TIDMDRX
RNS Number : 1562E
Drax Group PLC
16 October 2018
16 October 2018
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
Drax Group plc
(Symbol: DRX)
Acquisition of flexible, low-carbon and renewable UK power
generation from Iberdrola
Drax (the "Group" or "Drax Group") is pleased to announce that
it has agreed to acquire Scottish Power's portfolio of pumped
storage, hydro and gas-fired generation (the "Portfolio") for
GBP702 million in cash (the "Acquisition") from Iberdrola, subject
to Drax shareholder approval.
Highlights
-- A unique portfolio of pumped storage, hydro and gas-fired generation assets
-- Compelling strategic rationale
o Growing system support opportunity for the UK energy
system
o Significant expansion of Drax's flexible, low-carbon and
renewable generation model
o Diversified generation capacity - multi-site,
multi-technology
o Opportunities in trading and operations
-- Strong financial investment case
o High quality earnings
o Expected returns significantly ahead of Weighted Average Cost
of Capital (WACC)
o Expected EBITDA(1) of GBP90-110 million in 2019
o Debt facility agreed, net debt/EBITDA expected to be around 2x
by the end of 2019
o Supportive of credit rating and reduced risk profile for
Drax
o Strengthens ability to pay a growing and sustainable
dividend
Commenting on today's announcement Will Gardiner, Chief
Executive Officer of Drax Group, said:
"I am excited by the opportunity to acquire this unique and
complementary portfolio of flexible, low-carbon and renewable
generation assets. It's a critical time in the UK power sector. As
the system transitions towards renewable technologies, the demand
for flexible, secure energy sources is set to grow. We believe
there is a compelling logic in our move to add further flexible
sources of power to our offering, accelerating our strategic vision
to deliver a lower-carbon, lower-cost energy future for the UK.
"This acquisition makes great financial and strategic sense,
delivering material value to our shareholders through long-term
earnings and attractive returns.
"We are combining our existing operational expertise with the
specialist technical skills of our new colleagues and I am looking
forward to what we can achieve together."
A flexible, low-carbon and renewable portfolio
The Portfolio consists of Cruachan pumped storage hydro (440MW),
run-of-river hydro locations at Galloway and Lanark (126MW), four
CCGT(2) stations: Damhead Creek (805MW), Rye House (715MW),
Shoreham (420MW) and Blackburn Mill (60MW), and a
biomass-from-waste facility (Daldowie).
Attractive high quality earnings and returns
The Portfolio is expected, based on recent power and commodity
prices, to generate EBITDA in a range of GBP90-110 million, from
gross profits of GBP155 million to GBP175 million, of which around
two thirds is expected to come from non-commodity market sources,
including system support services, capacity payments, Daldowie and
ROCs(3) . Pumped storage and hydro activities represent a
significant proportion of the earnings associated with the
portfolio. Further information is set out in Appendix 2 of this
Announcement.
Capital expenditure in 2019 is expected to be in the region of
GBP30-35 million.
For the year ended 31 December 2017, the Portfolio generated
EBITDA of GBP36 million(4) . EBITDA in 2019 is expected to be
higher due to incremental contracted capacity payments (c.GBP42
million), no availability restrictions (Cruachan's access to the UK
grid during 2017 was limited by network transformer works) (c.GBP8
million), a lower level of corporate cost charged to the portfolio
(c.GBP9 million) and revenues from system support services and
current power prices. Gross assets as at 31 December 2017 were
GBP419 million(5) .
The Acquisition represents an attractive opportunity to create
significant value for shareholders and is expected to deliver
returns significantly in excess of the Group's WACC and to be
highly accretive to underlying earnings in 2019.
The Acquisition strengthens the Group's ability to pay a growing
and sustainable dividend. Drax remains committed to its capital
allocation policy and to its current GBP50 million share buy-back
programme, with GBP32 million of shares purchased to date.
Financing the Acquisition
Drax has entered into a fully underwritten GBP725 million
secured acquisition bridge facility agreement to finance the
Acquisition. Assuming performance in line with current
expectations, net debt to EBITDA is expected to fall to Drax's
long-term target of around 2x by the end of 2019.
Drax expects its credit rating agencies to view the Acquisition
as contributing to a reduced risk profile for the Group and to
reaffirm their ratings.
Conditions for completion
The Acquisition is expected to complete on 31 December 2018 and
is conditional upon the approval of the Acquisition by Drax's
shareholders and clearance by UK Competition and Markets Authority
(the "CMA"). A summary of the terms of the Acquisition agreement
(the "Acquisition Agreement") is set out in Appendix 1 to this
announcement.
Drax trading and operational performance
Since publishing its half year results on 24 July 2018 Drax has
commenced operation of a fourth biomass unit at Drax Power Station,
which is performing in line with plan, and availability across
biomass units has been good.
Taking these factors into account, alongside a strong 2018
hedged position and assuming good operational availability for the
remainder of the year, Drax's EBITDA expectations for the full year
remain unchanged, with net debt to EBITDA now expected to be around
1.5x for the full year, excluding the impact of the
Acquisition.
Biomass generation is now fully contracted for 2019.
Contracted power sales at 30 September 2018
2018 2019 2020
---------------------------------- ----------- ----------- -----------
Power sales (TWh) comprising: 18.6 11.5 5.7
TWh including expected CfD
sales 18.6 15.6 11.2
- Fixed price power sales (TWh) 18.6 11.0 5.1
At an average achieved price at GBP46.8 at GBP50.4 at GBP48.3
(per MWh)
- Gas hedges (TWh) - 0.5 0.6
At an achieved price per therm - 43.5p 47.4p
---------------------------------- ----------- ----------- -----------
Drax intends to hedge up to 1TWh of the commodity exposures in
the Portfolio ahead of completion in line with the Group's existing
hedging strategy.
Other matters
In light of the Acquisition and the expected timing of the
general meeting to approve it, Drax will postpone the planned
Capital Markets Day on 13 November 2018.
Drax expects to announce its full year results for the year
ending 31 December 2018 on 26 February 2019.
Enquiries:
Drax Investor Relations: Mark Strafford
+44 (0) 1757 612 491
+44 (0) 7730 763 949
Media:
Drax External Communications:
Matt Willey
+44 (0) 7711 376 087
Ali Lewis
+44 (0) 7712 670 888
J.P. Morgan Cazenove (Financial Adviser and Joint Corporate
Broker):
+44 (0) 207 742 6000
Robert Constant
Jeanette Smits van Oyen
Carsten Woehrn
Royal Bank of Canada (Joint Corporate Broker):
+44 (0) 20 7653 4000
James Agnew
Jonathan Hardy
Acquisition presentation meeting and webcast arrangements
Management will host a presentation for analysts and media at
9:00am (UK Time), Tuesday 16 October 2018, at FTI Consulting, 200
Aldersgate, Aldersgate Street, London EC1A 4HD.
Would anyone wishing to attend please confirm by e-mailing
Christopher.Laing@fticonsulting.com or calling Christopher Laing at
FTI Consulting on +44 (0) 20 3727 1355 / 07809 234 126.
The meeting can also be accessed remotely via a live webcast, as
detailed below. After the meeting, the webcast will be made
available and access details of this recording are also set out
below.
A copy of the presentation will be made available from 9am (UK
time) on Tuesday 16 October 2018 for download at:
www.drax.com>>investors>>results-reports-agm>>
#investor-relations-presentations or use the link below.
Event Title: Drax Group plc: Acquisition of flexible,
low-carbon and renewable UK power generation
from Iberdrola
Event Date: Tuesday 16 October 2018
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Event Time 9:00am (UK time)
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Webcast Live Event Link www.drax.com/investors/16-oct-2018-webcast
020 3059 5868 (UK)
+44 20 3059 5868 (from all other locations)]
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Start Date: Tuesday 16 October 2018
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Delete Date: Monday 14 October 2019
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Archive Link: www.drax.com/investors/16-oct-2018-webcast
----------------------------------------------
For further information please contact Christopher Laing on +44
(0) 20 3727 1355 / 07809 234 126
Website: www.drax.com
Acquisition of the Portfolio from Iberdrola
Drax Smart Generation Holdco Limited ("Drax Smart Generation"),
a wholly owned subsidiary of Drax, has entered into the Acquisition
Agreement with Scottish Power Generation Holdings Limited (the
"Seller"), a wholly-owned subsidiary of Iberdrola S.A., for the
acquisition of ScottishPower Generation Limited ("SPGEN"), for
GBP702 million in cash.
Strong asset base
The Portfolio principally consists of 2.6GW of assets which are
highly complementary to Drax's existing generation portfolio and
play an important role in the UK energy system. The assets
include:
Cruachan Pumped Storage Hydro
440MW of large-scale storage and flexible low-carbon generation
situated in Argyll and Bute, Scotland.
Cruachan provides a wide range of system support services to the
UK energy market, in addition to providing merchant power
generation. Cruachan has GBP35 million of contracted capacity
payments for the period 2019 to 2022.
Cruachan, which provides over 35% of the UK's pumped storage by
volume, can provide long-duration storage with the ability to
achieve full load in 30 seconds, which it can maintain for over 16
hours, making it a strategically important asset remunerated by a
broad range of non-commodity based revenues.
Galloway and Lanark Run-of-River Hydro
126MW of stable and reliable renewable generation situated in
South-west Scotland.
Both locations benefit from index-linked ROC revenues extending
to 2027 and Galloway, in addition to renewable power generation,
operates a reservoir and dam system providing storage capabilities
and opportunities for peaking generation and system support
services. It also has GBP4 million of contracted capacity payments
for the period 2019 to 2022.
Combined Cycle Gas Turbine (CCGT)
1,940MW of capacity at Damhead Creek (805MW), Rye House (715MW)
and Shoreham (420MW) all strategically located in South-east
England.
These assets provide baseload and/or peak power generation in
addition to other system support services and benefit from
attractive grid access income associated with their location. The
three plants have contracted capacity payments of GBP127 million
for the period 2019 to 2022.
Damhead Creek also benefits from an attractive option for the
development of a second CCGT asset, Damhead Creek II, which
provides additional gas generation optionality alongside Drax's
existing coal-to-gas repowering and OCGT(6) projects. All options
could be developed subject to an appropriate level of support.
Damhead Creek II is eligible for the 2019 capacity market auction
along with two of Drax's existing OCGT projects.
Other smaller sites
The portfolio also includes a small CCGT in Blackburn (60MW) and
a 50K tonne biomass-from-waste facility in Daldowie, which benefits
from a firm offtake contract agreement with Scottish Water until
2026.
Benefits of the Acquisition
A leading provider of flexible, low-carbon and renewable
generation in the UK
The UK has a target to reduce carbon emissions by 80% by 2050.
The transition to a low-carbon economy requires decarbonisation of
heating, transport and generation. This will in turn require
additional low-carbon sources of generation to be developed in the
UK. As much as 85%(7) of future generation could come from
renewables - predominantly wind and solar. This will lead, at
times, to high levels of power price volatility and increasing
demand for system support services. Managing an energy system with
these characteristics will only be possible if it is supported by
the right mix of flexible assets to manage volatility, balance the
system and provide crucial non-generation services which a stable
energy system requires.
The Acquisition is closely aligned with this structural need and
the operation of Drax's existing biomass and gas options which
provide the flexibility required to enable higher levels of
intermittent renewable generation.
The Acquisition is in line with these system needs and when
combined with Drax's existing flexible, biomass generation and gas
options offers the Group increased exposure to the growing need for
system support and power price volatility.
Increased earnings potential aligned with generation strategy
and UK energy needs
The Acquisition of this unique portfolio is in line with the
Group's strategy to create value from flexible, low-carbon and
renewable generation. The Acquisition will provide Drax with an
increasing level of low-carbon and renewable capacity, and contract
based system support revenues, providing improved long-term
earnings visibility. This positions Drax to capture value by
supporting the system operator in managing the impact of the UK's
transition to a low-carbon economy as the share of wind and solar
generation increases.
High quality earnings
Two thirds of the gross profits of the Portfolio is expected to
come from non-commodity market sources, including system support
services, capacity payments, Daldowie and ROCs, in addition to
power generation activities. Due to the expected growing demand for
these assets and the contract-based nature of many of these
services Drax expects to improve long-term earnings visibility
through structured non-commodity earnings streams, whilst retaining
significant opportunity to benefit from power price volatility.
When combined with renewable earnings and system support from
existing biomass generation, the Acquisition is expected to lead to
an increase in the quality of earnings.
Diversified generation and portfolio benefits
The Acquisition accelerates Drax's development from a
single-site generation business into a multi-site, multi-technology
operator.
With the acquisition of this portfolio, a fall in gas prices
could be mitigated by an increase in gas-fired generation
reflecting the relative dispatch economics of the different
technologies.
Drax expects to benefit from the management of generation across
a broader asset base, leveraging the Group's expertise in the
operation, trading and optimisation of large rotating mass
generation.
Drax believes that the team operating the Portfolio has a strong
engineering culture which is closely aligned with the Drax model
and will enhance the Group's strong capabilities across engineering
disciplines.
Around 260 operational roles will transfer to Drax as part of
the Acquisition, complementing and reinforcing Drax's existing
engineering and operational capabilities.
Financing and capital structure
Drax has entered into a fully underwritten GBP725 million
secured acquisition bridge facility to finance the Acquisition,
with a term of 12 months from the first date of utilisation of the
facility (with a seven-month extension option) and interest payable
at a rate of LIBOR plus the applicable margin (the "Acquisition
Facility Agreement"). The facility is competitively priced and
below Drax's current cost of debt.
Drax will consider its options for its long-term financing
strategy in 2019.
Assuming performance in line with current expectations, net debt
to EBITDA is expected to return to Drax's long-term target of
around 2x by the end of 2019.
Drax expects credit rating agencies to view the Acquisition as
supportive of the rating and contributing to a reduced risk profile
for the Group.
Process and integration plan
Drax is progressing a detailed integration plan to combine the
Acquisition as part of the existing Power Generation business.
The transaction is subject to shareholder approval. A combined
Shareholder Circular and notice of General Meeting will be posted
as soon as practicable.
The transaction is expected to complete on 31 December 2018.
Notes:
(1) EBITDA is defined as earnings before interest, tax,
depreciation, amortisation and material one-off items that do not
reflect the underlying trading performance of the business. 2019
EBITDA is stated before any allocation of Group overheads.
(2) Combined Cycle Gas Turbine.
(3) Renewable Obligation Certificates.
(4) 2017 EBITDA is unaudited and based on the audited financial
statements of Scottish Power Generation Limited and SMW Limited,
adjusted to exclude results of assets that do not form part of the
Portfolio and restated in accordance with Drax accounting
policies.
(5) On an unaudited historic cost basis, inclusive of an
historic write down and other changes arising from the application
of Drax's accounting policies, and incorporating intercompany
debtors which will be replaced by Drax going forward.
(6) Open Cycle Gas Turbines.
(7) Intergovernmental Panel on Climate Change. In a 1.5c pathway
renewables are projected to be 70-85% of global electricity in
2050.
IMPORTANT NOTICE
The contents of this announcement have been prepared by and are
the sole responsibility of Drax Group plc (the "Company").
J.P. Morgan Limited (which conducts its UK investment banking
business as J.P. Morgan Cazenove) ("J.P. Morgan Cazenove") and RBC
Europe Limited ("RBC"), which are both authorised by the Prudential
Regulation Authority (the "PRA") and regulated in the United
Kingdom by the FCA and the PRA, are each acting exclusively for the
Company and for no one else in connection with the Acquisition, the
content of this announcement and other matters described in this
announcement and will not regard any other person as their
respective clients in relation to the Acquisition, the content of
this announcement and other matters described in this announcement
and will not be responsible to anyone other than the Company for
providing the protections afforded to their respective clients nor
for providing advice to any other person in relation to the
Acquisition, the content of this announcement or any other matters
referred to in this announcement.
J.P. Morgan Cazenove, RBC and their respective affiliates do not
accept any responsibility or liability whatsoever and make no
representations or warranties, express or implied, in relation to
the contents of this announcement, including its accuracy,
fairness, sufficient, completeness or verification or for any other
statement made or purported to be made by it, or on its behalf, in
connection with the Acquisition and nothing in this announcement
is, or shall be relied upon as, a promise or representation in this
respect, whether as to the past or the future. Each of J.P. Morgan
Cazenove, RBC and their respective affiliates accordingly disclaims
to the fullest extent permitted by law all and any responsibility
and liability whether arising in tort, contract or otherwise which
it might otherwise be found to have in respect of this announcement
or any such statement.
Certain statements in this announcement may be forward-looking.
Any forward-looking statements reflect the Company's current view
with respect to future events and are subject to risks relating to
future events and other risks, uncertainties and assumptions
relating to the Company and its group's, the Portfolio's and/or,
following completion, the enlarged group's business, results of
operations, financial position, liquidity, prospects, growth,
strategies, integration of the business organisations and
achievement of anticipated combination benefits in a timely manner.
Forward-looking statements speak only as of the date they are made.
Although the Company believes that the expectations reflected in
these forward looking statements are reasonable, it can give no
assurance or guarantee that these expectations will prove to have
been correct. Because these statements involve risks and
uncertainties, actual results may differ materially from those
expressed or implied by these forward looking statements.
Each of the Company, J.P. Morgan Cazenove, RBC and their
respective affiliates expressly disclaim any obligation or
undertaking to supplement, amend, update, review or revise any of
the forward looking statements made herein, except as required by
law.
You are advised to read this announcement and any circular (if
and when published) in their entirety for a further discussion of
the factors that could affect the Company and its group, the
Portfolio and/or, following completion, the enlarged group's future
performance. In light of these risks, uncertainties and
assumptions, the events described in the forward-looking statements
in this announcement may not occur.
Neither the content of the Company's website (or any other
website) nor any website accessible by hyperlinks on the Company's
website (or any other website) is incorporated in, or forms part
of, this announcement.
APPIX 1
PRINCIPAL TERMS OF THE ACQUISITION
The following is a summary of the principal terms of the
Acquisition Agreement.
1. Acquisition Agreement
Parties and consideration
The Acquisition Agreement was entered into on 16 October 2018
between Drax Smart Generation and the Seller. Pursuant to the
Acquisition Agreement, the Seller has agreed to sell, and Drax
Smart Generation has agreed to acquire, the whole of the issued
share capital of SPGEN for GBP702 million, subject to certain
customary adjustments in respect of cash, debt and working
capital.
Drax Group Holdings Limited has agreed to guarantee the payment
obligations of Drax Smart Generation under the Acquisition
Agreement. Scottish Power UK plc has agreed to guarantee the
payment obligations of the Seller under the Acquisition
Agreement.
Conditions to Completion
The Acquisition is conditional on:
-- the approval of the Acquisition by Drax shareholders, which
is required as the Acquisition constitutes a Class 1 transaction
under the Listing Rules (the "Shareholder Approval Condition");
and
-- the CMA having indicated that it has no further questions at
that stage in response to pre-Completion engagement by Drax or the
CMA having provided a decision that the Acquisition will not be
subject to a reference under the UK merger control regime.
Completion is currently expected to occur on 31 December 2018
assuming that the conditions are satisfied by that date.
Termination for material reduction in available generation
capacity
Drax Smart Generation has the right to terminate the Acquisition
Agreement upon the occurrence of a material reduction in available
generation capacity at any of the Cruachan, Galloway and Lanark or
Damhead Creek facilities which subsists, or is reasonably likely to
subsist, for a continuous period of three months. The right of Drax
Smart Generation to terminate in these circumstances is subject to
the Seller's right to defer Completion if the relevant material
reduction in available generation capacity can be resolved by end
of the month following the anticipated date of Completion.
Break fee
A break fee of GBP14.6 million (equal to 1% of Drax's market
capitalisation at close of business on the day before announcement)
is payable if the Shareholder Approval Condition is not met, save
where this is as a result of a material reduction in available
generation capacity as described above.
Pre-completion covenants
The Seller has given certain customary covenants in relation to
the period between signing of the Acquisition Agreement and
completion, including to carry on the SPGEN business in the
ordinary and usual course. The Seller will carry out certain
reorganisation steps prior to completion.
Pension liabilities
Drax Smart Generation has agreed to assume the accrued defined
benefit pension liabilities associated with the employees of the
SPGEN group as at the date of signing the Acquisition Agreement.
Following Completion, the SPGEN group will continue to participate
in the Seller's group defined benefit pension scheme, known as the
ScottishPower Pension Scheme ("SPPS") for an interim period of 12
months unless agreed otherwise (the "Interim Period") while a new
pension scheme is set up by the SPGEN group for the benefit of its
employees (the "New Scheme").
At the end of the Interim Period, the SPPS trustees will be
requested to transfer from the SPPS to the New Scheme an amount of
liabilities (and corresponding share of assets) agreed between the
Seller and Drax Smart Generation (or failing agreement, an amount
determined by an independent actuary) in respect of the past
service liabilities relating to the SPGEN group employees. If the
amount of assets transferred to the New Scheme does not match the
amount agreed (or independently determined), there will be a
true-up between the Seller and Drax Smart Generation.
If the SPPS trustees do not make any transfer to the New Scheme
within the period of 18 months following the Interim Period (unless
this was caused by a breach of the Acquisition Agreement by the
Seller), Drax Smart Generation has agreed to pay GBP16 million
(plus base rate interest) to the Seller as compensation for the
SPPS liabilities not taken on by the New Scheme.
Seller's warranties, indemnities and tax covenant
The Seller has provided customary warranties in the Acquisition
Agreement. The Seller also has provided Drax Smart Generation with
indemnities in respect of certain specific matters, including for
any losses associated with the reorganisation referred to above. A
customary tax covenant is also provided in the Acquisition
Agreement.
2. Transitional Services Agreement
The Seller and SPGEN will enter into a transitional services
agreement effective at Completion. The specific nature, terms and
charges relating to the services to be provided will be agreed
between the Seller and SPGEN prior to Completion. The Seller will
also provide assistance in relation to the extraction and
separation of the SPGEN group from the systems of the Seller and
integration of the SPGEN group onto the systems of the Drax
Group.
APPIX 2
PROFIT FORECAST
Profit forecast for the Portfolio for the year ending 31
December 2019 including bases and assumptions.
The Portfolio is expected, based on recent power and commodity
prices, to generate EBITDA in a range of GBP90-110 million ("Profit
Forecast"), and gross profits of GBP155 million to GBP175 million,
of which around two thirds is expected to come from non-commodity
market sources, including system support services, capacity
payments, Daldowie and ROCs. Pumped storage and hydro activities
represent a significant proportion of the earnings associated with
the portfolio.
For the purpose of the Profit Forecast, EBITDA is stated before
any allocation of Group overheads (as these will be an allocation
of the existing Drax Group cost base which is not expected to
increase as a result of the acquisition of the Portfolio).
Basis of preparation
The Profit Forecast has been compiled on the basis of the
assumptions stated below, and on the basis of the accounting
policies of the Drax Group adopted in its financial statements for
the year ended 31 December 2017. Subsequent accounting policy
changes include the application of IFRS15 and IFRS9 which are not
initially expected to change the EBITDA results of the Portfolio.
It also does not reflect the impact of IFRS16 which would apply in
respect of the 2019 Annual Report and Accounts.
The Profit Forecast has been prepared with reference to:
-- Unaudited 2017 financial statements based on the audited
financial statements of Scottish Power Generation Limited and SMW
Limited, adjusted to exclude results of assets that do not form
part of the Portfolio and restated in accordance with Drax
accounting policies
-- The audited financial statements of the entities forming the
Portfolio for the year ending 31 December 2017
-- The unaudited management accounts of the Portfolio for the
nine months ending 30 September 2018
-- And on the basis of the projected financial performance of
the Portfolio for the year ending 31 December 2019
The Profit Forecast is a best estimate of the EBITDA that the
Portfolio will generate for a future period of a year in respect of
assets and operations that are not yet under the control of Drax.
Accordingly the degree of uncertainty relating to the assumptions
underpinning the Profit Forecast is inherently greater than would
be the case for a profit forecast based on assets and operation
under the control of Drax and/or which covered a shorter future
period. The Profit Forecast has been prepared as at today and will
be updated in the shareholder circular.
The forecast cost base reflects the expectations of the Drax
Directors of the operating regime of the Portfolio under Drax's
ownership and the central support it will require.
Principal assumptions
The Profit Forecast has been prepared on the basis of the
following principal assumptions:
Assumptions within management's control
1. There is no change in the composition of the Portfolio.
2. There is no material change to the manner in which these assets are operated.
3. There are no material changes to the existing running costs /
operating costs of the Portfolio.
4. There will be no material restrictions on running each of the
assets in the Portfolio other than those that would be envisaged in
the ordinary course.
5. No material issues with the migration of services including
trading and information technology from Scottish Power to Drax.
6. No hedges are transferred as part of the Transaction.
7. Transaction costs and one-off costs associated with the Integration are not included.
Assumptions outside of management's control
1. The acquisition of the Portfolio is completed on 31 December 2018.
2. There is no material change to existing prevailing UK
macroeconomic and political conditions prior to 31 December
2019.
3. There are no material changes in market conditions in
electricity generating market and no change to the UK energy supply
mix.
4. There are no material changes in legislation or regulatory
requirements (e.g. ROCs, capacity market, grid charges) impacting
the operations or accounting policies of the Portfolio.
5. There are no changes to recent market prices for clean spark
spread, power, carbon and other commodities.
6. There is no material change from the historical 10-year average rainfall.
7. There are no material adverse events that have a significant
impact on the financial performance of any of the acquired assets,
including any more unplanned outages than would be expected in the
ordinary course.
8. Prior to completion, the business will be operated in the ordinary course.
9. There are no material issues with the transitional services
provided by Scottish Power to Drax pursuant to the TSA, including
the migration of such services to Drax.
10. There is no material change in the management or control of
the Drax group.
END
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END
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