–
–
–
138.9
Disposals
(27.6)
(8.8)
(0 .1)
–
(1.1)
( 37.6)
Transfers from right-of-use assets
1.9
–
–
–
–
1.9
Effect of changes in foreign exchange rates
(19.3)
–
–
–
–
(19.3)
At 31 December 2025
486.3
1,627.1
92.0
–
25.4
2,230.8
Net book value:
At 31 December 2024
465.6
8 47.2
409.6
7.6
9.9
1,739.9
At 31 December 2025
291.1
759.6
400.7
7.3
11.0
1,469.7
(1) Comparative amounts have been re-presented to show the OCGT plant in a separate category.
Section 3: Operating assets and working capital continued
3.1 Property, plant and equipment continued
177
Drax Group plc Annual report and accounts 2025
Financial statements
Lease modifications are accounted for as a separate lease where the scope of the lease increases
through the right to use one or more underlying assets, and where the consideration of the lease
increases by an amount that is equivalent to the standalone price of the increase in scope. Where
a modification decreases the scope of the lease, the carrying amount of the right-of-use asset and
lease liability are adjusted, and a gain or loss is recognised in proportion to the decrease in the
scope of the lease. All other modifications are accounted for as a reassessment of the lease liability
with a corresponding adjustment to the right-of-use asset.
Lease extension or termination options are included within the lease term when the Group, as the
lessee, has the discretion to exercise the option and where it is reasonably certain that the option
will be exercised.
Leases with a term shorter than 12 months, or where the identified asset has a value below £5,000,
are expensed to the Consolidated income statement on a straight-line basis over the term of the
agreement.
Lease remeasurements, lease modifications, transfers between property, plant and equipment
and right-of-use assets, and disposals of leased assets are included within other movements in the
table below.
Section 3: Operating assets and working capital continued
The depreciation expense in the Consolidated income statement comprises the following:
Year ended 31 December
2025 2024
£m £m
Depreciation charged on property, plant and equipment
200.5
197.5
Depreciation charged on right-of-use assets (note 3.2)
26.9
2 8 .1
Movement on depreciation included in closing inventories
1.5
(0.8)
Total depreciation expense
228.9
224.8
Depreciation charged on right-of-use assets in the table above is presented net of £1.7 million
(2024: £0.9 million) depreciation related to salary sacrifice electric vehicles included within staff
costs in operating and administrative expenses. Right-of-use asset depreciation totals £28.6 million
for the year ended 31 December 2025 (2024: £29.0 million).
The Group’s definition of capital expenditure has been updated in the year, see note 2.7 for a
reconciliation between Capital expenditure presented in note 2.1 and capital additions presented
in note 3.1.
3.2 Leases
Accounting policy
IFRS 16 determines a control model to distinguish between lease agreements and service
contracts on the basis of whether the use of an identified asset is controlled by the Group for a
period of time. If the Group is deemed to have control of an identified asset, then a right-of-use
asset and corresponding lease liability are recognised on the Consolidated balance sheet.
The lease liability is initially measured at the present value of the future lease payments discounted
using the discount rate that is implicit in the lease. If this discount rate cannot be determined from
the agreement, the liability is discounted using an incremental borrowing rate. The borrowing rate
for leased property is derived with reference to property yields specific to the location of the leased
property and property type. For non-property leases, the borrowing rate is derived from a series
of inputs including counterparty-specific proxies for risk-free rates, such as UK Gilt curves, and an
adjustment for credit risk based on the Group’s credit rating. The liability is subsequently adjusted
for interest, repayments, remeasurements and other modifications. The right-of-use asset is initially
measured at cost and is subsequently measured at cost less accumulated depreciation and
accumulated impairment losses. Cost comprises the initial calculation of the lease liability,
estimated costs for dismantling or restoring the asset, any initial direct costs, and lease payments
made less incentives received prior to commencement of the lease.
3.1 Property, plant and equipment continued
178
Drax Group plc Annual report and accounts 2025
Lease liabilities
Year ended 31 December
2025 2024
Carrying amount: £m £m
At 1 January
116.5
135.8
Additions
9.9
9.8
Interest charge for the year
6.5
6.6
Payments
(34.6)
(34.0)
Other movements
6.2
(2.8)
Effect of changes in foreign exchange rates
(5.9)
1.1
At 31 December
98.6
116.5
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 £1.4 million during the
year (2024: £6.0 million) in relation to short-term and low value leases.
The maturity of the gross undiscounted lease liabilities at the reporting date is as follows:
As at 31 December
2025 2024
£m £m
Within one year
31.2
31.6
Within one to two years
21.2
24.6
Within two to five years
30.4
39.0
After five years
38.3
47. 2
Total gross lease liabilities
121.1
142.4
Effect of discounting
(22.5)
(25.9)
Lease liabilities recognised in the Consolidated balance sheet
98.6
116.5
Current
28.2
26.0
Non-current
70.4
90.5
Section 3: Operating assets and working capital continued
Right-of-use assets
Land and Plant and
buildings equipment Rail cars Vessels Total
£m £m £m £m £m
Cost:
At 1 January 2024
38.7
26.8
28.4
87.5
181.4
Additions at cost
2.3
6.0
–
–
8.3
Movement in reinstatement
asset
2.3
–
–
–
2.3
Other movements
5.1
(3.2)
(0.4)
(5.2)
(3.7)
Effect of changes in foreign
exchange rates
(0.3)
0.1
(1.0)
(5.3)
(6.5)
At 1 January 2025
4 8 .1
29.7
27.0
77.0
181.8
Additions at cost
1.0
7. 0
1.9
–
9.9
Movement in reinstatement
asset (note 5.2)
(0.8)
–
4.1
–
3.3
Other movements
3.3
(6.2)
(2.0)
(0 .1)
(5.0)
Effect of changes in foreign
exchange rates
(0.5)
(0.6)
(1.1)
(2.0)
(4.2)
At 31 December 2025
51.1
29.9
29.9
74.9
185.8
Accumulated depreciation and
impairment:
At 1 January 2024
17.7
13.6
10.8
17.1
59.2
Depreciation charge for the year
8.2
7.7
5.0
8 .1
29.0
Impairment
0 .1
–
–
–
0 .1
Other movements
(0 .1)
(3.3)
(2.3)
0 .1
(5.6)
Effect of changes in foreign
exchange rates
(0.2)
0 .1
(0.3)
(1.4)
(1.8)
At 1 January 2025
25.7
18 .1
13.2
23.9
80.9
Depreciation charge for the year
8.7
7.7
4.7
7. 5
28.6
Impairment
9.3
0.4
9.6
0.8
20 .1
Other movements
(3.1)
(5.8)
(2.4)
–
(11.3)
Effect of changes in foreign
exchange rates
(0.3)
(0.4)
(0.8)
(0.6)
(2 .1)
At 31 December 2025
40.3
20.0
24.3
31.6
116.2
Net book value:
At 31 December 2024
22.4
11.6
13.8
5 3.1
100.9
At 31 December 2025
10.8
9.9
5.6
43.3
69.6
3.2 Leases continued
179
Drax Group plc Annual report and accounts 2025
Financial statements
Renewable certificate assets are derecognised when they are submitted to Ofgem or at the point
of sale to a customer. The point of sale is when the customer takes control of the renewable
certificate, which is usually at the point of transfer of the certificate. At this point any revenue
expected to be received from the customer is recognised (see note 2.2) and the carrying amount
of the renewable certificate asset sold is recognised within cost of sales.
Valuations of generated ROCs and REGOs are comprised of the expected value to be obtained in
a sales transaction with a third-party supplier at the point of generation. These estimates are made
using various sources of information including future contracted and recently achieved sales
prices, ongoing sales negotiations, internal forecasts, and published third-party market price
assessments and data.
The Renewables Obligation (RO) scheme places an obligation on electricity suppliers to source an
increasing proportion of their electricity from renewable sources. Under the RO scheme, ROCs are
issued to generators of renewable electricity which are then sold bilaterally to counterparties,
including suppliers, to demonstrate that they have fulfilled their obligations under the RO scheme.
ROCs are managed in compliance periods (CPs), running from April to March annually. CP1
commenced in April 2002. At 31 December 2025, the Group is operating in CP24.
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). From April 2026, the
UK Government intends to change to Consumer Price Index (CPI)-based indexation, subject to the
publication of statutory instruments. The buy-out price for CP24 is £67.06 (2024: CP23 £64.73). 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.
At initial recognition, valuations of generated ROCs are comprised of two parts: the buy-out price
element and an estimate of the future benefit that may be obtained from the ROC recycle fund at
the end of the CP. The recycle fund provides a benefit where supplier buy-out charges (incurred by
suppliers who do not procure sufficient ROCs to satisfy their obligations) are redistributed to the
suppliers who presented ROCs in a CP on a pro-rata basis. The estimate of the recycle value is based
on assumptions about likely levels of renewable generation, which is generally weather dependent,
the demand for ROCs over the CP, and the number of ROCs banked in a CP, and is thus subject to
some uncertainty. The Group utilises external sources of information, such as energy demand and
generation forecasts, average historical weather data, and published information about ROC banking
in previous CPs, in addition to its own forecasts, in making these estimates. Historical experience
indicates that the assumptions used in the valuations are reasonable, but the recycle value remains
subject to possible variation and may subsequently differ from assumptions at the reporting date.
REGOs are certificates that enable suppliers to prove that energy supplied to their customers
came from a renewable source. One REGO is issued to a generator for every MWh of renewable
electricity they generate. The primary use of REGOs is for the Fuel Mix Disclosure that requires
licensed electricity suppliers to disclose to potential and existing customers the mix of fuels used
to generate the electricity supplied. REGOs are managed in CPs, running from April to March
annually. CP1 commenced in April 2002. At 31 December 2025, the Group is operating in CP24.
At initial recognition, valuations of generated REGOs are usually based on published third-party
market price assessments.
Section 3: Operating assets and working capital continued
The Group recognised the following charges relating to leases in the Consolidated income
statement:
Year ended 31 December
2025 2024
£m £m
Expense relating to short-term leases
1.4
5.9
Expense relating to low value leases
–
0 .1
Interest charge for the year
6.5
6.6
Depreciation charge for the year
28.6
29.0
Variable lease payments
0.7
0.6
Right-of-use asset depreciation in the table above includes £1.7 million (2024: £0.9 million)
depreciation related to salary sacrifice electric vehicles. The interest charge for the year on lease
liabilities includes £0.3 million (2024: £0.1 million) related to salary sacrifice electric vehicles. These
costs are included within staff costs in operating and administrative expenses.
3.3 Renewable certificate assets
The Group generates renewable certificate assets, including Renewables Obligation Certificates
(ROCs) and Renewable Energy Guarantees of Origin (REGOs), which are accredited by the Office
for Gas and Electricity Markets (Ofgem), as a result of generating renewable electricity using
certain generating units at Drax Power Station and generating renewable electricity at the Group’s
run-of-river hydro plants. The Group also purchases renewable certificates from third parties. The
Group’s ROCs and REGOs are sold bilaterally to counterparties, including external suppliers, and are
also utilised by the Energy Solutions business.
This note sets out the value of renewable certificate assets that the Group held at the reporting date.
Accounting policy
Renewable certificate assets are recognised at cost or deemed cost less any impairments.
Renewable certificates, principally ROCs and REGOs, are recognised as current assets in the period
they are generated or purchased. For generated renewable certificates the Group uses their fair
value at initial recognition, based on the estimated price that would be achieved in a market sale
transaction, as deemed cost. For renewable certificates purchased from third parties the agreed
purchase price is the cost.
Generating renewable power simultaneously creates joint products, being electricity and the
renewable certificates. The cost of generating renewable electricity is allocated between the
cost of the electricity generation, which is recognised in the Consolidated income statement at
the point of generation, and the cost of generating the renewable certificate, which is initially
recognised as an asset in the Consolidated balance sheet. As such, the value of generated
renewable certificates earned reduces the cost of electricity generation.
Where the Energy Solutions business incurs an obligation to deliver renewable certificates, that
obligation is accrued in the period incurred and recognised within cost of sales.
3.2 Leases continued
180
Drax Group plc Annual report and accounts 2025
3.4 Inventories
The Group holds inventories of fuels and other consumable items that are used in the process of
generating electricity and raw materials used in the production of biomass pellets. This note shows
the cost of biomass, other fuels and consumables held at the reporting date.
Accounting policy
The Group’s inventories are valued at the lower of cost and net realisable value. The costs of items
of inventory are determined using weighted average costs.
The cost of purchased inventories includes all direct costs incurred in bringing the raw material, fuel
or consumables to their present location and condition, including the purchase price, import duties
and other taxes, and transport and handling costs. The Group uses forward foreign exchange
contracts to hedge the costs of fuel denominated in foreign currencies. Where these contracts are
designated into hedge relationships in accordance with IFRS 9, the inventory cost is recognised
at the hedged value, to the extent these hedges are effective, and all such gains and losses are
included in cost of sales as part of the inventory cost.
Biomass inventories are weighed when entering, moving within or exiting the Group’s sites using
technology regularly calibrated to industry standards. Fuel burn in the electricity generation
process is calculated using calibrated weighers to provide closing inventory volumes. Calibrated
weighers are subject to a range of tolerable error. All fuel inventories are subject to regular surveys
to ensure measurements are sufficiently accurate.
The characteristics of biomass means that it requires specialist handling and storage. Biomass
at Drax Power Station is stored in sealed domes with a carefully controlled atmosphere for fire
prevention purposes and thus cannot be surveyed using traditional methods. Instead, this
inventory is surveyed using regularly calibrated radar scanning technology to validate the accuracy
of the weights outlined above. Recorded system volumes are also periodically verified through
dome cycling (running a dome down until empty).
The cost of manufactured inventories includes all direct costs as well as conversion costs including
labour, direct overheads and an allocation of indirect overheads, including depreciation. The cost
of inventories includes other costs incurred in bringing the inventories to their existing condition
and location.
Costs that do not contribute to bringing inventories to their present condition and location, such
as storage and administration overheads, are excluded from the cost of inventories and expensed
as incurred. Abnormal amounts of wasted materials, labour or other production costs are also
excluded from the cost of inventories.
The valuation of fibre inventory involves estimations of conversion rates to determine the volume
of residual fibre stockpiles and log inventory. Third-party surveys are performed regularly to assess
the volume of inventory and appropriate adjustments are made, if required, using conversion factors
estimated by management. Internal inventory counts are performed periodically at all locations.
Section 3: Operating assets and working capital continued
At each reporting date, the Group reviews the carrying value of renewable certificate assets held
against updated anticipated sales prices or anticipated obligation requirements, and the estimated
recycle value. Where relevant, this takes account of agreed forward sales contracts, changes in
published third-party market price assessments, the likely utilisation of renewable certificates
generated to settle the Group’s own obligations, and any relevant information about the levels
of wider renewable generation in the market. Any impairment loss on these assets is recognised
in the Consolidated income statement in the period incurred within cost of sales.
Year ended 31 December
2025 2024
Carrying amount: £m £m
At 1 January
540.0
292.2
Earned from generation
768.9
752.6
Purchased from third parties
271.0
464.6
Utilised by the Energy Solutions business
(514.6)
(654.7)
Sold to third parties
(510.8)
(314.7)
Impairment
(12.4)
–
At 31 December
54 2.1
540.0
Of the £542.1 million of renewable certificates recognised at 31 December 2025 (2024: £540.0 million),
£534.0 million (2 0 24 : £4 86.1 million) relates to ROCs and £8.1 million (2024: £53.9 million) relates to
REGOs. Of the £768.9 million (2024: £752.6 million) of renewable certificates earned from generation,
£758.2 million (2024: £652.6 million) was attributable to ROCs and £10.7 million (2024: £100.0 million)
to REGOs.
Recognition of revenue from the sale of renewable certificates is described in further detail in
note 2.2.
Climate change considerations for renewable certificate assets are discussed in more detail in
note 3.8.
3.3 Renewable certificate assets continued
181
Drax Group plc Annual report and accounts 2025
Financial statements
Financial assets are recognised at amortised cost if:
– they are held within a business model whose objective is to hold financial assets in order
to collect contractual cash flows; and
– the contractual terms give rise to payments that are solely payments of principal and
interest (SPPI).
Financial assets are recognised at fair value through other comprehensive income (FVOCI) if:
– they are held within a business model whose objective is achieved by both holding financial
assets in order to collect contractual cash flows and selling financial assets; and
– the contractual terms give rise to payments that are SPPI.
All financial assets not classified as measured at amortised cost or FVOCI are measured at FVTPL.
The Group has access to a receivables monetisation facility under which amounts receivable from
a portfolio of receivables can be sold to a third party on a non-recourse basis. This portfolio of
receivables, that may be sold under this facility or held to collect the contractual cash flows, are
accounted for at FVOCI in accordance with IFRS 9, due to the objective of the business model
being achieved by both collecting contractual cash flows and the selling of the financial assets.
For the receivables within this portfolio that are sold, the receivables are derecognised from
the Consolidated balance sheet at the point of sale, which is shortly after the initial recognition
of the receivable balance, as the significant risks and rewards of ownership are deemed to have
been transferred. Fair value gains or losses on these receivables are recognised within other
comprehensive income and reclassified to interest payable and similar charges in the Consolidated
income statement when derecognised. Impairment gains or losses are recognised directly in the
Consolidated income statement. At 31 December 2025, the receivables sold under this facility
were £275.6 million (2024: £386.3 million). See note 4.3 for further information about the facility.
As part of the sale of customer meter points to EDF by Opus Energy in the prior year (see note 2.7
for further details), the receivables relating to the meter points sold were transferred to EDF. The
amount the Group received for transferring these receivables was dependent on the amounts
collected by EDF. The receivables sold to EDF did not qualify for derecognition under IFRS 9 as
Opus Energy had retained substantially all the risks and rewards of ownership of the financial
assets. These receivables were accounted for at FVTPL in accordance with IFRS 9, due to the
contractual terms of the financial assets giving rise to cash flows that were not SPPI. The cash
flows received by Opus Energy on collection of the receivables by EDF were calculated in
accordance with the Asset Purchase Agreement (APA) and were dependent on the amounts
collected by EDF, with the majority of these cash flows being settled in the prior year. The
impairment requirements of IFRS 9 did not apply to these receivables as the receivables were
measured at FVTPL. Subsequent to the transfer, any fair value gains or losses on these receivables
were recognised within the Consolidated income statement within operating and administrative
expenses. These receivables were fully settled during the year.
Section 3: Operating assets and working capital continued
As at 31 December
2025 2024
£m £m
Biomass – finished goods
167.1
244.7
Biomass – fibre and other raw materials
11.3
15.8
Other fuels and consumables
45.4
41.5
Total inventories
223.8
302.0
Total inventories of £223.8 million (2024: £302.0 million) are stated net of provisions of £6.2 million
(2024: £5.3 million).
The cost of inventories recognised as an expense in the Consolidated income statement in the year
ended 31 December 2025 was £1,712.8 million (2024: £1,627.3
(1)
million). This includes the value of
write downs of inventory in the year.
(1) The 2024 amount for the cost of inventories recognised as an expense has been restated from £1,708.5 million to
£1,627.3 million to exclude costs that are not directly attributable to the purchase or conversion of inventory on the
Consolidated balance sheet.
3.5 Trade and other receivables and contract assets
Trade receivables represents amounts owed by customers for goods or services provided in the
ordinary course of business that they have been invoiced for but have not yet paid. Accrued income
represents income earned on goods or services provided in the ordinary course of business in the
period, but not yet invoiced, largely in respect of energy supplied to customers that will be invoiced
the following month. Prepayments represent amounts paid in respect of goods or services not yet
received. Other receivables include collateral posted in relation to the Group’s commodity and
treasury trading activities, and other amounts for goods or services provided that have been
invoiced for but not yet paid that do not fall under trade receivables. Contingent consideration
related to amounts receivable dependent on certain triggers in respect of the option to develop the
Damhead Creek 2 land disposed of as part of the sale of the Combined Cycle Gas Turbines (CCGT)
generation portfolio in 2021.
Accounting policy
Trade receivables and accrued income that do not contain a significant financing component are
initially measured at the transaction price. Other financial assets, principally other receivables, are
initially measured at fair value plus transaction costs, other than financial assets measured at fair
value through profit or loss (FVTPL) where transaction costs are recognised immediately in the
Consolidated income statement.
The classification of financial assets subsequent to initial recognition depends on the business
model used by the Group to manage them and the characteristics of the contractual cash flows.
3.4 Inventories continued
182
Drax Group plc Annual report and accounts 2025
The contingent consideration relates to the Group’s disposal of the CCGT generation portfolio
in January 2021. Should the acquirer satisfy certain triggers in respect of the option to develop
the land at the Damhead Creek 2 site, which was disposed of as part of this sale, £29.0 million of
contingent consideration would become payable to the Group from the acquirer. The estimated
fair value of this contingent consideration is £nil (2024: £9.4 million). Changes in the fair value
of the contingent consideration are recognised within the other gains and losses line within the
Consolidated income statement. See note 7.1 for further details on the contingent consideration.
The following table shows the movement in fair value of the Group’s trade and other receivables
measured at FVTPL:
As at 31 December
2025 2024
Receivables measured at FVTPL: £m £m
At 1 January
9.7
9.2
Fair value of transferred receivables at the date of transfer to EDF
–
21.6
Fair value losses recognised in operating and administrative
expenses
(0.5)
(12.9)
Fair value (losses)/gains recognised in other gains and losses
(9.4)
0.2
Amounts paid to/(received from) EDF
2.7
(2.0)
Offset for credit balances transferred to EDF
(2.5)
(6.4)
At 31 December
–
9.7
Of which relates to:
Receivables sold to EDF
–
0.3
Contingent consideration
–
9.4
Impairment of financial assets
Accounting policy
The Group applies the impairment model in IFRS 9 to provide for expected credit losses on the
Group’s financial assets not measured at FVTPL, including trade receivables, accrued income,
contract assets and other financial assets. The provision for impairment of trade receivables
and accrued income (including contract assets) is measured at an amount equal to the lifetime
expected credit loss. Contract assets relate to amounts for goods or services provided under
customer contracts and, therefore, have substantially the same risk characteristics as trade
receivables for the same types of contracts.
Section 3: Operating assets and working capital continued
Contingent consideration receivable is classified as a financial asset. As the cash flows are not
SPPI, it does not meet the criteria for recognition at either amortised cost or FVOCI, and is
therefore recognised at FVTPL. The impairment requirements of IFRS 9 do not apply to these
receivables as the receivables are measured at FVTPL. Fair value gains and losses on this receivable
are recognised in other gains and losses in the Consolidated income statement. At the reporting
date the fair value of the contingent consideration was assessed as £nil (2024: £9.4 million)
resulting in a £9.4 million fair value loss (2024: £0.2 million fair value gain) recognised in the
Consolidated income statement.
As at 31 December
2025 2024
£m £m
Trade receivables
26.9
105.4
Accrued income
214.6
278.6
Prepayments
22.6
24.9
Other receivables
73.7
52.0
Contingent consideration
–
9.4
Total trade and other receivables and contract assets
337.8
470.3
At 31 December 2025, the Group had no amounts receivable from significant counterparties which
represented 10% or more of total trade receivables and accrued income (2024: no significant
counterparty).
Of total trade receivables and accrued income at 31 December 2025, £90.9 million
(2024: £192.8 million) relates to the Energy Solutions business, £118.0 million (2 024: £145.1 million)
relates to the Biomass Generation business, £14.6 million (2024: £19.9 million) relates to the
Flexible Generation business, and £18.0 million (2024: £26.2 million) relates to the Pellet
Production business.
Accrued income includes contract assets which relate to amounts for goods or services provided
under customer contracts, where the entitlement to consideration is contingent on something
other than the passage of time. The Group has recognised a contract asset for any services
provided where the Group does not yet have the unconditional right to receive payment and the
condition is not solely the passage of time. Any amount previously recognised as a contract asset
is reclassified to trade receivables at the point at which the Group’s right to payment becomes
unconditional and when an invoice is issued. Contract assets included in accrued income at
31 December 2025 were £11.1 million (2024: £43.4 million) .
3.5 Trade and other receivables and contract assets continued
183
Drax Group plc Annual report and accounts 2025
Financial statements
Expected credit loss
The movement in the overall allowance for expected credit losses on trade receivables is presented
in the following table. This excludes £nil (2024: £0.3 million) of trade receivables measured at
FVTPL:
As at 31 December
2025
2024
Provision Combined Provision
matrix probability matrix
method method method Total
£m £m £m £m
At 1 January
42.4
50.6
8.8
59.4
Amounts written off
Net additional amounts provided
(12.0)
(28.5)
(17.9)
(46.4)
against
Transfer of financial assets to FVTPL
7. 8
28.0
20.9
48.9
category
–
(19.5)
–
(19.5)
Change in provisioning methodology
–
(30.6)
30.6
–
Receivables sold
( 7.6)
–
–
–
At 31 December
30.6
–
42.4
42.4
Gross trade receivables
57.5
147.5
147.5
Expected credit loss provision
(30.6)
(42.4)
(42.4)
Trade receivables subject to the
IFRS 9 impairment model
26.9
10 5.1
10 5.1
Average expected credit loss
53%
29%
29%
The provision in the table above relates primarily to trade receivables in the Energy Solutions
business (2024: £2.9 million of the total provision related to the Biomass Generation business).
The risk of default within the Biomass Generation, Flexible Generation and Pellet Production
businesses is considered to be remote, supported by strong historical collection rates, high
credit quality counterparties and short payment terms with timely receipts resulting in negligible
aged debt.
The net charge to the Consolidated income statement in 2025 for impairment of financial assets
was £3.3 million (2024: £40.0 million). This is the net of the additional amounts provided against
in relation to trade receivables of £7.8 million (2024: £48.9 million) less a £4.5 million (2024:
£8.9 million) benefit in the period in respect of the resolution of legacy credit balances. Of the net
charge, £3.8 million (2024: £12.7 million) was recognised as exceptional as part of the Opus Energy
sale of meter points and restructuring (see note 2.7 for further details).
Section 3: Operating assets and working capital continued
For other financial assets, the Group recognises a lifetime expected credit loss provision when
there has been a significant increase in credit risk since initial recognition. If the credit risk of the
financial instrument has not increased significantly since initial recognition, the Group recognises
a 12-month expected credit loss provision.
The greatest concentration of credit risk exists in the Energy Solutions business. For all receivables
in the current year, across all businesses, a provision matrix method was adopted. The prior year
includes the change from the combined probability method which was used for the small and
medium-sized enterprise (SME) consumers within the Energy Solutions business. As a result of the
sale of the majority of the SME portfolio to EDF, the receivables balance and exposure to credit risk
for these customers significantly reduced in 2024. As such, the use of the combined probability
method was not deemed appropriate subsequent to this sale and the provision matrix method was
applied to all trade receivables.
Under the Group’s debt recovery strategy, a breach in terms could lead to the customer being
disconnected or pursued legally for recovery of an outstanding balance. The Group considers a
financial asset to be in default when the amount due from a debtor is unlikely to be received in full,
or when contractual payments are 90 days past due. The Group writes off a financial asset when
there is no realistic prospect of recovery and all attempts to recover the balance have been
exhausted. An indication that all credit control activities have been exhausted is where the debt on
an account is exclusively greater than 365 days past due and active recovery attempts have failed,
or where there are known insolvency issues relating to the customer.
Customers are grouped according to the age of the debt based on the number of days past due. The
provision rates are based on historical collection rates and an expectation of future cash collection.
3.5 Trade and other receivables and contract assets continued
184
Drax Group plc Annual report and accounts 2025
Section 3: Operating assets and working capital continued
The value of provisions calculated using the Group’s provision matrix method is set out below. This shows the ageing profile in 30-day increments of the trade receivables and accrued income (including
contract assets) of the Group at 31 December 2025 excluding £nil (2024: £0.3 million) of trade receivables that are measured at FVTPL.
As at 31 December 2025
As at 31 December 2024
Estimated Estimated
total gross Lifetime total gross Lifetime
carrying amount expected Expected carrying amount expected Expected
at default credit losses credit loss rate at default credit losses credit loss rate
£m £m % £m £m %
Accrued income balances not yet due
219.6
5.0
2%
2 87. 6
9.0
3%
Trade receivables days past due:
Balances not yet due
4.0
1.5
38%
81.6
4.0
5%
Between 0–30 days
17. 5
0.6
3%
5.2
0.8
15%
Between 31–60 days
1.1
0.7
64%
2.5
0.7
28%
Between 61–90 days
1.2
0.3
25%
2 .1
0.8
38%
Over 90 days
33.7
27.5
82%
5 6 .1
36 .1
64%
Trade receivables subject to the IFRS 9 impairment model total
57. 5
30.6
53%
147.5
42.4
29%
Total
27 7.1
35.6
13%
435.1
51.4
12%
The expected credit loss provision of £35.6 million (2024: £51.4 million) in the table above primarily relates to the Energy Solutions business. The expected credit loss rates above are expressed as a
percentage of the gross carrying amount of all of the Group’s trade receivables and accrued income balances that are subject to the provision matrix method. The provision for expected credit losses
expressed as a percentage of gross trade receivables has increased to 53% compared to 29% as at 31 December 2024. The main cause of this is due to providing 100% for the remaining trade
receivables in the Opus Energy business following the Opus Energy transaction.
The expected credit loss provision calculated for other financial assets of the Group was negligible.
Credit and counterparty risk are disclosed in further detail in note 7.2.
3.5 Trade and other receivables and contract assets continued
185
Drax Group plc Annual report and accounts 2025
Financial statements
The difference between the carrying value of the financial liability based on the terms pre-
modification and post-modification is recognised in the Consolidated income statement.
As at 31 December
2025 2024
£m £m
Trade payables
150.7
134.8
Fuel accruals
34.2
67.9
Energy supply accruals
403.2
473.2
Other accruals
289.5
319.5
Other payables
189.9
264.4
Contract liabilities
23.4
29.3
Total trade and other payables and contract liabilities
1,090.9
1, 2 8 9.1
Trade payables are unsecured and are usually paid within 60 days of recognition. The carrying
amounts of trade and other payables approximates their fair values, due to their short-term nature.
The Group facilitates a supply chain finance arrangement under which certain suppliers can obtain
early access to payments from a bank and the Group pays the bank based on the original payment
terms. The Group has assessed the supply chain finance arrangement, considering the nature and
specific terms of the arrangement and has determined that it is appropriate for the amount to
continue to be recognised within trade payables. This conclusion is supported by the fact that there
are no changes to the Group’s payment terms under this arrangement, nor would there be if the
arrangement was to cease. The payable to the original supplier and the payable owed to the facility
provider (once the payable owed to the original supplier has been derecognised) are both presented
within trade payables as the payable remains operating in nature and there is no extension to the
Group’s payment terms under this arrangement. Trade payables includes £62.6 million
(2024: £38.4 million) relating to supply chain finance. Cash flows relating to supply chain finance,
being the Group’s payment to the bank, are included within net cash from operating activities in
the Consolidated cash flow statement. See note 4.3 for further details.
The Group also has access to deferred letter of credit payment facilities under which the Group
benefits from an extension to invoice payment terms of less than 12 months for a fee. The original
liability is derecognised from trade payables once the deferred letter of credit has been issued and
drawn. This is normally at the point that the original liability is due for payment in accordance with
original invoice payment terms. The amount due to the facility provider is recognised in other
payables. Fees are either recognised in the Consolidated income statement, or capitalised if
they are directly attributable to the construction of a qualifying asset and meet the criteria for
capitalisation, in the period incurred. Other payables includes £73.2 million (2024: £150.3 million)
related to deferred letters of credit. Of the total deferred letters of credit, £42.4 million
(2024: £92.8 million) were utilised for capital expenditure and £30.8 million (2024: £57.5 million)
were utilised for trade payables. Cash flows relating to deferred letters of credit, being the Group’s
payment to the bank, are included within net cash from operating activities in the Consolidated
cash flow statement where utilised for biomass purchases or net cash used in investing activities
for capital expenditure. See note 4.3 for further details.
Section 3: Operating assets and working capital continued
3.6 Contract costs
The Group incurs costs of obtaining contracts in the Energy Solutions business.
Accounting policy
Management expects that incremental broker fees paid to intermediaries as a result of obtaining
electricity and gas contracts are recoverable. The Group has therefore capitalised them as
contract costs at the point the fee is paid. The fees are amortised over the contract period in
line with the recognition of revenue and are charged to cost of sales. The balance is included
within prepayments (see 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
2025 2024
£m £m
At 1 January
2.7
21.1
Additions
1.5
19.2
Amortisation
(2.7)
(21.5)
Accelerated amortisation – customers sold
–
(10.6)
Impairment – customers retained
–
(5.5)
At 31 December
1.5
2.7
During 2024, the Group sold the majority of its non-core SME customers in Opus Energy to EDF
(see note 2.7 for further details). The amortisation of the commissions relating to the customers
sold was accelerated due to the future cash flows from those customers’ contracts being received
as part of the consideration for the sale of the customer meters. This accelerated charge was
recognised as exceptional within the Consolidated income statement. The remaining commissions
relating to the customers retained by Opus Energy were impaired in the prior year due to those
customer contracts being onerous following the sale (see note 5.2).
3.7 Trade and other payables and contract liabilities
Trade and other payables represents amounts the Group owes to its suppliers for trade purchases
and ongoing costs, taxes and social security amounts due in relation to the Group’s role as an
employer, and other creditors that are due to be paid in the ordinary course of business. The Group
makes accruals for amounts that will fall due for payment in the future as a result of the Group’s
activities in the current period. Contract liabilities represents the Group’s obligation to transfer goods
and services to its customers whereby the Group has already received the consideration in advance
or where the amount is recognised as a receivable due from the customer at the reporting date.
Accounting policy
Trade and other payables are financial liabilities that are initially measured at fair value. Trade and
other payables are subsequently measured at amortised cost using the effective interest method.
Financial liabilities are derecognised when the contractual obligations are discharged, cancelled or
expire. If the terms of a financial liability are significantly modified, the existing financial liability is
derecognised and a new financial liability based on the modified terms is recognised at fair value.
186
Drax Group plc Annual report and accounts 2025
Section 3: Operating assets and working capital continued
The table below details the amount of trade and other payables and contract liabilities that relate to financial liabilities that are part of supplier finance arrangements, such as supply chain finance and
deferred letters of credit, and how much of these amounts have already been paid out by the finance providers at the reporting date.
As at 31 December
2025
2024
Deferred letters Deferred letters Deferred letters Deferred letters of
Supply chain of credit – biomass of credit – capital Supply chain of credit – biomass credit – capital
finance purchases expenditure finance purchases expenditure
Carrying amount of financial liabilities:
Financial liabilities that are part of the arrangement £m
62.6
30.8
42.4
38.4
57.5
92.8
– Of which represents the value of accelerated payments to suppliers £m
36.0
30.3
41.5
11.8
56.6
90.3
Trade Other Other Trade Other Other
Presented within payables payables payables payables payables payables
Range of payment due dates:
Extension Extension
of invoice of invoice
45 to 65 84 to 94 payment 45 to 65 80 to 117 payment
days after days after terms by days after days after terms by
Liabilities that are part of the arrangement invoice date invoice date 313-364 days invoice date invoice date 329-364 days
5 to 60 5 to 10 30 to 42 5 to 60 5 to 10 30 to 42
days after days after days after days after days after days after
Comparable trade payables that are not part of the arrangement invoice date invoice date invoice date
invoice date
(1)
invoice date
(1)
invoice date
Non-cash movements in the period:
Derecognition of amounts owed to the supplier and recognition of amounts owed to the facility provider £m
198.0
212.4
41.4
219.5
219.1
97.8
Effect of changes in foreign exchange rates £m
(1.9)
4.0
1.9
1.9
0.7
1.5
(1) The payment terms for comparable trade payables in the prior period has been updated to reflect payment terms from invoice date.
3.7 Trade and other payables and contract liabilities continued
187
Drax Group plc Annual report and accounts 2025
Financial statements
Section 3: Operating assets and working capital continued
The Group does not include working capital facilities that are linked directly to a specific payable
and give an extension in payment terms of less than 12 months (see note 2.7) in its definition
of borrowings or Net debt. These amounts are recognised within trade and other payables and
contract liabilities.
Energy supply accruals includes £296.4 million (20 24: £ 3 47.7 million) in relation to the Group’s
obligation to deliver renewable certificates arising from activities in the Energy Solutions business.
The decrease is due to the lower value of REGOs compared to the prior year. The remaining balance
principally comprises third-party grid charge accruals of £57.7 million (2024: £65.5 million) and
Feed-in-Tariff accruals of £16.2 million (2024: £25.3 million).
Contract liabilities primarily relate to the advanced consideration received from customers for
fixed price electricity and gas contracts, for which revenue is recognised based on the stage of
completion of the contract. The balance reduces as revenue is subsequently recognised in the
following periods, offset by further advanced consideration received. Contract liabilities at the
reporting date were £23.4 million (2024: £29.3 million). The movement in the current year includes
a release of £2.2 million (2024: £4.2 million) as a result of the Opus Energy transaction.
3.8 Climate change
Climate change, and tackling it, is closely linked to the Group’s purpose, as set out in the Strategic
report on pages 1 to 50. The Sustainability Report, starting on page 18, sets out how the Group’s
ambition is not just to reduce emissions, but to have a net positive impact on the climate. The TCFD
disclosures, starting on page 31, along with the Principal Risks section, starting on page 41, set out
the Group’s approach to managing climate risks and opportunities, including scenario analysis.
Climate change is factored into short, medium and long-term forecasts and estimates used by the
Group. In the Viability statement on page 49 and the TCFD report, quantitative risk analysis on the
Group’s operational Biomass Generation, Flexible Generation and Pellet Production assets indicates
that asset exposure to impacts arising from transitional and physical climate-related risks currently
remains low.
3.7 Trade and other payables and contract liabilities continued
188
Drax Group plc Annual report and accounts 2025
Section 3: Operating assets and working capital continued
Climate change and the transition to Net Zero have been considered in the preparation of these Consolidated financial statements. The impact of future climate change regulation could have a material
impact on the currently reported amounts of the Group’s assets and liabilities. In preparing these Consolidated financial statements, the following climate change-related risks have been considered:
Area
Description
Page reference
Critical accounting judgements Impairment of assets and capitalisation of development project costs are sensitive to climate change. As detailed in note 2.4, the Group has impaired 132–134
and key sources of estimation the carrying value of the UK BECCS project to £nil in the current year due to the reduced likelihood of the project proceeding in the short to medium
uncertainty term. However if an appropriate regulatory framework were to be developed and the political environment was to become more supportive of
large-scale capital investment in UK BECCS, increasing the likelihood of the project progressing, a reversal of the impairment of certain UK BECCS
costs may be required. In the Clean Power 2030 report issued in November 2024 by the National Energy System Operator (NESO) it is assumed that
one biomass unit is converted to BECCS in their pathways. This is consistent with management’s view that development of BECCS at Drax Power
Station is important to the UK’s Net Zero strategy.
Impairment of non-current The Group’s expectations around the impacts of climate change, and in particular the requirements of the UK Government’s commitment to reach 133–134 and
assets Net Zero by 2050, are integral to the forecasts used in the Group’s impairment analysis. For example, the forward power price curves used take into 150–158
account expectations regarding the impact of climate change and the changing mix of generating assets on the UK power system. This could lead
to lower average power prices as the proportion of intermittent renewables increases, but this would be tempered by increased structural volatility,
meaning a need for biomass and other dispatchable generation.
Government and societal responses to climate change are still developing, and therefore financial forecasts cannot capture all potential future
scenarios. This presents uncertainty around future cash flows from an IAS 36 perspective. Sensitivities modelled seek to capture and assess some
of these potential scenarios, including those around reductions in power prices and volatility, which could be caused by climate change and its
impact on the energy transition, and biomass acceptability and changes in regulation. Consideration was given to and sensitivities modelled around
biomass generation and biomass prices after the low carbon dispatchable CfD is due to end in March 2031. 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.
Climate change could have an impact on weather patterns and the supply of renewable energy generation, affecting energy prices. Sensitivities
for these scenarios were run on the run-of-river hydro and pumped storage assets and did not indicate any potential impairments.
See note 2.4 for further details on the impairment assessments performed.
Going concern and viability
As above, forecast power prices and potential operational outages are also incorporated into the going concern and viability assessments.
Pages 15 and
Additionally, the impact of climate change on the OCGT assets has been considered as part of the going concern and viability assessments, by 131 for going
modelling the impact of low market volatility on the revenues of the OCGTs on the Group. Climate change could cause low market volatility by concern and
causing higher levels of wind and hydro generation. Whilst there is a risk of legislative change relating to unabated gas, the sites are underpinned 15 and 49–50
by long-term, Government-backed Capacity Market contracts. When they are operational these assets will be amongst the newest on the system. for viability
The NESO Clean Power 2030 report states gas generation will remain critical for security of supply.
Useful economic lives of The potential impact of climate change is one of the factors assessed in determining how long the Group anticipates both new and existing assets 173
non-current assets will operate for. For example, the UELs of the OCGT assets due to be commissioned in 2026 will be in line with the Group’s expectations around the
UK’s transition to a Net Zero position by 2050.
As outlined in note 3.1, UELs at Drax Power Station may decrease or increase as a result of future decisions, that may be directly or indirectly linked
to climate change. Were UELs to be shortened by 8 years to 2031, in line with the end of the low carbon dispatchable CfD, and if a decision was taken
not to develop UK BECCS or other opportunities (such as data centres) at the site, the impact on the annual depreciation charge would be an
increase of approximately £59.4 million. If the UELs of Drax Power Station assets that are currently limited to 2039 were to increase by a further 10
years, the annual depreciation charge would decrease by approximately £18.0 million.
3.8 Climate change continued
189
Drax Group plc Annual report and accounts 2025
Financial statements
Section 3: Operating assets and working capital continued
Area
Description
Page reference
Present value of As described in note 5.2, the decommissioning provisions in relation to Drax Power Station, the OCGTs and certain pellet plants have been assessed 203
decommissioning provisions with the support of third-party experts.
The third-party analyses specifically considered potential impacts of climate change, both physical and transitional, extending over the medium term,
and concluded that direct effects were unlikely to have a significant impact over this time horizon.
If Drax Power Station or the OCGT sites closed sooner than indicated by their current UELs, for reasons explained above, then the decommissioning
provisions would increase as the cash outflows would occur earlier; however, this would not have a material impact on the provisions.
Legislation and regulatory requirements could have an impact on the UELs of the OCGTs. If a law was enacted that could result in early closure of
unabated gas generation, this would result in an earlier utilisation of the provision.
Fair value of contingent Future regulatory changes in relation to the type of assets that can be built in the UK and support mechanisms in place, in response to climate 218
consideration change, could lead to the project at Damhead Creek 2 becoming more or less likely to progress than is currently assumed. The Group has assessed
the fair value of the contingent consideration at the reporting date to be £nil (2024: £9.4 million), but changes in the electricity industry and its
regulatory environment could lead to a change increasing the likelihood of the project proceeding. This could increase the fair value of the contingent
consideration. Currently, no reasonably possible changes would be expected to lead to a material increase in the fair value.
Defined benefit pension scheme
The Group operates one defined benefit pension scheme. The trustees of the scheme have an investment strategy that seeks to diversify its risk
210
exposures. The investment policy requires investment managers to take climate risk into account. The impact of climate change is relatively low due
to the risk profile of the assets held under the scheme.
Renewable certificates
The Renewable Energy Guarantees of Origin (REGO) market continues to be volatile. There was an increase in the demand for REGOs over the past
180
five years that was in part due to the need for organisations to decarbonise and promote their corporate social responsibility and environmental
social governance. This demand has reduced in the current year as high REGO prices resulted in customers looking for alternative options for
renewable energy. The run-of-river hydro assets and biomass assets are eligible to claim REGOs on the electricity they produce. Certificates are
utilised by the Energy Solutions segment, who submit them to Ofgem on behalf of their customers. Further volatility in REGO prices in the future
could impact the value of renewable certificates held, in turn impacting future revenues.
ROC valuations are comprised of two parts: the buy-out price element and an estimate of the future benefit that may be obtained from the ROC
recycle fund. The recycle fund provides a benefit where supplier buy-out charges are redistributed to the suppliers who presented ROCs in a
compliance period on a pro-rata basis. One of the key estimates of the recycle value are assumptions about the expected levels of renewable
generation, which is largely dependent on weather. Climate change could have an impact on weather patterns and therefore the supply of ROCs,
which would impact the recycle value recognised.
Sustainable financing
A number of the Group’s facilities have embedded aspects of the Group’s climate targets and commitments.
191
The GBP and EUR term loan (2024) and the sustainability-linked £450 million RCF have a customary margin grid referenced over SONIA or EURIBOR with
adjustments linked to certain Scope 1, 2 and 3 carbon emissions which are based on the Group’s 2030 Science Based Targets initiative (SBTi) targets.
Should the Group not meet the targets the Group would be liable to increased finance costs prospectively.
Deferred tax assets
Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which deductible temporary
159
differences can be utilised.
The Group currently has deferred tax assets related to its US business. The estimates used when assessing the future profitability of the US business
have been approved by the Board and are consistent with estimates used in the going concern and impairment assessments. As discussed above,
the impairment assessment factors in climate change risks in the forecasts. See note 2.4 for further details on how climate change has been factored
into the forecasts used in the impairment assessments.
3.8 Climate change continued
190
Drax Group plc Annual report and accounts 2025
Section 4: Financing and capital structure
This section provides further information about the Group’s capital structure (equity and debt
financing) and cash generated from operations during the year.
4.1 Cash and cash equivalents
Accounting policy
Cash and cash equivalents comprise cash at bank, short-term bank deposits with a maturity
of three months or less, and money market funds. Cash equivalents are highly liquid low-risk
investments and are readily convertible into known amounts of cash with a maturity of three
months or less. As such, there is an insignificant risk of a change in value. The carrying amount
of these assets is approximately equal to their fair value. It is the Group’s policy to deposit available
cash in low-risk bank accounts or short-term deposit accounts.
As at 31 December
2025 2024
£m £m
Cash at bank
95.5
73.5
Short-term deposits
204.7
179.4
Money market funds
1.9
103.1
Total cash and cash equivalents
302 .1
356.0
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, net of transaction costs that are directly attributable to the debt
issuance. Subsequent to initial measurement, debt instruments are measured at amortised cost
using the effective interest method. Transaction costs (any such costs incremental and directly
attributable to the issue of the financial instrument) are included in the calculation of the effective
interest rate and are recognised over the expected life of the instrument.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to
the extent that it is probable that some or all of the facility will be drawn down. Loan commitment
fees may be payable to the lender to entitle the Group to draw down at any time over a fixed period.
Where there is a fixed repayment date, regardless of when the loan is drawn down, the
commitment fees are recognised on a systematic basis over the period the Group is able to draw
down. Where the loan has the same fixed term, regardless of when the loan is drawn down, if
drawdown is probable, then the commitment fees are deferred until drawdown and are recognised
over the life of the instrument as part of the effective interest rate. If drawdown is not probable,
then loan commitment fees are recognised on a systematic basis over the period the Group is able
to draw down.
Fees that are paid for the availability of a facility where the amount and timing of drawdown can
vary at the Group’s discretion, such as under a revolving credit facility (RCF), are recognised on a
systematic basis over the life of the facility.
Debt instruments denominated in foreign currencies are revalued using the period-end exchange
rates, with any exchange gains and losses being recognised as a component of foreign exchange
gains or losses in the period they arise. The Group hedges foreign currency risk and interest rate
risk in accordance with the policies set out in note 7.2. Where hedging instruments are used to fix
cash flows associated with debt instruments, the debt instrument and the hedging instrument are
measured and presented separately on the Consolidated balance sheet. Where hedge accounting
is applied to foreign exchange risk and interest rate risk on debt instruments, gains and losses are
recycled to the Consolidated income statement within either foreign exchange gains or losses or
interest payable and similar charges, to match the exposure they are hedging, where effective.
The borrowings amounts disclosed in the tables below exclude any impact of hedging instruments.
Debt instruments are derecognised when the contractual obligations are discharged, cancelled
or expired. If the terms of a debt instrument are significantly modified, the existing liability is
derecognised and a new liability based on the modified terms is recognised at fair value. The
difference between the carrying value of the debt instrument based on the terms pre-modification
and post-modification is recognised in the Consolidated income statement.
If the terms of the debt instrument are not significantly modified, the modification is accounted for as
an adjustment to the carrying value of the existing liability. The revised cashflows are discounted at
the original effective interest rate and the difference between the new present value and the current
carrying value of the liability is recognised immediately in the Consolidated income statement.
191
Drax Group plc Annual report and accounts 2025
Financial statements
Section 4: Financing and capital structure continued
The Group’s borrowings at each reporting date were as follows:
As at 31 December 2025
As at 31 December 2024
Effective Effective
sterling Principal Amortised sterling Principal Amortised
interest rate
(1)
value Year of cost
interest rate
(1)
value Year of cost
% m maturity £m % m maturity £m
Non-current secured borrowings:
5.875% EUR loan notes 2029
7.5%
€350.0
2029
306.5
7.5%
€350.0
2029
289.5
UK infrastructure private placement facility (2019)
3.0%
£50.0
2029
49.7
3.0%
£50.0
2029
49.5
€31.5 + 2027 – €101.5 + 2026 –
UK infrastructure private placement facility (2020)
2.6%
£98.0
2030
125.2
2.5%
£98.0
2030
181.0
CAD term loan facility
–
–
n/a
–
6.1%
C$200.0
2026
111.0
€185.0 + 2028 – €185.0 + 2027 –
GBP and EUR term loan facility (2024)
5.5%
£100.0
2029
260.6
5.5%
£100.0
2029
251.9
2027 – 2027 –
£125m GBP term loan facility (2024)
6.2%
£125.0
2029
125.6
6.2%
£125.0
2029
124.9
£50m GBP term loan facility (2024)
5.5%
£50.0
2028
50 .1
5.5%
£50.0
2028
49.9
Current secured borrowings:
2.625% EUR loan notes 2025
–
–
n/a
–
4.6%
€143.8
2025
119.0
UK infrastructure private placement facility (2020)
2.1%
€70.0
2026
61.3
–
–
n/a
–
Total borrowings
979.0
1,176.7
Current
61.3
119.0
Non-current
917.7
1,057.7
(1) The effective sterling interest rate includes the impact of any interest rate and cross-currency interest rate swaps.
The effective sterling interest rate gives the rate that the Group has fixed to pay on each of the facilities, using a combination of interest rate swaps and cross-currency interest rate swaps. These
instruments as well as foreign currency forward contracts are used to fix the sterling repayment of the principal. See note 7.2.2 for further details on the Group’s hedging of borrowings.
During 2024, the Group refinanced a number of existing facilities to extend the Group’s average debt maturity profile. Further details of this refinancing activity is provided in the Group’s 2024 Annual
report and accounts on pages 217–218.
During July 2025, the Group agreed with the lenders of the GBP and EUR term loan facility (2024) to extend the maturity of the €135.0 million and £50.0 million tranches that were due to mature in 2027,
by one year, to 2028. This facility is sustainability-linked and has a customary margin grid referenced over SONIA or EURIBOR with adjustments linked to certain Scope 1, 2 and 3 carbon emissions which
are based on the Group’s 2030 Science Based Targets initiative (SBTi) targets. In August 2025, the Group chose to make an early repayment of the C$200.0 million CAD term loan facility that had an
original maturity of January 2026. In October 2025, the remaining €143.8 million outstanding principal of the 2.625% EUR loan notes was repaid.
In December 2025, the Group agreed a new £190.0 million term loan facility which remained undrawn at the reporting date (see note 2.7 for details on the Group’s committed facilities). This was
subsequently drawn during January 2026. Also during January 2026, the Group repaid €70.0 million of the UK infrastructure private placement facility (2020) at maturity.
The Group has a committed £450.0 million sustainability-linked revolving credit facility (RCF). During the period, the maturity of the facility was extended from August 2027 to August 2028. The facility
has a customary margin grid referenced over SONIA with adjustments linked to certain Scope 1, 2 and 3 carbon emissions which are based on the Group’s 2030 SBTi targets. No cash has been drawn
under this facility since its inception in August 2024 and it remained undrawn as at 31 December 2025. See note 2.7 for further details on the Group’s cash and committed facilities. See note 3.8 for
further details on climate change considerations related to borrowings.
The Group’s secured borrowings are secured by a charge over a number of the Group’s assets. See note 3.1 for details of the assets pledged as security. The weighted average interest rate payable, at the
reporting date, on the Group’s borrowings was 5.40% (2024: 5.39%).
4.2 Borrowings continued
192
Drax Group plc Annual report and accounts 2025
Section 4: Financing and capital structure continued
Reconciliation of borrowings
The table below shows the movement in borrowings during the current and prior year:
Year ended 31 December 2025
Opening Amounts Transaction Amounts Cash interest Non-cash Closing
amortised cost drawn costs repaid payments movements amortised cost
£m £m £m £m £m £m £m
2.625% EUR loan notes 2025
119.0
–
–
(124.8)
(3.2)
9.0
–
5.875% EUR loan notes 2029
289.5
–
–
–
(17.6)
34.6
306.5
UK infrastructure private placement facility (2019)
49.5
–
–
–
( 3.1)
3.3
49.7
UK infrastructure private placement facility (2020)
181.0
–
–
–
(9.2)
14.7
186.5
CAD term loan facility
111.0
–
–
(108.8)
(4.7)
2.5
–
GBP and EUR term loan facility (2024)
251.9
–
(0.2)
–
(13.0)
21.9
260.6
£125m GBP term loan facility (2024)
124.9
–
–
–
(7.9)
8.6
125.6
£50m GBP term loan facility (2024)
49.9
–
–
–
(3.0)
3.2
5 0.1
Total borrowings
1,176.7
–
(0.2)
(233.6)
(61.7)
97.8
979.0
Non-cash movements in borrowings during 2025 comprises foreign exchange losses of £32.1 million and interest costs of £65.7 million.
Year ended 31 December 2024
Opening Amounts Transaction Amounts Cash interest Non-cash Closing
amortised cost drawn costs repaid payments movements amortised cost
£m £m £m £m £m £m £m
2.625% EUR loan notes 2025
215.7
–
–
(88.7)
(4.4)
(3.6)
119.0
6.625% USD loan notes 2025
391.5
–
–
(393.9)
(13.0)
15.4
–
5.875% EUR loan notes 2029
–
298.8
(4.4)
–
(7.8)
2.9
289.5
UK infrastructure private placement facility (2019)
373.9
–
–
(325.0)
(10.9)
11.5
49.5
UK infrastructure private placement facility (2020)
206.4
–
(0.8)
(21.6)
(11.5)
8.5
181.0
CAD term loan facility
117. 8
–
(0.1)
–
(6.6)
(0 .1)
111.0
GBP and EUR term loan facility (2024)
–
258.0
(2.0)
–
(9.9)
5.8
251.9
£125m GBP term loan facility (2024)
–
125.0
(1.3)
–
(3.7)
4.9
124.9
£50m GBP term loan facility (2024)
–
50.0
(0.4)
–
(0.6)
0.9
49.9
Collateral facility
120.0
–
–
(120.0)
(6.4)
6.4
–
Total borrowings
1,425.3
731.8
(9.0)
(949.2)
(74.8)
52.6
1,176.7
Non-cash movements in borrowings during 2024 comprises foreign exchange gains of £30.7 million, interest costs of £85.0 million and gains on extinguishment of £1.7 million.
4.2 Borrowings continued
193
Drax Group plc Annual report and accounts 2025
Financial statements
Section 4: Financing and capital structure continued
As disclosed above, the Group has a number of cross-currency interest rate swaps and foreign
currency forward contracts that fix the sterling value of the principal repayment of certain foreign
currency denominated borrowings. Accordingly, the foreign exchange losses (2024: gains) on
borrowings disclosed above have been offset by £33.5 million of foreign exchange gains
(2024: £32.5 million losses) on cross-currency interest rate swaps and foreign currency forward
contracts that have been recycled to profit and loss as part of the hedging relationship. See note
2.7 for further details of the impact of the Group’s cash flow hedging relationships on Net debt.
See note 7.2.2 for further details of the Group’s cash flow hedging relationships on borrowings.
Compliance with loan covenants
The Group has customary financial covenants, principally in relation to the consolidated net
leverage ratio. The consolidated net leverage ratio broadly equates to a Net debt to Adjusted
EBITDA ratio calculation (see note 2.7), and is calculated in line with the Group’s financial covenant
requirements in the loan facility agreements
(1)
. The Group also has conditions placed on its dividend
payments as a result of the financing facilities. The Group is required to test its financial covenants
every six months at financial full-year and half-year reporting periods, and has complied with all
financial covenants during the current and prior year. The Group has significant headroom and
expects to continue to comply with these financial covenants for the foreseeable future, including
the five-year viability period. See the Viability statement on page 49 for further details on the
scenarios considered.
(1) The net debt calculation for financial covenants is based on Net debt as defined in note 2.7 but also includes the cash,
borrowings and lease liabilities attributable to non-controlling interests, and excludes the impact of hedging.
Letters of credit and surety bonds
As at 31 December 2025, the Group had issued letters of credit totalling £52.7 million
(2024: £56.8 million), of which £14.5 million (2024: £14.5 million) were utilised to cover commodity
trading collateral requirements. As at 31 December 2025, the Group had surety bonds with a
number of insurers totalling £76.5 million (2024: £89.0 million), of which £20.0 million
(2024: £30.0 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 operating activities, dividends paid as cash flows from
financing activities, and dividends received as cash flows from investing activities. The interest
repayments on lease liabilities are included within interest paid, and the lease principal repayments
are presented within cash flows from financing activities. Payments for short-term and low value
leases are included within cash flows from operating activities.
Cash generated from operations
Cash generated from operations is the starting point of the Group’s Consolidated cash flow
statement on page 139. The table below makes adjustments for any non-cash accounting items
to reconcile the Group’s net profit for the year to the amount of cash generated from the
Group’s operations.
Year ended 31 December
2025 2024
£m £m
Profit for the period
68.2
525.5
Adjustments for:
Interest payable and similar charges
(1)
75.7
107.5
Interest receivable and similar gains
(17.8)
(20.1)
Tax charge
227.9
121.3
Movement in provision for research and development tax credits
(2.0)
2.0
Share of losses from associates
2.2
1.6
Depreciation of property, plant and equipment
196.7
202.0
Depreciation of right-of-use assets
(1)
2 8 .1
28.6
Amortisation of intangible assets
17.0
14.2
Impairment of non-current assets
14.4
37 7.7
Losses on disposal of non-current assets
11.2
5.4
Other losses
1.7
9.4
Certain remeasurements of derivative contracts
(2)
(89.3)
23.4
Non-cash charge for share-based payments
14.0
15.7
Effect of changes in foreign exchange rates
(21.9)
(13.6)
Operating cash flows before movement in working capital
1,012.9
913.8
Changes in working capital:
Decrease in inventories
25.2
76.5
Decrease in receivables
392.2
136.2
Decrease in payables
(142.7)
(110.2)
Net movement in derivative-related collateral
83.7
(24.5)
Increase in provisions
11.5
10.4
Increase in renewable certificate assets
(247. 8)
(2.1)
Total cash released from working capital
12 2.1
86.3
Pension service charge less contributions paid
0 .1
(0.6)
Cash generated from operations
1,135.1
999.5
(1) Included within the adjustments above are interest charged on lease liabilities of £0.3 million and depreciation charged
on right-of-use assets of £1.7 million in relation to the Group’s salary sacrifice EV scheme. These costs are presented within
staff costs within operating and administrative expenses in the Consolidated income statement.
(2) 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.
4.2 Borrowings continued
194
Drax Group plc Annual report and accounts 2025
Section 4: Financing and capital structure continued
The most significant factors contributing to cash generated from operations are explained in
further detail below.
The £23.4 million inflow due to the adjustment for certain remeasurements for derivative
contracts in the current year (2024: £89.3 million outflow) mainly relates to unrealised fair value
losses (2024: unrealised fair value gains) on open derivative contracts offset by cash payments
on maturing trades.
Cash collateral is sometimes paid or received in relation to the Group’s commodity and treasury
trading activities. When derivative positions are out of the money for the Group, collateral may be
required to be paid to the counterparty. When derivative positions are in the money, collateral may
be received from counterparties. These positions reverse when mark-to-market positions reduce,
or contracts are settled, and the collateral is returned.
The Group has had a net cash outflow of £24.5 million from derivative-related collateral during
the year, as trades have matured and mark-to-market positions have reduced (2024: £83.7 million
inflow). As at 31 December 2025, the Group held £nil (2024: £9.8 million) in cash collateral receipts
recognised in payables, and had posted £19.4 million (2024: £4.7 million) of cash collateral
payments recognised in receivables.
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 utilised
£14.5 million (2024: £14.5 million) of letters of credit and £20.0 million (2024: £30.0 million) of
surety bonds to cover commodity trading collateral requirements. Letters of credit and surety
bonds utilised at the reporting date have reduced the requirement for cash collateral payments,
which has increased the amount by which receivables have decreased.
The Group has a strong focus on cash flow discipline and managing liquidity. The Group enhances
its working capital position by managing payables, receivables, inventories and renewable
certificate assets to make sure the working capital committed is closely aligned with operational
requirements. The impact of these actions on the cash flows of the Group is included within the
further detail explained below.
The table below sets out the key arrangements utilised by the Group to manage elements of its
working capital:
As at As at
31 December 31 December Inflow/
2025 2024 (outflow)
£m £m £m
Receivables monetisation
348.4
(1)
400.0
(51.6)
ROC monetisation sales
50.0
–
50.0
Deferred letters of credit
(73.2)
(150.3)
( 7 7.1)
(1) As at 31 December 2025 the Group had sold £275.6 million (2024: £386.3 million) of receivables under this facility
(see note 3.5). At 31 December 2025 the Group had recognised an amount payable to the facility provider of £72.8 million
(2024: £13.7 million), being the movement in the receivables sold compared to the prior month. This amount was paid to
the facility provider in January 2026, so as at 31 December 2025 the utilisation of the facility was £348.4 million
(2024: £400.0 million).
None of the balances in the table above are included within the Group’s definition of Net debt
or borrowings (see note 2.7 for further details on Net debt and note 4.2 for further details on
borrowings). The receivables monetisation facility is non-recourse in nature and therefore there is
no future liability associated with these amounts. Through standard ROC sales and ROC purchase
arrangements the Group is able to manage the working capital cycle of inflows and outflows of these
assets. The supply chain finance and deferred letters of credit facilities are linked directly to specific
payables. The deferred letters of credit facilities provide a short extension of payment terms of less
than 12 months. See note 3.7 for further disclosures relating to supplier finance arrangements.
The impact of these facilities on the cash flows of the Group is explained further below.
The cash inflow of £76.5 million (2024: £25.2 million) as a result of the decrease in inventories
primarily results from higher generation in December at Drax Power Station and the timing of
shipments.
The overall cash inflow of £136.2 million (2024: £392.2 million) due to lower receivables in the
current year is primarily a result of a reduction in energy prices compared to the prior year.
The Energy Solutions segment has access to a receivables monetisation facility which enables
it to accelerate cash flows associated with amounts receivable from energy supply customers on
a non-recourse basis. During the year the maturity of the facility was extended to March 2030,
from March 2027. The Group now has the option to set the facility limit between £300.0 million
and £400.0 million. Upon the Group’s request, the lender agreed to reduce the facility limit to
£350.0 million from August 2025 in line with the lower receivables balances in the Energy Solutions
business. The limit was £350.0 million as at 31 December 2025 (31 December 2024: £400.0 million).
4.3 Notes to the Consolidated cash flow statement continued
195
Drax Group plc Annual report and accounts 2025
Financial statements
Section 4: Financing and capital structure continued
Payables have decreased from the prior year, with a cash outflow of £110.2 million
(2024: £142.7 million). This is due to a reduction in other payables as the deferred letters of credit
have reduced in relation to OCGT capital expenditure now that the assets are nearing completion.
The decrease in payables is also due to the reduction in energy supply accruals compared to the
prior year as the value of REGOs has reduced year-on-year. Certain of the Group’s suppliers are able
to access a supply chain finance facility provided by a bank, for which funds can be accelerated
in advance of normal payment terms. At 31 December 2025, the Group had trade payables of
£62.6 million (2024: £38.4 million) related to this. The facility does not directly impact the Group’s
working capital, as payment terms remain unaltered with the Group and would remain the same
should the facility fall away.
The Group also has access to deferred letters of credit facilities under which the Group benefits
from an extension to payment terms of less than 12 months for a fee. The amount outstanding
under these facilities at 31 December 2025 was £73.2 million (2024: £150.3 million). Of the total
deferred letters of credit, £42.4 million (2024: £92.8 million) were utilised for capital expenditure
and £30.8 million (2024: £57.5 million) were utilised for trade payables. Utilisation of these payment
facilities impacted the purchases of property, plant and equipment line in the Consolidated cash
flow statement and the movement in payables line above.
The movement in renewable certificate assets during the year includes a combination of
generation, utilisation, purchases and sales, as described in note 3.3. Cash from renewable
certificates, and in particular ROCs, is typically realised several months after they are earned;
however, through standard ROC sales and ROC purchase arrangements the Group is able to
manage the working capital cycle of inflows and outflows of these assets. At 31 December 2025,
the Group had cash inflows of £50.0 million (2024: £nil) from using these standard renewable
certificate sales.
Changes in liabilities arising from financing cash flows
A reconciliation of the movements in liabilities arising from financing activities as a result of both
cash and non-cash movements is provided below:
Obligation to
Lease Hedging purchase own
Borrowings liabilities
instruments
(1)
shares Total
£m £m £m £m £m
At 1 January 2025
1,176.7
116.5
41.0
–
1,334.2
Cash flows from financing
activities
(233.8)
(28 .1)
(4.0)
–
(265.9)
Effect of changes in foreign
exchange rates
32.1
(5.9)
(33.5)
–
( 7. 3)
Other movements
4.0
16 .1
2.3
7. 3
29.7
At 31 December 2025
979.0
98.6
5.8
7.3
1,090.7
Lease Hedging
Borrowings liabilities
instruments
(1)
Total
£m £m £m £m
At 1 January 2024
1,425.3
135.8
32.5
1,593.6
Cash flows from financing activities
(226.4)
(27.4)
(31.5)
(285.3)
Effect of changes in foreign exchange rates
(30.7)
1.1
18.3
(11.3)
Other movements
8.5
7.0
21.7
37. 2
At 31 December 2024
1,176.7
116.5
41.0
1,334.2
(1) Hedging instruments include both financial assets and financial liabilities used to hedge liabilities arising from financing
activities. At 31 December 2025 hedging instruments include £4.9 million (2024: £nil) of financial assets and £10.7 million
(2024: £41.0 million) of financial liabilities.
Other movements on borrowings principally relate to interest. Other movements on lease liabilities
principally relate to discounting and additions in the year. Other movements on hedging
instruments include cross-currency interest rate swaps that are hedging both principal and interest
payments on borrowings. Interest payments are classified as operating cash flows in the
Consolidated cash flow statement. As such, fair value movements and cash settlements relating
to the interest payments on these hedges are recognised within the other movements line above.
Other movements on obligation to purchase own shares represent an initial liability of £7.2 million
a n d £0.1 million of interest charged in relation to this liability.
4.3 Notes to the Consolidated cash flow statement continued
196
Drax Group plc Annual report and accounts 2025
Section 4: Financing and capital structure continued
4.4 Equity and reserves
The Group’s ordinary share capital reflects the total number of shares in issue, which are publicly
traded on the London Stock Exchange.
Accounting policy
Ordinary shares are classified as equity as evidenced by their residual interest in the assets of the
Company after deducting its liabilities. Incremental costs directly attributable to the issue of new
shares or options are shown in equity as a deduction, net of tax, from the proceeds.
Issued equity
As at 31 December
2025 2024
£m £m
Issued and fully paid:
432,171,763 ordinary shares of 11
16
⁄29 pence each (2024: 427,770,766)
49.9
49.4
The movement in allotted and fully paid share capital of the Company during the year was as
follows:
Year ended 31 December
2025 2024
(number) (number)
At 1 January
427,770,766
424,923,406
Issued in respect of employee share schemes
4,400,997
2 , 8 47,360
At 31 December
432,171,763
427,770,766
The Company has only one class of shares, which are ordinary shares of 11
16
⁄29 pence each,
carrying no right to fixed income. Throughout the year, shares were issued in satisfaction of options
vesting in accordance with the rules of the Group’s employee share schemes (see note 6.2).
During the year 2,611,059 shares were issued at a weighted average exercise price of 190.2 pence
per share in respect of options vesting on employee share purchase schemes and 1,789,938 shares
were issued in respect of share options vesting on share awards with no exercise price.
Own shares reserve
The own shares reserve represents shares of Drax Group plc purchased under share buyback
programmes and held by the Company as Treasury shares, or shares of Drax Group plc held by the
EBT for the purpose of satisfying employee share plan awards. The EBT is treated as an extension
of the Company and therefore the Group, in accordance with IFRS 10.
The cost of the shares held by the EBT or the Company are recognised as a deduction from equity
until the shares are issued to employees under share awards, cancelled, reissued or disposed of.
The amount deducted from equity includes any incremental directly attributable costs. No gain or
loss is recognised in the Consolidated income statement on the purchase, sale, issue or cancellation
of the Company’s own equity instruments. Where the Company has entered into a forward
contract and has an obligation to purchase a fixed amount of its own shares for a fixed price, the
present value of this obligation is recognised as a deduction to equity, within retained earnings, and
a corresponding liability is recognised. The unwinding of the discount is included in interest payable
and similar charges in the Consolidated income statement. Once the shares have been received
under this forward contract, the deduction to equity within retained earnings is transferred to the
own shares reserve.
As at 31 December 2025, the own shares reserve comprises 91.8 million (2024: 57.8 million) shares
at a value of £534.6 million (2024: £314.2 million) held in treasury, and nil (2024: nil) shares held by
the EBT.
During the year, the EBT subscribed for 1.8 million of new shares at nominal value for a total of
£0.2 million, which were subsequently issued to employees to satisfy share plan awards during the
year.
Share buyback programme
On 31 July 2025, the Group announced a £450 million share buyback programme, to commence
immediately following the completion of the £300 million share buyback programme that took place
between 2024 and 2025.
Year ended 31 December 2025
Year ended 31 December 2024
Number of shares Total net cost Number of shares Total net cost
(million) £m (million) £m
Shares repurchased:
£300 million buyback programme
29.4
185.7
17.8
115.4
£450 million buyback programme
4.7
35.4
–
–
Total
34 .1
2 21.1
17. 8
115.4
Price paid per share:
Pence
Pence
Average
644.7
645.6
Range
Between 544.3 and 833.3
Between 618.8 and 673.9
The £300 million share buyback programme completed on 8 October 2025. The £450 million
programme is ongoing. During 2026, to 24 February 2026, under the £450 million share buyback
programme, 2.5 million shares have been repurchased at a total net cost of £21.9 million.
Shares purchased under these share buyback programmes are held in treasury within the own
shares reserve awaiting reissue or cancellation and have no voting rights attached to them. The
shares purchased by the Group have not been cancelled and so continue to be included in the
issued shares in the above table.
Section 4: Financing and capital structure continued
197
Drax Group plc Annual report and accounts 2025
Financial statements
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
2025 2024
£m £m
At 1 January
443.8
441.2
Issue of share capital
4.7
2.6
At 31 December
448.5
443.8
Other reserves
Capital
redemption Translation Merger Own shares Total other
reserve reserve reserve reserve reserves
£m £m £m £m £m
At 1 January 2024
1.5
75.5
710.8
(199.6)
588.2
Exchange differences on
translation of foreign
operations
–
(6.6)
–
–
(6.6)
Own shares utilised to satisfy
share-based payment
arrangements
–
–
–
0.8
0.8
Repurchase of own shares
through share buyback
programmes
–
–
–
(115.4)
(115.4)
At 1 January 2025
1.5
68.9
710.8
(314.2)
467.0
Exchange differences on
translation of foreign
operations
–
(66.8)
–
–
(66.8)
Issue of share capital
–
–
–
(0.2)
(0.2)
Own shares utilised to satisfy
share-based payment
arrangements
–
–
–
0.9
0.9
Repurchase of own shares
through share buyback
programmes
–
–
–
(221.1)
(221.1)
At 31 December 2025
1.5
2 .1
710.8
(534.6)
179.8
The capital redemption and own shares reserves initially arose when the Group completed previous
share buyback programmes. The own shares reserve comprises 91.8 million shares at a value of
£534.6 million held in treasury. The 91.8 million (2024: 57.8 million) shares held within the own
shares reserve have no voting rights attached to them .
Exchange differences relating to the translation of the net assets of the Group’s US and Canadian
subsidiaries from their functional currencies (USD and CAD) into sterling for presentation in these
Consolidated financial statements are recognised in the translation reserve.
Hedge reserve and Cost of hedging reserve
Movements in the hedge reserve and the cost of hedging reserve, which reflect the change
in fair value of derivative financial instruments designated into hedge accounting relationships
in accordance with IFRS 9 and related deferred tax, are set out in notes 7.3 and 7.4.
4.5 Non-controlling interests
Accounting policy
In accordance with IFRS 3, the Group elects on an acquisition-by-acquisition basis whether to
measure non-controlling interests (NCIs) at their proportionate share of the identifiable net assets
of the acquiree at the acquisition date, or at fair value. The Group treats transactions with NCIs
that do not result in a loss of control as transactions with equity owners of the parent company.
A change in ownership interest results in an adjustment between the carrying amounts of the
controlling interests and NCIs to reflect their relative interests in the subsidiary. Any difference
between the amount of the adjustment to NCIs and the fair value of any consideration paid or
received is recognised in equity, within retained profits.
At 31 December 2025, the Group has one (2024: two) subsidiary undertaking with NCIs.
During the year, the Group acquired the remaining 30% of NCI in Smithers Pellet Limited
Partnership increasing the Group’s interest to 100%. See the transactions with NCI section below
for further information.
Summarised financial information
The summarised financial information disclosed is shown on a 100% basis. It represents the results
of each entity below that would be shown in the subsidiaries’ own financial statements prepared in
accordance with IFRS, modified for Group-level fair value adjustments at acquisition, and gains or
losses on translation of the entities’ financial statements into the Group’s presentational currency,
which are recognised through the Consolidated statement of comprehensive income. All amounts
are presented before intercompany eliminations.
Section 4: Financing and capital structure continued
4.4 Equity and reserves continued
198
Drax Group plc Annual report and accounts 2025
As at 31 December 2025
As at 31 December 2024
Principal Non-controlling Non-controlling Non-controlling Non-controlling
place of interest interests interest interests
business % £m % £m
Lavington Pellet Limited Partnership
North America
25%
–
25%
5.9
Smithers Pellet Limited Partnership
North America
0%
–
30%
3.9
Total
–
9.8
Distributions of £1.2 million (2024: £0.4 million) were paid to non-controlling interests during the year.
Summarised statement of total comprehensive income
Year ended 31 December 2025
Year ended 31 December 2024
Total Total
comprehensive comprehensive
loss loss
Loss attributable Loss attributable
attributable to the Total to the attributable to the Total to the
non-controlling comprehensive non-controlling non-controlling comprehensive non-controlling
Revenue Loss interests loss interests Revenue Loss interests loss interests
£m £m £m £m £m £m £m £m £m £m
Lavington Pellet Limited Partnership
30.7
(18.4)
(4.6)
(18.9)
(4.7)
27.6
(0 .1)
–
(1.8)
(0.6)
Smithers Pellet Limited Partnership
(1)
3.6
(0.7)
(0.2)
(0.7)
(0.3)
12.3
(3.6)
(1.1)
(4.5)
(1.3)
Total
34.3
(19.1)
(4.8)
(19.6)
(5.0)
39.9
(3.7)
(1.1)
(6.3)
(1.9)
(1) The 2025 Summarised statement of total comprehensive income for Smithers Pellet Limited Partnership is for the period up to acquisition of the remaining NCI on 30 April 2025.
Summarised balance sheet
As at 31 December 2025
As at 31 December 2024
Current Non-current Current Non-current
Non-current assets Current assets liabilities liabilities Net assets Non-current assets Current assets liabilities liabilities Net assets
£m £m £m £m £m £m £m £m £m £m
Lavington Pellet Limited Partnership
–
3.4
(0.5)
(2.9)
–
22.0
7.6
(2.8)
( 3 .1)
23.7
Smithers Pellet Limited Partnership
13.9
3.3
(4.3)
–
12.9
Total
–
3.4
(0.5)
(2.9)
–
35.9
10.9
( 7.1)
( 3 .1)
36.6
Section 4: Financing and capital structure continued
4.5 Non-controlling interests continued
199
Drax Group plc Annual report and accounts 2025
Financial statements
Summarised cash flows
Year ended 31 December 2025
Year ended 31 December 2024
Net cash inflow/ Net cash
(outflow) Net cash outflow Net cash inflow Net cash Net cash
from from outflow from from outflow from inflow from
operating investing financing Net cash operating investing financing Net cash
activities activities activities outflow activities activities activities inflow
£m £m £m £m £m £m £m £m
Lavington Pellet Limited Partnership
5.1
(0.5)
(4.9)
(0.3)
2.2
(0.7)
0.3
1.8
Smithers Pellet Limited Partnership
(1)
(0.2)
–
–
(0.2)
1.4
(1.1)
–
0.3
Total
4.9
(0.5)
(4.9)
(0.5)
3.6
(1.8)
0.3
2 .1
(1) The 2025 Summarised cash flow for Smithers Pellet Limited Partnership is for the period up to acquisition of the remaining NCI on 30 April 2025.
Transactions with NCI
When the Group acquired Pinnacle during 2021, the NCI in Smithers Pellet Limited Partnership was 30%. In April 2025, the Group acquired the remaining 30% of NCI in Smithers Pellet Limited
Partnership, resulting in the Group now owning 100% of Smithers Pellet Limited Partnership. This resulted in a £2.9 million credit recognised in equity, within retained profits, for the difference between
the adjustment to NCI and the fair value of the consideration paid. The following table summarises the impact of changes in the Group’s ownership of Smithers Pellet Limited Partnership.
Year ended
31 December 2025
Carrying amount of non-controlling interest acquired
3.6
Consideration paid to non-controlling interest
(0.7)
Increase in equity attributable to owners of the parent company
2.9
Section 4: Financing and capital structure continued
4.5 Non-controlling interests continued
200
Drax Group plc Annual report and accounts 2025
Section 5: Other assets and liabilities
This section provides information on the assets and liabilities in the Consolidated balance sheet
that are not covered in other sections, including goodwill, other intangible assets and provisions.
5.1 Goodwill and intangible assets
Intangible assets are not physical in nature but are identifiable from other assets. Goodwill arises on
the acquisition of a business when the consideration paid exceeds the fair value of the identifiable
net assets acquired. Intangible assets other than goodwill can be acquired in business
combinations, acquired separately or internally generated.
Accounting policy
Goodwill is measured as the excess of the:
– consideration transferred; less
– amount of any non-controlling interest in the acquired entity; and
– acquisition date fair value of any previous equity interest in the acquired entity;
over the fair value of the identifiable net assets acquired.
Goodwill arising on the acquisition of a foreign operation is treated as an asset of that operation and
therefore denominated in the functional currency of the operation to which it is allocated. Goodwill
denominated in a foreign currency is subsequently translated at the rate prevailing at each
reporting date. Foreign exchange differences arising on retranslation are recognised in the
Consolidated statement of comprehensive income.
Goodwill is allocated to the cash-generating units (CGUs), or groups of CGUs, that are expected
to benefit from the synergies of the acquisition. If one or more CGUs, or group of CGUs, to which
goodwill is allocated are restructured, then the goodwill is reallocated to the CGUs impacted by the
restructure. Goodwill is considered to have an indefinite useful life, is not amortised, and is assessed
annually for impairment (see note 2.4 for further details).
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. Intangible assets with an indefinite useful life are assessed for impairment annually
at each reporting date, regardless of the presence of impairment indicators. The Group’s policy is
to recognise any impairment charge through accumulated amortisation and impairment.
Intangible assets are amortised over their anticipated useful economic lives (UELs), which are
reviewed at least at each financial year end. When reviewing UELs the assessment takes into
account regulatory changes, climate change, and commercial and technological changes.
Any changes to estimated UELs are applied prospectively. Amortisation of intangible assets
is presented through the amortisation line of the Consolidated income statement.
Method of Average UEL
amortisation (years)
At 31 December 2025
Customer-related assets:
BMM
Straight line
7
Computer software and licences:
Internally generated
Straight line
3
Acquired separately
Straight line
5
Carrying amounts are assessed for indicators of impairment at each reporting date. The customer-
related asset is attributable to the Drax Energy Solutions CGU following the acquisition of BMM.
During the year the Pinnacle customer-related asset and goodwill were impaired. During the prior
year the Opus Energy CGU customer-related asset was disposed of and the brand asset impaired
to £nil (see below for further details) .
201
Drax Group plc Annual report and accounts 2025
Financial statements
Software and Software and
Customer-related licences – internally licences – acquired Other
assets Brand generated separately intangibles Goodwill Total
£m £m £m £m £m £m £m
Cost and carrying amount:
At 1 January 2024
261.1
11.3
138.5
20.5
2.0
431.2
864.6
Additions at cost
–
–
6.9
–
–
–
6.9
Adjustment related to business combinations
–
–
–
–
–
(0.2)
(0.2)
Disposals
(211.1)
–
–
–
–
–
(211.1)
Transfers between categories
–
–
0.7
(0.9)
0.2
–
–
Transfers from property, plant and equipment (note 3.1)
–
–
2.9
0.3
–
–
3.2
Effect of changes in foreign exchange rates
(2.8)
–
–
0.1
(0.1)
(1.4)
(4.2)
At 1 January 2025
47.2
11.3
149.0
20.0
2.1
429.6
659.2
Additions at cost
–
–
12.3
0.6
–
–
12.9
Impairment
–
–
–
–
–
(8.5)
(8.5)
Disposals
–
(11.3)
(34.2)
(1.3)
–
(14.5)
(61.3)
Transfers between categories
–
–
0.1
(0.1)
–
–
–
Transfers from property, plant and equipment (note 3.1)
–
–
0.3
–
–
–
0.3
Effect of changes in foreign exchange rates
(1.1)
–
–
(0.1)
–
(10.4)
(11.6)
At 31 December 2025
46.1
–
127.5
19.1
2 .1
396.2
591.0
Accumulated amortisation and impairment:
At 1 January 2024
219.0
10.9
107. 8
12.4
1.8
14.5
366.4
Amortisation charge for the year
6.7
0.2
8.7
1.4
–
–
17.0
Disposals
(209.2)
–
–
–
–
–
(209.2)
Impairment
–
0.2
2.4
–
–
–
2.6
Transfers between categories
–
–
0.3
(0.3)
–
–
–
Effect of changes in foreign exchange rates
(0.8)
–
–
–
–
–
(0.8)
At 1 January 2025
15.7
11.3
119.2
13.5
1.8
14.5
176.0
Amortisation charge for the year
4.6
–
8.9
0.6
0.1
–
14.2
Disposals
–
(11.3)
(34.2)
(1.3)
–
(14.5)
(61.3)
Impairment
22.5
–
1.1
–
0 .1
–
23.7
Effect of changes in foreign exchange rates
(0.4)
–
–
(0 .1)
–
–
(0.5)
At 31 December 2025
42.4
–
95.0
12.7
2.0
–
152 .1
Net book value:
At 31 December 2024
31.5
–
29.8
6.5
0.3
415 .1
483.2
At 31 December 2025
3.7
–
32.5
6.4
0.1
396.2
438.9
Section 5: Other assets and liabilities continued
5.1 Goodwill and intangible assets continued
202
Drax Group plc Annual report and accounts 2025
Section 5: Other assets and liabilities continued
The Group has incurred research and development expenditure of £23.2 million (2024: £26.2 million),
which is included within operating and administrative expenses in the Consolidated income
statement.
Customer-related assets
Customer-related assets reflect the value of customer contracts acquired as part of business
combinations, or purchased customer contracts. The assets included customer contracts from
the acquisitions of Opus Energy, Pinnacle and BMM, and customer contracts acquired from
Pacific BioEnergy.
The Opus Energy customer-related asset was disposed of in 2024 as part of the sale of non-core
small and medium-sized enterprise (SME) meter points to EDF (see note 2.7 for further details).
The Pinnacle and Pacific BioEnergy customer-related assets were fully impaired during the year
(see note 2.4 for further details).
Opus Energy brand
The Opus Energy brand was acquired as part of the Opus Energy acquisition in February 2017.
During 2024 the Opus Energy brand was fully impaired, and the asset has been disposed of during
the year following the sale of the remaining meter points in the year. See note 2.7 for further
details.
Computer software and licences
Additions in the year include those in the ordinary course of business, which principally reflect
ongoing investment in business systems to support the Energy Solutions segment. Software assets
are amortised on a straight-line basis over their estimated UELs ranging from 1–23 years.
As at 31 December 2025, computer software assets under the course of construction amounted
to £21.1 million (2024: £12.5 million).
A £2.4 million impairment in respect of software specific to the Opus Energy business was
recognised in the prior year as it was no longer considered to have future value following the
Opus Energy transaction and the related restructuring of the Opus Energy business. See note 2.7
for further details.
Goodwill
The table below shows the carrying amount of goodwill by CGU:
Drax Energy Pellet Northern
Solutions Lanark Galloway Cruachan Operations Biomass Pellets Total
£m £m £m £m £m £m £m £m
Goodwill
At 1 January 2025
161.2
11.3
4 0 .1
26.9
175.6
–
–
415.1
Reallocations
–
–
–
–
(165.1)
156.7
8.4
–
Impairment (note 2.4)
–
–
–
–
–
–
(8.5)
(8.5)
Effect of changes in
foreign exchange rates
–
–
–
–
(10.5)
–
0 .1
(10.4)
At 31 December 2025
161.2
11.3
40 .1
26.9
–
156.7
–
396.2
Goodwill arising from the 2021 Pinnacle acquisition was previously allocated to the Pellet
Operations CGU. Following the change in CGU structure (see note 2.4 for further details), this
goodwill has been reallocated between Northern Pellets and Southern Pellets using a relative fair
value approach, in accordance with IAS 36. This resulted in C$15.7 million (£8.4 million based on
exchange rates at the time of reallocation) being allocated to Northern Pellets and US$210.8 million
(£156.7 million based on exchange rates at the time of reallocation) being allocated to Southern
Pellets.
5.2 Provisions
The Group makes provisions for reinstatement to cover the estimated costs of decommissioning
and demolishing or remediating the sites of its Biomass Generation, Flexible Generation and Pellet
Production assets at the end of their UELs. The Group has recognised restructuring provisions in
respect of the coal closure at Drax Power Station, the Opus Energy restructuring, and the Future
Focus transformation and restructuring (see note 2.7). The Group has also recognised onerous
contract provisions as a result of the Opus Energy restructuring, and fibre purchase contracts
for the Longview site that are no longer expected to be utilised.
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.
Specifically, a provision is made for the estimated decommissioning costs at the end of the UELs
of the Group’s 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
decommissioning provision is capitalised within property, plant and equipment (PPE), with the
capitalisation shown in the movement in reinstatement asset line in note 3.1. For leased assets,
an amount equivalent to the discounted provision is capitalised within right-of-use assets (ROU),
with the capitalisation shown in the movement in reinstatement asset line in note 3.2. The amount
5.1 Goodwill and intangible assets continued
203
Drax Group plc Annual report and accounts 2025
Financial statements
Section 5: Other assets and liabilities continued
capitalised 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
occur. Any costs to be incurred relating to the ongoing activities of the Group are excluded from the
provision. A provision for termination benefits is recognised at the earlier of when the Group can no
longer withdraw the offer of the termination benefit and when the Group recognises any related
restructuring costs.
Provisions are recognised for onerous contracts at the amount of the unavoidable costs of meeting
the obligations of the contract that exceed the economic benefit expected to flow from the
contract. The unavoidable costs are the lower of fulfilling the contract or paying any penalties to
terminate the contract early.
Other provisions relate to a provision in respect of dilapidation costs for rail cars.
Onerous
Decommissioning Restructuring contract Other
provisions provisions provisions provisions Total
£m £m £m £m £m
Carrying amount:
At 1 January 2025
72.0
10.8
13.1
–
95.9
Movement in provision charged to
PPE (note 3.1)
(9.6)
–
–
–
(9.6)
Movement in provision charged to
ROU (note 3.2)
(0.8)
–
–
4 .1
3.3
Transfer between provision
categories
(0.5)
–
–
0.5
–
Provisions utilised
(2.4)
(4.6)
(9.9)
(0 .1)
(17.0)
Charged/(credited) to profit or loss:
Additional provision recognised
–
5.0
22.0
–
27.0
Provisions released
–
(0.1)
–
–
(0 .1)
Unwinding of discount (note 2.5)
2.9
–
–
–
2.9
Effect of changes in foreign
exchange rates
0.2
–
–
–
0.2
At 31 December 2025
61.8
11.1
25.2
4.5
102.6
Current
2.9
7.3
7. 0
0.4
17. 6
Non-current
58.9
3.8
18.2
4.1
85.0
Decommissioning provisions
Decommissioning provisions are made in respect of Drax Power Station (£49.4 million), the OCGTs
(£ 7.3 million), and certain pellet plants (£5.1 million).
Decommissioning work relating to certain elements of the coal operations at Drax Power Station
began in 2024 and is expected to be completed by the end of 2026. All other decommissioning
work relating to the Drax Power Station site is assumed to take place 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 UELs of each site, which are estimated to be between 2033 and 2044.
A legal obligation exists to decommission and demolish the OCGT sites at the end of station lives,
which are assumed to be 2050.
Of the £9.6 million movement in the decommissioning provision charged to PPE, £2.3 million relates
to additions offset by an £11.9 million adjustment for changes in assumptions.
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 significantly impact the estimated cost, such as
changes in prices, or changes in expected decommissioning plans. The most recent valuation for
the Drax Power Station decommissioning provision took place in December 2023. For the majority
of the pellet plant decommissioning provisions, the most recent valuations took place in December
2023. One plant received an updated valuation in December 2025. The exercise to assess the
decommissioning provision relating to the three OCGT sites was performed in July 2024. There
have been no significant changes to the scope, expected timing or prices since the most recent
valuations that would indicate an updated valuation should be performed earlier than the planned
triennial basis.
An inflation curve is used to inflate the separate elements of the decommissioning cost estimates
(which are based on current prices) to the dates that they are expected to occur. These values are
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 for Drax Power Station and the OCGTs, and Canadian
Government bonds for the pellet plants, 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 specific to the liability.
The discount rates used for the Group’s decommissioning provisions range from 3.68%–6.00%
(2024: 3.33%–5.78%).
The cost of decommissioning Drax Power Station is estimated, based on the midpoint of the range
calculated by third-party experts, to be £93.6 million at current prices with a range of £65.5 million
to £121.6 million. The average cost of decommissioning each of the three OCGT sites is estimated
to be £5.6 million at current prices with a range of between £5.5 million and £5.8 million.
For Drax Power Station decommissioning provision if inflation and discounting assumptions,
consistent with those applied to the recognised Drax Power Station decommissioning provision,
were applied to the range calculated by the third-party experts this would result in an estimated
provision range of £35.3 million to £63.1 million. An increase of 100 basis points in the inflation and
5.2 Provisions continued
204
Drax Group plc Annual report and accounts 2025
Section 5: Other assets and liabilities continued
discount rates used in the calculation of the Drax Power Station decommissioning provision
would result in an increase of £9.3 million (2024: £8.5 million) and a decrease of £7.6 million
(2024: £6.4 million) respectively in the amount recognised. The relationship between the change
in basis points and change in the 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 going to be incurred
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 significant 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 decommissioning provisions are not considered a key source of estimation uncertainty as there
is not a significant risk of a material adjustment to the carrying amounts within the next financial
year. Decommissioning provisions are based on costs sufficiently 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 financial year to update this estimate that would result in a material
adjustment.
Restructuring provisions
The restructuring provision at 31 December 2025 includes coal closure provision costs for
engineering works that are required to make the coal units and related assets safe following the
cessation of operations. The formal closure of the coal units commenced at the end of the winter
contingency service in March 2023.
The restructuring provision also includes redundancy costs in relation to the Opus Energy
restructuring. The sale of the non-core SME customer meter points resulted in a reduction in the
required headcount to reflect the fact that Energy Solutions no longer has an SME customer base
and its focus on core industrial and commercial (I&C) customer and renewables services.
The Group has commenced a transformation and restructuring programme (“Future Focus”)
described in note 2.7. A provision has been made for expected redundancy costs where
consultations are already in progress and numbers of headcount reduction are known at the
reporting date.
Of the £11.1 million balance at 31 December 2025, £6.1 million relates to engineering works
associated with the coal closure, of which £2.3 million is expected to be utilised in 2026, with the
remaining amounts expected to be utilised in the period from 2027 to 2029. A further £5.0 million
relates to Future Focus employee severance costs, all of which are expected to be utilised in 2026.
Onerous contract provisions
As a result of the Opus Energy restructuring in the prior year, an onerous contract provision was
recognised. Of the £25.2 million onerous contract provision at 31 December 2025, £3.2 million
relates to Opus Energy with £2.2 million expected to be utilised in 2026 with the remaining
amounts expected to be utilised in the period from 2027 to 2029.
Due to the decision to pause the Longview pellet plant development (see note 2.4 for further
details), the Group has certain fibre purchase contracts where the fibre can no longer be utilised.
An onerous contract provision of £22.0 million has been recognised in relation to these contracts,
with £4.8 million expected to be utilised in 2026 and the remaining amounts expected to be utilised
in the period from 2027 to 2029.
5.2 Provisions continued
205
Drax Group plc Annual report and accounts 2025
Financial statements
Section 6: People costs
The notes in this section relate to the remuneration of the Directors and employees of the Group,
including the Group’s obligations under retirement benefit schemes.
6.1 Employee costs
This note provides a 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, Biomass Generation and Flexible Generation sites), Energy Solutions (employees in
the Group’s Energy Solutions 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 87.
Staff costs (including Executive Directors)
Year ended 31 December
2025 2024
£m £m
Wages and salaries
249.9
262.0
Social security costs
29.2
26.5
Defined benefit pension service cost (note 6.3)
1.6
2 .1
Defined contribution pension cost (note 6.3)
24.3
24 .1
Share-based payments (note 6.2)
15.7
14 .1
Termination benefits
10.4
8.7
Total staff costs
331.1
337.5
Staff costs capitalised
(14.2)
(14.7)
Staff costs included in operating and administrative expenses
(note 2.3)
316.9
322.8
Average monthly number of people employed (including Executive Directors)
Year ended 31 December
2025 2024
(number) (number)
Operations (Pellet Production)
818
815
Operations (Biomass Generation)
469
526
Operations (Flexible Generation)
175
163
Energy Solutions
449
802
Central corporate and commercial functions
1,217
1,151
Total average monthly number of people employed
3 ,1 2 8
3,457
6.2 Share-based payments
The Group operates five share option schemes for employees: the Long-Term Incentive Plan (LTIP)
for Executive Directors and senior employees, 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 qualifying UK
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, DSP, One Drax Awards, ESPP and SAYE share-based payment schemes are equity-
settled. 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.
Where share options have an exercise price, the proceeds received are credited to equity.
Employer’s social security obligations payable by the Group in respect of share-based payment
awards are charged to the Consolidated income statement in line with IAS 19. Costs recognised
in the Consolidated income statement in relation to share-based payments during the year were
as follows:
Year ended 31 December
2025 2024
£m £m
LTIP
11.0
7.1
DSP
0.8
0.6
One Drax Awards
1.6
1.6
ESPP
0.1
0.2
SAYE
2.2
4.6
Total share-based payment expense included within staff costs
(note 6.1)
15.7
14 .1
206
Drax Group plc Annual report and accounts 2025
Section 6: People costs continued
Movements in the number of share options outstanding at the reporting date for each scheme is shown below. Discretionary awards are issued at nil cost and so have no exercise price.
Discretionary awards
ESPP
SAYE
Three-year Five-year
weighted weighted
Weighted average average average
LTIP DSP One Drax Awards exercise price ESPP exercise price SAYE three-year exercise price SAYE five-year
(number) (number) (number) (pence) (number) (pence) (number) (pence) (number)
At 1 January 2024
5,385,172
285,774
259,788
469
64,497
470
2,886,902
173
2,585,809
Granted
3,065,741
106,341
360,448
468
126,303
378
3,334,272
378
470,417
Dividend shares granted
171,367
10,460
9,053
–
–
–
Forfeited
(228,490)
–
(31,443)
469
(3,801)
455
(111,452)
461
(4,521)
Exercised
(1,846,285)
(109,827)
(260,439)
398
(126,938)
327
(634,525)
290
(33,319)
Cancelled
–
–
–
–
496
(1, 570,14 4)
492
(205,988)
Expired
–
–
–
–
331
(4,572)
298
(1,008)
At 1 January 2025
6,547,505
292,748
337, 4 07
544
60,061
405
3,900,481
182
2,811,390
Granted
2,922,838
90,073
295,702
527
91,918
453
708,527
453
207,49 8
Dividend shares granted
137,719
7,70 6
15,053
–
–
–
Forfeited
(1, 037,7 3 4)
–
(16,096)
544
(1,842)
413
(232,975)
367
(45,810)
Exercised
(1,505,654)
(84,808)
(348,446)
516
(112,841)
523
(2 9 6,161)
129
(2,202,057)
Cancelled
–
–
–
–
404
(238,679)
430
(20,628)
Expired
–
–
–
–
563
(4,345)
–
At 31 December 2025
7, 0 6 4 ,674
305,719
283,620
548
37,29 6
404
3,836,848
395
750,393
6.2 Share-based payments continued
207
Drax Group plc Annual report and accounts 2025
Financial statements
Section 6: People costs continued
Key information about each active scheme for options granted and exercised in the current and prior year is presented below.
Year ended 31 December 2025
Scheme
LTIP
DSP
One Drax Awards
ESPP
SAYE three-year
SAYE five-year
Weighted average share price of options exercised during the year at the date of exercise (pence)
599
586
570
612
665
665
Number of options exercisable at reporting date
102,942
7,6 48
–
37, 296
75,233
2,058
Weighted average exercise price of options exercisable at reporting date (pence)
–
–
–
548
423
420
Between Between
Range of exercise price of options outstanding at reporting date (pence)
–
–
–
548
378 and 563 127 and 563
Weighted average remaining contractual life (months)
50
15
3
–
24
42
Year ended 31 December 2024
Scheme
LTIP
DSP
One Drax Awards
ESPP
SAYE three-year
SAYE five-year
Weighted average share price of options exercised during the year at the date of exercise (pence)
484
484
484
565
538
538
Number of options exercisable at reporting date
120,705
13,351
–
–
149,486
120,418
Weighted average exercise price of options exercisable at reporting date (pence)
–
–
–
–
427
142
Between Between
Range of exercise price of options outstanding at reporting date (pence)
–
–
–
544
378 and 563 127 and 563
Weighted average remaining contractual life (months)
51
22
2
2
32
20
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 vesting 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 for each scheme is determined by calculating the historical volatility of the Group’s share price over the same length of time
as the vesting period for that scheme. The expected life used in the valuations is based on the length of the vesting period. This is based on management’s 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.
6.2 Share-based payments continued
208
Drax Group plc Annual report and accounts 2025
Section 6: People costs continued
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 2025
Scheme
LTIP
LTIP
DSP
One Drax Awards
ESPP
ESPP
SAYE three-year
SAYE five-year
20 March 2 September 20 March 20 March 1 March 1 September 10 April 10 April
Grant date 2025 2025 2025 2025 2025 2025 2025 2025
Monte Monte Black- Black- Black- Black- Black- Black-
Valuation model used Carlo Carlo Scholes Scholes Scholes Scholes Scholes Scholes
Share price at grant date (pence)
581
627
581
581
610
645
546
546
Exercise price (pence)
–
–
–
–
519
548
453
453
Dividend yield
–
–
–
–
5.11%
3.60%
6.42%
6.77%
Vesting period of options granted
3 years
3 years
3 years
1 year
6 months
4 months
3 years
5 years
Expected volatility
35.75%
32.61%
35.75%
28.51%
21.52%
24.24%
36.24%
39.10%
Annual risk-free interest rate
4.18%
3.99%
4 .18%
4 .13%
4.38%
4.01%
3.96%
4.03%
Weighted average fair value of options granted at measurement date (pence)
449
484
581
581
112
123
128
132
Year ended 31 December 2024
Scheme
LTIP
LTIP
DSP
One Drax Awards
ESPP
ESPP
SAYE three-year
SAYE five-year
15 March 3 September 15 March 15 March 1 March 1 September 10 April 10 April
Grant date 2024 2024 2024 2024 2024 2024 2024 2024
Monte Monte Black- Black- Black- Black- Black- Black-
Valuation model used Carlo Carlo Scholes Scholes Scholes Scholes Scholes Scholes
Share price at grant date (pence)
473
641
473
473
466
639
483
483
Exercise price (pence)
–
–
–
–
396
543
378
378
Dividend yield
–
–
–
–
5.97%
3.17%
5.80%
6.42%
Vesting period of options granted
3 years
3 years
3 years
1 year
6 months
6 months
3 years
5 years
Expected volatility
37.4 8%
38.20%
37.4 8%
35.35%
42.23%
3 7.39%
36.94%
4 0 .15%
Annual risk-free interest rate
4.28%
3.88%
4.28%
4.98%
5.24%
4.80%
4.13%
4.03%
Weighted average fair value of options granted at measurement date (pence)
363
447
473
473
109
147
132
132
6.2 Share-based payments continued6.2 Share-based payments continued
209
Drax Group plc Annual report and accounts 2025
Financial statements
6.2 Share-based payments continued
Each of the Group’s share-based payment schemes vest subject to continued employment, or
“good leaver” termination provisions. For the LTIP, DSP and One Drax Awards, each time a dividend
is paid out during the vesting period of the scheme, participants are entitled to receive further
share options of equivalent value to the dividends, determined using the market value of shares on
the ex-dividend date, and which are formally granted on the vesting date for each scheme. As such,
a dividend yield of 0% is input into the fair value calculations for each of these schemes to reflect
that the fair value of each share option is not reduced by dividends paid out over the vesting period.
LTIP
The LTIP was introduced in 2020 for Executive Directors and senior employees. 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’s 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 basic EPS over three years. The fair value of LTIP options with the TSR vesting
condition is calculated with the support of external specialists due to the TSR vesting condition being
market-based and therefore requiring a valuation to be performed using a Monte Carlo simulation.
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.
One Drax Awards
One Drax Awards are granted to certain employees below senior management and vest after one
year. The number of shares awarded to the employee is equivalent to 10% of their base salary
based on the Group’s share price at the grant date.
ESPP
The ESPP scheme is offered to all US and Canada-based 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 fixed 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 five days immediately preceding
the grant date, determined in accordance with the scheme rules. The options are exercisable at the
end of three or five-year savings contracts.
Additional information in relation to the Group’s share-based incentive plans is included in the
Remuneration Committee report starting on page 87.
6.3 Retirement benefit obligations
The retirement benefit schemes operated by the Group are detailed in the table below:
Name of scheme
Type of benefit
Status
Country
Closed to new
Defined benefit members on
Drax 2019
Scheme
final salary
transfer in 2019
UK
My Drax Retirement Savings Open to new
Section of the Aon MasterTrust
Defined contribution
members
UK
Open to new
Drax Biomass Inc. 401(K) Plan
Defined contribution
members
US
Pinnacle Registered Retirement Open to new
Savings Plan
Defined contribution
members
Canada
Trustee governance (defined benefit pension schemes)
The Drax 2019 Scheme is administered by a sole trustee (PAN Trustees UK LLP, “the Trustee”),
which is legally separate from the Group. The Trustee is required by law to act in the interest of all
relevant beneficiaries and is responsible for the investment policy for the assets and the day-to-day
administration of the defined benefit scheme.
Accounting policy
Payments to defined 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 defined contribution schemes represents the total contributions from the Group
earned by employees for services rendered during the current period.
For the defined benefit pension scheme, the cost of providing benefits 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 and the
return on plan 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. Defined benefit 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 income is recognised in the Consolidated income statement within
either interest payable and similar charges or interest receivable and similar gains.
Significant estimation uncertainty
Measurement of the defined benefit 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 modified 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.
210
Drax Group plc Annual report and accounts 2025
Section 6: People costs continued
The assumptions applied in 2025 have been prepared in accordance with third-party actuarial
advice received and are consistent with those applied in the prior period.
Defined contribution schemes
The Group operates three defined contribution schemes for all qualifying employees. Pension costs
for the defined contribution schemes are as follows:
Year ended 31 December
2025 2024
£m £m
Total included in staff costs (note 6.1)
24.3
24 .1
As at 31 December 2025, contributions of £1.7 million (2024: £3.1 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.
Defined benefit scheme
The Group currently operates one defined benefit scheme. The net pension surplus is as follows:
As at 31 December
2025 2024
£m £m
Total net surplus recognised in the Consolidated balance sheet
23.8
24.7
At 31 December 2025, application of the accounting assumptions used in relation to the defined
benefit scheme, which are described in further detail below, continued to result in a net position
of surplus assets over liabilities.
The Drax 2019 Scheme (the Scheme) is a defined benefit final salary plan, where employees are
entitled to retirement benefits based on their final 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 benefits are provided. The Scheme is open to future accrual of benefits
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.
The Scheme exposes the Group to actuarial and other risks, the most significant of which are
considered to be:
Investment risk
The Scheme’s liabilities are calculated using a discount rate set with
reference to corporate bond yields; if assets underperform against
this yield, this creates a deficit. The Scheme holds a significant
proportion of growth assets (diversified growth funds, direct lending,
credit and property) 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’s long-term objectives.
Discount rate risk
A decrease in corporate bond yields will increase the value placed
upon the Scheme’s liabilities, although this will be partially offset by
an increase in the value of the Scheme’s bond holdings.
Longevity risk
The majority of the Scheme’s obligations are to provide benefits for
the life of the member, so increases in life expectancy will result in
an increase in the liabilities of the Scheme.
Inflation risk
The majority of the Scheme’s obligations to pay benefits are linked
to RPI inflation and, as such, higher inflation leads to higher liabilities.
In most cases, caps on inflationary increases are in place to protect
against extreme inflation. The Scheme has a significant holding in
liability-driven investments to protect against inflation risk.
Credit risk
Around 95% of the Scheme’s overall funded liabilities are currently
hedged against interest rates and inflation 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’s holding in corporate bonds mitigates
this risk to some extent.
Other risks include operational risks (such as paying out the wrong benefits), legislative risks (such
as the UK 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 Scheme’s liabilities shown below reflect management’s
understanding of the benefits due at the reporting date and make no allowance for any potential
impact on benefits of recent case law (such as the recent High Court judgment in the case of Virgin
Media Limited vs NTL Pension Trustees II Limited).
6.3 Retirement benefit obligations continued
211
Drax Group plc Annual report and accounts 2025
Financial statements
Section 6: People costs continued
A qualified third-party actuary, Aon, carried out the most recent funding valuation of the Scheme
as at 31 March 2025. The actuarial review at 31 December 2025 is based on the same underlying
membership and other data as this funding valuation. The Scheme’s Board accepted the advice
of the actuary and approved the use of these assumptions for the purpose of assessing the
Scheme’s costs.
The result of the latest funding valuation has been adjusted to 31 December 2025, taking into
account experience over the period since 31 March 2025, changes in market conditions and
differences in financial and demographic assumptions. The present value of the defined
benefit obligation and the related current service costs were measured using the projected
unit credit method.
The principal assumptions for the Scheme across the current and prior year are set out below.
As at 31 December
2025 2024
% p.a. % p.a.
Discount rate
5.6
5.5
Inflation (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
3.4
The defined benefit obligation for the Scheme as at 31 December 2025 allows for expected benefit
increases that will be awarded in 2026, based on known 2025 indices.
Mortality assumptions are based on recent actual mortality experience of the Scheme’s members
and allow for expected future changes in mortality rates. See table below for further details of
mortality assumptions.
As at 31 December
2025 2024
(years) (years)
Male
Female
Male
Female
Life expectancy for pensioner
members aged 60 at the reporting
date
26
28
25
27
Life expectancy at 60 for non-
pensioners aged 45 at the reporting
date
27
28
26
28
The weighted average duration of the Scheme at 31 December 2025 based on the IAS 19 position
was 14 years (2024: 15 years).
The defined benefit obligation in respect of the Scheme includes benefits for current employees of
the Group (23%), former employees of the Group who are yet to retire (10%) and retired pensioners
(67%).
The net surplus recognised in the Consolidated balance sheet in respect of the Scheme is the
excess of the fair value of the plan assets over the present value of the defined benefit obligation,
determined as follows:
As at 31 December
2025 2024
£m £m
Fair value of plan assets
208.6
203.4
Defined benefit obligation
(184.8)
(178.7)
Net surplus recognised in the Consolidated balance sheet
23.8
24.7
The total charges and credits recognised in the Consolidated income statement, within operating
and administrative expenses and interest receivable and similar gains, are as follows:
Year ended 31 December
2025 2024
£m £m
Current service cost included in staff costs (note 6.1)
1.6
2 .1
Interest income on net defined benefit surplus included in interest
receivable and similar gains (note 2.5)
(1.4)
(0.9)
Total amount recognised in the Consolidated income statement
0.2
1.2
6.3 Retirement benefit obligations continued
212
Drax Group plc Annual report and accounts 2025
Section 6: People costs continued
Changes in the present value of the defined benefit obligation of the Scheme are as follows:
Year ended 31 December
2025 2024
£m £m
Defined benefit obligation at 1 January
178.7
201.9
Current service cost
1.6
2.1
Interest cost
9.6
9.0
Actuarial losses/(gains) on defined benefit obligation
4.9
(24.3)
Benefits paid
(10.0)
(10.0)
Defined benefit obligation at 31 December
184.8
178.7
The actuarial losses of £4.9 million (2024: gains of £24.3 million) reflect gains of £5.9 million
(2024: £23.5 million) arising from changes in financial assumptions, losses of £9.3 million
(2024: £1.0 million) arising from scheme experience (including reflecting updated census data
provided for the latest triennial actuarial valuation), and losses of £1.5 million (2024: gains of
£1.8 million) arising from changes in demographic assumptions.
The gains in the current year due to changes in financial assumptions principally reflect the
reduction in the present value of the Scheme’s liabilities arising as a result of the movement in
discount rate assumption to 5.6% p.a. (2024: 5.5% p.a.) following an increase in corporate bond
yields, along with a reduction in overall long-term inflationary assumptions, reflecting market
pricing.
Changes in the fair value of plan assets are as follows:
Year ended 31 December
2025 2024
£m £m
Fair value of plan assets at 1 January
203.4
220.3
Interest on plan assets
11.0
9.9
Remeasurement gains/(losses) on fair value of plan assets
2.1
(18.8)
Employer contributions
2.1
2.0
Benefits paid
(10.0)
(10.0)
Fair value of plan assets at 31 December
208.6
203.4
There were contributions of £nil (2024: £0.2 million) outstanding at the reporting date.
The actual return on plan assets in the period was a gain of £13.1 million (2024: loss of £8.9 million).
Remeasurement losses on the defined benefit pension scheme of £2.8 million (2024: gains of
£5.5 million) were recognised in the Consolidated statement of comprehensive income. These are
made up as follows:
Year ended 31 December
2025 2024
£m £m
Actuarial (losses)/gains on defined benefit obligation
(4.9)
24.3
Remeasurement gains/(losses) on fair value of plan assets
2.1
(18.8)
Total remeasurement (losses)/gains recognised in other
comprehensive income
(2.8)
5.5
The fair values of the major categories of plan assets were as follows:
As at 31 December
2025
2024
Quoted Unquoted Total Quoted Unquoted Total
£m £m £m £m £m £m
Gilts
83.1
–
83.1
85.5
–
85.5
Equities
40.9
–
40.9
31.3
–
31.3
Bonds:
Emerging market
8.1
–
8 .1
5.3
–
5.3
High yield
14 .1
–
14 .1
14.0
–
14.0
Corporate
–
–
–
3.4
–
3.4
Property
4.7
15.1
19.8
6.7
15.0
21.7
Infrastructure
11.2
–
11.2
9.6
–
9.6
Cash and cash equivalents
2.1
–
2.1
5.3
–
5.3
Other assets:
Private credit
–
15.8
15.8
–
16.6
16.6
Downside risk management
(1)
4.7
–
4.7
4.7
–
4.7
Dynamic asset allocation
(1)
3.8
–
3.8
–
–
–
Asset backed securities
5.0
–
5.0
4.0
–
4.0
Credit
–
–
–
–
2.0
2.0
Fair value of total plan assets
17 7.7
30.9
208.6
169.8
33.6
203.4
(1) Downside risk management relates to assets that are expected to reduce sensitivity to markets and protect in times of
market falls. Typically, these strategies achieve this through the use of derivatives. Dynamic asset allocation relates to
strategies that aim to generate returns by exploiting market inefficiencies and the Scheme’s investment advisers short and
medium term economic and market views.
6.3 Retirement benefit obligations continued
213
Drax Group plc Annual report and accounts 2025
Financial statements
Section 6: People costs continued
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 benefits), and life expectancy have a potentially significant effect on the
measurement of the Scheme’s 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 defined benefit 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
2025 2024
As at 31 December £m £m
Discount rate
– Increase
0.25%
5.7
6.3
– Decrease
0.25%
(6 .1)
(6.5)
Inflation rate
(1)
– Increase
0.25%
(4.5)
(5.2)
– Decrease
0.25%
4.4
5.1
Life expectancy
– Increase
1 year
(5.2)
(4.8)
– Decrease
1 year
5.3
5.1
(1) The sensitivity of the Scheme’s liabilities to salary and pension increases is closely correlated with inflation, therefore
separate sensitivities have not been performed on salary and pension increases as 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 UK 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’s 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 benefits). 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 does not expect to make any contributions to the Scheme during the 12 months ending
31 December 2026.
The latest actuarial valuation of the Scheme which was carried out as at 31 March 2025 resulted
in a funding surplus of £7.1 million and so no deficit recovery plan was required.
It was agreed that the Group will cease paying contributions in respect of future accrual of benefits,
with the cost being met from surplus assets, subject to annual reviews. The Group agreed to make
an additional payment in 2029 if at that point the Scheme is not fully funded on a low-risk basis, as
agreed between the Group and Trustee at the time. At this point, the Scheme is expected to be fully
funded on the agreed low-risk basis, unless material adverse changes in economic conditions arise
compared to those assumed in the valuation. The Group is satisfied that the additional payment
is manageable within the Group’s business plan. As part of the funding agreement between the
Group and the Trustee, a surety bond has been provided by the Group.
The Trust Deed of the Scheme provides 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.
Update on the Virgin Media Limited v NTL Pension Trustees II Limited case
In June 2023, the 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. The
ruling confirmed the need for actuarial confirmation where schemes made changes to benefits
between 6 April 1997 and 5 April 2016, and any relevant amendments were void without the
appropriate confirmation. The Department for Work and Pensions has recently announced that
it will introduce legislation and guidance that will allow and support retrospective confirmation of
historical benefit changes. This announcement should significantly reduce the impact on pension
schemes and mean that for most schemes the existence of confirmations is no longer the relevant
issue, but rather whether confirmation was obtained or can be provided now.
The Trustee has taken legal advice and concluded that it is reasonable to believe that previous rule
amendments were carried out in accordance with the relevant requirements and that no further
action is needed at this stage.
Notwithstanding this initial risk assessment there remain areas of uncertainty that could potentially
require legal clarification.
Management has performed an assessment to understand the potential impact of the ruling in the
case and based on this is satisfied that there is no material liability or probable outflow, and as such,
no adjustment has been reflected within the defined benefit obligation at this time.
6.3 Retirement benefit obligations continued
214
Drax Group plc Annual report and accounts 2025
Section 7: Risk management
This section provides disclosures around financial risk management, including the financial
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 financial instruments, including cash
and cash equivalents, borrowings, payables and receivables arising from operations.
Accounting classifications and fair values
IFRS 13 requires categorisation of the Group’s financial instruments in accordance with the
following hierarchy in order to explain the basis on which their fair values have been determined:
– Level 1 – Fair value measurements are those derived from quoted prices (unadjusted) in active
markets for identical assets or liabilities
– Level 2 – 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)
– Level 3 – Fair value measurements are those derived from valuation techniques that include
inputs for the asset or liability that are not based on observable market data (unobservable inputs)
Categorisation within this fair value measurement hierarchy has been determined on the basis
of the lowest level input that is significant to the fair value measurement of the relevant asset
or liability.
The derivative financial instruments used by the Group and not subject to the own-use exemption
have been categorised as follows:
– Commodity contracts – 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
– Foreign currency exchange contracts – currency-related contracts including forwards, swaps,
vanilla options and structured option products
– Interest rate and cross-currency contracts – contracts that swap one interest rate for another
in a single currency, including floating-to-fixed interest rate swaps, and contracts that swap
interest and principal cash flows in one currency for another currency, including fixed-to-fixed
and floating-to-fixed cross-currency interest rate swaps
– Inflation rate contracts – swap contracts, such as floating-to-fixed, that are linked to an inflation
index such as the UK Retail Price Index (RPI) or the UK Consumer Price Index (CPI)
Fair value measurement
– Commodity contracts – 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
– Foreign currency exchange contracts – the fair value of foreign currency exchange contracts
is determined using forward currency exchange market rates at the reporting date
– Interest rate contracts – 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 fixed-to-fixed swaps and by using the relevant forward currency exchange
market rates and interest index for floating-to-fixed swaps
– Inflation rate contracts – 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 profile of all these contracts, liquid forward market price curves are available
for the duration of the contracts.
The fair values of all derivative financial 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 changes. Due to the nature of the derivative financial instruments the
Group holds, minor differences in the inputs, assumptions or methodologies used can result in
different, but appropriate, estimates of fair values to those recognised by the Group. There may be
choices to be made regarding 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’s derivative contracts (e.g. due to quoted product types,
maturity dates or time periods not exactly matching the terms of the Group’s 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 profile of the Group’s contracts, liquid forward
market price curves are usually available for the duration of the contracts and any impact of
assumptions that are made when forward curves are not an exact match for the Group’s derivative
contracts is not significant. As such, the fair value of derivatives is not considered a key source of
estimation uncertainty, as defined by IAS 1, as reasonably possible changes in inputs,
methodologies or assumptions would not result in a materially different value being recognised at
the reporting date.
Whilst the carrying amount of derivative assets and liabilities will likely change materially within
the next financial year, this is as a result of movements in market prices or rates. Movements in
market prices or rates are as a result of changes that occur subsequent to the reporting date and
are not indicative of an alternative valuation that could reasonably have been recognised at the
reporting date.
Sensitivities are provided in note 7.2 for the impact of changes in inputs on the fair value.
The Group has reviewed all significant contracts for the presence of embedded derivatives. Certain
of the Group’s borrowings (see note 4.2) contain early repayment options that meet the definition
of embedded derivatives. However, in all cases, these do not require separate valuations as they are
deemed to be closely related to the host contract.
215
Drax Group plc Annual report and accounts 2025
Financial statements
Section 7: Risk management continued
The table below shows the carrying amounts and fair values of financial assets and liabilities, including their levels in the fair value hierarchy as defined by IFRS 13. It does not include fair value
information for lease liabilities, or for financial assets and financial 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’s borrowings relate principally to the publicly traded loan notes and amounts drawn against term loans (note 4.2). These financial liabilities are measured
at amortised cost.
Carrying amount
Fair value
Financial Financial
Fair value – Mandatorily assets at liabilities at
hedging at FVTPL – amortised amortised
instruments others FVOCI cost cost Total Level 1 Level 2 Level 3 Total
At 31 December 2025 £m £m £m £m £m £m £m £m £m £m
Financial assets measured at fair value
Commodity contracts
41.4
18.0
–
–
–
59.4
–
59.4
–
59.4
Foreign currency exchange contracts
1.9
25.8
–
–
–
27.7
–
27.7
–
27.7
Interest rate and cross-currency contracts
5.9
–
–
–
–
5.9
–
5.9
–
5.9
Trade and other receivables
–
–
13.8
–
–
13.8
–
13.8
–
13.8
Cash and cash equivalents
–
1.9
–
–
–
1.9
–
1.9
–
1.9
Financial assets not measured at fair value
Trade and other receivables
–
–
–
290.3
–
290.3
Cash and cash equivalents
–
–
–
300.2
–
300.2
Financial liabilities measured at fair value
Commodity contracts
(10.3)
(29.7)
–
–
–
(40.0)
–
(40.0)
–
(40.0)
Foreign currency exchange contracts
(78.7)
(20.7)
–
–
–
(99.4)
–
(99.4)
–
(99.4)
Interest rate and cross-currency contracts
(11.9)
(0.7)
–
–
–
(12.6)
–
(12.6)
–
(12.6)
Inflation rate contracts
(97. 8)
–
–
–
–
(97.8)
–
(97.8)
–
(97. 8)
Financial liabilities not measured at fair value
Secured bank loans
–
–
–
–
(672.5)
(672.5)
–
(67 7.5)
–
(67 7.5)
Secured loan notes
–
–
–
–
(306.5)
(306.5)
(316 .1)
–
–
(316 .1)
Lease liabilities
–
–
–
–
(98.6)
(98.6)
Trade and other payables
–
–
–
–
(673.8)
(673.8)
7.1 Financial instruments and their fair values continued
216
Drax Group plc Annual report and accounts 2025
Section 7: Risk management continued
Carrying amount
Fair value
Financial Financial
Fair value – Mandatorily assets at liabilities at
hedging at FVTPL – amortised amortised
instruments others FVOCI cost cost Total Level 1 Level 2 Level 3 Total
At 31 December 2024 £m £m £m £m £m £m £m £m £m £m
Financial assets measured at fair value
Commodity contracts
101.9
51.6
–
–
–
153.5
–
153.5
–
153.5
Foreign currency exchange contracts
21.0
75.7
–
–
–
96.7
–
96.7
–
96.7
Interest rate and cross-currency contracts
7.1
–
–
–
–
7.1
–
7.1
–
7.1
Contingent consideration
–
9.4
–
–
–
9.4
–
–
9.4
9.4
Trade and other receivables
–
0.3
38.9
–
–
39.2
–
39.2
–
39.2
Cash and cash equivalents
–
103 .1
–
–
–
103.1
–
103.1
–
103.1
Financial assets not measured at fair value
Trade and other receivables
–
–
–
353.4
–
353.4
Cash and cash equivalents
–
–
–
252.9
–
252.9
Financial liabilities measured at fair value
Commodity contracts
(50.9)
(30.9)
–
–
–
(81.8)
–
(81.8)
–
(81.8)
Foreign currency exchange contracts
(24.6)
(12.3)
–
–
–
(36.9)
–
(36.9)
–
(36.9)
Interest rate and cross-currency contracts
(30.6)
–
–
–
–
(30.6)
–
(30.6)
–
(30.6)
Inflation rate contracts
(184.0)
–
–
–
–
(184.0)
–
(184.0)
–
(184.0)
Financial liabilities not measured at fair value
Secured bank loans
–
–
–
–
(768.2)
(768.2)
–
(771.2)
–
(771.2)
Secured loan notes
–
–
–
–
(408.5)
(408.5)
(422.3)
–
–
(422.3)
Lease liabilities
–
–
–
–
(116.5)
(116.5)
Trade and other payables
–
–
–
–
(793.0)
(793.0)
7.1 Financial instruments and their fair values continued
217
Drax Group plc Annual report and accounts 2025
Financial statements
Section 7: Risk management continued
The fair value of commodity contracts, foreign currency exchange contracts, interest rate swaps,
cross-currency interest rate swaps 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 significant 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
financial reporting purposes, including Level 3 fair values. No external specialists have been utilised
for the valuation of the current or prior year derivative financial 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 level of 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 £29.0 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. The valuation technique in the prior year
was based on the assumption that the option to develop the land would be exercised if the
Capacity Market price were to clear above a certain level, providing sufficient certainty on the
economics of the development. This was calculated using a range of forecasts for future Capacity
Market auctions. During the current year, the probability of this trigger occurring is estimated to
have reduced to virtually zero. The probability of any of the other triggers occurring that would
result in the contingent consideration becoming due are also estimated to be virtually zero.
Therefore, a fair value loss of £9.4 million has been recognised in the current year to reduce the
carrying value of the contingent consideration to £nil.
As the change in fair value reflects the reversal of a previous credit recorded within exceptional
items, the £9.4 million has been excluded from Adjusted results and presented as an exceptional
item included within other gains and losses in the Consolidated income statement (see note 2.7).
A reconciliation of the contingent consideration is detailed below:
Year ended 31 December
2025 2024
£m £m
Balance at 1 January
9.4
9.2
Net change in fair value
(9.4)
0.2
Balance at 31 December
–
9.4
There are no reasonably possible changes to unobservable inputs to the fair value calculation that
would have a material impact on the fair value measurement of the contingent consideration.
Accounting for derivatives
Derivatives (subject to certain exemptions described below) must be measured at fair value, which
generally 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 qualifies 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’s own purchase, sale or usage requirements. The Group’s own-use contracts,
such as certain power purchase agreements (PPAs) and the Group’s energy supply contracts, are
excluded from fair value mark-to-market accounting.
Contracts for non-financial assets that do not qualify for the own-use exemption (principally
wholesale power, gas and carbon emissions allowances) and financial contracts (principally foreign
exchange, interest, inflation, financial oil and financial freight) 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.
Changes in fair value of the derivatives that do not meet the hedge accounting requirements are
excluded from Adjusted results in the Consolidated income statement until the contract matures,
as management believes this more clearly reflects the underlying performance of the Group as it
ensures these commodity and financial contracts are recognised in the period that they are
intended to hedge at their contracted prices (see note 2.7 for further details).
The Group’s 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 the biomass market means these contracts cannot be readily net settled in cash or other
financial instruments and, as a result, they remain outside of the scope of IFRS 9 and are excluded
from fair value mark-to-market accounting.
7.1 Financial instruments and their fair values continued
218
Drax Group plc Annual report and accounts 2025
Section 7: Risk management continued
Derivative balances are classified in the Consolidated balance sheet as current or non-current
based on the final maturity date of the contracts. The derivative financial instruments recognised
in the Consolidated balance sheet at the reporting date are:
As at 31 December
2025 2024
£m £m
Non-current derivative financial instrument assets
24.4
81.7
Current derivative financial instrument assets
68.6
175.6
Total derivative financial instrument assets
93.0
257.3
Non-current derivative financial instrument liabilities
(75.6)
(262.2)
Current derivative financial instrument liabilities
(174.2)
( 71.1)
Total derivative financial instrument liabilities
(249.8)
(333.3)
Total net derivative financial instruments
(156.8)
(76.0)
The gains and losses recognised in the period relating to derivative financial instruments
mandatorily measured at fair value through profit or loss (FVTPL) are detailed below. The Group
had no financial assets or financial liabilities voluntarily designated at FVTPL. In addition to the
amounts disclosed below, gains and losses relating to derivative financial instruments qualifying for
hedge accounting are disclosed in notes 7.2 to 7.4.
Year ended 31 December
2025 2024
£m £m
Net gains on derivative financial instruments not qualifying for hedge
accounting – recognised in revenue
24.9
11.9
Net (losses)/gains on derivative financial instruments not qualifying for
hedge accounting – recognised in cost of sales
(55.4)
45.3
Net gains on derivative financial instruments not qualifying for hedge
accounting – recognised in foreign exchange gains/(losses)
1.2
–
Total (losses)/gains on derivative financial instruments not qualifying
for hedge accounting
(29.3)
57. 2
7.2 Financial risk management
The Group’s activities expose it to a variety of financial risks, including commodity price risk, foreign
currency risk, interest rate risk, inflation risk, liquidity risk, counterparty risk and credit risk. The
Group’s overall risk management programme focuses on the unpredictability of commodity and
financial markets and seeks to manage potential adverse effects on the Group’s financial
performance.
The Group uses derivative financial instruments to hedge certain risk exposures. Risk management
is overseen by the risk management committees as explained in the Principal risks and
uncertainties section (starting on page 41). The Financial Risk Management Committee identifies,
evaluates and manages financial risks in close coordination with the Group’s 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 financial 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 Group’s exposure to commodity
prices and the impact on profit 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 are held constant.
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 interpolated or extrapolated from the table below
as changes in prices have a relatively linear relationship with the impact on profit after tax and on
the hedge reserve.
Impact on other components
Impact on profit after tax of equity, net of tax
10% decrease 10% increase 10% decrease 10% increase
£m £m £m £m
At 31 December 2025
Power
–
–
28.0
(27.7)
Carbon
(0.8)
0.8
–
–
Gas
(1.0)
1.0
–
–
Oil
(5.6)
5.2
–
–
Freight
(1.6)
1.6
–
–
7.1 Financial instruments and their fair values continued
219
Drax Group plc Annual report and accounts 2025
Financial statements
Section 7: Risk management continued
Impact on other components of equity,
Impact on profit after tax net of tax
10% decrease 10% increase 10% decrease 10% increase
£m £m £m £m
At 31 December 2024
Power
–
–
43.0
(43.0)
Carbon
1.6
(1.6)
–
–
Gas
10.8
(10.8)
–
–
Oil
(4.8)
4.8
–
–
Freight
(0.2)
0.2
–
–
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 prices and the impact on the hedge reserve resulting from these movements. Profit
after tax is sensitive to increases or decreases in commodity prices as a result of the impact on the
fair value of derivative financial 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, and purchases of fuel when
it is profitable to do so and is in line with specified limits under approved policies. Forward power
sales can be secured up to 100% of forecast availability, after taking account of the volume held
back for operational risk management purposes. Where the power generation has contract
indexation, forward power sales are generally entered once the indexation window has begun. All
commitments to sell and purchase power under fixed price contracts are designated as cash flow
hedges as they reduce the Group’s cash flow exposure resulting from fluctuations in the price of
power. The Group purchases biomass pellets and other fuels under either a fixed 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 that these contracts were
entered into and continue to be held for the purpose of receipt or delivery of the non-financial item
in accordance with the Group’s 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 where 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 gas sales as a proxy for power to
mitigate the risk of power price fluctuations. The Group also purchases gas under fixed-price
contracts to meet the requirements of the Energy Solutions segment and for its Daldowie fuel
plant. The Group’s gas supply business is reducing in size due to the decision made in January 2023
to phase out the Group’s gas supply contracts and due to the sale of the Group’s non-core SME
customer meter points (see note 2.7 for further details).
The Group purchases carbon emissions allowances under fixed-price contracts to cover the
Group’s purchase requirements under the UK Emissions Trading Scheme in relation to the Group’s
carbon emissions. Carbon emissions allowances are also sold as part of the proxy power hedges
that utilise gas sales as a proxy for power, as described above. Sales and purchases of carbon are
not designated as cash flow hedges.
The Group purchases financial oil contracts to hedge freight costs for the delivery of biomass. Oil is
a significant input into the overall cost of freight. Financial oil contracts are not designated as cash
flow hedges.
The Group purchases financial freight contracts to hedge freight costs for the delivery of biomass.
Financial freight contracts are not designated as cash flow hedges.
Hedge accounting
The Group has cash flow hedges relating to commodity contracts, principally commitments to
sell and purchase power. In the prior year, cash flow hedge accounting was also applied to certain
carbon purchases for part of the year. 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 recycled to the Consolidated income statement as the hedged item impacts profit or loss.
For power sales and purchase contracts, this is when the underlying power is delivered.
Included in amounts released from equity are current and prior period gains and losses on financial
instruments for which the hedged transaction has now occurred and these gains and losses have
been released to the Consolidated income statement in the period. No ineffectiveness was
recognised in the Consolidated income statement on continuing commodity hedges in the current
or prior year. Due to the use of “all-in-one” hedges, this results in the movement in fair value for
the hedged items and hedging instruments being identical. The only sources of ineffectiveness
regarding the “all-in-one” hedges would be if delivery of the commodities was no longer expected
to occur (which would result in hedge accounting being discontinued) and credit risk. The Group
applies a hedge ratio of 1:1 to its commodity risk cash flow hedges.
The reconciliation of the reserves and time period when the hedging instrument 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’s commodity contracts that qualify for hedge accounting in accordance with IFRS 9. The
rates do not reflect the overall average rate of the Group’s total portfolio of commodity contracts
that are used to protect the value of future cash flows.
7.2 Financial risk management continued
220
Drax Group plc Annual report and accounts 2025
Section 7: Risk management continued
At 31 December 2025
Balance in the hedge
Cumulative change in reserve for hedging
fair value of hedging relationships for
instrument since Balance in the which hedge
inception used Fair value hedge reserve for accounting is
for measuring recognised in Fair value recognised continuing hedges no longer applied
Notional value Weighted average ineffectiveness – balance sheet – in balance sheet – net of deferred tax – net of deferred
of contracts fixed price gains/(losses) assets liabilities (debit)/credit tax – (debit)/credit
Exposure (MWh, allowances)
£
Maturity date
£m £m £m £m £m
Commodity contracts January 2026
Sale and purchase of power
4,835,705
77.08
– March 2030
156.8
41.4
(10.3)
15.6
–
31 December 2025
Cumulative change in Hedge Amount Amount reclassified Line item
fair value of hedged ineffectiveness transferred to Amount reclassified due to the hedged in the income
item since inception Hedging gains recognised in Line item in the the cost or carrying due to the hedged future cash flows statement/
used for measuring recognised in OCI the income statement income statement value of a item affecting being no longer balance sheet
ineffectiveness – in the period – in the period – that includes non-financial profit or loss – expected to occur – affected by the
losses/(gains) gains/(losses) gains/(losses) hedge asset (gains)/losses (gains)/losses transfer/
Exposure £m £m £m ineffectiveness £m £m £m reclassification
Commodity contracts
156.8
122.3
–
Revenue
–
(114.7)
–
Revenue
Sale and purchase of power
–
Cost of sales
–
(21.3)
–
Cost of sales
7.2 Financial risk management continued
221
Drax Group plc Annual report and accounts 2025
Financial statements
Section 7: Risk management continued
At 31 December 2024
Balance in the hedge
Cumulative change in reserve for hedging
fair value of hedging relationships for
instrument since Balance in the which hedge
inception used Fair value hedge reserve for accounting is
for measuring recognised in Fair value recognised continuing hedges no longer applied
Notional value Weighted average ineffectiveness – balance sheet – in balance sheet – net of deferred tax – net of deferred
of contracts fixed price gains/(losses) assets liabilities (debit)/credit tax – (debit)/credit
Exposure (MWh, allowances)
£
Maturity date
£m £m £m £m £m
Commodity contracts January 2025
Sale and purchase of power
7,013,76 6
87.3
– September 2028
34.5
101.9
(50.9)
25.9
–
Purchase of carbon emissions allowances
–
–
–
–
–
–
–
–
At 31 December 2024
Cumulative change in Hedge Amount Amount reclassified Line item
fair value of hedged ineffectiveness Line item transferred to Amount reclassified due to the hedged in the income
item since inception Hedging gains recognised in in the income the cost or due to the hedged future cash flows statement/
used for measuring recognised in OCI in the income statement statement carrying value of item affecting being no longer balance sheet
ineffectiveness – the period – gains/ in the period – that includes a non-financial profit or loss – expected to occur – affected by the
losses/(gains) (losses) gains/(losses) hedge asset (gains)/losses (gains)/losses transfer/
Exposure £m £m £m ineffectiveness £m £m £m reclassification
Commodity contracts
34.5
(15.2)
–
Revenue
–
(397.5)
–
Revenue
Sale and purchase of power
–
Cost of sales
–
103.9
–
Cost of sales
Purchase of carbon emissions allowances
–
(0.6)
–
Cost of sales
–
1.2
–
Cost of sales
7.2 Financial risk management continued
222
Drax Group plc Annual report and accounts 2025
Section 7: Risk management continued
7.2.2 Foreign currency and interest rate risk
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 Biomass
Generation segment and principal and interest payments relating to foreign currency denominated
borrowings. These fuel purchases are typically denominated in US dollars (USD), euros (EUR) or
Canadian dollars (CAD), and the foreign currency borrowings are denominated in EUR (see note 4.2
for further details on the Group’s borrowings). The Group also had CAD denominated borrowings at
the prior year end.
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 segment.
Foreign currency sensitivity
The analysis below shows the impact on profit after tax and other components of equity, net of tax,
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 the reporting date
on outstanding monetary items denominated in foreign currencies and the valuation of foreign
currency derivative instruments. The analysis excludes the impact of the translation of the net
assets of foreign operations. For foreign currency derivatives designated into hedge relationships
the analysis includes the impact of recycling amounts from the hedge reserve if a change in foreign
exchange rates would result in the recycling of gains and losses due to the item they are hedging
impacting profit or loss. The analysis assumes all other variables are held constant.
Impact on other components
Impact on profit after tax of equity, net of tax
10% 10% 10% 10%
strengthening weakening strengthening weakening
£m £m £m £m
At 31 December 2025
USD
41.6
(41.5)
150.8
(121.6)
EUR
17.8
(17. 5)
33.1
(26.9)
CAD
1.7
(1.7)
15.1
(12.3)
Impact on other components
Impact on profit after tax of equity, net of tax
10% 10% 10% 10%
strengthening weakening strengthening weakening
£m £m £m £m
At 31 December 2024
USD
66.8
(57.4)
(75.9)
(75.9)
EUR
10.1
(8.9)
(19.1)
(27.4)
CAD
1.2
(1.0)
(6.6)
(6.9)
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.
Profit 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’s 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
Group’s currency risk management policy, including forwards and options, to manage the risks
associated with its anticipated foreign currency requirements over a rolling six-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 borrowings (see note 4.2 for further details on borrowings). The Group currently has
issued foreign currency denominated borrowings in EUR (2024: EUR and CAD). The Group utilises
derivative contracts, including cross-currency interest rate swaps and foreign exchange forward
contracts, to manage exchange risk on foreign currency borrowings.
7.2 Financial risk management continued
223
Drax Group plc Annual report and accounts 2025
Financial statements
Section 7: Risk management continued
Foreign currency risk hedge accounting
The Group designates certain forward and option foreign currency exchange contracts as hedging
instruments of the foreign currency risk of biomass purchases denominated in foreign currencies.
Gains and losses on these foreign currency exchange contracts are transferred from equity to
inventories for these hedges when the Group takes ownership of the biomass. The Group
designates the spot element of these foreign currency exchange contracts and applies a hedge
ratio of 1:1.
The Group designates certain foreign currency exchange contracts, such as forwards and swaps,
as hedging instruments of the foreign currency risk on the principal repayments of certain foreign
currency denominated borrowings. Gains and losses that are effective at hedging the foreign
exchange risk on the principal repayments are released to foreign exchange gains or losses to
offset gains and losses on retranslating the hedged foreign currency denominated borrowings.
The Group designates the spot element of these foreign currency exchange contracts and applies
a hedge ratio of 1:1.
The Group also designates certain cross-currency interest rate swaps as hedging instruments of
the foreign currency risk on payments of both principal and interest on certain foreign currency
denominated borrowings. Gains and losses that are effective at hedging the foreign exchange risk
on the interest payments are released to interest payable and similar charges at the same time as
the interest on the related hedged foreign currency denominated borrowings is expensed. Gains
and losses that are effective at hedging the foreign exchange risk on the principal repayments are
released to foreign exchange gains or losses to offset gains and losses on retranslating the hedged
foreign currency denominated borrowings. The Group applies a hedge ratio of 1:1 for its cross-
currency interest rate swaps.
The main sources of ineffectiveness relating to foreign currency exchange contracts (forwards
and swaps) that are designated as hedging spot foreign currency risk 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.
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) and the Energy Solutions receivables
monetisation facility, should they be utilised. The returns generated on the Group’s cash balance, or
payable on amounts drawn on the RCF or amounts utilised under the Energy Solutions receivables
monetisation facility, are exposed to movements in short-term interest rates. The Group actively
manages cash balances to protect against adverse changes in interest rates whilst retaining
liquidity. Further information about the Group’s variable rate borrowings (including the RCF) and
their repayment schedules is provided in note 4.2.
Interest rate sensitivity
The sensitivity analysis below has been determined based on the exposure to interest rates for
both derivative and non-derivative financial 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 and previous year’s profit 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 profit after tax of equity, net of tax
100 basis points 100 basis points 100 basis points 100 basis points
increase decrease increase decrease
£m £m £m £m
At 31 December 2025
Variable rate debt – hedged
(4.8)
4.8
–
–
Interest rate swaps
4.9
(4.9)
(0.1)
0.1
Net impact
0.1
(0 .1)
(0 .1)
0 .1
Impact on other components
Impact on profit after tax of equity, net of tax
100 basis points 100 basis points 100 basis points 100 basis points
increase decrease increase decrease
£m £m £m £m
At 31 December 2024
Variable rate debt – hedged
(5.6)
5.6
–
–
Interest rate swaps
5.6
(5.6)
9.8
(9.8)
Net impact
–
–
9.8
(9.8)
An increase or decrease in interest rates would affect profit after tax as a result of the impact
on the interest payable in the period on any variable rate borrowings. The Group has reduced its
exposure to interest rate risk on variable rate borrowings through the use of floating-to-fixed
interest rate and cross-currency swaps. These swaps are designated as hedging instruments under
cash flow hedge accounting and therefore a change in interest rates would not have a significant
impact on profit after tax as the recycling of gains and losses on these swaps would generally
offset the impact of changes in interest rates on the Group’s variable rate borrowings. Other
components of equity are sensitive to an increase or decrease in interest rates due to the impact
changes in interest rates has on the valuation of these floating-to-fixed interest rate and cross-
currency swaps, however this impact is reduced by the amounts recycled to profit or loss to offset
the interest payable. These fair value changes impact the hedge reserve.
7.2 Financial risk management continued
224
Drax Group plc Annual report and accounts 2025
Section 7: Risk management continued
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’s current and
forecast interest rate exposure.
Interest rate risk hedge accounting
The Group designates certain interest rate swaps as hedging instruments of the interest rate risk
of variable rate borrowings. 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 Group applies a hedge ratio of 1:1 to its interest rate swaps.
The main sources of ineffectiveness relating to interest rate hedges are differences in the critical
terms, differences in repricing dates, and credit risk.
Hedge accounting information
The Group has Sterling Overnight Index Average (SONIA) floating-to-fixed interest rate swaps to
fix the interest payments on the following facilities: £50.0 million of the UK infrastructure private
placement facility (2019), £98.0 million of the UK infrastructure private placement facility (2020),
two £50.0 million tranches of the GBP and EUR term loan facility (2024), £125.0 million of the
GBP term loan facility (2024) and the £50.0 million GBP term loan facility (2024).
The Group has Euro Interbank Offered Rate (EURIBOR) floating-to-fixed interest rate swaps to fix
the principal and interest payments on €70.0 million of the UK infrastructure private placement
facility (2020). The Group has EURIBOR floating-to-fixed interest rate swaps to fix the interest
payments on €185.0 million of the GBP and EUR term loan facility (2024). The Group has separately
taken out €185.0 million notional value foreign exchange forwards in order to fix the sterling cash
flows payable on the principal repayment.
The Group had Canadian Overnight Repo Rate (CORRA) floating-to-fixed interest rate swaps to
fix the interest payments on the C$200.0 million CAD term loan facility. The Group had separately
taken out C$200.0 million notional value foreign exchange forwards in order to fix the sterling cash
flows payable on the principal repayment. During the year the Group chose to make an early
repayment of this term loan facility. Due to the repayment of the underlying hedged item, hedge
accounting ceased at the date the facility was repaid.
The Group has taken out fixed-to-fixed cross-currency interest rate swaps to hedge the future cash
flows associated with the €350.0 million fixed rate EUR loan notes 2029 and the €31.5 million fixed
rate element of the UK infrastructure private placement facility (2020).
The Group had a fixed-to-fixed cross-currency interest rate swap that was entered into to hedge
the future cash flows associated with the €143.8 million 2.625% EUR loan notes 2025. During the
year this swap and the underlying loan notes matured and were settled.
As at 31 December 2025, the Group has fixed in sterling all interest and principal payments on
variable rate and foreign currency denominated borrowings through the use of interest rate swaps,
cross-currency interest rate swaps, and foreign currency exchange forwards and swaps, as
described above. See note 4.2 for further details on the Group’s borrowings.
A summary of amounts relating to the Group’s hedge accounting of foreign currency risk and
interest rate risk are presented in the table below.
The information is disaggregated by risk type. Hedges of biomass purchases, principal repayments
on borrowings hedged using foreign currency forwards or swaps, and fixed-to-fixed cross-currency
interest rate swaps are designated as hedges of foreign currency risk. Interest rate swaps are
designated as hedges of interest rate risk. Floating-to-fixed cross-currency interest rate swaps are
designated as hedges of both foreign currency and interest rate risk.
The average forward rates quoted below only reflect the rates applicable to the portion of the
Group’s 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’s total portfolio of
derivatives that are used to fix the sterling value of future cash flows.
A reconciliation of reserves and the time period when the hedge will affect profit or loss, or will
be transferred from equity and included in the initial cost of the non-financial item, are disclosed
in notes 7.3 and 7.4.
7.2 Financial risk management continued
225
Drax Group plc Annual report and accounts 2025
Financial statements
Section 7: Risk management continued
At 31 December 2025
Balance in the hedge
Cumulative change in reserve for hedging
fair value of hedging relationships for
instrument since Balance in the which hedge
inception used Fair value Fair value hedge reserve for accounting is
Weighted for measuring recognised in recognised in continuing hedges no longer applied
Notional value of average ineffectiveness – balance sheet – balance sheet – net of deferred net of deferred
contracts fixed/variable gains/(losses) assets liabilities tax – (debit)/credit tax – (debit)/credit
US$m, €m, C$m
rate
Maturity date
£m £m £m £m £m
Foreign currency risk on biomass purchases January 2026
Purchases in foreign currency – USD
2,731.5
US$1.29
– December 2030
(92.0)
1.1
(66.0)
(47.3)
–
January 2026
Purchases in foreign currency – EUR
4 87.0
€1.10
– September 2030
(3.0)
0.8
(5.3)
0.4
–
January 2026
Purchases in foreign currency – CAD
343.5
C$1.75
– October 2030
(11.8)
–
(5.6)
(4.8)
–
Foreign currency risk on borrowings January 2026
Interest and principal payments – EUR
381.5
€1.16 / 7.22%
– November 2026
4.5
4.9
(1.9)
(0.8)
–
February 2027
Principal payments – EUR
185.0
€1.11
– March 2028
6.5
–
(1.8)
–
–
Principal payments – CAD
–
–
–
(4.0)
–
–
–
–
Foreign currency and interest rate risk on borrowings January 2026
Interest and principal payments – EUR
255.0
€1.11 / 4.04%
– March 2026
(6.8)
–
( 7.0)
(1.0)
–
Interest payments – CAD
–
–
–
(2 .1)
–
–
–
–
Interest rate risk on borrowings January 2026
Variable rate GBP debt
423.0
2.89%
– July 2029
(2 .1)
1.0
(3.0)
(1.8)
–
7.2 Financial risk management continued
226
Drax Group plc Annual report and accounts 2025
Section 7: Risk management continued
Exposure
At 31 December 2025
Cumulative change in Hedge Amount reclassified
fair value of hedged ineffectiveness Amount reclassified due to the hedged Line item in the
item since inception Hedging losses recognised in the Amount transferred due to the hedged future cash flows income statement/
used for measuring recognised in OCI income statement Line item in the to the cost or item affecting being no longer balance sheet
ineffectiveness – in the period – in the period – income statement carrying value of a profit or loss – expected to occur – affected by
losses/(gains) gains/(losses) gains/(losses) that includes hedge non-financial asset (gains)/losses (gains)/losses the transfer/
£m £m £m ineffectiveness £m £m £m reclassification
Foreign currency risk on biomass purchases
Purchases in foreign currency – USD
(92.0)
(104.5)
–
Cost of sales
27.1
–
–
Inventories
Purchases in foreign currency – EUR
(3.0)
8.0
–
Cost of sales
(1.5)
–
–
Inventories
Purchases in foreign currency – CAD
(11.8)
(4.8)
–
Cost of sales
6.2
–
–
Inventories
Foreign currency risk on borrowings Interest payable Interest payable
–
and similar charges
–
7.1
–
and similar charges
4.5
10.4
Foreign exchange Foreign exchange
Interest and principal payments – EUR –
gains/(losses)
–
(24.4)
–
gains/(losses)
Foreign exchange Foreign exchange
Principal payments – EUR
6.5
8.3
–
gains/(losses)
–
(8.3)
–
gains/(losses)
Foreign exchange Foreign exchange
Principal payments – CAD
(4.0)
(2.3)
–
gains/(losses)
–
2.3
–
gains/(losses)
Foreign currency and interest rate risk on borrowings Interest payable Interest payable
(3.2)
5.4
–
and similar charges
–
–
–
and similar charges
Foreign exchange Foreign exchange
Interest and principal payments – EUR (3.6)
gains/(losses)
–
( 3.1)
–
gains/(losses)
Interest payable Interest payable
Interest payments – CAD
(2 .1)
(0.3)
–
and similar charges
–
1.0
0.9
and similar charges
Interest rate risk on borrowings Interest payable Interest payable
Variable rate GBP debt
(2.3)
(2.3)
–
and similar charges
–
(5.9)
–
and similar charges
7.2 Financial risk management continued
227
Drax Group plc Annual report and accounts 2025
Financial statements
Section 7: Risk management continued
Exposure
At 31 December 2024
Balance in the hedge
Cumulative change in reserve for hedging
fair value of hedging relationships for
instrument since Balance in the which hedge
inception used Fair value Fair value hedge reserve for accounting is
for measuring recognised in recognised in continuing hedges no longer applied
Notional value Weighted average ineffectiveness – balance sheet – balance sheet – net of deferred tax – net of deferred
of contracts fixed/variable gains/(losses) assets liabilities (debit)/credit tax – (debit)/credit
US$m, €m, C$m
rate
Maturity date
£m £m £m £m £m
Foreign currency risk on biomass purchases January 2025
Purchases in foreign currency – USD
1,430.5
US$1.27
– February 2027
18.6
20.7
(2.1)
10.7
–
January 2025
Purchases in foreign currency – EUR
270.0
€ 1.15
– October 2026
(6.3)
–
(6.3)
(4.5)
–
January 2025
Purchases in foreign currency – CAD
166.0
C$1.67
– March 2027
(5.1)
0.3
(5.4)
(5.8)
–
Foreign currency risk on borrowings
Interest and principal payments – USD
–
–
–
–
–
–
–
–
November 2025
Interest and principal payments – EUR
525.3
€1.14 / 6.48%
– April 2028
(10.4)
–
(19.7)
4.4
–
February 2027
Principal payments – EUR
185.0
€ 1.11
– March 2028
(5 .1)
–
(5 .1)
–
–
Principal payments – CAD
200.0
C$1.68
January 2026
(5.7)
–
(5.7)
–
–
Foreign currency and interest rate risk on borrowings January 2026
Interest and principal payments – EUR
255.0
€1.09 / 4.04%
– March 2028
(8.6)
–
(8.7)
(2.7)
–
Interest payments – CAD
200.0
6.05%
January 2026
(1.5)
–
(1.8)
(1.3)
–
Interest rate risk on borrowings January 2026
Variable rate GBP debt
423.0
2.89%
– April 2028
6.1
7.1
(0.4)
4.3
–
7.2 Financial risk management continued
228
Drax Group plc Annual report and accounts 2025
Section 7: Risk management continued
Exposure
At 31 December 2024
Cumulative change in Hedge Amount reclassified
fair value of hedged ineffectiveness Amount reclassified due to the hedged Line item in the
item since inception Hedging losses recognised in the Amount transferred due to the hedged future cash flows income statement/
used for measuring recognised in OCI in income statement Line item in the to the cost or item affecting being no longer balance sheet
ineffectiveness – the period – in the period – income statement carrying value of a profit or loss – expected to occur – affected by the
losses/(gains) gains/(losses) gains/(losses) that includes hedge non-financial asset (gains)/losses (gains)/losses transfer/
£m £m £m ineffectiveness £m £m £m reclassification
Foreign currency risk on biomass purchases
Purchases in foreign currency – USD
18.6
19.7
–
Cost of sales
4.3
–
–
Inventories
Purchases in foreign currency – EUR
(6.3)
(7.1)
–
Cost of sales
0.9
–
–
Inventories
Purchases in foreign currency – CAD
(5.1)
(5.9)
–
Cost of sales
(0.4)
–
–
Inventories
Foreign currency risk on borrowings Interest payable Interest payable
Interest and principal payments – USD
–
(5.6)
–
and similar charges
–
(0.7)
–
and similar charges
Foreign exchange Foreign exchange
–
gains/(losses)
–
9.3
–
gains/(losses)
Interest payable Interest payable
Interest and principal payments – EUR
(11.3)
(7.5)
–
and similar charges
–
7.4
–
and similar charges
Foreign exchange Foreign exchange
–
gains/(losses)
–
6.4
–
gains/(losses)
Foreign exchange Foreign exchange
Principal payments – EUR
(5.1)
(6.0)
–
gains/(losses)
–
6
–
gains/(losses)
Foreign exchange Foreign exchange
Principal payments – CAD
(5.7)
(7.4)
–
gains/(losses)
–
7.4
–
gains/(losses)
Foreign currency and interest rate risk on borrowings Interest payable Interest payable
Interest and principal payments – EUR
(8.7)
(6.4)
–
and similar charges
–
(2.5)
–
and similar charges
Foreign exchange Foreign exchange
–
gains/(losses)
–
3.4
–
gains/(losses)
Interest payable Interest payable
Interest payments – CAD
(1.6)
(1.3)
–
and similar charges
–
(0.4)
–
and similar charges
Interest rate risk on borrowings Interest payable Interest payable
Variable rate GBP debt
10.8
(2.3)
–
and similar charges
–
(12.0)
–
and similar charges
7.2 Financial risk management continued
229
Drax Group plc Annual report and accounts 2025
Financial statements
Section 7: Risk management continued
7.2.3 Inflation risk
The Group is exposed to inflation risk on elements of its revenues and cost base. The Group’s ROC
revenue is linked to UK RPI and its CfD and Capacity Market income are linked to UK CPI (see note
2.2 for further information on ROC and CfD income). It is the intention of the UK Government to
change to CPI-based indexation for ROC revenue from April 2026, subject to the publication of
statutory instruments. In addition, a proportion of the Group’s 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 profit 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 of equity,
Impact on profit after tax net of tax
200 basis points 200 basis points 200 basis points 200 basis points
increase decrease increase decrease
£m £m £m £m
At 31 December 2025
UK CPI inflation swaps
–
–
(22.3)
19.3
UK RPI inflation swaps
–
–
(1.6)
1.6
Impact on other components
Impact on profit after tax of equity, net of tax
200 basis points 200 basis points 200 basis points 200 basis points
increase decrease increase decrease
£m £m £m £m
At 31 December 2024
UK CPI inflation swaps
–
–
(25.7)
22.1
UK RPI inflation swaps
(1.0)
1.0
(10.9)
10.9
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.
Profit after tax in the prior year was 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’s 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 reclassified to revenue
in the Consolidated income statement at the same time the revenue from the inflation-linked
contracts impacts profit or loss or if the hedged item is no longer expected to occur. The Group
applies a hedge ratio of 1:1 for its inflation swaps.
The main sources of ineffectiveness relating to the inflation swaps are the basis difference between
the RPI swaps and the CPI-linked revenues they are hedging, calculation differences, and the
hedged item no longer being expected to occur. Calculation differences occur due to differences
between the reference months used to calculate the inflationary increase per the swaps and the
reference months used to calculate the inflationary increase for the CPI-linked revenues.
The Group recognised £3.5 million of gains (2024: £8.7 million of losses) as ineffective primarily due
to the basis difference between the RPI hedging instruments and the CPI exposure. In the current
year, as a result of the updated estimates of the OCGT commissioning dates, the Group recycled
£0.8 million (2024: £1.2 million) of losses to the Consolidated income statement on CPI inflation
swaps designated as hedging instruments for the OCGT Capacity Market revenues, due to the
hedged item no longer being expected to occur.
7.2 Financial risk management continued
230
Drax Group plc Annual report and accounts 2025
The summary of the amounts relating to the hedging instruments and any related ineffectiveness in the period is presented in the table below.
At 31 December 2025
Balance in the hedge
Cumulative change in reserve for hedging
fair value of hedging relationships for
instrument since Balance in the which hedge
inception used hedge reserve for accounting is
for measuring Fair value recognised Fair value recognised continuing hedges no longer applied
Notional value ineffectiveness – in balance sheet – in balance sheet – net of deferred net of deferred tax –
of contracts Weighted average gains/(losses) assets liabilities tax – (debit)/credit (debit)/credit
Exposure £m
fixed rate
Maturity date
£m £m £m £m £m
Inflation April 2026
Inflation-linked sales contracts – CPI
30.4
CPI – 2.70%
– July 2038
(8.5)
–
(13.1)
(6.3)
1.9
Inflation-linked sales contracts – RPI
440.0
RPI – 3.46%
April 2026
(133.5)
–
(84.7)
(19.0)
–
At 31 December 2025
Hedge
ineffectiveness/
Cumulative change in reversal of Amount reclassified
fair value of hedged ineffectiveness Amount reclassified due to the hedged Line item in the
item since inception Hedging gains recognised in the Amount transferred due to the hedged future cash flows income statement/
used for measuring recognised in OCI income statement Line item in the to the cost or item affecting being no longer balance sheet
ineffectiveness – in the period – in the period – income statement carrying value of a profit or loss – expected to occur affected by
losses/(gains) gains/(losses) gains/(losses) that includes hedge non- financial asset (gains)/losses – (gains)/losses the transfer/
Exposure £m £m £m ineffectiveness £m £m £m reclassification
Inflation
Inflation-linked sales contracts – CPI
(8.5)
3.3
–
Revenue
–
(4.6)
0.8
Revenue
Inflation-linked sales contracts – RPI
(109.8)
(3.9)
3.5
Revenue
–
2 5.1
–
Revenue
7.2 Financial risk management continued
Section 7: Risk management continued
231
Drax Group plc Annual report and accounts 2025
Financial statements
At 31 December 2024
Balance in the hedge
Cumulative change in reserve for hedging
fair value of hedging Balance in the relationships for
instrument since hedge reserve which hedge
inception used for for continuing accounting is
measuring Fair value recognised Fair value recognised hedges net of no longer applied
Notional value ineffectiveness in balance sheet – in balance sheet – deferred tax – net of deferred tax –
of contracts Weighted average – gains/(losses) assets liabilities (debit)/credit (debit)/credit
Exposure £m
fixed rate
Maturity date
£m £m £m £m £m
Inflation April 2026
Inflation-linked sales contracts – CPI
30.4
CPI – 2.70%
– July 2038
(18.6)
–
(18.6)
(14.5)
10.5
Inflation-linked sales contracts – RPI
440.0
RPI – 3.65%
April 2026
(75.4)
–
(165.4)
(34.9)
–
At 31 December 2024
Cumulative change Hedge Amount reclassified
in fair value of hedged ineffectiveness Amount reclassified due to the hedged Line item in the
item since inception Hedging gains recognised in the Amount transferred due to the hedged future cash flows income statement/
used for measuring recognised in OCI in income statement Line item in the to the cost or item affecting being no longer balance sheet
ineffectiveness – the period – in the period – gains/ income statement carrying value of a profit or loss – expected to occur – affected by the
gains/(losses) gains/(losses) (losses) that includes hedge non-financial asset (gains)/losses (gains)/losses transfer/
Exposure £m £m £m ineffectiveness £m £m £m reclassification
Inflation
Inflation-linked sales contracts – CPI
(18.6)
(1.3)
–
Revenue
–
(3.1)
1.2
Revenue
Inflation-linked sales contracts – RPI
(47.9)
(2 .1)
(8.7)
Revenue
–
27.1
–
Revenue
7.2 Financial risk management continued
Section 7: Risk management continued
232
Drax Group plc Annual report and accounts 2025
Section 7: Risk management continued
7.2.4 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 financing commitments. The Group maintains a mixture of cash and
cash equivalents, committed facilities and uncommitted facilities in order to ensure sufficient
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 Energy Solutions energy
supply sales. In each case this is undertaken on a non-recourse basis and, accordingly, the ROC assets
and Energy Solutions receivables 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’s cash flows is described in note 4.3.
Such facilities are not included within the Group’s definition of Net debt, as outlined in note 2.7.
The following tables set out details of the expected maturity profile of the undiscounted,
contractual payments of non-derivative financial 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.
At 31 December 2025
Within 3 months –
3 months 1 year 1–2 years 2–5 years >5 years Total
£m £m £m £m £m £m
Term loans, gross value
69.1
22.8
165.3
489.5
–
746.7
Loan notes, gross value
–
17.9
17.9
332.3
–
368.1
Borrowings, contractual
maturity
69.1
40.7
183.2
821.8
–
1,114.8
Trade and other payables
594.7
77.5
1.6
–
–
673.8
Lease liabilities
9.0
22.2
21.2
30.4
38.3
121.1
672.8
140.4
206.0
852.2
38.3
1,909.7
At 31 December 2024
Within 3 months –
3 months 1 year 1–2 years 2–5 years >5 years Total
£m £m £m £m £m £m
Term loans, gross value
11.2
30.5
202.8
613.3
27.0
884.8
Loan notes, gross value
–
139.1
17.0
332.2
–
488.3
Borrowings, contractual
maturity
11.2
169.6
219.8
945.5
27.0
1,3 7 3 .1
Trade and other payables
763.5
28.2
1.1
0.2
–
793.0
Lease liabilities
8.9
22.7
24.6
39.0
47.2
142.4
783.6
220.5
245.5
984.7
74.2
2,308.5
The weighted average interest rate payable at the reporting date on the Group’s borrowings was
5.40% (2024: 5.39%).
Trade and other payables of £673.8 million (2024: £793.0 million) excludes non-financial liabilities
such as contract liabilities, the Group’s obligation to deliver ROCs and employee benefit-related
accruals.
The following tables set out details of the expected maturity profile of contractual payments and
receipts of derivative financial instruments. Where the amount payable is not fixed, 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. Certain commodity contracts are expected to be gross settled
through delivery or receipt of the commodity and a subsequent cash settlement of the traded
value. Vanilla foreign currency exchange contracts are expected to be gross settled through
delivery of one currency and receipt of another. Gross settlement of both the interest and principal
on cross-currency interest rate swaps is expected through delivery of one currency and receipt of
another. 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 expected to
include the net settlement of the interest rate and inflation rate differentials. For option derivative
contracts, such as foreign currency options, the expected cash flows are only included if the option
has intrinsic value at the reporting date and therefore would exercise based on the market curves
existing at the reporting date.
Where derivatives are expected to be gross settled based on the traded value rather than the
mark-to-market value, the gross undiscounted cash flows based on the contracted traded values
have been presented in the table below. Where derivatives are expected to be net settled, the
undiscounted net cash flows expected to occur based on the current fair value have been
presented in the table below. Where derivative balances are subject to offsetting, the net expected
contractual payments and receipts of the offset asset and liability have been presented.
The amounts included within the difference to carrying amount column include the effect of
discounting for the time value of money and credit risk on all trade types. Additionally, for all
physically settled commodity trades, the difference to carrying amount includes the market value
of these trades, as the traded price is included as the cash payment or receipt in the table below,
but the carrying amount is based on the mark-to-market of the trade, being the difference between
the market value and traded value. For foreign currency exchange contracts the amounts included
within the difference to carrying amount column also includes the time value of options that have
no intrinsic value, for example out-of-the-money options. As these trades are not expected to
exercise no cash flows have been included in the below table.
7.2 Financial risk management continued
233
Drax Group plc Annual report and accounts 2025
Financial statements
Section 7: Risk management continued
Derivative liabilities – cash inflow/(outflow)
At 31 December 2025
At 31 December 2024
Difference to Difference to
Within carrying Carrying Within carrying Carrying
1 year 1–2 years >2 years Total amount amount 1 year 1–2 years >2 years Total amount amount
£m £m £m £m £m £m £m £m £m £m £m £m
Commodity contracts – inflow
209.8
8.3
–
218 .1
(224.0)
(5.9)
303.0
259.3
3 7. 8
6 0 0.1
(673.5)
(73.4)
Commodity contracts – outflow
(137.7 )
(52.5)
(15.6)
(205.8)
171.7
(34.1)
(33.8)
(1.4)
(4.1)
(39.3)
30.9
(8.4)
Foreign exchange contracts – inflow
1,075.4
688.7
1,497.0
3,261.1
26.4
(99.4)
6 41.1
468.4
328.0
1,43 7.5
15.2
(36.9)
Foreign exchange contracts – outflow
(1,118.0)
(711.9)
(1,557.0)
(3,386.9)
(637.4)
(494.6)
(357.6)
(1,489.6)
Cross-currency contracts – inflow
97.3
2.7
0.5
100.5
0.8
(9.6)
215.7
53.9
341.0
610.6
1.2
(30.2)
Cross-currency contracts – outflow
(107.3)
(3.1)
(0.5)
(110.9)
(241.3)
(63.4)
(337.3)
(642.0)
Interest rate contracts – inflow
–
–
–
–
0.1
(3.0)
0.3
–
–
0.3
0.1
(0.4)
Interest rate contracts – outflow
(1.6)
(1.3)
(0.2)
(3.1)
–
(0.5)
(0.3)
(0.8)
Inflation contracts – outflow
(86.9)
(1.5)
(12 .1)
(100.5)
2.7
(97.8)
(84.3)
(91.5)
(20.0)
(195.8)
11.8
(184.0)
(69.0)
(70.6)
(87.9)
(227.5)
(22.3)
(249.8)
163.3
130.2
(12.5)
281.0
(614.3)
(333.3)
Derivative assets – cash inflow/(outflow)
At 31 December 2025
At 31 December 2024
Difference to Difference to
Within carrying Carrying Within carrying Carrying
1 year 1–2 years >2 years Total amount amount 1 year 1–2 years >2 years Total amount amount
£m £m £m £m £m £m £m £m £m £m £m £m
Commodity contracts – inflow
425.3
8 4.1
0 .1
509.5
(458.0)
51.5
363.7
50.6
16.8
431.1
(306.5)
124.6
Commodity contracts – outflow
(36.6)
( 7 7. 3)
(45.1)
(159.0)
166.9
7.9
(117.5)
(4.5)
(24.9)
(146.9)
175.8
28.9
Foreign exchange contracts – inflow
172.4
2.4
–
174.8
1.2
27.7
874.6
1,030.0
245.1
2,149.7
(9.7)
96.7
Foreign exchange contracts – outflow
(148.3)
–
–
(148.3)
(839.9)
(97 7.1)
(226.3)
(2,043.3)
Cross-currency contracts – inflow
18.6
18.2
314.6
351.4
10.1
4.9
–
–
–
–
–
–
Cross-currency contracts – outflow
(22.8)
(22.6)
(311.2)
(356.6)
–
–
–
–
Interest rate contracts – inflow
1.0
–
–
1.0
–
1.0
6.3
1.1
–
7.4
(0.2)
7.1
Interest rate contracts – outflow
–
–
–
–
–
–
(0.1)
(0 .1)
409.6
4.8
(41.6)
372.8
(279.8)
93.0
287. 2
10 0 .1
10.6
397.9
(140.6)
257.3
7.2 Financial risk management continued
234
Drax Group plc Annual report and accounts 2025
7.2.5 Credit risk
The Group’s gross exposure to credit risk for financial instruments is limited to the carrying amount
of financial assets recognised at the reporting date. The maximum exposure to credit risk at the
reporting date is the carrying value of each class of financial assets disclosed in note 7.1.
Trade and other receivables are stated gross of the provision for expected credit losses on trade
receivables of £30.6 million (2024: £42.4 million) and expected credit losses on accrued income
of £5.0 million (2024: £9.0 million). The balance excludes non-financial receivables such as
prepayments.
The Group‘s four reportable segments (Pellet Production, Biomass Generation, Flexible Generation
and Energy Solutions) 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’s 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 Biomass Generation and Flexible Generation segments, 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 Biomass Generation and Flexible Generation segments’ credit risk is with
counterparties in related energy industries or with financial institutions. In addition, where deemed
appropriate, the Group has historically purchased credit default swaps.
The highest credit risk exposure is in the Energy Solutions segment, with a large number of
customers of varying sizes operating in a variety of markets. Credit risk is managed by checking a
company’s creditworthiness and financial strength both before commencing trade and during the
business relationship. Credit risk is monitored and managed by industry sector. Due to the sale of
the Opus Energy non-core SME meter points (see note 2.7) the Group has reduced its credit risk
exposure for the Energy Solutions segment.
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 sufficient
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 profile.
The Group had cash and cash equivalents of £302.1 million at 31 December 2025 (2024: £356.0 million).
The Group’s cash and cash equivalents excluding money market funds (held at FVTPL) are subject to
the impairment requirements of IFRS 9. The Group had cash and cash equivalents excluding money
market funds of £300.2 million at 31 December 2025 (2024: £252.9 million). The identified impairment
loss, based on the 12-month expected credit loss basis, was immaterial. Cash and cash equivalents at
the reporting date were 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 financial assets, disclosed in
note 7.1, represents the Group’s maximum credit risk exposure. Some derivative contracts are fully
cash collateralised, thereby minimising credit risk. At 31 December 2025, the Group held £nil in
cash collateral receipts (2024: £9.8 million) covering certain derivative assets and had posted
£19.4 million (2024: £4.7 million) of cash collateral payments covering certain derivative liabilities.
The credit rating of counterparties to which the £19.4 million of cash collateral had been posted
ranged from A to A+.
Counterparty risk
As the Group relies on third-party suppliers and counterparties for the delivery of financial and
non-financial items, it is therefore exposed to the risk of non-performance by these third-party
suppliers. For financial instruments, such as foreign currency forwards, this risk is limited to the
credit risk, as discussed above. The Group is also exposed to counterparty risk on non-financial
items, such as the purchases of biomass and capital expenditure. If a large supplier were to fall
into financial difficulty 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 financial
distress or increase the risk profile 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.
7.2 Financial risk management continued
Section 7: Risk management continued
235
Drax Group plc Annual report and accounts 2025
Financial statements
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 financial 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’ equity (excluding the hedge and cost of hedging reserves), plus Net debt.
Net debt is comprised of borrowings, lease liabilities, 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 starting on page 49 for
details of scenario analysis performed on covenant restrictions within the Group’s financing
facilities.
At 31 December
2025 2024
£m £m
Net debt (note 2.7)
783.6
991.7
Total shareholders’ equity attributable to owners of the parent
company, excluding hedge and cost of hedging reserves
1,789.1
2,078.3
7.3 Hedge reserve
The Group designates certain hedging instruments that are used to address commodity price risk,
foreign currency exchange risk, interest rate risk, foreign currency exchange and interest 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 the 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 reclassified in the periods when the hedged item
affects profit or loss. If the hedged item results in the recognition of a non-financial 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 reclassified from equity due to the hedged item affecting profit or loss,
and the amounts reclassified due to the hedged future cash flows no longer being expected to
occur. See section 7.2 for further details on these amounts.
7.2 Financial risk management continued
Section 7: Risk management continued
236
Drax Group plc Annual report and accounts 2025
Hedge reserve
Foreign
Commodity currency Interest Foreign currency Inflation
price risk exchange risk rate risk and Interest rate risk Total
£m £m £m rate risk £m £m
At 1 January 2024
25 7.0
(10.8)
15.1
1.4
(55.3)
207. 4
Gains/(losses) recognised:
– Change in fair value of hedging instrument recognised in OCI
(15.8)
(19.8)
(2.3)
( 7.7)
(3.4)
(49.0)
Reclassified from equity as the hedged item has affected profit or loss:
– Reclassified to the Consolidated income statement – included in revenue
( 397.5)
–
–
–
24.0
(373.5)
– Reclassified to the Consolidated income statement – included in cost of sales
105.1
–
–
–
–
10 5.1
– Reclassified to the Consolidated income statement – included in interest payable and similar charges
–
6.7
(12.0)
(2.9)
–
(8.2)
– Reclassified to the Consolidated income statement – included in foreign exchange gains/(losses)
–
2 9.1
–
3.4
–
32.5
Reclassified from equity as the hedged item is no longer expected to occur:
– Reclassified from equity – included in revenue
–
–
–
–
1.2
1.2
Transferred from equity and included within the initial cost of a non-financial asset:
– Transferred to cost of inventories
–
4.8
–
–
–
4.8
Related deferred tax, net (note 2.6)
77.1
(5.2)
3.5
1.8
(5.4)
71.8
At 1 January 2025
25.9
4.8
4.3
(4.0)
(38.9)
(7.9)
Gains/(losses) recognised:
– Change in fair value of hedging instrument recognised in OCI
122.3
(84.9)
(2.3)
5.1
(0.6)
39.6
Reclassified from equity as the hedged item has affected profit or loss:
– Reclassified to the Consolidated income statement – included in revenue
(114.7)
–
–
–
20.5
(94.2)
– Reclassified to the Consolidated income statement – included in cost of sales
(21.3)
–
–
–
–
(21.3)
– Reclassified to the Consolidated income statement – included in interest payable and similar charges
–
7.1
(5.9)
1.9
–
3.1
– Reclassified to the Consolidated income statement – included in foreign exchange gains/(losses)
–
(30.4)
–
(3.1)
–
(33.5)
Reclassified from equity as the hedged item is no longer expected to occur:
– Reclassified from equity – included in revenue
–
–
–
–
0.8
0.8
Transferred from equity and included within the initial cost of a non-financial asset:
– Transferred to cost of inventories
–
31.8
–
–
–
31.8
Related deferred tax, net (note 2.6)
3.4
19.1
2.1
(0.9)
(5.2)
18.5
At 31 December 2025
15.6
(52.5)
(1.8)
(1.0)
(23.4)
(63.1)
Section 7: Risk management continued
7.3 Hedge reserve continued
237
Drax Group plc Annual report and accounts 2025
Financial statements
The expected release profile from equity of post-tax hedging gains and losses is as follows:
At 31 December 2025
Within 1 year 1–2 years >2 years Total
£m £m £m £m
Commodity risk
12.7
2.1
0.8
15.6
Foreign currency exchange risk
(19.9)
(9.0)
(23.6)
(52.5)
Interest rate risk
(1.0)
(0.7)
(0 .1)
(1.8)
Foreign currency and interest rate risk
(0.8)
(0.2)
–
(1.0)
Inflation risk
(11.9)
(3.7)
(7.8)
(23.4)
(20.9)
(11.5)
(30.7)
(63.1)
At 31 December 2024
Within 1 year 1–2 years >2 years Total
£m £m £m £m
Commodity risk
34.7
(9.2)
0.4
25.9
Foreign currency exchange risk
(1.3)
(3.0)
9.1
4.8
Interest rate risk
4.2
0.4
(0.3)
4.3
Foreign currency and interest rate risk
(2.4)
(1.3)
(0.3)
(4.0)
Inflation risk
(15.1)
(10.1)
(13.7)
(38.9)
20.1
(23.2)
(4.8)
(7.9)
7.4 Cost of hedging reserve
The Group designates the change in the spot rate as the hedged risk in the Group’s cash flow
hedge relationships hedging the purchase of inventory denominated in foreign currencies. The
Group designates the cost of hedging, being the change in fair value associated with forward points
including currency basis, to equity.
For foreign currency options designated as cash flow hedges for the purchase of inventory
denominated in foreign currencies the Group designates only the change in intrinsic value as the
hedged risk. The change in fair value associated with the time value of options is recognised in the
cost of hedging reserve.
The purchase of inventory denominated in a foreign currency is a transaction related hedged item
that results in the recognition of a non-financial asset. As such, amounts accumulated in the cost
of hedging reserve are removed from the cost of hedging reserve and included within the initial
cost of the non-financial asset, being the inventory, on initial recognition of the non-financial asset.
Section 7: Risk management continued
7.4 Cost of hedging reserve continued
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-financial asset:
Cost of hedging
2025 2024
£m £m
At 1 January
6.9
18.7
(Losses)/gains recognised:
– Change in fair value of hedging instruments recognised in the
Consolidated statement of comprehensive income
(21.9)
6.8
Transferred from equity and included within the initial cost of a
non-financial asset:
– Transferred to cost of inventories
(4.3)
(22.6)
Related deferred tax, net (note 2.6)
6.5
4.0
At 31 December
(12.8)
6.9
The expected release profile from equity of post-tax cost of hedging gains and losses is as follows:
At 31 December 2025
Within 1 year 1–2 years >2 years Total
£m £m £m £m
Foreign currency exchange risk
(3.6)
(4.1)
(5.1)
(12.8)
As at 31 December 2024
Within 1 year 1–2 years >2 years Total
£m £m £m £m
Foreign currency exchange risk
5.1
0.7
1.1
6.9
7.3 Hedge reserve continued
238
Drax Group plc Annual report and accounts 2025
Section 7: Risk management continued
7.5 Offsetting financial assets and financial 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 financial assets and liabilities with certain counterparties that are subject to master
netting agreements. Some financial 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 financial 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:
At 31 December 2025
At 31 December 2024
Net amounts
Gross Net amounts Related cash of financial
amounts of financial Related collateral Gross amounts instruments Related Related cash
Gross of financial instruments financial assets/ of financial presented financial collateral
amounts instruments presented instruments (liabilities) Gross amounts instruments in the instruments assets/
of financial offset in the in the that are that are not of financial offset in the balance that are (liabilities) that
instruments balance sheet balance sheet not offset offset Net amount
instruments
(1)
balance sheet
sheet
(1)
not offset are not offset Net amount
£m £m £m £m £m £m £m £m £m £m £m £m
Financial assets
Derivative financial instruments
129.3
(36.3)
93.0
(46.5)
–
46.5
328.5
(71.2)
2 57.3
(166.4)
(1.5)
89.4
Trade and other receivables and contract assets
369.6
(65.5)
30 4.1
(2.7)
(10.9)
290.5
445.3
(52.7)
392.6
(2.5)
–
39 0.1
Financial liabilities
Derivative financial instruments
(286.1)
36.3
(249.8)
47. 8
10.9
(191.1)
(404.5)
71.2
(333.3)
156.1
–
(17 7.2)
Trade and other payables and contract liabilities
(739.3)
65.5
(673.8)
1.4
–
(672.4)
(845.7)
52.7
(793.0)
12.8
1.5
(778.7)
(1) The amounts in the table above have been represented to present only the financial assets and financial liabilities included within the balance sheet line item.
Collateral assets and liabilities are recorded in other receivables and other payables respectively.
239
Drax Group plc Annual report and accounts 2025
Financial statements
7.6 Contingencies
Contingent assets are potential assets that arise from past events whose existence will be
confirmed by a future event that is outside of the control of the Group. The amount or timing of
any potential receipt is uncertain.
Contingent liabilities are potential obligations that arise from past events whose existence will be
confirmed by a future event that is outside of the control of the Group. The amount or timing of
any potential outflow is uncertain.
As at 31 December 2025, the Group had the following contingent liabilities.
Environmental
The Group’s subsidiaries operate facilities in the United States that are subject to federal and state
environmental regulation. In this context, certain of the Group’s subsidiaries have been named as
defendants in two U.S. civil proceedings in Federal Court in the Southern District of Mississippi.
One complaint is filed as a putative class action, which alleges property damage, personal injury,
and other harms alleged to arise from environmental emissions or other aspects of local site
operations. The other complaint is a mass action with similar health and property harm allegations
but additionally asserting Clean Air Act violations.
The Group intends to defend the complaints vigorously; however, the ultimate outcome and
potential financial or operational impact cannot be predicted with certainty. The Group continues
to assess these matters and will update disclosures as required. At this stage management cannot
estimate the potential economic impact of the complaints with any reliable precision and therefore
these have been treated as contingent liabilities. At this stage, they are not considered to be
material to the Consolidated financial statements. Litigation of this nature in the United States can
be complex, protracted, and costly to defend.
With litigation of this nature in the United States, there is risk of complaints expanding to more sites
where the Group’s subsidiaries operate facilities.
Third Party Intermediary commissions
Recent judicial developments relating to commission disclosure obligations of Third Party
Intermediaries (“TPIs”), particularly in the non domestic energy sector, have increased the potential
for claims by commercial customers alleging hidden or undisclosed broker commissions. A series
of recent judgments have provided additional guidance on how such claims will be considered by
the English courts. We are in the process of reassessing the potential exposure from existing and
threatened commercial customer claims in light of such legal developments. At this stage, it is not
considered to be material to the Consolidated financial statements.
7.7 Commitments
The Group has a number of financial 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.
At 31 December
2025 2024
£m £m
Contracts placed for future capital expenditure not provided in the
Consolidated financial statements – property, plant and equipment
153.1
142.8
Contracts placed for future capital expenditure not provided in the
Consolidated financial statements – intangible assets
2.5
–
Future commitments to purchase ROCs
51.7
–
Future commitments to purchase biomass under fixed and variable
priced contracts
1,094.7
2,353.3
Future commitments to purchase fibre under fixed and variable
priced contracts
275.8
424.4
Future commitments to purchase biomass have reduced compared to the prior year, as the majority
of committed purchases match the period out to the end of the existing renewable schemes in
March 2027.
The contractual maturities of the future commitments to purchase biomass and fibre are as follows:
At 31 December
2025 2024
£m £m
Within one year
1,053.2
995.2
Within one to five years
270.5
1,442.7
After five years
46.8
339.8
1,370.5
2,777.7
Commitments to purchase biomass 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 financial statements as they are not within the scope of
IFRS 9 as they are for the purchase of a non-financial item that due to the nature of the biomass
market cannot be settled net in cash, and are not, therefore, required to be measured at fair value.
Section 7: Risk management continued
240
Drax Group plc Annual report and accounts 2025
This section details reference information relevant to the compiling of the Consolidated financial
statements and provides general information about the Group. This section also sets out the basis
of preparation of the Company financial statements and general accounting policies that are not
specific to any one note.
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 four principal activities:
– Pellet Production: production and subsequent sale of biomass pellets from the Group’s
processing facilities in North America
– Biomass Generation: generation and sale of electricity from the Group’s biomass assets in the UK
– Flexible Generation: generation and sale of electricity from pumped storage, run-of-river hydro
and OCGT assets, and the processing and sale of waste-derived pellets, in the UK
– Energy Solutions: supply of electricity to non-domestic customers in the UK
The Group’s activities are principally based within the UK, US and Canada.
The address of the Company’s registered office and principal establishment is Drax Power Station,
Selby, North Yorkshire, YO8 8PH, United Kingdom . A full list of the Company’s direct and indirect
related undertakings is disclosed in note 5 to the Company financial statements, which follow these
Consolidated financial statements.
8.2 Adoption of new and revised accounting standards
The following amendments became effective for the first time in 2025. The Group adopted the
following from 1 January 2025:
– IAS 21 (amended) – Lack of Exchangeability – effective from 1 January 2025
The adoption of this amendment in the current period has not had a material impact on these
Consolidated financial statements.
At the date of approval of this report, the following new or amended standards and relevant
interpretations, which have not been applied in these Consolidated financial statements, were in
issue but not yet effective:
– IFRS 10 (amended) – Consolidated Financial Statements – effective date deferred indefinitely
(1)
– IAS 28 (amended) – Investments in Associates and Joint Ventures (2011) – effective date
deferred indefinitely
(1)
– IFRS 9 (amended) and IFRS 7 (amended) – Amendments to the Classification and Measurement
of Financial Instruments – effective from 1 January 2026
– IFRS Accounting Standards – Annual Improvements to IFRS Accounting Standards – Volume 11
– effective from 1 January 2026
– IFRS 9 (amended) and IFRS 7 (amended) – Contracts Referencing Nature-dependent Electricity
– effective from 1 January 2026
– IFRS 18 – Presentation and Disclosure in Financial Statements – effective from 1 January 2027
– IFRS 19 – Subsidiaries without Public Accountability: Disclosures – effective from 1 January
2027
(1)
(1) Pending endorsement by the UK Endorsement Board (UKEB).
On 9 April 2024, the International Accounting Standards Board (IASB) issued IFRS 18 Presentation
and Disclosure in Financial Statements, which is expected to be effective for periods commencing
on or after 1 January 2027. This was endorsed by the UK Endorsement Board on 12 December
2025. The standard will replace IAS 1 Presentation of Financial Statements. Whilst IFRS 18 will
not directly impact recognition or measurement, it will impact how amounts are presented, with
the principal changes being:
– Categorisation of all income and expenditure into three newly defined categories: Operating,
Investing and Financing
– Introduction of two newly defined subtotals to be presented within the income statement:
Operating profit and Profit before financing and income taxes
– New disclosure requirement for Management Performance Measures (MPMs)
– New requirements regarding the aggregation and disaggregation of information to be presented
in the financial statements
The Group is currently considering the impact of applying IFRS 18, prior to adoption. From the
transition work completed so far, the Group expects the main impact to be in relation to the
presentation of the Group’s Consolidated income statement, as the Group determines the most
appropriate categorisations and breakdowns of income and expense items to present. This will
likely result in new consolidated income statement categories, different disaggregation of certain
types of income and expenses, and will result in different subtotals being presented to those used
currently. The Group does not expect a significant impact on either the APMs currently disclosed
by the Group, or the level of disclosure provided, as many of the MPM disclosure requirements of
IFRS 18 are already provided by the Group. However, the Group’s current APMs will be clearly
distinguished between those that meet the IFRS 18 definition of an MPM to which the
requirements of IFRS 18 apply, and other performance measures provided. The Group’s
Consolidated cash flow statement under IFRS 18 will start at operating profit, rather than profit
after tax, and interest paid and interest received will be presented in financing and investing
activities respectively, rather than within operating activities as they are currently. Apart from the
impacts described above, the new requirements are not expected to significantly impact any other
primary statements or related disclosures.
Adoption of other new or amended standards and relevant interpretations in future periods is not
expected to have a material impact on the Consolidated financial 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 UK.
Section 8: Reference information
241
Drax Group plc Annual report and accounts 2025
Financial statements
8.3 Related party transactions
A related party is either an individual or entity with control or significant 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 significant influence over. The Group’s related parties are primarily
its associate and its key management personnel. The 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:
Balances as at
Transactions in the year ended 31 December 2025
31 December 2025
(1)
Drax Revenue Other income Purchases Payable Receivable
Ownership £m £m £m £m £m
Houston Pellet
Limited Partnership
HPLP
30%
2.0
0.6
18.4
1.2
0.7
Balances as at
Transactions in the year ended 31 December 2024
31 December 2024
(1)
Drax Revenue Other income Purchases Payable Receivable
Ownership £m £m £m £m £m
Houston Pellet
Limited Partnership
HPLP
30%
2.1
0.5
18.7
1.9
2.9
(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
specified in IAS 24. Further information about the remuneration of individual Directors, together
with the Directors’ interests in the share capital of the Company, is provided in the audited section
of the Remuneration Committee report on pages 105–111.
Year ended 31 December
2025 2024
£000 £000
Short-term employee benefits
7,6 0 4
7,274
Termination benefits
2,591
388
Share-based payments
5,203
4 ,107
Post-employment benefits
406
411
Total remuneration
15,804
12,18 0
Compensation of the Group’s key management personnel includes short-term employee benefits,
which includes salaries and other short-term benefits. The compensation also includes
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.
The average number of members of the Board and executive management during the year was 15
(2024: 16) and the amounts included in the table above reflect their remuneration.
There were no other transactions with Directors for the periods covered by these Consolidated
financial statements.
Section 8: Reference information continued
242
Drax Group plc Annual report and accounts 2025
Company balance sheet
Notes
As at 31 December
2025
£m
2024
£m
Non-current assets
Investments in subsidiaries 5 78 5.1 769.4
Current assets
Amounts due from other Group companies 6 319.2 318.9
Cash and cash equivalents 2.0 4.9
321.2 323.8
Current liabilities
Other payables ( 7. 4) –
Amounts due to other Group companies (2.8) (2.2)
(10.2) (2.2)
Net current assets 311.0 321.6
Net assets 1, 0 96.1 1,091.0
Shareholders’ equity
Issued equity 7 49.9 49.4
Share premium 448.5 443.8
Own shares reserve (534.6) (314.2)
Capital redemption reserve 1.5 1.5
Retained profits 1,130.8 910.5
Total shareholders’ equity 1,096 .1 1,091.0
The Company reported a profit for the financial year ended 31 December 2025 of £30 8 .4 million
(2024: £490.9 million).
These financial statements were approved and authorised for issue by the Board of Directors
on25February 2026.
Signed on behalf of the Board of Directors:
Frank Lemmink
CFO
Company statement of changes in equity
Issued
equity
£m
Share
premium
£m
Own shares
reserve
(1)
£m
Capital
redemption
reserve
£m
Retained
profits
£m
Total
£m
At 1 January 2024 4 9.1 441.2 (199.6) 1.5 50 0 .1 792.3
Issue of share capital (note 7) 0.3 2.6 – – – 2.9
Profit and other comprehensive
income for the year – – – – 490.9 490.9
Movement in equity associated
with share-based payments – – 0.8 – 13.0 13.8
Equity dividends paid (note 8) – – – – (93.5) (93.5)
Repurchase of own shares
through share buyback
programmes (note 10) – – (115.4) – – (115.4)
At 1 January 2025 49.4 443.8 (314.2) 1.5 910.5 1,091.0
Issue of share capital (note 7) 0.5 4.7 (0.2) – – 5.0
Profit and other comprehensive
income for the year – – – – 308.4 308.4
Movement in equity associated
with forward contracts to
purchase own shares to satisfy
share-based payment
arrangements – – – – ( 7. 2) ( 7. 2)
Own shares utilised to satisfy
share-based payment
arrangements – – 0.9 – (0.9) –
Movement in equity associated
with share-based payments – – – – 15.7 15.7
Equity dividends paid (note 8) – – – – (95.7) (95.7)
Repurchase of own shares
through share buyback
programmes (note 10) – – (221.1) – – (2 21.1)
At 31 December 2025 49.9 448.5 (534.6) 1.5 1,130.8 1, 0 96.1
(1) The 91.8 million (2024: 57.8 million) shares held in this reserve have no voting rights attached to them.
The movement in equity associated with forward contracts to purchase own shares to satisfy
share-based payment arrangements is described under the own shares reserve section in note 11.
Drax Group plc
Company financial statements
243
Drax Group plc Annual report and accounts 2025
Financial statements
1. Basis of preparation
The separate financial statements of the Company are presented as required by the Companies
Act2006.
The Company meets the definition of a qualifying entity under Financial Reporting Standard 100
(FRS 100) issued by the Financial Reporting Council (FRC).
The principal activity of the Company is being the ultimate parent company of the Drax Group plc
group of companies.
The Company financial statements have been prepared in accordance with FRS 101, Reduced
Disclosure Framework.
The Company has an Employee Benefit Trust (EBT), primarily for the purpose of satisfying
employee share plan awards. The Company is deemed to control the EBT in accordance with
IFRS10 and therefore the EBT is consolidated within the results of the Company. The assets and
liabilities of the EBT are included in the Company balance sheet.
The Company applied certain new and amended standards for the first time in 2025. The full list
ofstandards adopted is set out in the Consolidated financial statements in note 8.2. These updates
and amendments have not had a material impact on the financial statements of the Company.
As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available
under that standard in relation to presentation of a cash flow statement, financial instruments,
share-based payments, capital risk management, standards not yet effective and certain related
party transactions. Where required, equivalent disclosures are given in the Consolidated financial
statements.
The Company financial statements have been prepared under the historical cost convention and
are presented in pounds sterling which is the functional currency of the Company and rounded
tothe nearest million to one decimal place unless stated otherwise. The principal accounting
policies adopted are summarised below and have been consistently applied to both years presented.
2. Accounting policies
Investments in subsidiaries
Investments in subsidiaries are stated at cost less, where relevant, provision for impairment.
Financial assets
Amounts due from other Group companies and other receivables are initially measured at fair value,
which is normally the transaction price, and subsequently at amortised cost less impairment. The
company holds the receivables with the objective of collecting the contractual cash flows and
therefore measures them subsequently at amortised cost using the effective interest method, less
any impairment.
A provision for impairment of other receivables, including amounts due from Group undertakings, is
measured at an amount equal to lifetime expected credit losses where there has been a significant
increase in credit risk since initial recognition. If the credit risk of the financial instrument has not
increased significantly since initial recognition, the Company recognises a 12-month expected
credit loss provision.
Financial liabilities
Amounts due to other Group companies and other payables are financial liabilities that are initially
measured at fair value. Amounts due to other Group companies and other payables are
subsequently measured at amortised cost using the effective interest method. Financial liabilities
are derecognised when the contractual obligations are discharged, cancelled or expire. If the terms
of a financial liability are significantly modified, the existing financial liability is derecognised and a
new financial liability based on the modified terms is recognised at fair value.
Financial instruments
Issued equity – Ordinary shares are classified as equity as evidenced by their residual interest
intheassets of the Company after deducting its liabilities. Incremental costs directly attributable
tothe issue of new shares or options are shown in equity as a deduction, net of tax, from the
proceeds. 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.
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.
Impairment of financial assets
The Company applies the impairment model in IFRS 9 to provide for expected credit losses on its
financial assets including amounts due from other Group companies and other financial assets.
Theprovision for impairment on amounts owed by Group companies is measured at an amount
equal to the lifetime expected credit loss when there has been a significant increase in credit risk
since initial recognition. If there has not been a significant increase in credit risk since initial
recognition, a 12-month expected credit loss provision is recognised.
To assess whether there is a significant increase in credit risk, the Company compares the risk
ofadefault occurring on a financial asset as at the reporting date with the risk of default as at the
date of initial recognition. The following information is considered when assessing if a significant
increase in credit risk has occurred since initial recognition:
– Changes in the external and internal credit ratings for the financial asset or counterparty to
thefinancial asset
– Changes in credit default swap pricing or spreads for the financial asset or counterparty to
thefinancial asset
– Actual or expected significant adverse changes in business, financial or economic conditions
thatare expected to impact the counterparty’s ability to meet its contractual payments
– Actual or expected significant changes in the operating results of the counterparty
Regardless of the analysis factors, a significant increase in credit risk is presumed if a contractual
payment due in respect of a financial asset is more than 30 days past due.
Drax Group plc
Notes to the Company financial statements
244
Drax Group plc Annual report and accounts 2025
3. Critical accounting judgements and key sources of estimation uncertainty
There were no critical accounting judgements made in the preparation of the Company’s financial
statements and there are no areas of significant estimation uncertainty within the Company’s
financial statements.
4. Profit and loss account
As permitted by Section 408 of the Companies Act 2006, the Company has elected not to present
its own profit and loss account for the years ended 31 December 2025 and 31 December 2024.
TheCompany’s financial statements were approved by the Board on 25 February 2026. The net
profit attributable to the Company is £308.4 million (2024: £490.9 million).
The Company received dividend income from its subsidiary undertakings totalling £300.0 million
in2025 (2024: £485.0 million).
The Company has no employees other than the Directors in the current or prior year, whose
remuneration was paid by a subsidiary undertaking and a proportion was recharged to the
Company.
The auditor’s remuneration for audit services provided to the Company for the year ended
31December 2025 was £11,000 (2024: £10,000).
5. Investments in subsidiaries and related undertakings
Year ended 31 December
2025
£m
2024
£m
Carrying amount:
At 1 January 769.4 755.3
Capital contributions relating to share-based payments 15.7 14 .1
At 31 December 7 85.1 769.4
Investments in subsidiary undertakings
The capital contributions in the current and prior year relate to charges in respect of equity-settled
share-based payment awards granted by the Company to employees of its subsidiaries under
employee share schemes, which the Company is obliged to settle. The charge is borne by the
relevant employing subsidiary entities and a corresponding investment in subsidiary balance arises
within the Company. For more information on each of the Group’s share-based payment award
schemes refer to note 6.2 to the Consolidated financial statements.
Full list of related undertakings
The table below lists the Company’s direct and indirect related undertakings as at 31 December
2025:
Name and nature of business Principal activity
Country of incorporation
and registration Type of share
Registered
number
Ownership
& voting %
Abbott Debt Recovery
Limited*** ++ Dormant England and Wales Ordinary 5355799 100
Abergelli Power
Limited***
Power
generation England and Wales Ordinary 8190497 100
Alabama Pellets LLC* Fuel supply Delaware, USA Common 7064679 100
Amite BioEnergy LLC* Fuel supply Delaware, USA Common 5128116 100
Arkansas Bioenergy LLC* Fuel supply Delaware, USA Common 7881707 100
Baton Rouge Transit LLC* Fuel supply Delaware, USA Common 5128759 100
BMM Energy Solutions
Limited^***
Energy
services Scotland Ordinary SC462201 100
C-Capture Limited
Research and
development England and Wales Ordinary 6912622 3
Carbon Removals
Denmark A/S<
Project
development Denmark Ordinary 45187942 100
DBI O&M Company LLC*
Non-trading
company Delaware, USA Common 5305470 100
Demopolis Pellets LLC* Fuel supply Delaware, USA Common 6314280 100
Donnington Energy
Limited Dormant England and Wales Ordinary 7109298 100
Drax Asia (Japan) K.K.>
Provision of
corporate
services Japan Common
0100-01-
227551 100
Drax BESS Holdco
Limited*** Dormant England and Wales Ordinary 16152612 100
Drax BESS Marfleet
Limited***
Power
generation England and Wales Ordinary 12967525 100
Drax BESS Neilston
Limited***
Power
generation England and Wales Ordinary 14428809 100
Drax Biomass Acquisitions
LLC*
Non-trading
company Delaware, USA Common 7897331 100
Drax Biomass Holdings
Limited***
Holding
company England and Wales Ordinary 8322715 100
Drax Biomass Holdings
LLC* Dormant Delaware, USA Common 5128115 100
Drax Group plc
Notes to the Company financial statements continued
245
Drax Group plc Annual report and accounts 2025
Financial statements
Name and nature of business Principal activity
Country of incorporation
and registration Type of share
Registered
number
Ownership
& voting %
Drax Biomass Inc.*
Biomass pellet
manufacturing Delaware, USA Common 5068290 100
Drax Biomass
International Holdings
LLC*
Holding
company Delaware, USA Common 5250168 100
Drax Biomass Transit
LLC*
Holding
company Delaware, USA Common 5128118 100
Drax CCS Limited Dormant England and Wales Ordinary 7885329 100
Drax Corporate Limited
Group-wide
corporate
services England and Wales Ordinary 5562058 100
Drax Cruachan Expansion
Limited***
Non-trading
company England and Wales Ordinary 6657393 100
Drax Energy Solutions
Limited Power retail England and Wales Ordinary 5893966 100
Drax Finco plc
Finance
company England and Wales Ordinary 10664639 100
Drax Fuel Supply
Limited*** ++
Non-trading
company England and Wales Ordinary 5299523 100
Drax Generation
Developments Limited***
Development
company England and Wales Ordinary 7821368 100
Drax Group Holdings
Limited
Holding
company England and Wales Ordinary 98 87429 100
Drax Holdings Limited+
Holding
company Cayman Islands Ordinary 92144 100
Drax Hydro Limited***
Holding
company England and Wales Ordinary 8654218 100
Drax Innovation
Limited***
Development
company England and Wales Ordinary 10664715 100
Drax Netherlands B.V.~ Dormant Netherlands Ordinary 81848455 100
Drax Pension Trustees
Limited Dormant England and Wales Ordinary 9824989 100
Drax Power Limited
Power
generation England and Wales Ordinary 4883589 100
Drax Pumped Storage
Limited***
Power
generation England and Wales Ordinary 6657336 100
Name and nature of business Principal activity
Country of incorporation
and registration Type of share
Registered
number
Ownership
& voting %
Drax Research and
Innovation Holdco
Limited***
Holding
company England and Wales Ordinary 6657454 100
Drax Retail Developments
Limited Dormant England and Wales Ordinary 10711130 100
Drax River Hydro
Limited***
Power
generation England and Wales Ordinary 5956747 100
Drax Smart Generation
Holdco Limited***
Holding
company England and Wales Ordinary 7821911 100
Drax Smart Sourcing
Holdco Limited***
Holding
company England and Wales Ordinary 7821375 100
Drax Smart Supply
Holdco Limited***
Holding
company England and Wales Ordinary 10664625 100
Elimini, Inc*
Provision of
corporate
services Delaware, USA Common 7216170 100
Elimini US Development,
LLC*
Development
company Delaware, USA Common 7234532 100
Elimini US Holdings, LLC*
Holding
company Delaware, USA Common 7234548 100
Farmoor Energy
Limited*** ++ Dormant England and Wales Ordinary 7111074 100
Haven Heat Limited++ Dormant England and Wales Ordinary 6657428 100
Haven Power Nominees
Limited*** ++ Dormant England and Wales Ordinary 7352734 100
Hirwaun Power
Limited***
Power
generation England and Wales Ordinary 8190283 100
Houston Pellet Inc.**
General
partner Richmond, Canada Common BC0730544 33
Houston Pellet Limited
Partnership** Fuel supply Richmond, Canada Units LP0428310 30
Jefferson Transit LLC* Dormant Delaware, USA Common 6297176 100
LaSalle Bioenergy LLC* Fuel supply Delaware, USA Common 6297174 100
Lavington Pellet Inc.**
General
partner Richmond, Canada Common BC1022038 75
Lavington Pellet Limited
Partnership** Fuel supply Richmond, Canada Units LP0649393 75
Drax Group plc
Notes to the Company financial statements continued
5. Investments in subsidiaries and related undertakings continued
246
Drax Group plc Annual report and accounts 2025
Name and nature of business Principal activity
Country of incorporation
and registration Type of share
Registered
number
Ownership
& voting %
Longview Bioenergy LLC* Fuel supply Delaware, USA Common 7881704 100
Millbrook Power
Limited***
Power
generation England and Wales Ordinary 8920458 100
Morehouse BioEnergy
LLC* Fuel supply Delaware, USA Common 5128117 100
Northern Pellet Inc.**
General
partner Richmond, Canada Common BC1213828 50
Northern Pellet Limited
Partnership** Fuel supply Richmond, Canada
Class A
and
ClassC LP781774 50
Opus Energy (Corporate)
Limited*** Power retail England and Wales Ordinary 5199937 100
Opus Energy Group
Limited***
Holding
company England and Wales Ordinary 4409377 100
Opus Energy Limited*** Power retail England and Wales Ordinary 4382246 100
Opus Energy Marketing
Limited*** ++ Dormant England and Wales Ordinary 5030694 100
Opus Energy Renewables
Limited Power retail England and Wales Ordinary 7126582 100
Opus Gas Limited***
Non-trading
company England and Wales Ordinary 5680956 100
Opus Gas Supply
Limited*** Power retail England and Wales Ordinary 6874709 100
Opus Water Limited Dormant England and Wales Ordinary 9425319 100
Pinnacle Renewable
Energy Inc.** Fuel supply Richmond, Canada Common BC1300366 100
Pinnacle Renewable
Holdings (USA) Inc.*
Holding
company Delaware, USA Common 7043656 100
Pirranello Energy Supply
Limited Dormant England and Wales Ordinary 10769036 100
Progress Power
Limited***
Power
generation England and Wales Ordinary 8421833 100
Smithers Pellet Inc.**
General
partner Richmond, Canada Common BC1135983 100
Smithers Pellet Limited
Partnership** Fuel supply Richmond, Canada Units LP730047 100
Name and nature of business Principal activity
Country of incorporation
and registration Type of share
Registered
number
Ownership
& voting %
SMW Limited^ Fuel supply Scotland Ordinary SC165988 100
Sunflower Energy Supply
Limited Dormant England and Wales Ordinary 9735929 100
Tyler Bioenergy LLC* Dormant Delaware, USA Common 6297175 100
US Genco I, LLC*
Project
development Delaware, USA Common 2595041 100
US Genco II, LLC*
Project
development Delaware, USA Common 4375052 100
US Genco III, LLC*
Non-trading
company Delaware, USA Common 2595050 100
All related undertakings are indirect apart from Drax Group Holdings Limited.
Registered office
Incorporated in England and Wales
The registered address of all the companies incorporated in England and Wales is Drax Power
Station, Selby, North Yorkshire, YO8 8PH. The exception to this is C-Capture Limited, which is
registered at Windsor House, Cornwall Road, Harrogate, HG1 2PW.
*Incorporated in the USA
The registered address of all related undertakings incorporated in the USA is CSC, 251 Little Falls
Drive, Wilmington, DE 19808-1674.
**Incorporated in Canada
The registered address of all related undertakings incorporated in Canada is 2800 Park Place,
666Burrard Street, Vancouver, BC V6C 2Z7.
^Incorporated in Scotland
The registered address of all related undertakings incorporated in Scotland is 13 Queen’s Road,
Aberdeen, Scotland, AB15 4YL.
+Registered in Cayman Islands
The registered address of Drax Holdings Limited is C/O Intertrust Corporate Services (Cayman)
Limited, One Nexus Way, Camana Bay, George Town, Grand Cayman KY1 9005, Cayman Islands.
~Registered in Netherlands
The address of Drax Netherlands B.V. registered in Netherlands is Barbara Strozzilaan 101,
Amsterdam, 1083HN.
>Registered in Japan
The address of Drax Asia (Japan) K.K. registered in Japan is Level 21, Marunouchi Nijubashi
Building, 3-2-3 Marunouchi, Chiyoda-ku, Tokyo, Japan 100-0005.
Drax Group plc
Notes to the Company financial statements continued
5. Investments in subsidiaries and related undertakings continued
247
Drax Group plc Annual report and accounts 2025
Financial statements
<Registered in Denmark
The address of Carbon Removals Denmark A/S registered in Denmark is C/O DLA Piper Law Firm
P/S, Oslo Plads 2, DK-2100 København Ø, Denmark.
***Exempt from audit
These subsidiaries have taken advantage of the exemption from audit available under section 479A
of the Companies Act 2006 for the 2025 statutory accounts. These companies are all incorporated
in the UK.
++Winding up
These companies are going through a voluntary winding up process. The companies have not
traded for some time and their dissolution will help the Group save on administrative costs.
Abbott Debt Recovery Limited and Opus Energy Marketing Limited have 30 December 2025 year
ends. All other related undertakings have 31 December 2025 year ends.
The Group consolidates all of the related undertakings disclosed above apart from:
– C-Capture Limited which is equity accounted
– Northern Pellet Inc. and Northern Pellet Limited Partnership which are accounted for as joint
operations
– Houston Pellet Inc. and Houston Pellet Limited Partnership which are equity accounted
6. Amounts due from other Group companies
The amounts due from other Group companies include short-term trading balances which are
unsecured, interest free and settled under normal payment terms. Amounts due from other Group
companies also includes other funds advanced by the Company and cash pool arrangements which
accrue interest at a commercial rate. Cash pool balances are repayable on demand and interest is
settled quarterly. Other funds advanced by the Company are settled according to the terms of the
agreement or, if shorter, the date demanded by the Company as the lender. If interest is not paid
onthe due date it is rolled over and capitalised.
The expected credit loss provision calculated on amounts due from other Group companies was
negligible in the current and prior year due to the high credit quality of the counterparties and short
time until expected receipt. As a result, no provision has been recognised.
7. Issued equity
As at 31 December
2025
£m
2024
£m
Issued and fully paid:
432,171,763 (2024: 427,770,766) ordinary shares of 11
16
⁄29 pence each 49.9 49.4
The movement in allotted and fully paid share capital of the Company during the year was as follows:
Year ended 31 December
2025
(number)
2024
(number)
At 1 January 427,770,766 424,923,406
Issued in respect of employee share schemes 4,400,997 2, 8 47,36 0
At 31 December 432,171,763 427,770,766
The Company has only one class of shares, which are ordinary shares of 11
16
⁄29 pence each,
carrying no right to fixed income. The Trustee of the Employee Benefit Trust (EBT) waived
dividends paid in the year on shares held by the EBT. The counterparty that holds shares as part
ofthe Group’s forward contracts to purchase its own shares (see note 4.4) has waived dividends
paid in the year on shares they hold. During the year 2,611,059 shares were issued at a weighted
average exercise price of 190 pence per share in respect of options vesting on employee share
purchase schemes and 1,789,938 shares were issued in respect of share options vesting on share
awards with no exercise price.
The total cash received, split between the nominal value of issued equity and share premium,
isshown in the Company statement of changes in equity on page 243.
Full details of share options outstanding are included in note 6.2 to the Consolidated financial
statements.
8. Dividends
Pence per share
Year ended 31 December
2025
£m
2024
£m
Amounts recognised as distributions to equity
holders in the year (based on the number of ordinary
shares outstanding at the record date):
Interim dividend for the year ended 31 December
2025 paid on 24 October 2025 11.6 40.0
Final dividend for the year ended 31 December 2024
paid on 16 May 2025 15.6 55.7
Interim dividend for the year ended 31 December
2024 paid on 25 October 2024 10.4 39.8
Final dividend for the year ended 31 December 2023
paid on 17 May 2024 13.9 53.7
Total distributions 95.7 93.5
At the forthcoming Annual General Meeting the Board will recommend to shareholders that a
resolution is passed to approve payment of a final dividend for the year ended 31 December 2025
of 17.4 pence per share (equivalent to approximately £59 million) payable on 15 May 2026. Thefinal
dividend has not been included as a liability as at 31 December 2025.
Drax Group plc
Notes to the Company financial statements continued
5. Investments in subsidiaries and related undertakings continued
248
Drax Group plc Annual report and accounts 2025
9. Distributable reserves
The Company considers its distributable reserves to be comprised of the retained profits, less
credits to equity in respect of share schemes, less own shares. Accordingly, the Company considers
itself to have sufficient distributable profits from which to pay the current proposed final dividend
for 2025 of approximately £59 million. In addition to its own reserves, the Company has access to
the distributable reserves of its subsidiary undertakings with which future dividend payments can
be funded.
The Company is dependent upon its subsidiaries for the provision of cash with which to make
dividend payments. The Group has sufficient cash resources with which to meet the proposed
dividend (see note 4.1 to the Consolidated financial statements for additional information).
10. Share buyback programme
On 31 July 2025, the Company announced a £450 million share buyback programme, to commence
immediately following the completion of the £300 million share buyback programme that took
place between 2024 and 2025.
Year ended 31December 2025 Year ended 31December 2024
Number of shares
(million)
Total net cost
£m
Number of shares
(million)
Total net cost
£m
Shares repurchased:
£300 million buyback programme 29.4 185.7 17.8 115.4
£450 million buyback programme 4.7 35.4 – –
Total 34 .1 2 21.1 17. 8 115.4
Price paid per share: Pence Pence
Average 644.7 645.6
Range Between 544.3 and 833.3 Between 618.8 and 673.9
The £300 million share buyback programme completed on 8 October 2025. The£450 million
programme is ongoing. During 2026, to 24 February 2026, under the £450 million share buyback
programme, 2.5 million shares have been repurchased at a total net cost of £21.9 million.
Shares purchased under these share buyback programmes are held in treasury within the own
shares reserve awaiting reissue or cancellation and have no voting rights attached to them.
Theshares purchased by the Company have not been cancelled and so continue to be included
inthe issued shares in the above table.
11. Own shares
The own shares reserve represents shares of Drax Group plc purchased under share buyback
programmes and held by the Company as Treasury shares, or shares of the Company held by the
Employee Benefit Trust (EBT) for the purpose of satisfying employee share-based payment awards.
The EBT is treated as an extension of the Company, in accordance with IFRS 10.
The cost of these shares held by the EBT or the Company are recognised as a deduction from
equity until the shares are issued to employees under share awards, cancelled, reissued or disposed
of. The amount deducted from equity includes any incremental directly attributable costs. No gain
or loss is recognised in the income statement on the purchase, sale, issue or cancellation of the
Company’s own equity instruments. Where the Company has entered into a forward contract and
has an obligation to purchase a fixed amount of its own shares for a fixed price the present value
ofthis obligation is recognised as a deduction to equity, within retained earnings, with a
corresponding liability recognised for the amount of the purchase price. Once the shares have
beenreceived under this forward contract the deduction to equity within retained earnings is
transferred to the own shares reserve.
As at 31 December 2025, the own shares reserve comprises 91.8 million (2024: 57.8 million) shares
at a value of £534.6 million (2024: £314.2 million) held in treasury.
During the year, the EBT subscribed for 1.8 million of new shares at nominal value for a total of
£0.2 million, which were subsequently issued to employees to satisfy share plan awards during the
year.
See the Company statement of changes in equity for a reconciliation of the movement in the own
shares reserve.
12. Guarantees
The Company has provided guarantees over the liabilities of its subsidiaries that have taken
advantage of the audit exemption available in section 479A of the Companies Act 2006. The list
ofsubsidiaries who have taken this exemption can be found in note 5.
The possibility of an economic outflow in relation to the above guarantees is considered remote.
Drax Group plc
Notes to the Company financial statements continued
249
Drax Group plc Annual report and accounts 2025
Financial statements
Key dates for 2026
At the date of publication of this document, the following are the proposed key
dates in the 2026 financial calendar:
Ordinary shares marked ex-dividend 23 April
Record date for entitlement to the final dividend 24 April
Annual General Meeting 30 April
Payment of final dividend 15 May
Financial half-year end 30 June
Announcement of half-year results 30 July
Financial year end 31 December
Other significant dates, or amendments to the proposed dates above, will be posted on the Group’s
website at www.drax.com as and when they become available.
Results announcements
Results announcements are issued to the London Stock Exchange and are available on its news
service. Shortly afterwards, they areavailable under Regulatory News within the Investors section
on the Group’s website.
Share price
Shareholders can access the current share price of Drax Group plc ordinary shares on the
Company’s website. During London Stock Exchange trading hours, the price shown on the website
is subject to a delay of approximately 15 minutes, and outside trading hours itis the last available
price.
The table below provides an indication of the fluctuations in the Drax Group plc share price during
the course of 2025, and the graph provides an indication of the trend of the share price throughout
the year.
Closing price on
31 December 2024
Low during the year
9 April 2025
High during the year
30 December 2025
Closing price on
31 December 2025
647.8 pence 536.8 pence 840.7 pence 837.8 pence
January
2025
February
2025
March
2025
April
2025
May
2025
June
2025
July
2025
August
2025
September
2025
October
2025
November
2025
December
2025
0
1.00
3.00
5.00
7.0 0
2.00
4.00
6.00
Share price chart
Share price (GBP)
Trade Volume
8.00
9.00
0m
3.0m
0.5m
1.0m
1.5m
2.0m
2.5m
Note:
The share prices given are the middle market closing prices as derived from the London Stock Exchange Daily Official List.
Market capitalisation
The market capitalisation, based on the number of shares outstanding and the closing price at
31December 2025, was approximately £2,205 million (2024: £2,396 million).
Financial reports
Copies of all financial reports published by the Group are available from the date of publication and
can be downloaded from theCompany’s website. Printed copies of reports can be requested by
writing to the Company Secretary at the registered office, byclicking on Contact Us on the
website, or direct by email to Drax.Enq@drax.com.
Shareholder information
250
Drax Group plc Annual report and accounts 2025
January
2025
February
2025
March
2025
April
2025
May
2025
June
2025
July
2025
August
2025
September
2025
October
2025
November
2025
December
2025
0
1.00
3.00
5.00
7.0 0
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Share price chart
Share price (GBP)
Trade Volume
8.00
9.00
0m
3.0m
0.5m
1.0m
1.5m
2.0m
2.5m
Note:
The share prices given are the middle market closing prices as derived from the London Stock Exchange Daily Official List.
Market capitalisation
The market capitalisation, based on the number of shares outstanding and the closing price at
31December 2025, was approximately £2,205 million (2024: £2,396 million).
Financial reports
Copies of all financial reports published by the Group are available from the date of publication and
can be downloaded from theCompany’s website. Printed copies of reports can be requested by
writing to the Company Secretary at the registered office, byclicking on Contact Us on the
website, or direct by email to Drax.Enq@drax.com.
Drax shareholder queries
The Company’s share register is maintained by Equiniti Limited (Equiniti), who are primarily
responsible for updating the share register and for dividend payments.
Shareholders should contact Equiniti directly if they have a query relating to their Drax
shareholding, in particular queries regarding:
– transfer of shares;
– change of name or address;
– lost share certificates;
– lost or out-of-date dividend cheques;
– payment of dividends direct to a bank or building society account; and
– death of a registered shareholder.
Equiniti can be contacted as follows:
– Call Equiniti on +44 (0)371 384 2030 from within the UK. Lines are open from 8.30am to 5.30pm,
Monday to Friday, (excluding Bank Holidays)
– Write to Equiniti at Equiniti Limited, Highdown House, Yeoman Way, Worthing, West Sussex,
BN99 3HH.
When contacting Equiniti by telephone or in writing it is advisable to have your shareholder
reference to hand and quote Drax Group plc, as well as the name and address in which the shares
are held.
Online communications
Registering for online communications allows you to have more control over the administration of
your shareholding. The registration process is easy via Equiniti’s secure website at shareview.co.uk.
Once registered with Shareview you are able to:
– elect how Drax communicates with you;
– amend some of your personal details;
– amend the way you receive dividends; and
– buy or sell shares online.
Registering for electronic communications does not mean that you can no longer receive paper
copies of documents. Equiniti are able to offer a range of services and tailor the communications
tomeet your needs.
A range of frequently asked shareholder questions can also be found on the Company’s website
atwww.drax.com/investors/investor-resources/equity-investors-faq/.
Tax on dividends
Below is a brief summary of the guidance provided by HMRC as it relates to the current tax year.
Ifyou are in any doubt as to the impact on your personal circumstances, you are recommended to
seek your own financial advice from a professional adviser authorised under the Financial Services
and Markets Act 2000.
There is a tax-free Dividend Allowance of £500 per annum in the 2025–2026 tax year (2024–2025:
£500). This means that there is notax to pay on the first £500 of dividend income, no matter what
non-dividend income a shareholder may have. Dividends paid on shares held within pensions and
ISAs are tax-free.
Non-taxpayers and basic rate taxpayers who receive dividend income of more than £500 but less
than £10,000 are required to notify HMRC that they have this source of income.
Non-taxpayers and basic rate taxpayers who receive dividend income of more than £10,000 are
required to file a self-assessment return with HMRC.
The above requirements apply to Share Incentive Plan participants receiving cash dividends on
their plan shares.
Further information and updates on tax on dividends can be found at gov.uk/tax-on-dividends.
Beneficial owners and information rights
If your shares are registered in the name of a third party (i.e. an ISA provider or other nominee
company) you may, if you wish, receive information rights under Section 146 of the Companies Act
2006. In order for this to happen, you must contact the third-party registered holder, who will then
nominate you. All communications by beneficial owners of shares where the shares are held by
third-party registered holders must be directed to that registered holder and not to Drax or Equiniti.
ShareGift
ShareGift (registered charity No. 1052686) is an independent charity which provides a free service
for shareholders wishing to dispose charitably of small parcels of shares, which would most likely
cost more to sell than they are worth. There are no capital gains tax implications (i.e. no gain or loss)
on gifts of shares to charity and it is possible to obtain income tax relief. Further information can be
obtained directly from the charity at sharegift.org.
Share frauds (boiler room scams)
In recent years, many companies have become aware that their shareholders have received
unsolicited phone calls or correspondence offering to purchase their shares at apparently inflated
prices. It is often the case that the caller, or message in the correspondence, claims that they
represent a majority shareholder who is looking to take over the Company. At the time of this report,
the Company was not the subject of a take-over attempt, hostile or otherwise, and approaches
such as those outlined are usually made by unauthorised companies and individuals. Shareholders
should be very wary of any unsolicited advice, offers to buy shares at a premium or offers of free
reports into the Company. Below is the advice from the Financial Conduct Authority (FCA).
Shareholder information continued
251
Drax Group plc Annual report and accounts 2025
Shareholder information
Beware of share fraud
Fraudsters use persuasive and high-pressure tactics to lure investors into scams. They may offer
tosell shares that turn out to be worthless or non-existent, or to buy shares at an inflated price in
return for upfront payment. While high profits are promised, if you buy or sell shares in this way you
will probably lose your money.
How to avoid share fraud:
– Keep in mind that firms authorised by the FCA are unlikely to contact you out of the blue with
anoffer to buy or sell shares.
– Do not get into a conversation, note the name of the person and firm contacting you and then
end the call.
– Check the Financial Services Register from fca.org.uk to see if the person and firm contacting
you is authorised by the FCA.
– Beware of fraudsters claiming to be from an authorised firm, copying its website or giving you
false contact details.
– Use the firm’s contact details listed on the Register if you want to call them back.
– Call the FCA on 0800 111 6768 if the firm does not have contact details on the Register or you
are told they are out of date.
– Search the list of unauthorised firms to avoid at fca.org.uk/scams.
– Consider that if you buy or sell shares from an unauthorised firm you will not have access to
theFinancial Ombudsman Service orFinancial Services Compensation Scheme.
– Think about getting independent financial and professional advice before you hand over
anymoney.
Remember, if it sounds too good to be true, it probably is!
Report a scam
If you are approached by fraudsters please tell the FCA using the share fraud reporting form at
fca.org.uk/scams, where you can findout more about investment scams.
You can also call the FCA Consumer Helpline on 0800 111 6768.
If you have already paid money to share fraudsters you should contact Action Fraud on
03001232040.
Shareholder information continued
252
Drax Group plc Annual report and accounts 2025
Ancillary services
Services provided to National Grid used forbalancing supply and
demand or maintaining secure electricity supplies within
acceptable limits. They are described in Connection Condition 8
ofthe Grid Code.
Availability
Average percentage of time the units wereavailable for
generation.
BECCS
Bioenergy with carbon capture and storage, with carbon
resulting from power generation captured and stored.
BESS
Battery energy storage system.
Biogenic carbon cycle
Biogenic refers to something that is produced by, or originates
from, a living organism. The biogenic carbon cycle is thenatural
process of plants and animals releasing CO
2
into the atmosphere
through respiration and decomposition, and plants absorbing
CO
2
via photosynthesis.
Biomass
Organic material of non-fossil origin, including organic waste,
that can be converted into bioenergy through combustion.
TheGroup uses sawmill and other wood industry residues and
forest residuals (which includes low-grade roundwood, thinnings,
branches and tops) in the form of compressed wood pellets,
togenerate electricity at Drax Power Station or sell the pellets
tothird parties.
Branches and tops
Tops, bark, and limbs of trees that have been left behind post-
harvest.
Capacity Market
Part of the UK Government’s Electricity Market Reform, the
Capacity Market is intended to ensure security of electricity
supply by providing a payment for reliable sources of capacity.
EBDS
The UK Government’s Energy Bills Discount Scheme.
EGL
The Electricity Generator Levy.
ENGO
Environmental NGO.
ESG
Environmental, Social and Governance.
First Nations
Any of the groups of indigenous peoples inCanada.
FlexGen
The reportable segments Flexible Generation and Energy
Solutions.
Forced outage/Unplanned outage
Any reduction in plant availability, excluding planned outages.
FSC®
Forest Stewardship Council: an international NGO which
promotes responsible management of the world’s forests.
Frequency response
The automatic change in generation output, or in demand, to
maintain a system frequency of 50Hz.
GHG
Greenhouse gas.
Grid charges
Includes transmission network use of system charges (TNUoS),
balancing services use of system charges (BSUoS) and
distribution use of system charges (DUoS).
IAB
Independent Advisory Board, comprising scientists, academics,
and forestry experts who provide independent challenge, insight
and advice into the Group’s activities.
Carbon capture and storage (CCS)
The process of trapping or collecting carbon emissions from
alarge-scale source and then permanently storing them.
CCC
The UK’s Climate Change Committee.
CDR
Carbon dioxide removal.
Contracts for Difference (CfD)
A mechanism to support investment in low-carbon electricity
generation. The CfDworks by stabilising revenues for generators
at a fixed-price level known as the “strike price”. Generators will
receive revenue from selling their electricity into the market as
usual; however, when the market reference price is below the
strike price, they also receive a top-up payment for the additional
amount. Conversely, if the reference price is above the strike
price, the generator must pay back the difference.
Combined Cycle Gas Turbines (CCGT)
A form of highly efficient energy generation technology that
combines a gas-fired turbine with a steam turbine.
Department for Energy Security andNet Zero (DESNZ)
The UK Government Department that provides dedicated
leadership focused ondelivering security of energy supply,
ensuring properly functioning markets, greater energy efficiency
and seizing the opportunities of net zero to lead the world in new
green industries.
Dispatchable power
An electricity generator produces dispatchable power when
thepower can be ramped up and down, or switched on or off,
atshort notice to provide (or dispatch) a flexible response to
changes in electricity demand. Biomass, pumped storage, coal,
oil, and gas electricity generation can meetthese criteria and
hence can be dispatchable power sources. Nuclear can be
dispatched against an agreed schedule but is not flexible. Wind
and solar electricity cannot be scheduled and hence are not
dispatchable. An electricity system requires sufficient
dispatchable power to operate and remain safe.
Glossary
253
Drax Group plc Annual report and accounts 2025
Shareholder information
Glossary continued
IFRS
International Financial Reporting Standards.
Lost Time Incident Rate (LTIR)
The frequency rate is calculated on the following basis: (fatalities
and lost time injuries)/hours worked x 100,000. Lost time injuries
are defined as occurrences where the injured party is absent
from work for more than 24 hours.
Low-grade roundwood
Low-grade roundwood is material which does not satisfy the
quality standards set by the timber industry and is rejected by
asawmill.
NGO
Non-governmental organisation.
Near Miss and Hazard Identification Rate (NMHIR)
NMHIR is the total number of near miss and hazard identification
reports logged per 100,000 hours worked.
NESO
National Energy System Operator. The energy system operator
for the UK.
Non-woody biomass
Biomass not derived from wood, for example non-woody
processing residues.
Open Cycle Gas Turbine (OCGT)
A free-standing gas turbine, using compressed air, to generate
electricity.
Planned outage
A period during which scheduled maintenance is executed
according to theplan set at the outset of the year.
PEFC
Programme for the Endorsement of Forest Certification: an
independent, non-profit, non-governmental organisation that
promotes sustainable forest management through independent
third-party certification.
REGO
The Renewable Energy Guarantees ofOrigin (REGO) scheme
provides certificates called REGOs which demonstrate electricity
has been generated from renewable sources.
Reserve
Generation or demand available to be dispatched by the System
Operator to correct a generation/demand imbalance, normally
attwo or more minutes’ notice.
Responsibly sourced biomass
Biomass that delivers climate, nature, and people positive
outcomes, adhering to strict compliance, traceability, and
third-party certification standards, where relevant.
ROC
A Renewables Obligation Certificate (ROC) is a certificate issued
to an accredited generator for electricity generated from eligible
renewable sources.
Salvage trees
Trees that are felled because they have defective stems, are ill
ordamaged (e.g. pest, insects, fungus, wind, storms, fires, etc.).
Sawmill and wood industry residues
Woody material produced during the processing of wood at the
sawmill, such as sawdust, shavings, chips, and offcuts.
SBP
Sustainable Biomass Program: a certification system designed
for woody biomass used in industrial energy production.
Summer
The calendar months April to September.
Sustainable biomass
Biomass which complies with the definition of “sustainable
source”, Schedule 3, Land Criteria, UK Renewables Obligation
Order 2015.
System operator
National Grid Electricity Transmission. Responsible for the
co-ordination of electricity flows onto and over the transmission
system, balancing generation supply and user demand.
TCFD
Task Force on Climate-related Financial Disclosures.
Thinning
Wood from a silvicultural operation where the main objective is
to reduce the density of trees in a stand, improve the quality and
growth of the forest, producing saleable trees and forest health
improvements.
TNFD
Taskforce on Nature-related Financial Disclosures.
Total Recordable Incident Rate (TRIR)
The frequency rate is calculated on the following basis: (fatalities,
lost time injuries and worse than first aid injuries)/hours worked
x100,000.
Total results
Financial performance measures prefixed with “Total” are
calculated in accordance with IFRS.
Total shareholder return (TSR)
A measure of the performance of a company’s shares over time.
It combines the rise or fall of the share price and dividends paid
to shareholders to show thetotal return to shareholders over a
particular period.
UK ETS
The UK Emissions Trading Scheme is a mechanism introduced
across the UK to reduce carbon emissions; the scheme is capable
of being extended to cover all greenhouse gas emissions.
Winter
The calendar months October to March.
254
Drax Group plc Annual report and accounts 2025
Company information Professional advisers
and service providers
Drax Group plc
Registered office and trading address
Drax Power Station, Selby,
North Yorkshire YO8 8PH
United Kingdom
T +44 (0)1757 618381
www.drax.com
Registration details
Registered in England and Wales
Company Number: 5562053
Group Company Secretary
Hillary Berger
Enquiry email address
Drax.Enq@drax.com
Independent Auditor
PricewaterhouseCoopers LLP
Central Square, 29 Wellington Street, Leeds, LS1 4DL
Bankers
Barclays Bank PLC
1 Churchill Place, Canary Wharf,
LondonE14 5HP
Brokers
Royal Bank of Canada
100 Bishopsgate,
London EC2N 4AA
J.P. Morgan Cazenove
25 Bank Street, Canary Wharf,
London E14 5JP
Financial PR
FTI Consulting LLP
200 Aldersgate, Aldersgate Street,
London EC1A 4HD
Registrars
Equiniti Limited
Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA
Remuneration advisers
Deloitte LLP
1 New Street Square, London EC4A 3HQ
Solicitors
Slaughter and May
One Bunhill Row,
London EC1Y 8YY
Cautionary note regarding forward-looking statements
This Annual Report and Accounts may contain certain
statements, expectations, statistics, projections and other
information that are, or may be, forward-looking. The accuracy
and completeness of all such statements, including, without
limitation, statements regarding the future financial position,
strategy, projected costs, plans, beliefs, and objectives for the
management of future operations of Drax Group plc (“Drax”) and
its subsidiaries (the “Group”), are not warranted or guaranteed.
By their nature, forward-looking statements involve risk and
uncertainty because they relate to events and depend on
circumstances that may occur in the future. Although Drax
believes that the statements, expectations, statistics and
projections and other information reflected in such statements
are reasonable, they reflect the Company’s current view and
noassurance can be given that they will prove to be correct.
Suchevents and statements involve risks and uncertainties.
Actual results and outcomes may differ materially from those
expressed or implied by those forward-looking statements.
There are a number of factors, many of which are beyond the
control of the Group, which could cause actual results and
developments to differ materially from those expressed or implied
by such forward-looking statements. These include, but are
notlimited to, factors such as: future revenues or earnings being
lower than expected; increasing competitive pressures inthe
industry; uncertainty as to future investment and support
achieved in enabling the realisation of strategic aims and
objectives; and/or general economic conditions or conditions
affecting the relevant industry, both domestically and
internationally, being less favourable than expected, including
theimpact of prevailing economic and political uncertainty, the
impact of conflicts, the impact ofcyber attacks on IT and systems
infrastructure (whether operated directly by Drax or through
third parties), the impact ofstrikes, the impact of adverse
weather conditions or events such as wildfires, and changes
tothe regulatory and compliance environment within which the
Group operates. Wedo not intend to publicly update or revise
these projections or other forward-looking statements to reflect
events or circumstances after the date hereof, and wedo not
assume any responsibility for doing so.
255
Drax Group plc Annual report and accounts 2025
Shareholder information
Go Online. Go Paperless. It’s Simple.
If you no longer wish to receive a hard copy of the
Annual Report and Accounts, and instead wish to receive
communications electronically, please contact our Registrar,
Equiniti, on +44 (0)371 384 2030 (lines are open from
8.30amto5.30pm, Monday to Friday, excluding public holidays,
inEngland and Wales).
This report is printed on Max Ultra White Matt which is made
ofFSC® certified and other controlled material.
Printed sustainably in the UK by Pureprint, a Carbon Neutral
company with FSC® Chain of custody and an ISO
14001-certified environmental management system recycling
100% of all dry waste.
Design and production
www.drax.com
Drax Group plc
Drax Power Station,
Selby,
North Yorkshire
YO8 8PH
T +44(0)1757 618381
Drax Group plc Annual report and accounts 2025
Drax Group plc Annual report and accounts 2025