The latest research note for Drax Group (LON:DRX) by Longspur Research highlights a strong set of full year results, with the renewable power generator delivering performance ahead of market expectations. According to Research Analyst Adam Forsyth, the company has benefited from record generation and continued strategic progress across its flexible generation and energy storage operations.
Drax remains one of the UK’s most significant renewable power producers, with operations spanning biomass generation, hydro power and energy storage. The company owns more than 6GW of grid connected capacity in the UK and continues to play an important role in supporting the country’s transition to a lower carbon energy system.
Strong Financial Performance Driven by Record Generation
The company reported full year results ahead of expectations, supported by higher generation volumes and operational stability.
Research Analyst Adam Forsyth commented in the report:
“Drax has delivered full year results ahead of expectations with a year of record generation representing 6% of UK power and 11% of UK renewable generation.”
Adjusted EBITDA came in at £947m, exceeding the consensus estimate of £914m and Longspur’s own forecast of £905m. The biomass generation business delivered a record 15.0TWh of generation, compared with 14.6TWh in the previous year.
Pellet production volumes also increased by 5%, although pellet EBITDA declined due to lower transfer prices reflecting reduced production costs. This shift effectively moved more value into the generation business, supporting overall profitability.
Full Year Highlights
- Adjusted EBITDA of £947m, ahead of market expectations
- Record biomass generation of 15.0TWh
- Pellet production increased 5% year on year
- Dividend increased 11.5% to 29.0p per share
- New £450m share buyback programme announced
- Net debt to adjusted EBITDA reduced to 0.8x
The strengthened balance sheet is a notable development. Lower leverage and strong cash generation provide flexibility for investment while continuing to return capital to shareholders.
Expanding Flexible Generation and Energy Storage
A key theme in the research note is the company’s growing focus on flexible power generation and energy storage solutions. Drax has expanded into battery energy storage systems and is targeting a gigawatt scale pipeline in this area.
This builds on the acquisition of the Flexitricity optimisation platform, which enhances the company’s ability to manage and optimise flexible generation assets.
Adam Forsyth noted that these developments fit well with the company’s broader strategy and growth ambitions. The expansion into battery storage is expected to complement existing generation assets while helping balance an increasingly renewable electricity system.
Outlook Remains Stable
Looking ahead, Drax expects financial performance in FY2026 to be broadly in line with market expectations. Consensus forecasts point to adjusted EBITDA of around £662m, with Longspur estimating approximately £670m.
Beyond that, the company continues to target adjusted EBITDA of £600m to £700m post 2027. Longspur believes these targets are achievable as the mix of earnings gradually evolves toward flexible generation and storage.
The group is also exploring new opportunities tied to rising electricity demand, including a potential 1.2GW data centre project, with an initial 100MW target from 2027. This reflects growing interest in AI driven energy demand and the infrastructure required to support it.
Meanwhile, Drax remains on track to deliver approximately £3bn of free cash flow by 2031 before growth investment, giving the company significant capacity to fund expansion and new projects.
Final Thoughts
The latest research note from Longspur Research presents a constructive view on Drax Group following its stronger than expected full year results. Record generation, improving balance sheet strength and growing opportunities in flexible power and energy storage highlight a business that continues to evolve alongside the UK’s changing energy landscape. With significant free cash flow potential and multiple avenues for growth, Drax appears well positioned to build on its current momentum in the years ahead.
