The document summarizes a presentation given by Tony Quinlan, the Finance Director of Drax Group plc, at a CBI conference on reforming the UK electricity market. The presentation discusses Drax as the largest coal-fired power station in the UK, supplying 7% of the country's electricity. It outlines drivers for change in the market, including aging generation capacity, decarbonization targets, and affordability concerns. Quinlan assesses different proposals for electricity market reform based on criteria like regulatory stability, investment signals, liquidity, and appropriate support for biomass generation. The presentation concludes that a complementary mix of technologies, including large-scale biomass, will be needed to meet policy objectives at low cost

1. CBI Energy Conference
Reforming the Electricity Market
22 February 2011
June 2011
Tony Quinlan – Finance Director, Drax Group plc

2. Agenda
Introduction to Drax
Electricity Market Reform
 Drivers of Change
 Independent Generator Requirements
 Assessment of Proposals
Summary and Conclusions
1 Drax Group plc CBI Presentation – June 2011

3. Introduction to Drax
Independent Merchant Generator
Indicative Annual Net Output / Supply from Verticos
Strategic value
100
 Largest, most efficient UK coal-fired
power station 50
 4GW – supplies 7% of UK electricity Total Supply
less
 Flexibility – provides key support
TWh
0
Total Generation =
services to grid c.50TWh pa
-50
Position in UK power market
 Net physical short position of Verticos is -100
E.ON
EDF
SSE
CNA
SPW
RWE
c. 50TWh per annum
 Drax can supply c. 40% of net short via Generation Supply
wholesale power market
Indicative Net Output* from Independent Generators
Strategic direction
 Progressively decarbonise generation
Others Drax
through biomass
 2010: highest renewable output from
single UK facility
Conoco
 Expansion of direct supply through Phillips
Haven Power
Intergen
GDF Suez / Intl Power
2 Drax Group plc CBI Presentation – June 2011 *Excludes volume sold to Verticos under tolling contracts

4. Electricity Market Reform
Policy Objectives and Independent Generator Requirements
Key drivers of change As an IPP(1) – what does Drax need?
Ageing fleet Security of supply
 c. 25% out of  Reliable and Regulatory Investment
service by 2020 dependable stability signals
Decarbonisation Affordability
 30%+ electricity
 Mitigate fuel poverty Liquidity Appropriate
from renewable
sources by 2020
and maintain beyond two support for
competitiveness
years biomass
 20% CO2 reduction
by 2020 (vs. 1990)
(1) IPP = Independent power producer
3 Drax Group plc CBI Presentation – June 2011

5. Electricity Market Reform
Assessment
Regulatory Investment Biomass
Liquidity
stability Signals Support
Feed-in-tariffs
for low carbon
   
 No windfalls  Compels  Bankable vs.  Possible index
generation
 Cost effective trading targets to fuel costs
Capacity
payments for
? ? ? ?
 Proposal too  Proposal  Need adequate  Need to reward
back-up
little too late adverse to return for flexibility
generation wholesale mkt capacity
Carbon price    
support  Windfalls  Distorts  Not bankable  No net CO2
 Political risk wholesale mkt vs. targets reduction
Emissions
Performance = =  =
 New unabated
Standard
coal unlikely
4 Drax Group plc CBI Presentation – June 2011

6. Summary and Conclusions
Complementary mix of generating technologies
required to deliver policy objectives
Biomass Generation
UK target: 30%+ electricity from renewables by
2020 (vs. c. 7% today)
 Financial impact significant – DECC estimates
price increase of c. 40% Low carbon
 More reliable / flexible generation required as
backup for intermittency Low cost
Biomass can make a significant contribution Low risk
4th largest energy source after oil, coal and gas
 Carbon neutral when sustainably managed
 Cost effective, secure and flexible
Large scale biomass generation through
existing coal plant is significantly cheaper than
offshore wind
Working with Government to make this a reality
5 Drax Group plc CBI Presentation – June 2011

7. Disclaimer
These presentation slides (and any subsequent discussions arising thereon) may contain certain statements, statistics and
projections that are or may be forward-looking. The accuracy and completeness of all such statements, including, without
limitation, statements regarding the future financial position, strategy, projected costs, plans and objectives for the
management of future operations of Drax Group plc (“Drax”) and its subsidiaries (the “Group”) are not warranted or
guaranteed. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and
depend on circumstances that may occur in the future. Although Drax believes that the expectations reflected in such
statements are reasonable, no assurance can be given that such expectations will prove to be correct. There are a number
of factors, many of which are beyond the control of the Group, which could cause actual results and developments to differ
materially from those expressed or implied by such forward-looking statements. These factors include, but are not limited to,
factors such as: future revenues being lower than expected; increasing competitive pressures in the industry; and/or general
economic conditions or conditions affecting the relevant industry, both domestically and internationally, being less favourable
than expected. We do not intend to publicly update or revise these projections or other forward-looking statements to reflect
events or circumstances after the date hereof, and we do not assume any responsibility for doing so.
In making these presentation slides available, Drax makes no recommendation to buy, sell or otherwise deal in shares in the
Group or in any other securities or investments whatsoever, and you should neither rely nor act upon, directly or indirectly,
any of the information contained in these presentation slides in respect of any such investment activity. Past performance is
no guide to future performance. If you are considering engaging in investment activity, you should seek appropriate
independent financial advice and make your own assessment.
Recipients in jurisdictions outside the United Kingdom should inform themselves about and observe any applicable legal or
regulatory requirements in relation to the distribution or possession of these presentation slides to or in that jurisdiction. In
this respect, neither Drax nor any of its connected persons accepts any liability to any person in relation to the distribution or
possession of these presentation slides to or in any such jurisdiction.
By accepting these presentation slides, you agree to be bound by the above conditions and limitations.
6 Drax Group plc Investor Presentation – June 2011

8. CBI Conference
Reforming the Electricity Market
June 2011