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Dwight Gardiner: 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.
Mark Strafford: 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.
Dwight Gardiner: 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: [Operator Instructions] Our first question comes from the line of Alex Wheeler from RBC.
Alexander Wheeler: 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?
Dwight Gardiner: 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.
Operator: Our next question comes from the line of Pavan Mahbubani from JPMorgan.
Pavan Mahbubani: 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.
Dwight Gardiner: 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.
Operator: Our next question comes from the line of Dominic Nash with Barclays.
Dominic Nash: 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.
Dwight Gardiner: 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.
Operator: Our next question comes from the line of Mark Freshney with UBS.
Mark Freshney: 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 --
Dwight Gardiner: What are you referring to the second thing, Mark, I don't understand.
Mark Freshney: 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?
Dwight Gardiner: 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.
Operator: Our next question comes from the line of Harrison Williams with Morgan Stanley.
Harrison Williams: 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?
Dwight Gardiner: 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.
Mark Strafford: 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.
Operator: Our next question comes from the line of Adam Forsyth with Longspur Research.
Adam Forsyth: 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?
Dwight Gardiner: Thanks, Adam. Can you tell me what was the second part of your question?
Adam Forsyth: 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?
Mark Strafford: 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.
Dwight Gardiner: 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.
Operator: Our next question comes from the line of Charles Swabey from HSBC.
Charles Swabey: 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?
Dwight Gardiner: 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.
Operator: Our next question comes from the line of Mark [indiscernible] with Citi.
Unknown Analyst: 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?
Dwight Gardiner: 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.
Mark Strafford: 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.
Operator: 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.
Dwight Gardiner: 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.
Mark Strafford: Thanks, guys.