CONCLUSIONES Y RECOMENDACIONES

r isk Gover nance F inanci als Sus tainable busines s re v ie w Ov e rv ie w

Our environment

Towards a low

carbon economy

We have an important role to play in the transition of the UK towards a low carbon economy whilst maintaining secure and affordable supplies of electricity. For us, a sustainable business principally implies delivering on our strategic carbon abatement initiative to generate increasing amounts of electricity from sustainable biomass in place of coal.

During 2013, significant progress was made on executing our plan to transform the business into a predominantly biomass-fuelled generator. We converted our first generating unit to burn sustainable biomass in place of coal at the beginning of April. Through increasing the amount of sustainable biomass burnt in place of coal we will significantly reduce our carbon footprint from 2012 levels. Our electricity supply business, Haven Power, has been successful in selling the increased output of renewable power generated from our biomass conversion to our customers. Renewable power sales are exempt from the Climate Change Levy so even after our price premium many customers can make savings whilst enjoying the benefits of power from sustainable biomass.

In partnership with Alstom UK Limited and BOC (a member of the Linde Group) and in association with National Grid, we are involved in a Front End Engineering and Design (“FEED”) study to develop a 426MW oxy-combustion carbon capture and storage (“CCS”) demonstration plant at the Drax Power Station site. The viability of the project is dependent on external funding and the introduction of a market mechanism to support low carbon technology uptake. To that end we are participating in UK and EU funded programmes.

Environmental performance

and compliance

Environmental compliance of our power station and associated landfill site is managed through an environmental management system. This system is externally certified to the international standard ISO 14001 and is subject to external audit twice a year.

We completed a trial with the Environment Agency in 2013 as part of the Environmental Permitting Compliance Assurance Scheme. The scheme is intended to reduce regulatory burden on the best performing sites, whilst maintaining an adequate level of oversight through combining assessment of specific legal compliance with certification to ISO 14001. The effectiveness of the scheme is being assessed by the Environment Agency and we await their proposals. There were no major breaches of our environmental consents during 2013.

Emissions to air

In accordance with the Companies Act 2006 we set out our carbon reporting information for direct emissions (“Scope 1”) from activities such as fuel combustion and processing, and indirect emissions (“Scope 2”) being the equivalent emissions created by the generation of the electricity, heat or steam we purchase. Scope 1 for Drax covers the emissions arising from burning fossil fuels, namely coal, to generate electricity and the operation of some of our plant at the power station, for example, our flue-gas desulphurisation system. The Group’s Scope 2 emissions arise mainly from electricity purchased to run operations across our various sites.

We are also required to disclose emissions of biologically sequestered carbon, which includes emissions released through burning biomass to generate electricity.

Through implementing our strategy to become a predominantly biomass- fuelled generator we aim to reduce our Scope 1 and 2 emissions. As a result there will be a rise in biologically sequestered carbon emissions. We collate data on our carbon dioxide emissions from fuel combustion as part of our measurement and reporting plan under the EU ETS. This includes all Scope 1 and the biologically sequestered carbon figures. For Scope 2 reporting we use the Greenhouse Gas Protocol, A Corporate Accounting and Reporting Standard (revised edition) and the Government’s published GHG conversion factors to determine the level of carbon emissions.

The majority of our emissions arise through the combustion of fossil fuel for generating electricity. As this single figure can shadow smaller, but still important trends, we have set a materiality threshold of 100 thousand tonnes, equivalent to approximately 0.5% of the reporting year’s emissions, to ensure we strike the right balance between demonstrating important trends and limiting data to a meaningful level.

Carbon dioxide emissions, calculated under the EU ETS, as a ratio of electricity generated, before deductions for that used on-site, is a principal performance indicator for the Group. This metric has also been selected for mandatory carbon reporting. Activity 2013 kt 2013 t/GWh 2012 kt 2012 t/GWh Scope 1 Fossil fuel combustion 20,162 720 22,513 777 Operations 157 6 180 7 Total Scope 1 20,320(2) _{725 22,693}(1) ₇₈₄ Scope 2 Purchased electricity 293 10 341 10 Total Scope 1 and 2 20,612 736 23,038 794 Biologically- sequestered carbon (biomass combustion) 2,799(2) _1,214(1) Gross generation TWh 28 29 Notes:

(1) Externally verified by Lloyd’s Register Quality Assurance. (2) During 2014 will be subject to the same audit as 2012 figures. Figures may not add up due to rounding.

Beyond carbon dioxide we manage all our emissions effectively and have maintained high levels of investment in flue gas desulphurisation and combustion control systems to ensure compliance with environmental limits. All emissions in 2013 were within the limits set by the Environment Agency. Looking ahead, work continues to develop a solution to comply with the emission limits which will be in place beyond 2016 under the Industrial Emissions Directive. Total emissions (kt) 2013 2012 2011 Sulphur dioxide 31.7 35.1 32.1 Nitrogen oxides 39.2 39.2 38.9 Dust 0.8 0.8 0.6 Discharges to water

Water is a key resource to Drax Power Station with the great majority of the cooling water abstracted from the River Ouse. Other minor sources include the Sherwood Sandstone Aquifer and the town’s mains. Procedures are in place to manage and monitor the drainage and water systems on-site so as to ensure all discharge consent limits are met.

Water abstraction

(Mt) 2013 2012 2011

River Ouse water 56.9 56.7 57.7 Mains water 0.3 0.2 0.2 Borehole water 1.9 1.8 2.1

Disposals to land

We have continued to invest in site infrastructure to maximise the sale of ash products into the construction industry and to reduce the disposal of surplus ash to landfill. In 2013, ash was sold in conformity with European construction product standards and in compliance with the Waste Recycling Action Programme quality protocol. This has helped us to sell over 80% of the 1.3 million tonnes of ash produced in 2013 as replacement for virgin aggregates and as a cement replacement product.

In 2013, construction was completed on the lightweight aggregate production facility on-site, which is owned and operated by Lytag Ltd, a company based in Escrick, North Yorkshire. The facility manufactures lightweight aggregate from pulverised fuel ash.

Any unsold ash is sent to the power station’s ash disposal site, Barlow Mound. The completed area of the site has been fully restored for use as farm land and woodland.

We pay landfill tax on the ash disposed of to the site. Through the Landfill Communities Fund, we are able to claim a tax credit for our donations to recognised Environmental Bodies. We have worked with Groundwork North Yorkshire since 2001 on projects designed to help mitigate the effects of landfill upon our local community. During 2013, we contributed £73,000 towards local community-based projects designed to bring about sustainable environmental benefits and contribute to the social and economic regeneration of the area.

We continue to manage waste from our operations in a responsible manner. In 2013, we met our target to divert 90% of non-ash waste from landfill.

Mar ket pl ace , per for mance and r isk Gover nance F inanci als Sus tainable busines s re v ie w Ov e rv ie w

Our people

Health and safety

Health and safety is at the heart of our business. Protecting our employees, contractors and all visitors from injury is fundamental to our philosophy. We are committed to developing and maintaining a positive health and safety culture in which statutory requirements are viewed as a minimum standard and leading performance as our goal. Personal safety statistics

2013 2012 2011

Fatality 0 0 0

Time losing injuries 6 3 3 Restricted work

injuries 4 2 1

Medical treatment

injuries 10 3 0

First aid injuries 297 220 207 RIDDOR(1) _{reportable 11 4 5}

Note:

(1) Reporting of Injuries, Diseases and Dangerous Occurrences Regulations.

The increase in the injury statistics above arose from weaker performance at two of our US construction sites. Working with our contractors we have significantly enhanced safety management and supervision at these sites.

Attaining leading performance The lost time injury rate and total recordable injury rate for 2013 at 0.09 and 0.29 respectively remain industry- leading. This performance was achieved in the context of significant construction work that took place during the year. Over one-third of the 6.9 million hours worked across the Group was in higher risk construction activities. Our safety record continues to compare very favourably with that of our sector peers and international benchmarks. Amongst global comparator coal-fired power stations we are ahead of the European and World Pacesetter group for total recordable injury rate. We have retained certification of our Health and Safety Management System to the internationally recognised Occupational Health and Safety standard, OHSAS 18001, at the Drax Power Station site and for our biomass pellet plant, based at Goole in the East Riding of Yorkshire. The standard is approved by Lloyd’s Register Quality Assurance.

In addition to this, we were once again awarded the The Royal Society for the Prevention of Accidents Gold Medal Award having achieved Gold Award standards for nine consecutive years. Safety leadership and recognition We are constantly striving to improve the critical safety leadership contribution required from first line supervisors. The expectations of both management and supervisors continue to be reaffirmed in the Safety Leadership Charter, which is based on the Health and Safety Executive’s approach to achieving a balance between the systems and behavioural aspects of management, treating health and safety management as an integral part of good management generally, rather than as a stand-alone system.

A Health and Safety Advisory Committee (“HESAC”), which brings together a range of employees, including trade union representatives, safety representatives, occupational health and management team members, continues to play a vital role in facilitating staff consultation on health and safety issues, and driving standards upwards.

Our active involvement with the programmes of our trade body, Energy UK, and the Coal Generators Forum, GENSIP, continues to provide new ideas and a stimulus to drive our health and safety improvement efforts forward. Health and wellbeing

We are committed to promoting the health and wellbeing of all our staff and ensuring a professional response to first aid and emergency situations should any occur. We have published occupational health policies which address industrial disease risks, and our occupational health team undertakes regular programmes to screen colleagues in accordance with risk, exposure and Health and Safety Executive requirements.

Health and wellbeing-based programmes and initiatives are run throughout the Group to raise awareness and promote a healthy lifestyle. All of the UK workforce is represented in formal joint management-worker health and safety committees that help monitor and advise on occupational health and safety programmes.

“We are committed to developing and maintaining

a positive health and safety culture.”

Matthew Houlden Trainee Health & Safety Advisor