Ladies and gentlemen, welcome to the Drax full-y ear results 2021 call. My name is Maria, and I will be the operator for your call this morning. I will now hand you over to Will Gardiner, CEO.
Thank you, and thanks, everyone, for joining the call. I'm gonna just dive right in. I'm on Page 5. Our purpose, which is enabling a zero carbon, lower cost energy future, is very much always at the core of what we do. During 2021, that was really about sort of transforming Drax. We started the year by selling our gas assets. Then we moved to ending commercial coal generation at the end of March. We moved from there to acquiring Pinnacle. And now I would say we're largely the largest U.K. pure play Renewable Power Company, producing more renewable power than the next two biggest producers combined. We're also the world's leading Biomass Generation and Supply Company, and are making good progress towards our ambition of becoming carbon negative by 2030.
I would say equally important during 2021, the global momentum for decarbonization continues to increase, right? Specifically, the importance of carbon removals and the role that BECCS can play to deliver them is increasingly being recognized. In short, I very much feel that Drax is now very well-positioned to take advantage of growth opportunities in flexible renewable generation in the U.K. and in biomass and in BECCS globally. If I turn to page 6 and talk about some of the highlights of the year. Again, a very strong delivery from our business during 2021, and I wanna thank all of our colleagues throughout the business for the hard work that they've done to deliver that.
We were very focused on keeping our employees safe and well and helping to keep the lights on in the U.K., as we went through the second year of the pandemic, and I think we were successful in doing that. On a financial basis, we delivered EBITDA of GBP 398 million, which included GBP 20 million from our discontinued or now discontinued gas generation. Excluding that, underlying EBITDA rose by 3%. On the pellet side, we more than doubled our production, when you include Pinnacle, and we continued to reduce our cost, by 7% in the year. On the Generation side, I would say that, sort of amplified by the very, very difficult events of today, the importance of our secure U.K. generation, the sustainable nature of it, the dispatchable nature of it, has never been more clear.
In our Customer business, we've bounced back well from the challenges of COVID and are now profitable again at the EBITDA level. As evidence of our confidence in the business and the opportunities in front of us, our Board is recommending a 10% increase in our dividend to GBP 0.188 per share for 2021. Move to Page 8. Our aim is to be a future positive company. We're fully committed to building a long-term sustainable business with strong operational and financial performance, investing in the delivering low carbon growth. At the same time, we aim to deliver people positive, nature positive, and climate positive outcomes, with the well-being of our employees at the core of who we are, as well as doing our best for the communities where we operate and for the environment.
On the people positive fronts, safety remains our top priority, and we had an improved total recordable injury rate in 2021, down from 0.29 the year before to 0.22. We also added two very capable Non-Executive Directors, Erika Peterman and Kim Keating, who have extensive experience across North America, which will give us, you know, great additional thinking on that front, so very pleased with that. On the climate positive front, I would emphasize that over 90% of our power generation is now from renewables, and that accounts for over 80% of our earnings. We expect that percentage to rise now that we've sold gas and we've ended commercial coal generation.
Finally, on the nature positive front, all of the biomass we produce and use is audited against International Biomass and Forestry Standards to ensure a strong chain of custody, and it's all fully in line with the best available science from the IPCC and underpinned by international law. Turning to Page 9 Over the past decade, Drax has invested over GBP 2 billion in renewable energy, and we have reduced our generation carbon intensity more than any other European utility by more than 95%. That journey will continue as we ended coal and gas-fired power generation last year. We're also continuing to reduce emissions in our Biomass Supply Chain to the Drax power station, which over the last five years have declined by over 20%.
In December last year at our Capital Markets Day, we announced plans to invest a further GBP 3 billion this decade in our Biomass Supply Chain, in dispatchable generation, and in negative emissions in the U.K., which all underpin our ambition to become a carbon negative company by 2030. In addition, we also have an opportunity to invest further in negative emissions globally. We recognize that it is important not only for us to deliver negative emissions, but also to reduce our own residual emissions and the emissions in our supply chain. To that end, we have set challenging targets to reduce our residual Scope 1, 2, and 3 emissions by 42% as part of our plan to become carbon negative by 2030. Moving on to Page 11, I want to talk a little bit about our Pellet business.
Drax is now the second-largest producer and supplier of biomass globally. We have 17 plants, Pellet plants in developments across three major fiber baskets and four deepwater ports. Those ports have a throughput capacity of 8 million tons, which gives us excellent operational resilience as well as a platform for growth. Having plants both on the east and the west coast of North America ideally suits us to serve markets both in Asia and Europe, minimizing ocean transport, carbon emissions, time, and cost. We plan to increase our existing production capacity from 5 million tons, which we are approaching as we speak, to 8 million tons by the end of the decade, as well as increasing our sales to third parties to 4 million tons with a focus on markets in Asia and Europe.
This year, we're building the infrastructure to support that growth with a new office and team in Tokyo and a team in London, the former handling Asia and the latter Europe. We also are building a strong technical sales team to leverage our engineering and generation heritage and to provide support on biomass conversions and on BECCS, where we believe our differentiated expertise can really make a difference. I would say it's been interesting that since COP, where ending coal was a major theme and where corporate engagement was higher than I've seen it before, having been there myself, we're seeing a lot of interest in additional coal to biomass conversions. If I turn to Page 12. In the year, we had a good operational performance from our pellet business. As I mentioned with Pinnacle, we more than doubled our production.
We have a 7% reduction in our cost per ton, and we had a 65% increase in EBITDA. In terms of our sources of fiber, one of the benefits of the Pinnacle acquisition is that we are now up to 57% sawmill residues in our fiber mix, which has both cost and sustainability benefits. As we said at the time of the acquisition, we have and we will make incremental investments in the Pinnacle facilities to ensure that they meet our standards for sustainability and safety. Finally, I really want to emphasize that I've been very impressed with our Pinnacle colleagues. They understand how to make a good pellet. They understand the markets and the opportunities that we have in front of us, and they're very excited to deliver on those things as part of Drax. Turning to Page 13.
During 2021 and into the beginning of this year, we continued to build and commission new capacity up to about 600,000 tons. We expanded our facilities at Morehouse and LaSalle. We built a new plant at Demopolis, and we've got two satellite plants that we're building at Leola and Russellville in Arkansas. All of those we expect to enter full service early this year. All in all, alongside our existing plants, this give us just under 5 million tons of production capacity across Canada and the U.S. We're also building an attractive portfolio of new development options. This could include additional satellite plants as well as new larger scale plants.
We expect to take final investment decisions on up to 1 million tons of new capacity during the year, which would represent a significant step towards our target of 8 million tons of capacity by 2030. On Page 14, we have a very high-quality order book with over 36 million tons of long-term contracts, of which 22 million tons are to high-quality counterparties across Japan, Asia, and Europe. Those have revenues of GBP 4.5 billion. We also have or within that are 14 million tons of additional own-use capacity, i.e. the pellets that go to the Drax Power Station, through 2026. That capacity can also be used longer- term to support our opportunities in BECCS, additional pellet sales, as well as merchant generation in the U.K. Turning to Page 15 in our Generation business.
Our Generation business continues to perform well, providing 12% of the U.K.'s renewable power. Our availability was up slightly year-on-year, driven primarily by the CFD unit. Overall earnings in biomass were lower on the year, and that reflected the opportunity cost of the planned CFD outage, as you all know, as well as the weaker pound that we hedged five years ago, which resulted in a higher sterling cost of biomass. All those things I think were well expected. There's an additional element here, which is that grid charges were significantly higher during the year than had been expected, which has been driven by the very volatile market conditions we've seen in the latter part of the year. The flip side of that is our own system support revenue was very strong given the volatility, again, the same volatility that we've seen in the U.K.
Turning to P age 16. Our power sales strategy, which, as you know, is to sell power forward to the extent that we can or to the extent that there is liquidity in forward power markets. We also will sell gas forward to the extent we can, which gives us additional liquidity. That means that in 2021, because we'd sold that power forward in prior years, we did not see a significant change in the average achieved price of the power we sell, even as prices in the current market have risen. All that being said, between 2022 and 2024, we now have a strong contracted position on our biomass units, where we expect to sell around 15 TWh per year across the ROC and CFD units.
We're now fully hedged for 2022, while we do have an open position in 2023 and 2024, again, as I mentioned, due to the lower liquidity in those periods. As I mentioned, gross profit from system support services has increased. Those reflect actions we've taken across the portfolio, including coal, which ran on a limited basis in the second half of the year, in line with the plans that we previously announced to only run when called on by the system operator. Again, as I noted, grid charges have significantly increased, which means that our profits from coal in the second half of the year were not material in the overall picture. Over time, we do expect that the value of system support services will increase as the system becomes more dependent on intermittent and inflexible generation, and the role of dispatchable technology becomes more pronounced.
Moving on to Page 17. I wanted to give you a reminder of where we are on U.K. BECCS. As you know, during the course of 2021, we had four different streams of work going. First one was the Transport. Transport and storage. We were part of the East Coast Cluster that was named as a priority cluster by the U.K. government, meaning that the pipeline that we will need to transport CO2 should be arriving at Drax in 2027. That stream of work went very well. The second stream was our Planning Process, which also has gone well. We're now in public consultation. The third piece was our own Technology work, where we appointed MHI as our technology partner, and we appointed Worley as our FEED partner.
Finally, we're working with the government to make sure that their strategy and their sort of commitment to BECCS was clear, and that has become very clear. They're committed to significant greenhouse gas removals as well as BECCS as part of their strategy. As a result, as you know, we made the decision in December to invest GBP 40 million in 2022 in both FEED work and site preparation. That will be a major activity for us during this year. At the same time, we expect some other key milestones. The government process will continue. We expect the government to announce priority projects in gas, hydrogen, and industrial CCS in May. We would expect the BECCS process to effectively run parallel alongside that, such that we will be in a position again to take a final investment decision by 2024.
Biomass Strategy will be launched in the second half of the year, defining the BECCS business model. Everything very much on track for what we need to get U.K. BECCS operating in 2027. On Page 18, this is a short update on where we are on new build BECCS internationally. We made great progress on this work in 2021. We narrowed our plans internationally down to the U.S. being our first focus. We landed on a sort of technology and plant design, and we began building the business case. We continued that in 2022, working with local governments to understand their priorities. We've been working on ongoing site selection, on technology development, as well as we've now begun discussions with potential buyers of the power and the negative emissions.
Final piece of the operational review is on Page 19, about our Customer business. As you know, we are repositioning that business to focus on the higher quality I&C customer base, which are lower risk than the SME customers and more aligned with our corporate purpose of enabling a zero carbon, lower cost energy future. They're all now committed to consuming renewable power, which is an increasing demand in the U.K., and there is actually an interesting premium developing for that renewable power, and we're in a very strong position to deliver that. As we said before, we're looking at options for our SME portfolio, and we will update you on that in due course as that evolves. Really most importantly, I would say that the SME or the Customer business did very well.
The overall Customer business did very well in bouncing back from COVID in 2021. Andy will give you some detail, but we earned about GBP 6 million at the EBITDA level for the year. With that, I will hand it over to Andy for a financial review.
Thanks, Will, and good morning, everyone. Starting on Slide 21. Our financial performance was strong for the year. Adjusted EBITDA of GBP 398 million includes the results of our gas operations until their sale at the end of January, and also includes the post-acquisition results of Pinnacle from April. Excluding the discontinued gas operations, our adjusted EBITDA for continuing operations grew 3.3% during the year. We have strong liquidity with available cash and committed undrawn facilities at the end of the year of GBP 549 million. This reflects strong operating cash flows, which we'll use to invest in growth and support the payment of a sustainable and growing dividend in line with our long-standing capital alloc ation policy.
We close the year with a net debt to adjusted EBITDA ratio of 2.6x , and we now expect that the group's net debt to adjusted EBITDA ratio will be below 2x by the end of 2022. As Will has noted, the board's proposed a final dividend of p11.3 per share, bringing the full- year dividend to p18.8 per share. It's a 10% year-on-year increase and takes a cumulative increase over the last four years to just over 50%. Moving on to Slide 22, and looking at the bridge of adjusted EBITDA. During 2021, we saw significant growth in our pellet production business. With adjusted EBITDA of GBP 86 million, it grew 65%.
Most notably, that's due to the acquisition of Pinnacle in April, but it also reflects higher levels of production and profitability from our existing operations. Our total Pellet production more than doubled, and the production cost per ton reduced 7%. In Generation, the decline to GBP 372 million of adjusted EBITDA principally reflects the major planned outage on the CFD unit, which was successfully completed in the second half of the year, and the sale of our gas assets at the end of January. Our forward power hedging strategy means that average achieved prices in the year did not see significant benefit from the higher power prices. We do have a strong contracted position for 2022 and 2023, which reflects a higher forward market price of power. This provides a high level of base earnings and a high degree of visibility over those earnings.
Our higher cost of biomass reflects overall weakening in sterling, with the timing linked to our Risk Management actions to secure foreign exchange rates five years in advance. This protects the GBP cost of biomass at the time of delivery. The hedge rate for 2021 reflects a period of significant uncertainty in advance of and immediately after the Brexit vote in June of 2016, and it was around 10% lower than the rate we achieved for 2020. Our hydro operations continued to perform well, providing system support services and peak power generation. These assets, alongside biomass, continued to represent most of our earnings in this growing market. Overall margin from system support and optimization grew to GBP 160 million from GBP 118 million in the prior year.
While our commercial coal operations ended in March, the system operator did call our coal units into the market on limited occasions after March in response to the challenges the U.K energy system was facing. These units remain available should the system operator require them to support the network until they formally close in September of this year. As Will noted, the performance of our Customers' business improved significantly during the year, returning to profitability with adjusted EBITDA of GBP 6 million. This compares to a GBP 39 million loss in the prior year. The results still includes an estimated GBP 16 million impact from the pandemic. Last year, the impact of the pandemic was around GBP 44 million. Our volumes of power sold in the year grew 7% as the U.K. economy rebounded from the height of the pandemic.
In addition to the challenges of COVID, a large number of supply businesses exiting the market during the second half of the year resulted in increased mutualization costs, which totaled around GBP 10 million. During the year, we implemented restructuring measures, which included the closure of offices in Oxford and Cardiff, as we continue to explore operational and strategic options for our SME business. In the last 12 months, we've increased the future volume of the I&C committed book by 27%, signing high-quality customers in our target segments. This includes three major customer wins since the start of the year, with a combined annual supply volume of 3 TWh or just over 15% from 2022. We also rebranded our Haven Power I&C business to Drax Energy Solutions.
Innovation, BECCS and other costs increased GBP 19 million in the year, and this includes an increase in strategic spend, primarily in the first half of the year on BECCS, that was not deemed to be capital in nature. Moving on to Slide 23. During the year, the volume of pellets we produced more than doubled to 3.1 million tons and the achieved costs reduced 7% to $143 per ton, reflecting lower costs of production in the acquired Pinnacle business, but also increased production volumes and reduced costs in the existing business. These improvements were delivered against a backdrop of extreme weather events in North America, particularly during the second half of the year. While these events did result in some restrictions in Pellet production and distribution, our Diversified supply chain enabled us to limit the impact.
From a starting point of $166 per ton in 2018, our target is to achieve $100 per ton in 2027. To date, we've delivered 35% of the required cost savings in three years, and we expect this will increase to 55% with an exit run rate for 2022 of around $130 a ton. In 2022, we'll benefit from a full- year's volume from Pinnacle, also from the Morehouse and LaSalle expansions, as well as new capacity from commissioning of Demopolis, Leola, and Russellville plants. When complete, these plants will bring our production capacity across North America to almost 5 million tons, allowing greater utilization of lower cost sawmill residues and leveraging our existing infrastructure.
Our innovation team continued to look at options for widening the fuel envelope to include other lower cost sustainable biomass materials. During the year at Drax Power Station, we completed trials of four different low-cost biomass materials to test combustion chemistry and handling. One of those materials represented 35% of the fuel mix on one of the units during testing runs. It's a significant increase on previous blending levels, and although there remains much work to do, in time, we believe these materials could represent 1 million tons of sustainable biomass and make a meaningful contribution to our cost reduction targets. Further future cost savings can be delivered through continued operational efficiencies across production and logistics and development of new technologies and innovation. Moving on to Slide 24 and capital investment.
We expect CapEx to be in the range of GBP 230 million-GBP 250 million for the current year, with maintenance CapEx of GBP 70 million-GBP 80 million across Drax Power Station, our hydro sites, and our pellet plants. As we announced at our Capital Markets Day in December, we expect to take final investment decision on up to 1 million tons of new pellet capacity during the year, and this would represent a significant step towards our target of 8 million tons of capacity by 2030. The increased strategic spend includes GBP 40 million of initial CapEx on these new Pellet plants. We're continuing to evaluate options for our Open-Cycle Gas Turbine project, including the potential sale, and our estimate for 2022 does not include material CapEx in this regard.
The assets can play an important system support role, and while it's likely we won't hold these assets in the longer- term, we'll continue to invest as appropriate in the short- term to fulfill our obligations under the Capacity Market contract and to maximize value from our investment. In the event of a disposal, we would expect recovery of any CapEx we might incur during the year, and this could total up to GBP 100 million. Moving on to Slide 25 and the balance sheet. We maintain a strong focus on cash flow discipline and maintenance of a robust balance sheet. It's provided protection in times of economic uncertainty, and it's a strong platform from which to execute our strategy. Our available cash and committed undrawn facilities provide substantial headroom over our short-term liquidity requirements.
As expected, reflecting the Pinnacle acquisition, our closing net debt ratio of 2.6x increased above our longer-term target of around 2x . We now expect the group's net debt to adjusted EBITDA ratio will be below 2x by the end of 2022. In July, we completed the refinancing of the Canadian dollar facilities acquired as part of the Pinnacle acquisition, and this provided an immediate synergy benefit, reducing the cost by just over 200 basis points. The new Canadian dollar CAD 300 million term loan facility includes an embedded ESG component, which adjusts the margin that we pay based on the group's carbon intensity measured against an annual benchmark. The facilities mature in 2024 and further diversify the group's sources of funds while reducing the all-in cost of debt to below 3.5%.
Both Fitch and S&P affirmed our corporate credit rating after the acquisition as B B+ stable. We also have a BB B flat investment-grade corporate rating from DBRS. The quality of our group's assets, earnings, and cash flows provide further opportunities to reduce the margin on our debt in the future. To support our growth ambitions for BECCS and other large-scale projects, we've sought as much flexibility as possible within the capital structure, and this year, all will be redeemable at little to no cost. Looking forward, we have a GBP 35 million index loan note that matures in spring, but beyond that, the next maturity is 2024-2025. The $500 million US dollar bond is now our most expensive cost of debt with a swap back rate in sterling of just under 5%.
There's a step down in prepay costs in the spring, making it more economical to refinance. Turning to Slide 26, sources and uses of cash. Earlier, Will mentioned our plans to invest a further GBP 3 billion this decade in our biomass supply chain, dispatchable generation, and negative emissions in the U.K. All of these underpin our ambition to become a carbon negative company by 2030. As a reminder, at our recent CMD, we laid out how we think about self-funding these investments through returns generated from the Existing business and generated by those investments. Our Existing business is highly cash generative, with strong visibility over a high proportion of long-term index-linked cash flows.
We expect that our investment for growth will also be underpinned by long-term index-linked earnings and cash flows, whether this is power and carbon payment schemes for U.K. BECCS or a cap and floor type mechanism for Cruachan II, or long-term contracts with high-quality counterparties as we expand our third-party supply business. Starting with the end of 2022 net debt leverage, which we now expect to be below 2x , we've assumed GBP 2 billion of free cash flow from the Existing business. Next, you see the GBP 3 billion of strategic capital investment for the pellet capacity, the U.K. BECCS and Cruachan II. Finally, GBP 1 billion of post-tax cash flow from these strategic investments by the end of 2030.
There's a phased contribution based on when the projects become operational, with the first additional pellet plant in 2024, the first BECCS unit in 2027, and the second BECCS unit in Cruachan II in 2030. These investments, as I noted, are underpinned by high quality, stable earnings, and they deliver strong index-linked cash flows well beyond 2030. Overall, this base plan delivers a business in 2030 with significant EBITDA expansion. It generates significant high-quality free cash flow, and it returns a growing and sustainable dividend with a net debt to EBITDA leverage significantly less than 2x. We think that our high-quality strategic portfolio provides a range of options for financing, but our base plan is to self-fund these investments without the need for issuing equity. Finally, on to Slide 27 in capital allocation.
Our capital allocation policy, which we launched in 2017, has served us well, and it remains unchanged. We believe our ambitious growth plan is supportive of maintaining our credit ratings, paying a growing and sustainable dividend throughout the period of strategic investment. With that, I'll hand back to Will.
Thank you, Andy. I will give a sort of brief update on our strategy. Frankly, given the Capital Markets Day in December, there's not a whole lot of new news, but I thought I would just remind you all of the highlights. Drax is undergoing a remarkable transformation, which now puts us in front of some very significant growth trends. In reflecting this at our CMD, we updated the three strategic pillars of the group. The first is to be a global leader in sustainable biomass pellets that we sell to third parties, and pellets that we also use for ourselves. Our second strategic goal is to be a global leader in negative emissions through our position in BECCS. Our third is to be a leader in the U.K. in dispatchable renewable power.
All these strategic objectives are underpinned by safety. Operating safely is absolutely critical. It's also underpinned by sustainability, which is the right thing for us to do. Finally, by the continued goal of reducing the cost of our fuel to $100 per ton FOB. Turning now to Page 30. In sustainable biomass pellets, we see a very significant market opportunity. As I mentioned, that if anything, that's accelerating, with more people looking at coal to biomass conversions. You also would have seen that using the wood pellets in liquid fuel markets is now becoming an interesting part of this opportunity, right.
We see increasing demand for sustainable biomass pellets as governments develop and implement policies that recognize the important role that biomass can play, both in phasing out coal, providing flexible generation to support intermittent renewables, in negative emissions, as well as in other types of fuels. As both a producer and a user of biomass, we have a differentiated position, and we see an opportunity for us both to sell to third parties, but also to use our supply chain for BECCS ourselves as well as for merchant generation. Turning to Page 31. Again, our strategy positions us as both a key producer and user of pellets, so we need to be sure that we have a clear approach and view on both our demand and our supply for those pellets.
Just to outline again our current plan for what we think the world in 2030 might look. First of all, on demand side, we plan to double our third-party sales from 2 million-4 million tons. Secondly, we expect to have two units of BECCS running in the U.K. using 5 million tons. Thirdly, we expect to be running two more biomass units at the Drax power station as peaking plant using as much as 2 million more tons. All told, our demand for pellets, we expect to be between 10 million and 11 million tons. On the supply side, we expect to double our own production from what now is about 5 million tons to 8 million tons. Not quite doubling, but up to 8 million tons, as well as sourcing between 2 million-3 million tons from third parties.
That includes a significant chunk, you know, as much as half of that from waste-derived pellets. On both fronts, we're making good progress. We will make our new investments prudently, only building on the back of clear long-term demand. Turning to Page 32. Is that 32? The need for negative emissions is increasingly clear. As you know, we're targeting 8 million tons of negative emissions in the U.K. by 2030. That would be the first international or global BECCS project at scale, which gives us a good advantage globally, which we then intend to take outside the U.K. We're also targeting 4 million tons of negative emissions outside the U.K. by 2030.
Just to recap on Page 33, we think that negative emissions is increasingly becoming a clear market opportunity, which we think could be as big as $1 trillion globally. The chart on the left shows the IPCC's estimate for how much carbon removal they think would be needed by 2030, sorry, by 2050 to get to net zero, and that's as much as 10 billion tons per year. The bar on the right is also the one done by the Coalition for Negative Emissions, which again has a similar set of numbers. Let's take that 10 billion ton number. If you apply a price to that, you know, $100 is a benchmark price. Frankly, that's where European and U.K. ETSs are trading in that neighborhood as we speak.
Even in the voluntary carbon market, participants like Microsoft have said that for long-term, high-quality engineered removals, $100 a ton is a reasonable price. That's how we get to that trillion-dollar market opportunity. The one thing I would say, sort of some new news in that front, which is in the EU, there has been legislation introduced, still going through the approval process, but there's been legislation introduced that would allow effectively negative emissions and BECCS to qualify for receiving, you know, ETS emission trading certificates on the basis that they are carbon removals, which is absolutely the type of setup that we've been looking for that will enable this market to scale attractively and quickly. On Page 34, our third leg of the strategy, again, to be a U.K. leader in dispatchable renewable power.
You know, we think that will become increasingly necessary as the U.K. power network depends more on intermittent renewables, wind, primarily offshore wind, but also solar and some onshore wind. The need for long-term dispatchable to support that is increasingly clear. The government is working on options for supporting that, and we're continuing to make good progress on Cruachan II , which as we said, is a potentially GBP 500 million project to effectively double the size of what we're doing at Cruachan by 2030. I won't go through the milestones again on Page 35, but you will have seen those. I'm very much making good progress on those, and you know, look forward to updating you more on those as we go through the year.
Finally, on Page 36, I mean, in terms of the outlook, we're very excited about the long-term prospects for Drax. We have three very clear opportunities in front of us, and we are putting significant resources to work against all three of those. In the more medium-term outlook, you know, clearly the power prices are high, and that will, you know, help us in our cash generation capability, although we also need to manage that carefully. It obviously increases the risk and cost of operational challenges. That's a challenge for us that we will be continually managing. Again, the opportunity for us is clear, and we also believe we are in a good position to deliver cash flow to enable us to make those investments. With that, I will turn it over to Q&A.
I guess Mark will take questions from verbal questions first, and then we'll take the written ones after that.
If you wish to ask a question, please press Star followed by one on your telephone keypad. If you change your mind and wish to remove your question, please press Star followed by two. When preparing to ask your question, please ensure that your phone is unmuted locally. To confirm, that's star followed by one to ask a question. Your first question is from John Musk of Royal Bank of Canada. Please go ahead.
Yes, morning, everybody. Maybe I'll just start with the big picture question on current tensions in Ukraine, Russia, and just put it out to you, Marcus. Sorry, Will, as to how this is going to play into energy security, maybe in the short- term in the U.K., and anything you think we need to be doing longer- term, given the ongoing situation. Secondly, on your pellet growth plans, looking to double production to 8 million tons, your closest peer, Enviva, also looking to double production from a higher base. In total, 10 million tons or so of additional volumes that you're both targeting.
I mean, are you confident, one, that there is enough demand for all these additional pellets, and two, that there is the fiber supply available at the right price to produce those pellets?
Thanks, John. First, let me talk about the Ukraine s ituation and Russia, which obviously is a terrible situation. What I would say I hope for a rapid conclusion in a positive way, but I can't say that I am very hopeful of that. First, I guess first thing, maybe start with some of the sort of specific impacts on us right now. We've obviously done a lot of work assessing what the risks might be to our business in terms of sort of how it might impact our operations, and we think that those are quite limited. We don't source anything material from Russia or the Ukraine. You know, again, you know, Graanul is one of our suppliers from the Baltics, so that's one we're watching, but we don't expect...
Well, we don't have any reason to believe things will move in that direction at this point. Again, we're very comfortable with our setup, you know, given obviously a very challenging and risky situation, right? Actually, I think that sort of points to the second point, which is that relative to other sources of fuel, biomass comes from, you know, parts of the world that are stable, that are safe, and that are long-term partners of the U.K., and we think that's an important part of the energy mix. I think it's increasingly recognized by the government as being an important part of the energy mix, that we, you know, we need to have sources of supply in the U.K. that are, you know, that are not dependent upon sources that are less reliable and more volatile.
I think that there's a positive element of biomass sort of power production in that I think is increasingly being recognized, right? Same thing I would say in terms of your pellet question. The demand picture, as I've sort of mentioned, we actually see if anything is accelerating. I mean, the countries that have already been using sort of biomass continue to be users and putting in place regulatory structures to support that, whether that's, you know, Europe, Japan, et cetera. We also see on the corporate side more interest in coal to biomass conversions than I would have said we saw before COP. I think we are optimistic of the opportunities that will create both broadly but also for us specifically.
On the supply side, I mean, there's sort of two pieces of this. I mean, right now there are plenty of biomass supply, and we are, you know, it's a very much a local question. You know, we look locally for where we can source from, and we have lots of opportunities to do that. As we do that, you know, we are quite comfortable with our plans to go up to 8 million tons, right? Now, longer- term, I think it is a strategic priority of ours to make sure that we have the right sourcing model to ensure that we actually are protected from potential competition from that fiber.
You know, that includes long-term agreements with sawmills as well as other ways of ensuring that we are protected on the supply side. Right now, very much in a good position.
Okay. Thank you.
The next question comes from the line of Dominic Nash with Barclays. Please go ahead.
Good morning, everyone. Sort of two questions from me, please. The first one, I'm intrigued about is that you're managing to increase output from your ROC units, I believe. I think it's like half a terawatt hour you're shifting from CFD to the ROs. I just wanna just quickly just run through the math on that. Is that basically changing like a marginal profit of, I don't know, GBP 40 a megawatt hour to GBP 140 a megawatt hour, which could give you sort of like a GBP 50 million EBITDA boost through this year? Follow-up question on that is this something you can do in 2023 and 2024, as well, or is this just a pure one-off?
Following up from that, you say consensus EBITDA for 2022 is GBP 565 million. But if we look at all the directions of your sort of moving parts, do you not think including this sort of like ROC move, including the higher power prices, I mean, I'm looking at the power forward, too, and again, could be sort of mental math at the moment, but you've also got higher biomass costs as well. Do you think that 565 million is doable? Is it gonna be considerably higher than that, or do you see sort of cost pressures rising? The final one from that, which is linked, is that we're obviously in a world where utility bills are doubling.
I'm reading the odd article in the press saying that there should be a windfall tax on sort of like the oil and gas producers. What would you say to someone who was advocating maybe a windfall tax on, say, Drax's renewable production if you were to see profitability rise sharply from here? Thank you.
Yeah. No. Thanks, Dominic. First on the just to give a sense of how we are thinking about the generation mix across the the four units. I mean, effectively the we have hedged more than sort of the the ROC cap on the ROC units. That's clear in what we've done there. It doesn't mean that we would expect to generate sort of more across the whole piece. I mean, we will basically be optimizing across all the units, and that's something, optimization, which is driven, I would say, primarily by ensuring we have a low risk running regime. You know, two shifting obviously does create higher sort of operational risk, so that's a big part of the management of that situation. You know, as well as obviously sort of making sure we get the optimal sort of pricing.
I would not sort of just bang in another GBP 50 million in terms of your numbers. That's not where I would get the math, primarily because we're not actually gonna be able to increase the overall output of the station, and that's primarily a function of pellet supply, right? You know, pellet supply, we are very comfortable with. We have enough pellets to deliver the generation we have this year, but there's not a whole lot more available in the marketplace, right?
I would say on that front, I mean, one of the things we are looking at carefully is how can we increase the ability for us to get pellets through the station in future years, but we think that's probably reasonably marginal without making a very significant investment in additional infrastructure, which we're not, at least at this point, comfortable that it would cost in the relatively short term that we can see visibility on so far. That's the way I would answer the first question. Second one on the consensus. I would say we're comfortable with consensus. I mean, there's, you know, it's anybody's guess where power prices will go, sort of, you know, obviously, events of today being a good example.
I think we're comfortable at this point with where the consensus is at this point. Then in terms of the possibility for a windfall tax, I think it's really important to sort of think about two things. One is, you know, the investments that were made to enable our biomass transformation, it was on the basis of a capital raise from our shareholders. That's very much sort of par of the game. The second thing, probably more importantly, is that, you know, we're investing frankly more money than we're making, right? You know, we're investing more than GBP 200 million in our sort of renewables. We're investing this year. We'll be investing GBP 3 billion over the course of the next decade.
I think that the U.K. has been a very good country for sort of long-term investment, historically on the basis that it's got a clear tax and regulatory regime, and that has enabled the U.K. to be, you know, a contributor to the U.K.'s leadership, for example, in offshore wind. People feel very comfortable investing in a place where the rules are clear. I think, you know, changing that with a windfall tax would damage that reputation and would actually sort of detract from the potential reality of U.K. being a global leader in, you know, not only offshore wind, but in carbon capture, in BECCS, in carbon removals.
I think that's the key thing is how can U.K. attract more investment, to make sure that we got, you know, the right jobs and the right technology for the future green revolution? That's what I was saying.
Thank you.
The next question is from the line of Mark Freshney with Credit Suisse. Please go ahead.
Hello. Thank you. Thank you for taking my questions. A couple of strands, if you like. Firstly, on the two coal-fired units, which are scheduled to close in October, have there been any discussions or requests from the government to keep those two coal-fired units open? Is that, I mean, you've already put a lot of measures in place, but can you reverse those measures to keep them open? Further to that, have you had any requests from the U.K. government to flip those over to burning fuel oil on a very high blend? Is it possible for those to run on petcoke or light fuel oil? The second strand of questions concerns, you know, the Section 36 for the BECCS facility and the planning.
Their planning has become very tricky in the U.K., particularly on the East Coast. As you saw with the issues around the coal to gas planning consent, which was, you know, did the right thing by backing away. What is it that makes you think this can be done within the two-year timeframe and won't be delayed like many other big sensitive projects? Thank you.
Thanks, Mark. I mean, the two sort of simple answers on the first one. I don't think it's technically feasible to run the coal units on fuel oil, and that we have not had any requests from the government to continue running on coal past September 2022. On the second one, the, you know, we are going through the planning process as we would, as you would expect. I mean, I think we will, you know, manage that, our part of that process carefully. We'd expect the government to manage their part of that process carefully. If it were to be challenged, we would expect it to be, having been done in the right way and being consistent with, U.K. law, we would expect it to be, to be whatever. We would expect to get our planning permission.
Okay. Thank you very much.
The next question is from the line of Chris Laybutt with Morgan Stanley. Please go ahead.
Oh, good morning, Will. Good morning, Andy. Couple of questions from me, please. Across the biomass value chain, where do you see the most value for the group at the moment? Do you think it's in the generation units, or do you think it's rather actually found in the Pellet businesses at the moment? I noticed in the presentation today, you did spend a lot of time discussing your growth ambitions in pellets. I guess the second part of that question would be where do you see the most growth for the group over the next, say, five to 10 years? Do you think you'll grow earnings more in pellets or more on the Generation side, given you have ambitions in both?
Just picking up on a strand earlier, I apologize I missed the detail. You mentioned your Baltic Pellet Supply. Just wondering whether you can give us some more details on the possible risk there, which countries or country you're exposed to and which companies. Thank you.
Sort of first one, in terms of where does the value sit in the value chain, I think for me you might not like the answer. I think actually the fact that we're integrated up and down the value chain is quite a significant part of that in the sense that, you know, our ability to both optimize sort of costs across the value chain, i.e. we can do things like determine the right level of fines in the pellet, you know, so optimize for fines in the pellet plant for how they might sort of impact combustion in the boiler. It may be that that means you spend more on the pellets to get lower costs at the power station, for example.
I think there's value across the value chain that we're taking advantage of right now. Where that ends up sitting over time, I think is still fluid, right. I would say that I think there is a lot of value in our Pellet business that I think that we're trying to make sure people do recognize. I'll make that point right. Where do I see the most growth in the business? I think frankly, it's probably in the third piece that you didn't mention, which is, I think negative emissions is gonna be a really interesting part of the business from now. I think the route to expansion of pellets, I think is clear, in terms of growing the number of facilities, in terms of growing the sales and contracted book.
I think the growth in our Generation business is clear in terms of the types of investment we would like to make. Cruachan II, for example. You know, open cycles, you know, we have those assets. You know, we're trying to maximize the value, you know, again, preferably without holding them to completion given the gas nature of them. But again, we think there's value in the projects that we've got. But fundamentally, in the Generation business, the growth ambition is around adding BECCS and also in the pumped storage. But in the third piece, again, as I said, the negative emissions market is not, you know, very nascent. It's not there yet. But over time, you know, if we're gonna hit net zero, there's no question we will need to do carbon removals.
I think we have absolutely the lowest cost technology that is available, and I think it will be the lowest cost for some time to actually deliver permanently engineered removals. I think that's really an exciting opportunity for us, both in the U.K. and also globally. Sorry, third piece. Where are we? I mean, our supplier in the, in the Baltics is, it is Graanul. As you would know, it's I think roughly 10% of our supply comes from there, and I believe it's Latvia. Yeah.
Thanks, Will.
The next question comes from the line of Martin Young with Investec. Please go ahead.
Yep. Good morning to everybody. Just a couple of questions from me. Firstly, can you talk a little bit more about the OCGTs? One, in respect of you not getting a Capacity Market contract on Abergelli, GBP 35.9 was considerably higher than the GBP 18 last year on which you did take contracts on three plants. So why didn't you take contract on Abergelli? And then, you know, where are you really on the build and then dispose or dispose now conundrum? And then the second question, I guess is a bit of a follow-on from Dom's question, you know, earlier. Yeah.
Another way of thinking about, you know, where we are in the wholesale market with certain plants with fixed costs benefiting and benefiting very nicely from elevated wholesale prices, is to think about wholesale market reform. What are your thoughts on that? Or is it an issue for you? You'll get to 2027 before it's feasible that we could see any changes in the wholesale market and therefore it effectively drops out as a non-issue. Interested in your thoughts in that respect, please. Thank you.
On the open cycles, I mean, first on Abergelli, I mean, I think. I guess the key point there would be sort of two things. One would be that the economics of each one of those sites are different, depending on where they are. That changes the cost base. Where they are did also impact their ability to get other types of revenue, for example, in the stability markets. Those were important factors in whether we thought it was attractive to take a contract for Abergelli. I guess the other thing I would say is that the lifetime or the expected life of future gas plants, I think continues to get shorter. I think the bar continues to rise for the investment in future gas.
Interesting that none of the new combined cycle plants that are a bunch of, I think there are maybe four or five larger scale projects. Interesting that none of those cleared in the auctions either, right? Where are we on the build and dispose? I mean, we are, there's definitely sort of two things going on there. I mean, we are continuing to develop the projects on the basis that we may own them to build them. At the end of the day, if we end up building them, then we end up running them. We are committed to doing that. We have the contracts, and we will do that if we need to. You know, we haven't gotten to an EPC agreement yet, but we're close to that.
Ultimately, if we, as Andy mentioned, if we end up not disposing of them, we might spend up as much as GBP 100 million developing them this year on the basis that they need to be ready for the Capacity Market in 2024. That's very much on track, right? As you also said, disposing of them would be an option we absolutely would look at, and we are actively exploring that. If there are good options for that, we would absolutely take those either now before we build them or once they're built. On wholesale market reform, I mean, I think there's obviously been currently high power prices.
You know, a lot of political issues around that, a lot of discussion around how to deal and how to support consumers. I think the way that the government has handled that so far has been relatively sort of measured, which I think is probably right. I think it's any sort of wholesale market reform, you know, to do something radical would be sort of quite a dramatic change. Given all the other changes that are going on, you know, I think that's sort of it is a long-term prospect. Given there's elements of this, for example, that there are, you know, there are lots of long-term contracts out there already. You know, as gas with CCS comes on, you know, over the next couple of years, there will be long-term contracts for that.
There'll be long-term contracts for BECCS. You know, I don't see a sort of radical reform coming in spite of where we are on wholesale prices. All that being said, Martin, I could absolutely be wrong.
Thank you.
We have a follow-up question from Mark Freshney with Credit Suisse. Please go ahead.
Hi. Hello. Can I ask about cost management in general, particularly on the pellet side? I mean, you have a lot of robust FX hedges five years ahead. You've also spoken about, you know, having contracted capacity. But my understanding is you can never contract forward for absolutely everything. Is there any sort of, like, cost inflation that you could come through at the fringes or at the edges on biomass? And I'm particularly thinking for the raw materials costs, which are about a third of it, and which I understand are indexed. Thank you.
That's a fair question, Mark, and I think there's a couple of things I would say on that. One is that many of our sort of fiber costs are indexed or are sort of priced in where there is sort of a sort of fixed element of price increase. Many of them are not, and actually the dynamics of those tend to be often counterintuitive. For example, when lumber prices are high, sawmills run more and the costs of fiber, actually, of sawmill residuals might be lower. But I guess maybe the answer is, so yes, there is the potential for escalation in some of the fiber costs, but we're absolutely not seeing that. And actually it's not a big part of the picture ultimately over time.
Our freight position, for example, you know, are well covered. As you said, our FX position well covered. You know, third party pellet contracts very, you know, well contracted. Will we see you know, will our wage and labor costs increase, you know, as you know, to the extent that there's inflation? Yes. But again, we think that the overall situation is quite well contained.
Perfect. If I may also ask on, I've forgotten the question now. Oh, I forgot my second question. Never mind. I think that's-
The answer is yes, I'm sure. That's fine.
Oh, that was the question. It was the levelized cost of CCUS. I ask you every time, then you point to CCC and some numbers. But in terms of pounds per megawatt hour or dollars per ton of carbon, what is your latest forecast of the cost? Or is it unchanged from the last two years?
It's really unchanged, Mark. I mean, we're sort of. I mean, I think the next, you know. Basically, as we get closer to a final design and as the FEED work continues, that'll get a sort of a narrow in. But fundamentally something, you know, on the order of GBP 100 a ton, GBP 50 for the MWh, that's very much where we are. But again, as we get further along in the project, that will become also clearer.
Thank you.
The next question is from the line of David Greene with Boldhaven. Please go ahead.
Hi, Andy. Hi, Will.
Hi.
Hi there. Just a couple of questions for me. I think you said that the U.K. government was developing the financial model for BECCS in 2022. So it just would be helpful to find out if there's any update there. In terms of the international opportunity for BECCS, it would just be interesting to get a bit more color there in terms of how far along you are with talking to potential international customers. Just the final question was really about how you're thinking about capital allocation. You've highlighted that the balance sheet will be less than two times net debt EBITDA after 2022. Even if we take into account the step up in investments for BECCS in Cruachan II, you're still gonna have a very strong balance sheet.
The question really is, at what point in time, does the potential return of surplus cash to shareholders make sense?
Why don't I take the first two and then give Andy a chance to put some time in the spotlight? The financial model for BECCS in 2022, I mean, it's fundamentally will be part of the Biomass Strategy, which we expect to sort of happen in the second half of the year. That's the sort of formal approach. I mean, they published a couple of sort of ideas last year. They had sort of work that they had done by consultants, which were effectively for either a sort of a negative emission CFD, which captured both the carbon removal and the power, or one which just captured the carbon removal. Those are the push positions we think would work for us.
Although, I think we've as we've said before, we think it makes the cost of capital be lower if there is a clear price for both power and carbon removal. We would expect the government to get to a minded to position on the business model that we were expecting the second half of the year. I would say at the same time, a lot of the other work around sort of choosing. Sorry, I'm getting watery eyes. The other piece of work that's been happening this year is the whole process for choosing greenhouse gas removal projects that the government will support. They're in the middle of assessing different greenhouse gas removal projects that were submitted as part of an expression of interest process.
We expect the answer to that to be probably in the next few months, in the quote-unquote spring. We expect them to move from there again in the second half of the year to choosing preferred projects to take forward from on the greenhouse gas removal projects, of which would be one. I believe we are significantly further advanced than any of the others. On the international model for BECCS, I would say it's significantly earlier days. I mean, I would say we are sort of narrowing in on a technology model, a cost base. I mean, frankly, I think the numbers will come out not dissimilar to the ones that we have in the U.K. We're narrowing in on locations.
We sort of look around the U.S. I would say the more likely and probably not surprise areas would be southeast of the U.S. and/or sort of northwest, sort of Northern California, Oregon, Washington. Those are probably the two areas we look at. We are very much at the early days of talking to potential buyers of both power and negative emissions to sort of test the appetite for where we think the pricing for those might be, you know. Then the final element of that is, as you know, the U.K., the U.S. government has been thinking about increasing the support for carbon capture through 45Q. Our understanding is that that's the that wasn't part of the, I forget which ones they were, the first infrastructure bill.
It's sort of supposed to be part of the Build Back Better Act, and that's sort of I guess one of the questions is, you know, what will happen if that doesn't get approved? The our understanding is that there's strong bipartisan support for an increase in that sort of support regime. We're hopeful that that will happen almost regardless of what happens with bigger legislation. I'll ask Andy to take the capital allocation one.
Yeah. I mean, as we've said, we have 2.6x leverage as we exited last year, and we have a GBP 3 billion investment plan as we look forward. I think it's important when you consider these things that you look forward as well as at any particular point in time. Our capital allocation policy is clear. The fourth leg of that is that if there are surplus funds, we will return those to shareholders, but surplus funds beyond our investment requirements.
Great. Many thanks.
We have a follow-up question from Dominic Nash with Barclays. Please go ahead.
Hi there, and thank you for that. Just a couple of quick brief ones. Firstly, as you move into FID on these pelleting plants in 2022, and I think it's in your presentation that you were looking at the terms and negotiations with it. Can you just give some color on what the actual what the value of biomass is? I think all the questions have been on the cost of it, but what's the value and the strike price of biomass in these contracts and whether the Enviva's guidance of 5x EBITDA for new projects is in the right ballpark for what you're working out. The second question is on hydro. That obviously reversed in EBITDA in 2021 over 2020.
Pumped hydro, which obviously makes up most of it, I would have thought we've had quite a good year last year, and I think SSE was sort of guiding to it being a fairly good year for hydro for pumped hydro. Is it possible to tell us why it's quite low and whether that's gonna be repeated in 2022, please?
Sure, Dom, I can take that. In terms of the value of the sort of biomass contracts, I mean, it is two things I would say. One is quite sort of market specific, in terms of, you know, where you're moving into and what sort of the ability to pay is in those different markets, i.e., Japan has different regimes than Korea, et cetera. Again, I would say, you know, the numbers that you would have heard from Enviva we're very comfortable with those types of numbers. On the hydro and pumped storage side, I would say are the system support from the hydro asset, you know, very attractive and very much what we would have seen in prior years. It's not growing.
I would say, though, that the actual generation from our hydro assets was lower, and this is the run-of-river side, because it surprisingly didn't rain as much in Scotland last year as it normally does, right? There was definitely an impact there. At the risk of trying to forecast the weather, well, maybe it'd be more or less tongue-in-cheek. When you look at the history of rainfall in Scotland over the very long period, let's say 100 years, there's a very clear trend of increasing rainfall over time. Right? We would not expect that trend of lower rainfall, therefore lower hydro generation to continue. Although, again, every year, you know, is a potential one-off.
Okay. Thank you.
The next question is from the line of Verity Mitchell with HSBC. Please go ahead.
Hi. Morning, everyone. Just a question about your capital investment and just the maintenance. I mean, obviously, you spent money on your biomass unit outage last year, but we're still seeing-
A similar amount on maintenance this issue. Is that just a function of being a larger group now, so therefore the numbers stay up? Just secondly, a really small question, what is the alternative fuel you're burning now? Just out of interest. Thank you.
Why don't I take the second one, and then I'll ask Andy to take the first one. On the alternative fuels, I mean, there's a whole range of things. You know, we are, you know, olive pomace, olive pits, sunflower seeds, lignin, I'm not going to be able to remember some of the other ones. So there's a whole range of things already, which, you know, again, we can probably do a full list of those of interest. But yeah, I think we have probably 10 or more different things that are approved for use. Frankly, in the U.K., we're also looking again at whether we can use Miscanthus and other types of energy crops to increase our domestic sourcing as well.
The CapEx is, this year, a lot of that maintenance CapEx is across the pellet plants. Now of course post Pinnacle acquisition, we've got 17 pellet plants across North America. As you rightly point out, less on the generation side, but more on the pellet plants this year.
Great. Thanks.
Okay. I think, well, if there's more questions coming on the phone, we might have time to do that, but I'll take a couple questions from the webcast. From Adam Forsyth, I'll read the question. It says, Why is the 42% emission reduction target not 100% given the carbon negative target, which appears to be for the same date? Are you implying a 42% reduction before CCS? The answer to that is, I think it's simple as a yes. I mean, there's a couple pieces of this that I probably worth highlighting. The first one is that the 42%, again, reduction is from a 2020 baseline. Important to know that that's, I think that's around 3 million tons at that point. It's already well down from over 20 million tons of where it started from.
As we continue a reduction. That's also both at the Scope 1, 2, and 3 targets. A similar one across all of those. I would also say that, you know, we are doing a lot of work now internally to understand further opportunities for reduction. I wouldn't be surprised if that target grows over time, right? Second thing I would say is we very clearly are differentiating between what we do for reduction and what we do for removal, right? Our aim is to reduce as much as we can. And then, frankly, on the basis that what the way we think about it is that if we can sell the negative emissions from BECCS from GBP 100 a ton, it's a pretty high bar.
We sort of, we would rather we'd rather monetize those in the market as opposed to use those for our own sort of carbon negative ambitions, right? You know. Two things. One is, yes, we are reducing on the one hand, and we are sort of removing on the other hand, and that's right, that's why the 42% is that number, right? Can you give a view, also from Adam, on likely project size of new build BECCS? I think a couple of metrics is likely to be as sort of 300 MW type plant, likely to be about 2 million tons of carbon removal, and it's likely to cost ±$1 billion, right? I'll use dollars, but it might be pounds.
Was there any efficiency gain following the biomass unit plant outage? The answer to that is yes, there was a slight increase in plant efficiency as well as an expected lower required maintenance, given the new configuration of those turbines. You know, we've, you know, estimated that to be up to as much as GBP 1 per megawatt hour. Can you give an indication of average cost per ton of the wider range of biomass materials? Andy, I don't know if you've given a number for that.
Well, I think we've said that some of those materials are at and around our target cost. Around $100 a ton target cost.
The last one is, Is the CI benchmark?
Yeah. The carbon intensity benchmark on the Canadian debt, is it static or does it tighten? The answer to that is it does step down over time.
That was the last question on the webcast so far. Move back to the operator, open to any other questions from the floor.
There are no further audio questions. This concludes our , question- and- answer session. I'm sorry. I would like to turn the conference back over to Will Gardiner for any closing remarks.
I'll just thank you all for joining. I'm very happy, and you guys know where you can reach us. I mean, Mark will be available or Andy and I if you need more help. Thank you for joining, and I hope the day goes okay.
Ladies and gentlemen, this concludes today's conference. Thank you for joining. You may now disconnect. Goodbye.