Drax Group (LON:DRX) has added greater diversity and new long-term options to its UK power portfolio following the acquisition of Bluefield Solar Investment Fund, highlighted in the latest research note from Longspur Research.
The broker believes the BSIF acquisition adds value even under relatively weak power price assumptions, while also giving Drax access to further opportunities in solar, battery storage, route-to-market services and potentially data centre power supply.
Research Analyst Adam Forsyth writes: “We think the acquisition of Bluefield Solar Investment Fund (BSIF) adds value to Drax even in a low power price environment.”
That assessment is supported by Longspur’s modelling of BSIF’s net asset value. Drax acquired the fund at a 9% discount to its last reported NAV of 104.52p per share. Longspur calculated a NAV of 104.81p using assumptions broadly aligned with those used by the fund.
Even when the broker applied a much more conservative solar power price forecast, its model produced a NAV of 92.76p per share, still slightly above the 92.574p bid price.
A broader generation portfolio
Longspur believes the transaction also improves the balance of Drax Group’s generation portfolio.
Drax already has exposure to biomass, pumped storage, hydro, flexible gas generation and battery energy storage. Following the BSIF acquisition, generation owned and controlled by Drax is expected to rise from 4.0GW in 2025 to 6.1GW in 2026.
The broker expects capacity to reach at least 7.4GW by 2029 as additional open-cycle gas turbine plants and battery projects are developed.
BSIF also brings a substantial development pipeline. Longspur highlights 25MW currently under construction and 1,204MW with planning consent. Its higher valuation scenario includes 510MW of consented battery energy storage projects and 545MW of solar capacity with Contracts for Difference support.
Financial and operational highlights
- Drax owned and controlled generation capacity is expected to increase from 4.0GW in 2025 to 6.1GW in 2026.
- Longspur forecasts generation capacity of at least 7.4GW by 2029.
- The broker forecasts group EBITDA of £688 million in 2026, £628 million in 2027, £768 million in 2028 and £827 million in 2029.
- Longspur forecasts earnings per share of 70.2p in 2026, rising to 91.4p by 2029.
- The dividend is forecast to rise from 32.2p per share in 2026 to 42.8p in 2029.
- Longspur’s central valuation for Drax Group has increased to 1,136p per share from 1,062p.
- The broker’s valuation range runs from 932p in its low case to 1,390p in its high case.
Potential hidden value in BSIF
One area that Longspur believes could be particularly important is the potential value remaining in solar sites towards the end of their original operating lives.
BSIF’s published NAV assumes a terminal value of zero for individual projects. Longspur argues that this may be conservative because solar farms can potentially have their operating lives extended or be repowered with newer technology.
Repowering could allow newer, more efficient solar panels, improved inverters and battery storage to be installed while retaining valuable existing grid connections.
Longspur estimates that solar repowering can typically increase energy yield by 20% to 40% and extend the life of a system by a further 20 to 25 years.
Under an illustrative assumption that repowering allows cash flows to continue beyond 2035 without growth, Longspur calculates a BSIF NAV of 161.7p using the company’s electricity price assumptions and 137.8p using the more conservative BNEF assumptions.
These figures are not included in the broker’s standard valuation as guaranteed outcomes, but they demonstrate why Longspur sees longer-term optionality in the acquired portfolio.
Battery storage and route-to-market opportunities
The existing solar portfolio could also provide opportunities for battery energy storage.
Because BSIF’s solar sites already have grid connections, batteries could potentially be co-located at certain sites without requiring entirely new grid infrastructure. Longspur notes that a direct current connection could also capture solar electricity that might otherwise be lost during periods of limited grid demand.
There may also be an opportunity for Drax to expand its route-to-market business.
Drax has historically generated around £10 million of EBITDA from agreements with approximately 2,000 smaller generators representing around 800MW of capacity. BSIF adds 809MW of operating wind and solar projects, and Longspur believes bringing more of this generation into Drax’s trading activities could roughly double the potential scale of that business.
Further income from flexible generation
Longspur also points to possible additional income from Drax’s three OCGT plants.
The Hirwaun unit delivered £4 million of adjusted EBITDA during the first half of 2026 despite beginning operations only in June. The unit was used for approximately 440 hours of non-generation ancillary services.
Using pricing from recent electricity system stability tenders, Longspur estimates that similar activity across all three OCGTs could potentially generate annual income of around £22 million.
Data centres could provide another option
The Drax Power Station site may also offer a longer-term opportunity to supply power to data centres.
Drax has outlined an illustrative first phase involving 100MW of power capacity from late 2027, followed by a potential 500MW second phase between 2028 and 2031.
Longspur highlights several characteristics of the site that could make it suitable, including substantial grid capacity, available land, water access, existing cooling infrastructure and proximity to planned fibre-optic infrastructure.
The broker has modelled a hypothetical 100MW data centre and estimates that, under its assumptions, Drax could potentially receive around £250/MWh for electricity supplied to the facility, alongside ground rent.
This remains an opportunity rather than a committed source of earnings, but Longspur includes 100MW of additional biomass generation sold to a data centre in its 1,390p high-case valuation.
Valuation rises to 1,136p
Following the inclusion of BSIF and revisions to its underlying forecasts, Longspur has increased its central valuation for Drax Group to 1,136p per share from 1,062p.
The broker’s low-case valuation is 932p, while its high case reaches 1,390p. The central case does not include the full BSIF development pipeline, giving Longspur scope to recognise additional value if projects progress.
The research also identifies risks, including changes in UK energy policy and regulation, volatile power prices and potential delays to pipeline projects. However, Longspur argues that Drax’s increasingly diversified portfolio, including flexible generation, storage and policy-supported renewable assets, helps mitigate some of these uncertainties.
Final Thoughts
The latest research note from Longspur Research presents the BSIF acquisition as more than simply an expansion of Drax Group’s renewable generation capacity. The broker sees the deal increasing portfolio diversity while adding potential future opportunities in solar repowering, battery storage, energy trading and data centre power supply.
With Longspur forecasting £827 million of EBITDA in 2029 and raising its central valuation to 1,136p per share, the research suggests that the strategic value of the acquisition may extend well beyond BSIF’s existing operating assets.
