Drax Group Aktie

Good morning, everyone, and thank you for joining us. Frank sends his apologies. He's not with us today due to personal medical reasons related to a cycling accident, and we expect him back shortly. So Mark Strafford, whom we all know well, and I will be hosting the call.

Our plan is that I will provide an overview of 2025 and an update on the business before handing over to Mark to take you through the numbers. I'll then come back to talk about the progress we're making on our growth strategy. And we'll finish by opening up to questions, which you can either ask verbally or submit online.

On to Page 3, please. You're all familiar with our purpose, which is to enable a zero carbon, lower-cost energy future. I'll start as I always do by reaffirming that that is our purpose, and it guides everything that we do.

In terms of our strategy, which is to create value by investing in the U.K. energy transition, we're focused on a couple of things. First, we are preparing the group for the new running regime that the new low-carbon dispatchable CfD will require. That process is well underway, and that will underpin the earnings and cash flow, which I'll talk about later that we expect to earn between now and 2031. Second part of our strategy is investing that cash to grow our U.K. power business as the energy transition continues and AI drives electrification and growth in demand. And I'll talk more specifically about the investments we're making in BESS and the progress we're making on a data center.

Finally, and most critically, our people are at the heart of Drax and their safety and well-being is an absolute priority for us. And while we've had to take some difficult but necessary steps to position our business effectively for its exciting future, it's more critical than ever at the times like this that everyone feels a valued member on a winning team with a worthwhile mission.

Turning to Page 4. We've delivered a strong operational and underlying financial performance across the group, which is underpinned by a continued focus on safe and efficient operations. We produced a record level of renewable power, primarily from the Drax Power Station, which serves to emphasize its ongoing importance. We're a major provider of renewable power in the U.K. as well as flexibility, accounting for around 6% of overall power and 11% of renewables. And in certain periods of peak demand, we have been more than 50% of U.K. renewable power generation when there has been limited levels of wind.

We've also delivered a record level of pellet production, while at the same time, reducing our costs in the U.S. South, which we see increasingly as highly integrated into our U.K. biomass generation operations. The signing of our low-carbon dispatchable CfD agreement for the Drax Power Station is a key inflection point for the group, enabling us to continue to support the U.K. system while investing for growth.

As you know, we're committed to our plans to generate free cash flows of about GBP 3 billion between 2025 and 2031, of which we delivered about GBP 0.5 billion last year. And to be clear, this is from the current business before accounting for new cash flows associated with our growth plans. Of that GBP 3 billion, we expect to initially allocate over GBP 1 billion of free cash flow to shareholder returns. which is inclusive of the ongoing GBP 450 million 3-year share buyback program. And up to about GBP 2 billion of that then will be allocated to incremental investment in growth as we seek to enable the energy transition and support the growth of AI.

And we're making great progress. First, at the Drax Power Station, we're developing plans for as much as 1 gigawatt or more of data center capacity, while at the same time, continuing to provide energy security for the U.K. Secondly, in our FlexGen business, we're developing a gigawatt scale BESS pipeline. And you will have seen that in the last 6 months, we have purchased or made agreements, which will give us operational control of over 700 megawatts of batteries across 5 different sites. We've also acquired a new optimization platform and one of the leading players in that space, Flexitricity. And third, we're continuing to assess further investment in flexible renewable energy, about which we would provide further updates later in the year. And finally and critically, we remain very much committed to disciplined capital allocation and delivering attractive returns for our shareholders.

Turning to Page 5. So sustainability remains at the heart of what we do. And we've made excellent progress this year and have started to see that reflected in third-party ratings and accreditations. Of particular note, we received 2 A ratings for our CDP disclosures on climate and forestry. Only 4% of the 22,000 companies making CDP disclosures receive an A rating and even less received 2, which we believe demonstrates our commitment clearly to sustainability and, importantly, also to transparency. We are also A rated by MSCI.

And in addition to that, during the course of the year, we undertook a significant number of new initiatives, including a new sustainability framework, our climate transition plan, and we continue to progress our reporting and alignment with both TCFD and TNFD as well as SBTi, which has recently validated our targets going out to 2040.

And finally, in January, we launched a public tracking tool, our biomass tracker, which shows the provenance of our biomass supply chain, and I would encourage you all to have a look at that.

Moving on to Page 6. I just want to reiterate, as we said at the beginning of last year that we have a target to deliver post 2027 adjusted EBITDA of GBP 600 million to GBP 700 million per annum across the combined pellet production, biomass generation and FlexGen and as we said before accounting for development expense. We're very much committed to that target, but as a reflection of the continued development of the U.K. power system, shifts in the Canadian pellet business and increasing value from the flexible generation, we now expect the FlexGen business to comprise a greater proportion of that mix over time.

And if you take those targets, together with the strong contracted cash flows that we have up until 2027, we believe we will deliver free cash flow of about $3 billion between 2025 and 2031. And delivering this plan supports our options for growth and enhanced value creation. And my plan now is to go through each of the different parts of the business and explain how we are doing.

On to Page 7. FlexGen, I'll start with pumped storage and hydro. So that portfolio has performed extremely well since we purchased it in 2018. And as a reminder, Cruachan represents about 1/3 of the total megawatt hours of long-duration storage in the U.K. It can run for up to 16 hours at full load and has the equivalent of over 7 gigawatt hours of stored energy. Under our ownership, Cruachan has seen an increase in its operating activity over the last 6 years from 20% to 60%, which reflects both its role in our portfolio and the growing need for system support across the U.K.

The strong performance of these assets has provided an exceptionally good return on investment and a 5-year payback. And reflecting the value we see in these assets, we're investing in an ongoing upgrade at Cruachan to replace 2 of the 4 turbines with new larger machines. This is a major program of work for the team and an investment of GBP 80 million in U.K. energy security that's going to take place between 2025 and 2027. As you know, Units 3 and 4 of Cruachan are currently unavailable due to a grid connection failure in late December caused by assets owned by the Scottish network operator, SSEN. We're working with them to restore the connection, and they will provide a timetable for that repair shortly. We're taking advantage of that downtime to progress planned outage work on Unit 3 for minimizing the overall impact.

Second piece of this business, the open cycles. We expect to take commercial control of the first of those shortly with the unit already receiving capacity market payments. The second and third sites are expected to commence commissioning in 2026. The earnings of the open cycles are underpinned by around GBP 270 million of capacity market payments, complemented by system support services, peak power generation and a low operating cost base. And again, we expect to retain these assets as a part of our FlexGen portfolio.

The third piece, which we're getting increasingly excited about as demand side response becomes a more important piece of the puzzle, is the energy solutions business. So in addition to power sales to industrial customers, we're also an enabler of more renewables on the system as we provide a route to market for 2,000 embedded generators. Across our customer book, we offer demand side response, whereby we can reduce load to industrial customers at certain periods of high demand, creating value for our customers as well as for Drax. It's also of note that we had significant experience enabling customers to purchase power through both the wholesale market and through PPAs.

Turning to Page 8 and the low-carbon dispatchable CfD. So the signing of a CfD for post 2027 is a key inflection point for our group and a significant endorsement of the contribution that biomass makes towards energy security as well as decarbonization and value for money, saving bill payers billions over the term of the agreement. Under the terms of the agreement, we will sell the equivalent of 6 terawatt hours per year or about 30% of the load of those units.

The structure of the agreement allows us to constantly reprofile generation to the periods of greatest need and highest value. So in periods of high demand, we would expect to use all 4 units to produce and sell as much power as possible at the highest prices. And in periods of low demand, we'll add value by buying back forward sold baseload power at lower prices. And by operating this way, we support energy security, provide flexibility to the power system and earn a higher average price for our power.

The agreement also includes the continued evolution of sustainability standards and a further reduction in supply chain emissions limits. We're very comfortable with that and supportive of those measures. As a reminder, we expect to use around 2 million tonnes of our own pellets from our operation in the U.S. South. Again, a further reminder, we've hedged all of the FX requirements associated with the deal as we have our logistics requirements for our own pellets, and we are progressing agreements to finalize biomass and logistics hedging from third parties.

So the third piece, turning to Page 9, our sustainable biomass business. So this is a bit new. We're increasingly looking at our pellet business in a new way. Our U.K. business is fundamentally part of our U.K. supply chain. That business is doing very well with its current level of value supported by existing contractual arrangements. As you will have seen, our Canadian business is more challenged, and we've been talking about this for some time as margins have come down due to fiber costs rising in Canada more rapidly than indexed power prices in Asia.

As we noted last year, this dynamic contributed to the decision we've made to close one of our pellet plants in Williams Lake towards the end of last year. So against this backdrop, we're not currently expecting to commit any more capital to this segment, and we are -- that includes the paused Longview project. Now overall, in the pellet market, while the market dynamics we expect to be challenging through the 2020s, as a company or as a group, we're largely insulated from that by the contracted nature of our book. Now if anything, we'll look to benefit from lower market pricing by accessing the spot market by pellets at attractive prices for Drax Power Station. And longer term, we continue to see opportunities for biomass to play a key role in energy transition and our Elimini business gives us an important capability and brand to continue exploring those opportunities in SAF, BESS and other areas. But again, as you will have seen, reflecting the current market environment, which we've seen for some time now and been talking about, we are reviewing strategic options for that Canadian business.

And with that, I will hand it over to Mark.

Thank you, Will, and good morning, everyone. I'll now take you through Frank's section of the presentation, starting on Page 10. We see tremendous value for the group in the delivery of our purpose and strategy through which we are supporting energy security, creating solutions for the energy transition in the U.K. and enabling AI growth. Unlocking that opportunity is a strategic puzzle, which the team are working through and, in doing so, creating value for shareholders and other stakeholders alike.

We have a very strong business today with a strong balance sheet, and we are generating strong cash flows, which can support value-accretive growth and returns to shareholders. But we must operate well and safely and execute our plans diligently to realize this.

Moving on to the financial summary on Page 11. Operationally, we performed well in 2025, generating GBP 947 million of adjusted EBITDA. This reflected a particularly strong December, where market conditions allowed us to generate additional volumes, leading to a record year for biomass power production, which totaled 15 terawatt hours. Adjusted earnings per share of 137.7p was an increase of 7% on 2024 and reflects the reduction in EBITDA, offset by the ongoing share buyback program and a lower net finance cost.

Strong cash generation meant that net debt of GBP 784 million was 0.8x 2025 EBITDA. This is significantly below our long-term target of around 2x. Total cash and committed facilities was GBP 942 million, a strong position, which supports our plans for growth across the group. Our expected full year dividend of 29p per share is an 11.5% increase on 2024 and reflects the confidence we have in the business.

We are committed to value and are pursuing this through disciplined capital allocation decisions. During 2025, we completed a GBP 300 million share buyback and commenced a further GBP 450 million program. So the 24th of February, we have purchased GBP 57 million of shares under the new program.

Moving on to EBITDA by business unit on Page 12. I'll now take the performance of each business unit in turn, starting with pellet production and biomass generation, which, as Will mentioned, we see as increasingly interlinked through the vertical integration between our operations in the U.S. South and Drax Power Station. Pellet production's EBITDA reduced from GBP 143 million in 2024 to GBP 129 million in 2025. Let me explain this movement. Volumes produced increased in 2025 to 4.2 million tonnes, which is a new record. We also showed progress on cost reductions, reducing the cost per tonne of biomass produced. For internal sales, the reduction in cost is then passed through to the generation business at a lower cost of biomass as part of a well-established cost-plus transfer pricing methodology.

To be clear, this is a positive outcome for the group. And if the price had remained at 2024 levels, pellet production EBITDA would have been over GBP 150 million in 2025. This is the rationale for why we see U.S. pellet operations and Drax Power Station as increasingly integrated. And accordingly, we are considering adjusting our reporting going forward to reflect this.

Outside of EBITDA, against the backdrop of an expected softening in the global pellet market post 2027 and a constrained fiber supply in British Columbia and Alberta, we have reduced our expectations for the Canadian business and recognized a charge of GBP 198 million. We have also paused our development project at Longview in Washington State and have taken the decision to impair this asset with a charge of GBP 139 million. We retain the land and the option to progress this opportunity at a later date if market conditions become attractive.

Moving on to biomass generation, which had another strong year. Despite an expected decrease in achieved power prices, the business produced record volumes of generation and had a particularly strong year-end, capturing value from meeting higher winter demand. As I mentioned, the business also benefited from cost reductions in the U.S. South and therefore, lower prices of internal pellet supply as well as a reduction in the electricity generator levy. This reinforces our view that Drax Power Station is a vital source of reliable renewable generation and energy security, both now and in the future.

Below the line, reflecting the lack of progress in development of appropriate commercial and regulatory support for carbon removals in the U.K., we have booked an impairment of GBP 48 million in relation to BECCS at Drax Power Station. However, we continue to believe that carbon removals at scale remain vital for the U.K. to deliver its commitment to net zero by 2050. As such, we retain the option for future development, minimizing cost and maximizing optionality so that we could proceed if the opportunity develops.

Moving on to FlexGen. Cruachan continued to perform well in 2025 and after adjusting for planned outages, maintained a high utilization rate, which is well above historic averages. EBITDA reduced from the previous year as planned outage works, including the Unit 3 and 4 upgrade program, progress.

In energy solutions, our I&C business performed well, maintaining a broadly consistent margin on a smaller revenue base against the backdrop of lower power prices. The windup of Opus Energy is now largely complete with a small residual loss in 2025.

Moving on to development expenditure. Elimini spend has reduced as we have been disciplined in allocating capital to that business against the market backdrop that does not currently support significant investment in carbon removals. Other DevEx, which includes a component of uncapitalized OCGT cost, is broadly flat.

Turning to Page 13 and the balance sheet. Our balance sheet remains strong. During 2025, we repaid over GBP 230 million of debt, extended facilities and secured a new term loan. Our year-end cash and committed facilities position was strong. At 0.8x levered, we have significant headroom to fund our plans for growth through the investment cycle.

Moving on to Page 14 and capital investment. We have continued to invest in growth and in our core business, including the OCGTs, our first battery acquisitions and the upgrade project at Cruachan. In addition to the acquisition of the Apatura battery project and Flexitricity, we have committed GBP 300 million to battery tolling agreements, which Will cover later in the presentation. These themes continue through 2026 as we commission the OCGTs and the enhancement work on Cruachan. Of the growth CapEx in 2026, we expect over half will be on batteries.

Lastly, we will continue to invest in the maintenance of our asset base to deliver good operational availability and safe and efficient operations. We expect an increase in maintenance CapEx in 2026 to reflect a major planned outage on one biomass unit at Drage Power Station.

Moving on to Page 15 and cost management. Our post 2027 EBITDA target requires us to be disciplined on costs, and we are making good progress towards putting in place the structures and cost base to allow us to succeed and deliver long-term value to stakeholders. Our targets are eminently achievable, and we are progressively taking actions to deliver significant cost reductions. By 2027, we expect to establish structural savings of over GBP 150 million per year compared to a 2024 base year.

You are aware of several areas of efficiency already, including a reduction in output from Drax Power Station post 2027, which will drive a lower cost base, an appropriately sized corporate and core services structure and a focused external supplier cost reduction program. But to reiterate, these savings are already reflected in the GBP 600 million to GBP 700 million post 2027 EBITDA target and are not additional to that.

Turning to Page 16 and capital allocation. Our capital allocation policy, which remains unchanged, is at the heart of the financial decisions we make and supports our focus on value creation and opportunities for growth. Our balance sheet is strong, and we remain committed to a long-term target of around 2x net debt to adjusted EBITDA. We will continue to invest judiciously in the core business to deliver safe and efficient operations and options for growth in flexible renewable energy.

Since 2017, the dividend per share has grown on average by 11% per annum, including the expected 11.5% increase in 2025. Income returns to shareholders are an important part of our investment case, and we remain firmly committed to our policy to pay a sustainable and growing dividend.

And lastly, to the extent there is a surplus of capital beyond our investment requirements, we will consider the best way to return this to shareholders. We see buybacks as an investment which we can make in the business to create value for shareholders alongside opportunities for growth.

And with that, I'll hand back to Will.

Thank you very much, Mark. Turning to Page 17. I'm not going to provide a wider strategy update here, but plan to do that later in the year. For today, I want to focus on the areas we're making the most progress in, Drax Power Station and batteries. Turning to Page 18. And before I get into the whole question of growth, let me share with you how we're preparing the company to run under the new CFD mechanism. We're putting in place the financial and operational structures, systems and performance culture, which will allow the company to succeed, and we call this program Future Focus.

As a part of this, we recently announced a consultation process for the U.K., and we've announced changes to our North American businesses, which could see a reduction of 350-plus roles across the group. We have conviction that this is the right thing to do for the business, and we will complete the process in a respectful and considerate way as quickly as possible.

So moving on to the Drax Power Station on Page 19. We believe that the size, flexibility and location of Drax Power Station making an important long-term part of the U.K. energy system, and we are focused on options to maximize value from the site. Options for a data center are a priority. But we could also utilize the site for multiple generation technologies, new system support services and, in the longer term, we're still excited about carbon removal.

So on Page 20, let me talk a bit more about options for a data center. The site, which is located centrally in the U.K. and next to one of the country's largest substations, comprises over 1,000 acres and has 4 gigawatts of grid access, of which 2.6 gigawatts are flexible renewable generation. We also have cooling systems on a secure site with proximity to the U.K. fiber optic cable network. And this makes it ideal for the development of a data center. So we're discussing the potential for a data center with a developer. We don't have more details to share at this stage, but we'll update the market as soon as we do.

What I can say is that we envisage development of the site in 3 phases. The first is for around 100 megawatts, utilizing existing infrastructure and transformers to import power directly from the grid, and we expect to submit a planning application shortly. The second and third phases are behind the meter. The second phase aims to utilize 500 megawatts of capacity before 2031. And since this is during the period under which the station is operating under the CfD, that development will be subject to agreement with the U.K. government. And the third phase would follow from 2031 onwards and add further 600 megawatts of capacity or more.

So again, we believe that Drax Power Station is uniquely placed to do this in the U.K. and that the development could represent a multibillion-dollar foreign investment opportunity for the U.K., creating thousands of jobs while continuing to support energy security through the period of 2031 and beyond. And quite importantly, we have a very talented workforce who are experts in U.K. power in planning and in consenting.

Turning to batteries on Page 21. I wanted to share some thoughts on the rationale for that market and why we're excited about it, how we see the market developing and the progress that we've made so far. NESO's future energy scenarios show power demand is likely to double in the U.K. over the next 25 years due to the electrification of heat, transport as well as new industrial demands like data centers. At the same time, intermittent renewables like offshore wind are expected to triple and flexibility will continue to fall, largely reflecting the removal of gas in the system. So as a result, there's likely to be either too little or too much power on the system at any one point in time.

To help manage this, NESO's analysis suggests a requirement for over 30 gigawatts of BESS by 2030 compared to 7 gigawatts today. As you know, BESS can respond very quickly, capturing higher prices when available and then storing the power when the demand is low. BESS also nicely complements our existing portfolio, having super-fast response and short duration storage for our existing portfolio, meaning we are well placed to maximize value no matter what the needs are of the system. But again, having the right assets in the right location at the right time will be critical to success as well having the tools to manage that portfolio effectively.

So what are we doing about it? If we look at Page 22, reflecting this demand, we're developing a gigawatt scale pipeline of BEV opportunities. And we're doing that in 2 ways. First, we're investing in the ownership of physical assets where we believe the locations are optimal and there are opportunities to invest in the sites in the long term. Secondly, many BESS assets will be developed by infrastructure funds who are looking to secure cash flows through floors and tolls. And that provides us with additional opportunities to access the BESS market and use our deep expertise in trading Flex assets. We believe that by acquiring development projects and tolling agreements with existing grid connections, we can benefit from a shorter time to power and at the same time, reduce our exposure to development risk.

In addition, the recent acquisition of Flexitricity bolsters our ability to provide our own assets as well as third-party owners with best-in-class optimization services. Flexitricity's platform, combined with Drax's 24/7 trading capability, underpins our ability to maximize returns for flexible assets, both in front of and behind the meter. So again, we're making good progress. We've committed on the order of GBP 0.5 billion with a control of over 700 megawatts of capacity in addition to the acquisition of Flexitricity.

Let me give you a little bit more detail on our progress. Turning to Page 23. In October of last year, we acquired 3 development projects for 260 megawatts under an agreement with the developer Apatura. It's a fixed price deal that's structured such that we have protection in the event of cost overruns. Two of the sites are located in the key England, Scotland transmission constraint corridor and a third is in East Yorkshire near the Drax Power Station. This deal also gives us option rights over an additional 289 megawatts of capacity.

In addition to that, on Page 24, so in addition to physical ownership, we've entered into tolling agreements for 450 megawatts with the developers of Fidra and Zenobe. This model complements physical ownership, but differs in that there is no cash outlay or ongoing maintenance costs. We'll pay a tolling fee in return for which the developer is responsible for building, maintaining and making the asset available. We, on the other hand, have full operational control and keep all revenues from operation other than capacity payments and, for Zenobe, certain other immaterial ancillary revenues. And we expect this model to work well for both parties.

The asset owner gets a predictable revenue stream, and we can access the value which we see from the energy market dynamics that I described previously, but with no capital outlay and a shorter time to power. And both of these projects are targeting FID this year.

For the third leg of this approach on Page 25, was in January, we agreed a deal to acquire the asset optimization platform, which is Flexitricity for about GBP 36 million. Flexitricity provides front of and behind-the-meter solutions to third parties with a customer base of over 900 megawatts across a large number of sites, including Air Products and Severn Trent. The technology is an important component of managing the enlarged FlexGen business and the gigawatt scale BESS portfolio, which we are developing. If we didn't have this capability, we would have had to outsource it. But by retaining it within the group, we keep the IP and value associated with an end-to-end trading and optimization capability, and we expect the transaction to complete in March.

Turning to Page 27. Our primary investment opportunities are currently in the U.K., where we are a leading provider of flexible renewable energy. Our expertise operating FlexGen and 24/7 operations makes us a good owner of these assets, and we believe we can create additional value through growing the portfolio. During this year and through 2028, we will start to add additional capacity from OCGTs and from BESS, providing a range of technologies, durations and dispatch feeds, which will enhance our capabilities. We also have options over additional BESS developments as well as the grid access we have at Drax Power Station.

In addition to which we expect to have close to 2 gigawatts of route-to-market services for over 2,000 small renewable assets as well as grid scale assets by Drax Energy Solutions and Flexitricity. In total, 8 gigawatts of capacity we own, we toll or provide other route-to-market services for. So importantly, to wrap that all together, while the earnings from Drax Power Station will reduce next year with the new CfD, we are expecting to grow earnings in our FlexGen business and overall as a group as we bring these new generating assets on stream through the rest of the decade.

Finally, on Page 28. So let me bring it all together. First, we have performed well again in 2025. And Drax is already a leading provider of flexible renewable generation in the U.K., as I have described. We see a great opportunity to grow that position. The first key underpin is the low-carbon CfD and the new operating regime that we are creating. The second one is we've already begun our investment program, as I've described, and look forward to growing our business through the rest of the decade and creating value by investing in the U.K. energy transition. We will be disciplined about how we approach these opportunities in line with our existing capital allocation policy, and we will be very focused on creating value and delivering excellent returns to shareholders.

With that, I'll hand it back to the operator, and we are ready to take any questions that you may have.

[Operator Instructions] Our first question comes from the line of Alex Wheeler from RBC.

Two questions from me, please. Firstly, on the impairment in the Canadian pellets. Should we think about this as formalizing the messaging you've already given? Or is there an implication here that you think things are getting worse? Then if you could also give some color on the strategic options for that business, that would be great.

And then secondly, just on the guidance, just interested in why you've not included the BESS assets within the current medium-term guidance and when you think you'll consider formally adding those?

Great. Thank you, Alex. So in terms of the impairment, I think you described it well. We have been, I think, communicating over the last sort of probably 6 quarters, the weakness that we see in the Canadian market. It's really a long-term sort of structural issue related to the nature of our contracts and the shrinking fiber supply becoming more competitive and not driving up the cost of our inputs, right? So it's absolutely not -- it's not an indication that things are getting worse. It's just really a sort of formalization, I think, of where we have been, right?

So -- and again, for the avoidance of doubt, the GBP 600 million to GBP 700 million that we've been talking about for some time, very much takes into account where we think the Canadian pellet business is and has been and will be.

In terms of strategic options, I mean, we're working with our suppliers to sort of manage our costs as best we can. We're working with our customers, again, to manage the contracts as best we can to drive increased profitability. We have had to shut the Williams Lake facility. We will look at the best way to optimize where we're supplying pellets from relative to where they're going. So that's another piece of that puzzle. And again, disposal of the asset would also be an option we will explore.

In terms of BESS, I mean the GBP 600 million to GBP 700 million, as we've said, is before those investments. And frankly, what we're planning to do is come back to the market sometime later in the year and sort of talk more completely about how the overall strategy fits together. And I think at that time, we would probably look to update our views of where we think numbers will be as we go through the rest of the decade.

Our next question comes from the line of Pavan Mahbubani from JPMorgan.

I have 2, please. Firstly, on the EUR 3 billion of cash flow and the uses, you talk about EUR 2 billion of investments and you've given us visibility on batteries. Can you give a bit more flavor or color as to where you see the rest of that capital deployed? Do you see it all as going into batteries? Are you looking at gas or maybe some other investments? Would be great to hear how you're thinking high level about where this money is going to go if it all gets deployed?

And my second question is, Will, on the confidence you have in the phasing of the data center opportunity as you laid it out in your slides, is this based on what you think your capacity is? Or is it based on the conversations you're actually having? I would appreciate any color around that as well. Those are my questions.

Thanks, Pavan. So first, in terms of the allocation of capital, I think -- so again, to make sure it's clear, GBP 3 billion is what we expect to generate. Again, that includes '25. So that's sort of over the next -- last year plus the next 4. The uses of that, I think, again, we talked about GBP 1 billion or GBP 1 billion plus that goes back to shareholders. Again, that should be pretty transparent in what we've already described. And then the GBP 2 billion. So I think at this point in time, we've already allocated about GBP 0.5 billion to batteries as we've described.

One of the things that give me a little bit of caution about investing a lot more in that now is that we haven't really seen the results of that investment yet. I mean those earnings will come on stream probably '27, '28, '29. So we need to watch how that develops to some extent. Although, again, we are excited about that market, and I could see plus or minus up to GBP 1 billion potentially of the GBP 2 billion moving into that space. I would call that a hard target. That's something that, again, we'll come back and sort of later in the year, give you more color.

But the other area, I think, which is -- before I get to the other area, the other thing that's interesting is that the data center, we would expect largely to be a source of capital, i.e., the type of deal we would look to be doing is one where we would be selling the powered land and then providing a PPA to the end customer. We will be making some investment in that space as we get to the bigger pieces of it, and I'll come back to that in a second, but again, largely a source of capital. And so -- but again, other things we'd be looking at, I mean, we are still very much committed to our purpose, as we said, enabling a lower cost zero carbon energy future. Again, I think that ports probably more in the direction of more renewables, although I wouldn't rule out gas, as you know, we've got the open cycles, but more intermittent renewables is the area that I think we're exploring at the moment.

And I guess, how do I see that? -- really, it needs to be -- well, the first thing I would say is it's very much consistent with our core business, right? We are a flexible renewable generator in the U.K. To add intermittent renewals to that portfolio would be a very logical extension of where we are today, right? It's the same trading environment, same regulatory environment, same grid environment, all of those things are very much part of our core competencies, right?

Second thing is though, it would need to really meet a sort of set of criteria that we are working through now. So it clearly has to be -- the returns have to be attractive. And I think it's actually -- there is more potential for that than there would have been, let's say, 5 years ago when a lot of these assets were being built. It's likely to be at least in the initial piece through acquisition, something that's generating cash probably more interesting in the first instance than just a development asset. We have to be convinced, and I think we're getting convinced that there's interesting sort of commercial and industrial logic, i.e., the potential to create attractive products for customers.

The third piece, which I think is one of the more interesting ones is that as we grow the FlexGen portfolio and given the characteristics of the bridge, our in-year earnings, we would expect to become more volatile. We're very much -- we're excited about the growth and volatility. But again, it does make our in-year earnings potentially more volatile and not as hedgeable as they would have been in the past, right? Adding longer-term contracted earnings, let's say, through intermittent renewables is quite an interesting sort of counterbalance to that. And that's one of the things that we think is quite an interesting thing to look at. So again, we're looking at those intermittent renewables. We haven't made any decisions. And again, we'll probably come back and make sure that we make a clear case for that as we look at it further.

On the data center, I think -- I mean, I've highlighted sort of 3 different phases for a couple of important reasons. So the first one is that we think that our ability to use 100 megawatts of in-feed to the Drax Power station quite quickly is differentiating. There aren't many ways that you can build a data center, potentially be online next year without -- not many people have that 100 megawatts available. So that's one of the reasons we described that.

Second reason we talk about the 500 is that very explicitly in our dispatchable CfD agreement with the government, we have effectively -- they've agreed that they will discuss with us. If we can -- and if we meet certain criteria, they would be very much open to us using that 500 megawatts for a data center. So that's the reason we discussed that.

And then the third piece is, ultimately, we think we have enough biomass behind-the-meter generating capacity to do something in excess of 1 gigawatt. And the final point is the logic for that is both a function of what we think makes sense and a function of what we are discussing. One thing I want to be very clear, it would not be very -- I would much -- I would be very disappointed if we ended up with 100 megawatts and not more, right? So that's very much part of the thinking.

Our next question comes from the line of Dominic Nash with Barclays.

A couple of questions from me as well, please. I think the first one might have a couple of more parts in it, and it's following up from sort of the data center angle. On the first 100 megawatts, will you have the ability to switch that to behind the meter at a later date? Or will that permanently be in front of the meter?

And secondly, on the economics of this, clearly, if you're in front of the meter that you've got no real competitive advantage, I presume, except the speed, which you mentioned. But when we then go to behind the meter, you've clearly got quite a high marginal cost of biomass. How are your conversations going with potential offtakers or what your thoughts are on, a, their desire to source power from biomass; and b, your relative economic position from behind the meter with biomass versus behind the meter from OCGTs? And of course, the follow-on question from that is, could you also provide gas from the Drax turbines at some point post 2031 or before?

And the second question is on the biomass part, you're moving from 7 million tonnes of consumption to 3 million tonnes. I think more than 2 million tonnes are going to be from yourself. You're saying you're contracting with third parties. Can you just tell us what sort of scale and when do we expect to get the news flow on who you're going to contract from? And the follow-on question from here is that do you not think there's a bit of a risk if you end up contracting too much of your feedstock from the United States alone, particularly in light of a very sort of capricious trade issues between the U.S. and everyone else and whether or not you should have some sort of diversification for your biomass sourcing.

Okay. I think there's probably about 7, Dominic, if I count them back. Thank you for the questions. I'm more than happy to respond, just kidding. So on the data center, the first one, I think, was could we switch to behind the meter later. And I would say, again, it's all -- we don't have a sort of negotiated deal. So that's obviously something we have to get to as we go. But I guess the key thing to think about from our perspective is that if you only have 100 megawatts of generation that's behind the meter, you don't have enough to effectively support a full unit at the full power station. So we will need to structure it in such a way that actually it manages that risk, right?

Secondly, the economics, I think you've absolutely landed on it in the sense that the behind-the-meter cost of biomass power is well below the front of the meter power cost. So we're clearly highly competitive relative to something that you get off the transmission network. But clearly, again, someone who's got behind-the-meter gas would be more sort of competitive than we are, right?

Now getting behind-the-meter gas and having that online between now and the rest of the end of the decade is not that straightforward. So again, we think we have advantages there. So again, all of this is something that we are and have been discussing with counterparties. And so again, the proof will be in the pudding. So when we come back and say, if and when we've got something done, I think that's probably the best way to answer that part of the question.

Could we do gas? Again, as you well know, Dominic, we had a plan to do a repowering with gas at one point in time. I guess what I would say is that that's -- it's not a trivial activity. And basically, it's a new power station or a massive refurb it's a big activity. So it's not something that we could do, but we would have to consider that as effectively a new investment. And frankly, with 2.5 gigawatts of capacity available, I think that's definitely our first port of call.

Just to be clear, the 2 million tonnes we have is effectively the capacity we have in the South. So we will be using all of those pellets. 7 million was a target. We never got to that. So the northern pellets again is about 2 million, and that's what the numbers are currently. Using another 1 million tonnes is something we're doing because of a combination of diversification. So yes, we clearly want to make sure we manage the geographical risk as we'll do that. Clearly, we want to manage price risk, so we want to make sure we can track that in the best possible way. And that's why as soon as we have something that is enunciable, we will do so. So that's all I will be saying at the moment.

Again, it makes sense. I may have missed something, Dominic, I'm happy to come back if I have.

Our next question comes from the line of Mark Freshney with UBS.

Thanks for your presentation, but to summarize, half your pelletization capacity is in Canada. It's uneconomic. You can't source the fiber. You're looking at shutting it down because it's high cost and it will be squeezed out in the impending pellet oversupply as subsidies are cut. That seems to be the synopsis of what you're saying. So it's of that 2 million tonnes that you may shut down, what would be the additional impairments and onetime costs of shutting it down?

Just secondly, on the cost-out plan, I think the 150, the existing one, mainly centered around Yorkshire. I think you only took a GBP 9.4 million charge below the line. So what would be additional -- are there any additional charges next year and the year after? And would they appear in the middle column or the left column?

And my final question --

What are you referring to the second thing, Mark, I don't understand.

The GBP 9.4 million charge for the cost reduction. So exceptional costs -- are there any additional such costs to come through? Or are you booking it in the middle line or in underlying, so it's within the EUR 600 million to EUR 700 million EBIT? And finally, just on the cabling issue with SPN, is there any compensation that you could get to the extent that you're not an outage?

Thank you for your questions, Mark. I guess first thing I would say is that the Canadian pellet business is effectively in the same position it has been for some time. So I'm not sure there's much new news there. I mean we're not -- I think you are saying that we're going to shut it down. We're not saying we're going to shut it down. So I think we should be careful in the way you characterize it. We are looking at various different options for how we manage that well. We have contracts with customers, which we intend to deliver on. And so that's quite important, right?

So just to make sure everyone else on the call understands what's happening here. We have contracts through the 2030s with customers in Japan, some in Korea, and we fully expect to deliver on those contracts. So we are not saying by any means that we are closing the Canadian business, right? And the value that remains there, we believe, is well underpinned by the assets that we have, right? So that's the first thing I'd say.

Second thing is we have taken, as you mentioned, a part of that impairment or part of the exceptional charge associated with the Future Focus program, and that is what we're doing for now, and that's all there is there.

And in terms of SPN, I mean, the key thing we're doing now is we're making sure we work closely with them to get those assets back online. That's our focus.

Our next question comes from the line of Harrison Williams with Morgan Stanley.

A couple from me. Firstly, coming back on the pellet division. You previously provided quite a useful EBITDA margin target of around GBP 50 per tonne, appreciating. Clearly, there's been some deterioration. Can you provide an update to that margin target now?

The second question I had was on batteries. Clearly, quite an attractive investment opportunity as things currently stand in the U.K. market. But can I ask how you are thinking about maybe the risk of cannibalization as we think a few years out if we really do see as much battery capacity added to the grid as some of these forecasters expect?

And then finally, can I just get one clarification. You mentioned the GBP 150 million cost saving plan is included in the medium-term guidance of GBP 600 million to GBP 700 million in EBITDA. Could you just confirm that was always the case, i.e., when you provided that medium-term guidance on EBITDA a few years ago?

So maybe, yes, it was always the case. On batteries cannibalization, I mean, we see batteries as an attractive participant in the wholesale market and the balancing market. So it effectively still will be a small piece of the overall market. So we think that that's -- there's lots of room for those to sort of deliver good value over time.

And in terms of pellets, I think what we've been talking about for some time now is the 600 to 700 combination of pellets, biomass generation and FlexGen, and that's very much in line with where we've been. And again, there's no new news in Canada other than the impairments. And so that's consistent with where we've been for some time.

I was just going to add, Harry, I mean, that GBP 50 target that you mentioned there, I mean, that is well underpinned by operations in the U.S. South, that business is in a good place. And the point we're making today is that lower EBITDA in U.S. pellets maps across the higher EBITDA in generation. It's just where that value sits. Fundamentally reducing the cost of biomass is a good thing for the business. So that value, that target is captured within the U.S. business and Drax Power Station. Of course, Canada more challenged.

Our next question comes from the line of Adam Forsyth with Longspur Research.

Just a couple of quick questions on the BESS opportunity. Do you see an ideal split between tolling and outright ownership? Or is that something that's really just likely to be driven by the opportunities that come up in the market? The last tolling deal you did for our non-escalating, is that the sort of agreement you would like to be seeing going forward or even into longer durations? And just on that longer duration opportunity, I mean, if we start to get a lot of assets coming -- being delivered through the cap and floor mechanism, do you see any opportunities for you there, either in maybe buying post-development assets? Or even perhaps I'm not sure if tooling really makes sense with cap and floor, but maybe it does. Is that something you've had to look at?

Thanks, Adam. Can you tell me what was the second part of your question?

The second one, just about the last tolling deal for ours and non-escalating. Is that the typical sort of deal you would like to be seeing going forward?

Yes. I mean I think having a mix of durations, Adam, is quite attractive, having that 2-hour and also 4-hour in the portfolio in addition to the longer duration storage we have at Cruachan. So having a mix of technologies and durations, I think, is helpful in terms of how we operate the portfolio. And in terms of the duration of the tolling agreements, 10 to 15 years, I mean, I think every deal is going to be slightly different, but something in that sort of range is something we're comfortable with.

And I think in the first part of your question, Adam, if you think about the sort of differences between them, I mean, clearly, there's a different risk profile, right? So with the tolling agreement, we're not taking the development risk, i.e., we only have the obligations and get paid when they start operating, not taking the operating maintenance risk and then we get attractive returns. And so I think what we're doing for now as we build the portfolio, we will look at the relative returns and the relative risk on a case-by-case basis and see which we want and think are more attractive. But we think that there's value in having sort of both of them, but we haven't set a sort of explicit target as to how much we want to have of each in the portfolio.

In terms of the cap and floor, I mean, I think my guess is that the cap and floor probably sort of makes a tolling or floor arrangement sort of less interesting because the government is effectively providing a lot of that for you already. And currently, we're focused much more -- we're actually focusing more on things that are actually on a merchant basis and, frankly, we're providing a lot of sort of stability in the earnings that maybe a cap and floor would otherwise provide.

Our next question comes from the line of Charles Swabey from HSBC.

Three for me. Just on -- back to battery storage, would you consider a move into markets outside of the U.K. for BESS to diversify some of the price risk there as you get more comfortable with the technology?

Two, on data centers, when you're thinking about the pool of developers that are interested in using Drax Power Station, how has that changed over the last year in terms of the number of interested parties and the type and what they're looking to actually use the site for?

And then three, with the dispatchable CfD in place, could you give any insight if there are any discussions with governments already about sort of plans for DPS post 2031?

Okay. I got that. So in terms of moving outside the U.K., I would say we are very much focused on the U.K. for now, Charles. And I think that's quite an important piece of what we're trying to do here is extend our sort of -- extend our generating technologies, but sort of consistent with maintaining that within a market regulatory and framework that we're quite interested in. I would say that the strategy is very much a sort of M&A sort of given one, right? So if there was something that was super attractive and largely U.K. or vast majority of U.K. but had some other pieces outside, we might look at that. But the focus is very much on the U.K.

In terms of parties, I mean, I think we've been quite clear we're working with a developer, and they've been talking to multiple parties. And I would say that, that group of parties, obviously, there are sort of people come in, people go out. But I guess I wouldn't say that there's a sort of a trend in the way that that's moved over time. I think there's still quite a few people that they are talking to.

And then in terms of the dispatchable CfD, I mean, we're in very close contact with the government on this all the time. We're very focused right now on getting ready for the first part of the one we've got, right? So we haven't started any explicit discussions post '31. And frankly, we're also -- we need to talk to them first, I would say, about the data center carve-out. So that's probably the next item on our agenda with government.

Our next question comes from the line of Mark [indiscernible] with Citi.

I've got one slightly around the edges for Drax, I suppose. But on the U.K. capacity market auction, the upcoming ones, can we get your views on how you think that will go? I mean we saw there's a lower capacity target requirement, potential greater headroom there. And if I look at your slide, I think your illustrative 60 kilowatt expansion [indiscernible] per kilowatt on that. Have your views -- or what are your views on how that might go in the next couple of weeks, please?

I'm afraid I'm going to be deeply unhelpful. I mean, I guess maybe the best way to think about it is we will be putting a series of our assets that are price takers into that market. Effectively, we don't have any new significant projects we're putting in. So I haven't spent a lot of time sort of focused on where we think that will come out. And I think probably better for me not to give a forecast.

And I was just going to add that the number in the presentation, Mark, that is purely illustrative and based on what it was historically, just to indicate that there is future value from the capacity market for existing assets when that current contracts under the scheme expire.

As we have no further questions on the conference line, that concludes our Q&A session. And I would now like to turn the call back over to management for closing remarks.

Okay. Well, I believe there are no questions in the webcast. So I guess I'll wrap up by saying I think the -- maybe I want to leave you with one thought, right, which is that I think where we're going to go from here is that we had a strong 2025. I was pleased with the way we overdelivered on our operating earnings there. Looking into 2026, again, we are comfortable with the consensus, and we're looking forward to delivering on that.

When we get into 2027, I think we start to really become, in some ways, quite a different company, right? We'll have the new CfD, and we actually have a strong growth trajectory from there, right? We've got the battery transactions you've already seen. We expect to be investing more of that sort of GBP 2 billion of available cash flow going forward. So -- and also the sort of the mix of things will start to shift, right? We'll be sort of maybe 50% biomass, 60% FlexGen and, over time, FlexGen should grow, and we look forward to sort of developing that new business as a sort of a leading growing dispatchable renewable energy company in the U.K. So watch this space.

Thanks, guys.

Good morning, everyone, and thank you for joining the call. I will provide a short introduction and overview, and then I'll hand it over to Andy for the numbers and operations, and then I'll come back to talk more about our investment program and capital allocation, and then we'll take questions.

You're all familiar with our purpose, which is to enable a zero carbon, lower-cost energy future. And I want to start with that, as I always do, as it guides everything about our company. And critically, our people are at the heart of Drax, and I want everyone here to feel a valued member on a winning team with a worthwhile mission.

We delivered a strong performance in the first half of the year. We produced more power than last year, reflecting a continued high demand for dispatchable renewable power and compensating for lower renewables elsewhere on the system. We accounted for 5% of U.K. power as we have for many, many years now and 11% of U.K. renewables. And importantly, in certain periods of peak demand, we have been over 50% of U.K. renewable generation.

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

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

We will continue to invest to maintain our existing assets and also invest in growth where we see attractive returns. We continue to grow our dividend and are proposing an 11.5% increase in dividends per share for 2025. And our current GBP 300 million share buyback program is GBP 272 million completed. And I would say importantly, today, we're announcing an additional GBP 450 million, 3-year extension of the current buyback. And that extension is underpinned fundamentally by the working capital inflow associated with the end of the renewable obligation scheme.

Turning to the low-carbon dispatchable CfD. Earlier this year, we agreed heads of terms with the U.K. government for a low-carbon dispatchable CfD covering all 4 units at the Drax Power Station through March of 2031. This was a strong endorsement of the contribution that the Draft Power Station and biomass make energy security and decarbonization as well as to the value for money proposition that we provide, saving bill payers billions of pounds over the terms of the agreement relative to the next best option. And we've been working with the government over the last 6 months, and we're making very good progress.

So importantly, the legislation enabling this agreement is now in place. The CMA has reviewed the subsidy regime, and that is complete and I think in a good place. And we are making good progress on negotiating the final contract, which we expect to conclude later this year. And this is a very critical turning point for our business as we are now comfortably expecting it to run this business through the 2020s and into the 2030s and beyond.

If you look at our portfolio of businesses, we have a high-quality portfolio of assets that support energy security in the U.K. Our FlexGen business is doing very well, delivering the flexible generation and system support services, so critical to the current power system. And as we recognize that opportunity, we continue to develop new abilities to deliver that through expanding our pump storage assets and building the open cycles, the latter of which we expect to begin commissioning from later this year.

And again, we continue to look at opportunities to complement the portfolio with investment in adjacent technologies, including batteries and other forms of storage. In our Energy Solutions business, we've now successfully exited the SME space and are very excited about the I&C portfolio we have, our renewables business and our EV solutions.

As I mentioned, our Pellet Production business did very well in the first half, and we have confidence in its future, but we also recognize that we have work to do to continue to unlock its full potential. At the Drax Power Station, which continues to play a key role at the heart of the U.K. power system, we have strong visibility over contracted power sales and cash flows through 2027. And those will be complemented or extended by the low carbon dispatchable CfD during -- which we believe will allow us to deliver between GBP 100 million and GBP 200 million of EBITDA per year.

So, reflecting all those factors, we're confident in the earnings and cash flow we can deliver from that portfolio and are focused on delivering that GBP 600 million to GBP 700 million of EBITDA post 2027. Just to be very clear, that target is stated before accounting for options for growth, the fourth column on this page, where we will continue to apply our disciplined capital allocation policy to opportunities which have the potential to deliver significant value, and I'll talk more about those later.

I wanted to give you a bit of an update on sustainability, which again is critical to everything that we do. In addition to updating our biomass sourcing policy, we've launched a new climate transition plan, as well as the new sustainability frameworks, which we discussed at the full year. And the transition plan provides more details on our decarbonization targets through 2040. I think we're making very good progress on delivering tangible results that improve our sustainability, and that's reflected in the ratings that I've included on the slide.

There's always more to do, and we will continue to work on improving. We're not complacent, and we welcome the opportunity to engage with all of you, as well as all other forms of stakeholders across civil society to make sure we're moving in the right direction.

So, I'm now going to hand it over to Andy, and this is his final set of results as our CFO. And I do want to thank him for his contribution over the last 7 years, which has been tremendous. I think you all would recognize that the difference between our business between now and where it was when he started in 2019 is quite pronounced, and he's made a huge contribution to that positive change. He's built a strong finance team, and I look forward to continuing to build on what he has achieved with Frank Lemmink, our new CFO, also a fabulous guy, who will start in September. So, Andy, for the last time, over to you.

And good morning, everybody, and thank you, Will, for your kind words. It truly has been both a privilege and a pleasure to be the CFO of Drax for almost 7 years, and I'm very grateful for the opportunity and thankful for the support, guidance and encouragement that you personally and the Board have given me. And as I hope to demonstrate over the next few minutes, I believe Drax is very well placed with high-quality assets, a robust balance sheet, good visibility over our future cash flows, but not least a great team to deliver on our strategy.

One of the first pieces of advice I received at Drax from Mark, our Head of IR, was that when it comes to presenting results, it's good for CFOs to be boring. He said, leave the excitement to the CEO, know your numbers and stay scripted. So now before I make Mark too nervous, I will start with the financial summary on Slide 9.

Continued strong operational and financial performance and our robust balance sheet are supportive of options for growth and returns to shareholders. Adjusted EBITDA of GBP 460 million reflects strong delivery across all segments of our business. The reduction compared to the prior period primarily reflects an expected decrease in the all-in achieved power price for biomass generation.

Adjusted basic earnings per share, however, of 65.6p is in line with the prior period, and it benefits from a 5% reduction in the number of shares outstanding to 351 million as a result of the ongoing share buyback. We recently published a company collected consensus for the full year and reflecting strong first half performance and expectations for the second half, we're comfortable with consensus, subject as always to continued good operational performance.

Our strong operational delivery is generating cash flows, which position us well to invest in our core business, take a disciplined approach to options for growth and support sustainable and growing returns to our shareholders in line with our capital allocation policy. During the period, cash generated from operations of GBP 378 million includes a working capital outflow of GBP 102 million. As in prior years, this reflects a buildup of ROC assets in the first half of the year, which will reverse in the second half as those ROCs from the last compliance period are settled.

During the period, we further strengthened our balance sheet and extended the average maturity of our debt. Our net debt to last 12 months adjusted EBITDA ratio of 1.1x remains significantly below our long-term target of around 2x. At the 30th of June, available cash and committed facilities of GBP 726 million provided substantial headroom over our short-term liquidity needs.

Consistent with our policy to pay a dividend, which is sustainable and expected to grow, the Board has resolved to pay an interim dividend of 100 -- 11.6p. That would have been exciting, 11.6p per share and expect this to be 40% of a full year dividend of 29p per share, an increase of 11.5%. As of July 29, we've completed GBP 272 million of the existing GBP 300 million share buyback program and are announcing this morning an extension to the program to repurchase an additional GBP 450 million of shares over a 3-year period to follow on from the current program.

So moving on to Slide 10 to look at performance by business. Overall, earnings of GBP 460 million reflects a strong renewable power generation and system support performance across the portfolio and further improvement in the pellet business. In FlexGen and Energy Solutions, earnings of GBP 81 million compared with GBP 98 million in the prior period. Our Hydro business delivered GBP 64 million, inclusive of the impact of the planned outage at Cruachan and reduced volume in our run-of-river assets, reflecting low rainfall in the period. The 40-megawatt expansion at Cruachan is progressing and due to complete by 2027, with earnings underpinned by capacity market payments of around GBP 16 million per annum. And in the appendix on Page 34, we provide 5 reference points to illustrate the growing need for system support services and the growing opportunity for value from these assets.

Reflecting further delays in national grid connection time lines, our first OCGT asset at Haven is expected to start commissioning towards the end of this year. Dates for progress in Millbrook have now moved to 2026. The OCGT earnings are also underpinned by long-term capacity market contracts close to GBP 19 million per annum. The balance of earnings comes from system support services and peak power generation, addressing the increasing need for flexible dispatchable power.

In Energy Solutions, the adjusted EBITDA of GBP 18 million included GBP 25 million from our I&C business and a loss of GBP 7 million in the SME business. During the first half, we completed the sale of the remaining SME meter points, and we expect the wind down to be substantially complete by the end of the year.

Our I&C business continues to perform well with a focus on value from high-quality and strategically aligned customers. In Pellet Production, performance continues to improve. Earnings of GBP 74 million grew 14% from the prior period with production volumes increasing to 2.1 million tonnes. And of this, 1.4 million tonnes were sold to Drax Power Station.

The margin achieved on our own new supply better reflects the current market value of long-term large-scale supply. The margin achieved on our legacy third-party contracts is lower. Combined with the reduced cost of production, the achieved EBITDA margin of GBP 35 per tonne was up almost GBP 3 per tonne from the prior period. We believe that the current level of earnings in Pellet Production is well underpinned by the low carbon dispatchable CfD at Drax Power Station.

In Biomass generation output increased to 7.1 terawatt hours. The reduction in earnings to GBP 332 million primarily reflects, as expected, a lower all-in achieved power price. This was partially offset by a reduction in amounts due for the energy generators levy or EGL, and further details are included in the appendix on Page 25.

In options for growth, development expenditure of GBP 27 million included GBP 16 million related to Elimini, our carbon removals business. As we noted in our last trading update, we won't participate in the first phase of the cap and floor scheme for the 600-megawatt expansion of Cruachan, but we do retain the option for potential future development, subject to an appropriate balance of risk and return. We will continue to be disciplined with development expenditure.

So, turning to Slide 11 and the balance sheet. We maintain a strong focus on cash flow discipline and maintenance of a robust balance sheet. In the second quarter, our corporate credit ratings were reaffirmed as BB+ by Fitch and S&P and as BBB low by DBRS, and there was a stable outlook in each case. Over the last 18 months, we've moved the balance of maturities significantly. During the period, we extended the maturity of our committed GBP 450 million revolving credit facility to 2028, with an option to extend further to '29. And no cash has been drawn on this facility since its inception.

In addition, during July, we extended the maturity of our GBP 50 million and EUR 135 million term loan facilities to 2028. We expect to repay the outstanding Eurobond and CAD term loan balances during the second half with surplus cash flow. As already noted, the available cash and committed facilities at the end of June provided substantial headroom over our short-term liquidity needs.

So, moving on to Slide 12 and strong visibility free cash flow. We continue to believe that there's growing value from dispatchable renewable generation assets, which can complement intermittent renewables and inflexible nuclear and enable the energy transition. Our portfolio of high-quality assets are well placed to deliver the flexible generation and system support services, which the power system needs. And we're increasingly confident in the visibility of the cash flows that they can produce.

So, I'll step through the building blocks of these cash flows through 2031. As already noted, we're comfortable that current consensus expectations for the full year provide a good starting point. We have a strong forward power sales book. We're fully hedged on the ROC units in '25 and '26, and we're well hedged for the first quarter of '27, with almost GBP 2.1 billion of forward sales at an average price of GBP 94 a megawatt hour.

Since our trading update in May, we've added 1.4 terawatt hours of hedges at GBP 102 a megawatt hour. And further details of the current forward power sales book are included in the appendix on Page 22. Beyond the first quarter of '27 through the first quarter of 2031, we're targeting an average of GBP 100 million to GBP 200 million of adjusted EBITDA through the low-carbon dispatchable CfD, with upside potential from merchant generation. This represents less than 30% of our GBP 600 million to GBP 700 million target, which also includes FlexGen and Energy Solutions and Pellet Production. And as Will has noted, the legislation is now in place. The CMA review is complete and contract negotiation is progressing.

Our FlexGen earnings have a strong underpin from capacity market payments. And again, in the appendix on Page 33, there's detail of almost GBP 600 million of index-linked capacity market agreements for this portfolio through 2042. That total value grows to GBP 1.2 billion if you apply the latest capacity market price to future auctions. The addition of the 900 megawatts of new OCGTs and the 40-megawatt expansion at Cruachan also provide further opportunity to capture value from flexibility and system support services.

In our Energy Solutions business, we've exited the SME business, and we're focused on I&C, renewables and EV solutions. This provides us with high credit quality customers and a longer duration of contracting. In our pellet business, performance continues to improve. And as I noted, we believe the current level of earnings is underpinned through the low-carbon dispatchable CfD.

In addition, we believe there are opportunities for sales in existing and new markets such as sustainable aviation fuels. So together, post '27, we're targeting GBP 600 million to GBP 700 million of adjusted EBITDA from FlexGen and Energy Solutions, Pellet Production and biomass generation before any development expenditure.

With the end of the renewable obligation scheme in '27, we expect around GBP 500 million from the sale of ROC assets generated in previous periods. We see this working capital inflow as supporting the buyback extension of GBP 450 million, which we've announced today. If you take an estimated maintenance investment of GBP 100 million to GBP 150 million across our portfolio and together with reasonable assumptions on interest and tax, it will point you towards a very attractive level of free cash flow before dividends through 2031.

We're focused on delivering these cash flows, and we'll be disciplined in how we use them to maintain a strong balance sheet, support options for growth, pay a sustainable and growing dividend and deliver additional returns to shareholders.

And with that, I'll hand back to Will.

So, thank you for that, Andy. And I guess it's now my job to get you all excited. And let me start with why I'm excited because I am absolutely excited about the opportunity that we have at Drax. And I was going to highlight 4 different things. So, first is really what we've talked about so far, which is the operational excellence that we have within the business to deliver the cash flows that we have so far and that we expect to continue to do well into the future. And it's operational excellence. It's also built on a strong foundation of balance sheet, compliance and sustainability.

The second thing is how well positioned the business is strategically to actually respond to the opportunities being created by the energy transition, and I'll talk more about that in a second. And the third thing is really the discipline with which we expect to go about doing that. And I'll talk a little bit about our capital allocation policy to demonstrate that. So as you know, we have a 4-stage policy. It's been in place since 2017, and we stick to it rigorously.

We maintain a strong balance sheet, currently defined as our current credit rating and 2x net debt to EBITDA. We invest in the core business, both to make sure that we maintain our high-quality asset base, as well as invest in opportunities around our core to extend and expand in areas where we have competitive advantage. We pay a sustainable and growing dividend, which Andy has highlighted, which we've been doing since 2017.

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

If we turn to the next page. So, I wanted to just remind you of the framework of how we look at the investment opportunities in front of us. First of all, the energy transition is creating a wealth of opportunities over different time scales for investments that have the opportunity or the potential to deliver attractive returns aligned with our capabilities and strategies. And this is no accident because while I've been at Drax, we've been positioning the company to frankly be -- to have opportunities to invest in the growing need for volatility, for flexibility and to complement intermittent renewables and in flexible nuclear.

And with the retirement of dispatchable fossil fuel plants, the deployment of more renewables, as well as the expected future increase in demand for power, we're seeing this play out. But let me give you a couple of examples. So, over the last 6 years, we've seen a 50% increase in the terawatt hours of energy or power generated by wind. We've seen a 500% increase in periods of negative pricing, and we've seen a doubling of system costs. And we can see that in action because Cruachan is now operating about twice as often or twice as much as it did at the beginning of that period.

So, we're already taking advantage of these opportunities by building the [ peaking ] plants, the open cycles, which will begin to commission later this year by investing in the 400 -- sorry, 40-megawatt expansion of Cruachan. So how can we capitalize further on this trend? So, the first thing I would say is, again, our current portfolio is increasingly valuable and will be as this volatility in the system continues to change, right? We like batteries as a potential attractive addition as we demonstrated by looking to buy the height portfolio. But again, as we demonstrated then, we will be disciplined in how we approach those investments.

In pellets, we're not looking at least currently to expand our capacity there until we have clear visibility on additional demand. But we are working hard and looking at ways to make sure that new markets, which we think will happen like sustainable aviation fuels, we're doing our part to see those come to fruition. So, as you know, we have the MOU with Pathway Energy, which has the potential to lead to 1 million tonnes per annum of sales in the U.S. by the end of this decade.

At the Drax Power Station, we see opportunities to create value from sort of small incremental opportunities, right? So, for example, we've established a small state, small JV to sell the ash that is built up at the power station. We have tens of millions of tons of that ash. And we believe that JV could deliver GBP 5 million of additional EBITDA per year over the next 20 years. That investment does not require any capital from us, and it sells into a market very much structurally aligned with the energy transition and is a great example of how we can create value from our existing assets.

Longer term, we're very focused on creating a definitive future for Drax Power Station beyond the extended CfD. We're working on data centers, which we'll come back to. But clearly, with 4 gigawatts of grid connection, we think we have a lot of value, and we're looking to monetize that.

We're looking at carbon removals. Elimini has recently signed a deal with HOFOR, a Danish utility, where effectively Elimini will participate in the development of a BECCS project in Denmark. We'll lend our expertise to that project. We'll also lead on the marketing of the associated CDRs, and we'll have the option to invest in that project to the extent it does get to FID. And to be clear, there's no requirement of capital from us, but it's an opportunity.

Let's take a closer look at FlexGen. So, the first piece of it, long-duration storage. As I mentioned, Cruachan is running at twice as much as it did 6 years ago, which reflects greater demand associated with more intermittent renewables and more balancing actions from the system operator. As you know, we are expanding that by about 40 megawatts. It's an GBP 80 million program, underpinned by more than GBP 220 million of capacity market revenue, adding visibility to that business out through 2040 and beyond with returns expected in excess of 20%. And we continue to look at other ways to invest to maximize value from that side.

As a reminder, we continue to have the option to actually expand it much more significantly by 600 megawatts, but we'll only do that to the extent we're comfortable with the risk return balance on that investment. The open cycles expected to come on later this year or to begin coming on later this year will provide power at times of peak demand. They are again underpinned by capacity market investments. And finally, in that space, we have demand side flexibility from our I&C business customers, which gives us another ability to create value for ourselves, for our customers and to support the system.

Finally, in terms of -- in the battery space, we're looking carefully at that. There's a very large pipeline, as you all know, of batteries that are waiting to be built in the U.K. We're looking at where there might be opportunities there for us to invest, but again, on the right terms and things like access to the grid, clear grid connections, there are a bunch of risks that need to be managed there properly before we can get comfortable with those investments.

Let me give you a short update on the data center possibility. So clearly, AI is changing the world in many ways, right? And in order for that to happen, there is a huge need for data center capacity, which has an attendance or complementary need for huge amounts of additional power. So again, we have the [ Drax ] Power Station, to the extent we can participate in that, it's a great possible opportunity.

The way we think about it is before 2030, it's likely to be something like 100-megawatt development that could ultimately scale to greater than 1 gigawatt through the 30s through a long-term behind-the-meter power offtake agreement with the power station. And that also could be complemented by BECCS. It's very much aligned with the 2027 CfD agreement, so we need to make sure that that's consistent and we think we can do that. But even beyond the data center -- sorry, beyond the biomass units, the access to the grid we have there, we have 1.2 gigawatts of grid access from the coal units, again, that we're looking at ways that, that could be monetized.

The one thing that's happened recently is we've partnered with the North Yorkshire County Council and other organizations in the region as part of an AI growth zone application, which, again, if successful, could help accelerate planning for all of those developments. There are other contenders for that, like Teesside, for example, but nothing has happened yet, and we believe we have a compelling case. We expect to hear more on that in the second half of the year.

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

And the second thing we've done is we've allocated that capital, I think, effectively through our capital allocation policy. What have we done? We've delivered about GBP 5 billion of EBITDA since 2017 with an average cash conversion of about 98%. We've invested about GBP 3 billion in the business. We've grown our dividend every year since 2017 at a rate that's now greater than 11% per year. And with our focus on shareholder value, we've returned significant capital to shareholders through -- by buying back shares to the tune of about GBP 472 million. And that's about 83 million shares at GBP 5.68 per share.

And as I've already described, we think there's more opportunity for us to do the same given the energy transition and where we positioned our business. I think it's important to note that we think the U.K. is an attractive market for investment in the energy transition, especially relative to some of our global peers. But again, being disciplined and focused on investing where we can add value and earn returns is central to our approach.

As our capital allocation policy requires, we'll look at that all in the context of how does that compare to the value we see in our own shares, which again is why we're announcing today the additional GBP 450 million buyback program, which again is underpinned by the working capital inflow associated with the end of the RO scheme. Just to be clear, that doesn't mean we're going to wait until 2027 to begin buying back the shares. That program will begin as soon as the current one finishes.

So, finally, in terms of the summary and the outlook. We're delivering attractive returns for shareholders as a result of strong operational and financial discipline and performance, substantial dividend growth, disciplined capital allocation and a major multiyear share buyback program. Important to us also is that we're delivering for all of our stakeholders, delivering energy security, decarbonization and operating in a sustainable and compliant way.

The heads of terms for a CfD at the Drax Power Station is a very important inflection point, taking away all mention of a 2027 cliff around our business. We continue to have a post 2027 adjusted EBITDA target of GBP 600 million to GBP 700 million, and we have increasing confidence in our ability to deliver that. We expect to generate strong cash flow. We expect to invest that in attractive growth opportunities, and we will do that in the context of our capital allocation policy.

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

The first question is from Pavan Mahbubani, JPMorgan.

And before I ask, I'd also like to congratulate Andy on his work as CFO over the last 7 years. And thank you, Andy, for being patient with our questions on the exciting topics, including receivables, factoring, working capital ones and pellet margins. We really appreciate it. I have 2 questions for you, team. Even with today's buyback, you still have substantial headroom to your 2x net debt-to-EBITDA target with a lot of growth options. Can you give us a bit of color over which options you maybe see materializing over the nearer term, if we think on a 12 to 18-month view? And then my second but related question is how you're thinking about Drax Power Station with 2 parts. Firstly, how is the development of U.K. BECCS progressing? And what, if any, conversations are you having with the government there? And then maybe some color on where you see the post 2031 future of Drax Power Station, whether you would expect an extension of the bridge or otherwise, how you see that power -- the future of the power station post March 2031?

Thanks, Pavan. I appreciate that. And I also appreciate your appreciation for Andy, which we all share. So, I think I can take those as sort of as maybe in a combination and sort of maybe a little bit of a preview of where we think we'll get to when we have our Capital Markets Day, which we expect to have in the autumn, right? So I think the way we're thinking about it is that the first most important thing we are doing as a company is delivering the cash flow, which we described between now and 2031, right, which I'm probably not supposed to say this, but if you do the math, it probably gives you about GBP 3 billion available for dividends, capital allocation and investment, right?

So making sure we do that, I want to sort of emphasize it takes a lot of hard work and a lot of operational excellence from the guys, and we're very confident we can do it. But I don't want to overlook the fact that that's really important, right? That's the first thing we're going to do. And I also should say that there's work to be done to adjust the way we run the business in the context of the bridge because again, we're going to be running significantly fewer hours than we have currently, and we have plans for doing that, but we need to make sure we're ready for that.

But if you then look at the sort of the 3 areas really that I think of that are interesting or important for us to focus on strategically, right? So the first one is where is the most proximate or immediate opportunity to allocate capital, right? And again, it's really -- the first one is really in the FlexGen space in the U.K. There's lots of opportunities in the battery space, finding ways to expand what we do in other types of storage is also interesting, growing and sort of investing in our – in our, in the DES, the Energy Solutions business, again, something we're looking at, the EV charging business. So, I think there's interesting opportunities to do that. And we're -- that's probably the first place that I would think to answer the first part of your question, the next 12 to 18 months is probably where you might see us doing some things, right?

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

The second area of really interesting opportunity is the Drax Power Station, as you say. And really, the question is how can we build and we will build a future for the Drax Power Station that goes well into the 30s and beyond, right? So, if you look at various scenarios that the system operator develops, et cetera, the Drax Power Station is still in those scenarios. It has some units with BECCS, some units without BECCS. And we absolutely will work to keep those options attractive and exciting and make sure that we work, I would say, in conjunction with the U.K. government, but also, I think, importantly, in conjunction with private sector counterparties who are looking to access high-quality CDRs because I think if you think about the hope for deal that we're looking at or the work we're doing with them. The Danish market has attracted, I think, quite an attractive model where the sort of the developers sort of put their projects together. They get private sector participants to effectively buy the carbon removals. And then the government's role is to then be the sort of the last piece of the puzzle and people bid for the subsidies from them and sort of the one who's got the most attractive project, either one that requires the least support wins. And I think that's an interesting model to think about in terms of how you combine sort of private public capital in delivering both renewable power, but also carbon removals, right?

So again, working on the long-term future for the power station, whether that's through a data center, whether that's through other forms of generation using the 1.2 gigawatts of tech that's available, whether that's through extension of some sort of bridge like mechanism or through BECCS. So all of those things are important activities that we're undergoing.

I would say less likely that we would be allocating significant capital in that space over the next 12 to 18 months, right? But we will do a lot of development work, a lot of intellectual work there. And the third area is really carbon removals and the future of biomass, the future of pellets. And I think of that as sort of one world where we have a very significant capability in accessing sustainable fiber and turning that into -- in the current state into pellets and turning that into power. We have excellent experience in that space, probably more than anyone. But our expectation is that the uses for those pellets and that fiber will be changing over time. Unabated power generation, yes, may continue. Carbon removals is probably more interesting, sustainable aviation fuel, another exciting opportunity in the future.

And so again, we're doing lots of what I would call business development work, looking at other ways of using that fiber, looking at carbon removals through Elimini, looking at biochar, for example, looking at BECCS. So again, but probably more in this space, again, business development, not large-scale capital deployment. And I think the HOFOR, for example, is a good way to think of the way we are approaching that space, right?

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

The next question from Dominic Nash, Barclays.

And again, I'd like to reiterate wishing the best for Andy on his next adventure. Can I ask 3 questions, please? The first one is on the GBP 600 million to GBP 700 million EBITDA split post 2027, which is no change from previous numbers. But previously, you gave us some granularity. I think GBP 150 million was hydro, GBP 50 million retail, 50 OCTs, GBP 100 million to GBP 200 million for DPS and then you've got GBP 250 million, which I think is a swing factor for pellets. So, the question I've got here is, are you still confident that that's broadly going to be the mix? And/or do you think that pellets are probably going to be under pressure. And then that leads on to the second question, which is the pellets. Could you just remind us again that you're producing, I think, you're going to be producing 5 million tonnes of pellets, of which I think I believe 2 million tonnes goes to Drax Power Station. What does it look like for pellet demand coming from sort of like Asia and European and other markets? And as we go to 2027, what do you think the Pellet Production profile of Drax will do when we step down from your sort of 15 terawatt hours to 6 terawatt hours in Drax? And then the third one, you sort of pick my interest a little bit on what to do with the coal units and/or potentially other biomass units. You've crossed the Rubicon a little bit by -- I think historically, you always wanted to be a zero fossil fuel company. The OCGTs are clearly here to stay. Can you convert your coal units to gas -- and/or could they be run like inertia products? Or what sort of options could we actually see with those 2 units?

Maybe I'll take those back to front. So, in terms of the sort of how we will best make use of the grid connections, which used to be effectively sort of putting -- bringing coal onto the system. I think I'm going to hold fire on answering that question, Dominic, because we're doing a lot of work on that area, and we probably can give you a better answer come later in the year when we have a Capital Markets Day.

I would say, I mean, yes, I think it's more likely than not that we keep the open cycles. But if you actually -- I know you've read our climate transition plan in some detail. And in there, we have commitments that effectively -- if we do keep them, we need to make sure that it's aligned with that program, right? So that's work that we will be doing to make sure that we keep -- we maintain our commitments to sustainability, which are as strong as they ever have been.

If I think about the pellet business, right, the first thing I would say is that we did about 4 million tonnes last year. We did about -- we are expecting to do a bit more than that this year, right? But one of the things we're doing now is that in the context of having a bridge, which frankly, is quite a bit less generation than we do now. And in the context of -- which basically means that just from ourselves, the demand goes from about 8 million tonnes to about 3 million tonnes. There's 5 million tonnes of pellets that will be coming into the market on a global basis.

There are other generators around Europe that also will be coming off. So, I think our own view is that the 2020 call it, 2028 market will be probably long pellets, and we need to make sure we're ready for that, right? So, we're looking carefully at our own portfolio. I think getting to 5 million tonnes is now less likely unless we see additional demand coming on stream in that time period, right? So, we're looking at what we're investing in now. We're looking at sort of where we get those pellets. I think it creates both a risk and an opportunity for us, right? So the 1 million tonnes of third-party pellets we plan to buy, again, that's -- we have good options for that, and we think we feel pretty good about that.

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

And on the split for the EBITDA?

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

The next question is from Alex Wheeler, RBC.

Two from me, please, both, I think, for Andy, fitting for the Swan. First one, how should we think about the timing of the GBP 450 million buyback? Is it fair to assume a linear profile here as you've been pretty quick on the current buyback? And does the GBP 500 million ROC cash inflow in '27 have a part to play here? And then my next question is just on the EBITDA and how we should think about that for H2 given the strong H1 and a run rate that probably puts you a bit ahead of the current consensus, which you've confirmed you're comfortable with. So any thoughts there appreciated.

So, on the buyback, I think you can assume a relatively even spread across the 3 years and a couple of reasons for that. One, as you know, we have our AGM approvals we need to renew each year that give us up to 10% of our share count. But two, also the liquidity on the stock as the number of shares continues to reduce. We do intend to run that from the end of the existing program, which should come to a completion during the second half of this year. And the way I think about the ROC unwind is that, that surplus working capital that's been on the balance sheet for a number of years and will come out in 2027. But as Will said, we're not waiting to start the buyback until that comes. So, we will start as soon as the existing one finishes.

On the second half numbers, if you look in the appendix at the hedge book and the details of sort of average price achieved for this year, you'll see that when I explained the actual results were lower as we expected because the captured price is lower than it had been in the prior period. The second half of the year, our locked-in hedge book is at a lower rate compared to the first half. So that simply means that we'll -- you shouldn't take the first half volume and rates and double it. And that leaves us comfortable with where consensus is.

The next question from Ahmed Farman, Jefferies.

Firstly, Andy, thank you and congratulations from my side as well. I just have sort of 2 quick questions. Firstly, on balance sheet capacity. So, a lot of -- you talked a lot about the work that you have done to build the visibility to 2027 and beyond. And there's also sort of the points about the value of the site with 4 gigawatts of sort of grid connections. I'm just wondering, does that -- have you had any conversations with rating agencies about whether the 2x net debt to EBITDA is still the appropriate target? Or actually could you support a higher leverage factor as a company given how visibility and sort of some of the sort of the outlook has emerged. So that's my first question. My second question is on for Will on the data center opportunity. I wanted to come back to the 100-megawatt potential behind-the-meter opportunity, which we have discussed before. I'm just wondering if there has been any progress on that, that you could share with us? And if not, maybe sort of talk a little bit about what are the constraints that need to be solved to sort of commercialize that opportunity?

Yes. Why don't I take both of those. I think on the balance sheet question, it's a very fair question because as you described, the business is changing. I think what we need -- what we're going to do is, as part of this, again, sort of look at our strategy in the context of the bridge. Again, we'll come back to that probably again at the Capital Markets Day and confirm where we are. I think -- I guess I would say that I think that target has served us well. And sort of in absence of sort of a strong view that either, a, there's a sort of strategic reason to have a different target, i.e., that the sort of having either a different credit rating would be beneficial and/or a strong view that the sort of nature of the cash flows is fundamentally different. I think we would -- one of those 2 things we have to change in order for us to make a change on that. But we'll come back to you on that, I would say, in the fall.

In terms of the data center, we continue to do a lot of work on that. I guess the thing for me, which is the different things that have to line up are what types of data centers are people building in the U.K. I mean my sense of it is that, most of the larger data centers, training the large language models probably are not going to be in the U.K. Most of those will be probably U.S., China, maybe some in the Middle East. We'll need edge data centers that sort of actually are the ones that sort of respond to queries and those will be more national.

Generally useful for those to be near customers or that's historic trend. So, we need to get people comfortable with that. Clearly, biomass power, getting people comfortable with that. The cost base, the sort of -- yes, we think behind-the-meter power for biomass is attractive relative to wholesale prices, but you have other options for behind-the-meter power, so we need to make sure we get people comfortable with that. So, there's a bunch of things that have to go into it. And then I guess the final point is that in order to actually make it happen, it's a very significant capital commitment. So, making sure that you've got the right partners ready to commit capital is something that we're also looking at doing, right?

So again, I would say a bunch of things need to line up. There's a lot of work still happening on that. And so again, as we learn more, we'll make sure that we share that with you.

The next question from Jenny Ping, Citi.

A couple of questions from me, please. Just following on Ahmed's question on data centers. I also wanted to just check in terms of some of the progress and challenges that you just outlined, I presume this is something that you're going to be working on over the next couple of years. Obviously, the bridge gives you the time to do that. But I just wondered, are you really going to have anything concrete to share with us by 4? Or is this really kind of like a 3-year view just to give us some sense of whether we should really be looking to sort of looking at the financials of some of these opportunities now. Secondly, I wanted to ask about the bridge itself. Obviously, FX was the only piece in the heads of terms that the government has left open for marking to market. If I look at what the FX was at the time of the heads of terms versus where it is now, it shaves off around GBP 5, GBP 4, GBP 5 per megawatt hour to the headline price. I wondered what you can comment around that and whether there's any other elements which could potentially offset that we should be taking into account? And then thirdly, just on Longview, some of the pellet growth. I just -- a technical point, but obviously, that's one that has been under construction, but now paused because of some of the permitting -- emission permitting delays. If that project doesn't get the permit to go ahead, is there any write-off that's coming from that investment?

So, on the data centers, I think your question, Jenny is focused on whether we see any sort of near-term milestones or things that we would explicitly want to lay out as sort of points where we would come back to you explicitly. I think the answer to that is no. I think those are sort of complex negotiation discussions, multiple people involved. And so, I think the best thing -- I don't want to sort of put specific dates on that where we actually expect to come back to you. And so I think the best way to think about that is as and when things happen that we think are important to share with the market or rely, we'll bring those back, but not tied to any specific dates.

In terms of FX on the bridge, the way that the heads of terms is structured is that those changes in FX rates before the actual signing of the final contract will effectively go into determining what the final strike price will be. So, we're still in that phase. And the third one on Longview, effectively where we are on that is that the sort of the permitting process continues. But as you would expect, we're sort of looking carefully at that project to determine whether we need those pellets. And when we have a decision on that, we will let you know whether that's going to continue or how we plan to handle that. So that one is yet to come.

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

Yes, I think there's about GBP 150 million on the balance sheet for that yet.

The next question is from Charles Swabey, HSBC.

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

I don't want to be too direct, but unfortunately, the direct answer to your question is no. We can't really provide that. But I think maybe a bit more color. I mean, I guess the simple answer is that in order for us to maybe I guess the first way to think about this is that in order for us to enable or develop a data center, there's going to be quite a significant amount of investment required, both in the data center itself, but also in our own infrastructure to enable us to connect it.

And in order for us to do that, we need to have a high level of confidence in the earnings that we would generate from that. And so, I think the sort of foundational part of your question is, will there be a long-term PPA with a reasonable price in it? And I think the answer that is we believe there would need to be in order for this to work. So, we're working on that as the best way to think about it, Charles, yes.

The next question is from Harrison Williams, Morgan Stanley.

First, I just wanted to ask on Cruachan. I know you walked away from the first round and we've seen some of your peers do similar on the terms. Can I ask about what the conversations have been with Ofgem since then? Are they receptive to your concerns with how the initial framework was designed? And I guess as a follow-up, yes, if that was to be developed, when could we expect to hear on that one? And then the second question I had was we saw recently that the U.K. ETS scheme was going to allow carbon removals. How significant could this be in terms of making BECCS a more feasible option? And maybe just to help us understand if we are seeing the linkage between the U.K. and European ETS schemes, is it feasible for the U.K. only to allow carbon removals or would we need to see similar movement in Europe as well?

So, on the sort of expansion of Cruachan, I guess the way I would respond to that, I think there's a series of different things that are sort of part of our decision-making there. I mean one is the duration of the project. Another one is the cap and floor. Another one is the sort of the timing of how it sort of worked for us. So, for example, the second round might be more effective for us. But the third one for me is also the sort of fundamental fact that, that project sort of would change the duration of the power station or reduce the duration of the storage we could provide quite significantly. So, all of those come into it. And sort of again, we'll continue to look and see whether we can get comfortable with that. And I'm not -- I think the sort of the Ofgem piece is one part of it, and I'm sure they're looking at how to make that more attractive, but I don't think that's the only issue for us, right?

In terms of the ETS, I think the answer to that is including carbon removals in European and/or U.K. ETS and/or our combined system is fundamental. It actually will make -- significantly change the ability of those projects to go forward. I mean it provides a much bigger pool of buyers for carbon removals and becomes a compliance issue as opposed to a voluntary one. So, I think that's a very, very significant development. Now how it actually plays out where the carbon price is, what the format of it is, what the structure of it is obviously very important. But again, we're very involved in those -- both of those processes, and I think they're both quite fundamental. So, but also not immediate, right? I mean they need to be determined. They need to work through. And anything that comes into play there is probably not until near the end of the decade.

At the moment, there are no phone questions.

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

So, again, I think it's nice that we have more clarity, nice that we have more certainty around that. And again, I, clearly, you're right, they are going to be reviewing TNUoS charges as part of this. And I think our own position is that we have a quite a good geographic spread of assets, some in Scotland, obviously, some in Yorkshire, some across the Midlands in terms of the open cycles. And so actually, I think we believe we have quite a good balance in terms of the risks, pending movements in grid access costs, right? We won't know definitively until it all happens. But currently, our expectation is it's a reasonably balanced position for us, right? I hope that helps, okay?

And maybe I'll just wrap up by one more time. So, thanking Andy for all his good work. Really, it's going to be -- it will be a different set of results next time, different and there'll be some nostalgia. I'm sure it will be a good one as well. But thank you all for your questions, and I hope everybody has a good day.