Drax Group plc (LON:DRX) is benefiting from strong summer trading, increased demand for flexible electricity generation and the addition of the Bluefield Solar Income Fund portfolio, according to the latest research note from Longspur Research.
The research follows Drax’s latest trading update, covering performance since the company’s first-half results. Longspur has increased its FY26 adjusted EBITDA forecast to £710 million from £688 million, while its central case valuation has risen to 1,141p from 1,136p.
Drax now expects full-year adjusted EBITDA to be at the top end of the current consensus range.
Summer electricity market conditions have played an important role. The UK heatwave placed additional pressure on the GB electricity system, creating opportunities for Drax to provide balancing and flexibility services across its generation portfolio. During the period, the company added 0.3TWh of net power to its position at an average price of £175.9/MWh.
Longspur Research analyst Adam Forsyth writes: “Forward contract sales out to 2028 at an average price of c.85/MWh provide a strong underpinning to earnings.”
The research also highlights the contribution that Drax’s flexible generation assets could make if electricity pricing remains volatile.
Bluefield acquisition expands renewable portfolio
Drax completed the acquisition of Bluefield Solar Income Fund on 31 July 2026.
The transaction adds approximately 0.9GW of operational solar and wind capacity, alongside a development pipeline of around 2.9GW covering solar and battery energy storage systems.
Longspur believes the acquisition should provide several benefits, including improved management of contracted power positions and expansion of Drax’s existing route-to-market activities.
The transaction was partly funded through a committed bridge facility, which Drax expects to refinance.
Key points from the Longspur Research note include:
• FY26 adjusted EBITDA forecast increased to £710 million from £688 million.
• Central case valuation increased to 1,141p from 1,136p.
• Bluefield adds around 0.9GW of operational solar and wind capacity.
• The acquisition includes a 2.9GW pipeline of solar and battery energy storage projects.
• Drax added 0.3TWh of net power during the summer at an average price of £175.9/MWh.
• Forward electricity sales extend to 2028 at an average price of approximately £85/MWh.
Flexible generation remains an important part of the investment case
Drax owns more than 6GW of grid-connected power generation capacity in the GB market.
Its portfolio includes the Drax Power Station in Yorkshire, the Cruachan pumped-storage hydro facility in Scotland, run-of-river hydro assets, flexible gas generation, battery storage and, following the Bluefield acquisition, a larger solar and wind portfolio.
Longspur identifies growth in flexibility and route-to-market income as potential catalysts for the business.
The broker also points to progress within Drax’s solar and battery development pipeline and the potential use of powered land at the Drax Power Station site for data centres.
In its higher valuation scenario, Longspur includes 545MW of fully consented solar capacity, 510MW of battery energy storage and an additional 100MW of biomass generation output sold to a data centre.
Longspur sets out valuation range for Drax
Longspur values Drax using a discounted cash flow approach with an 8.8% discount rate.
Its central case valuation stands at 1,141p per share.
The broker’s lower case valuation is 937p. This assumes no terminal value for the Bluefield assets and applies a more conservative long-term electricity price curve.
Its higher case valuation reaches 1,395p and incorporates additional value from consented solar and battery projects, together with the potential data centre opportunity.
The research also identifies several risks.
Drax remains exposed to changes in UK energy regulation and government policy. Power prices can also be volatile, while development projects carry execution and timing risks.
However, Longspur notes that its central valuation does not include the Bluefield development pipeline, meaning successful delivery of those projects could provide additional value beyond the assumptions used in the central case.
The broker’s financial forecasts show adjusted EBITDA of £710 million for FY26, followed by £628 million in FY27, £768 million in FY28 and £827 million in FY29.
Dividend forecasts also increase over the period, from 32.2p per share for FY26 to 35.4p in FY27, 38.9p in FY28 and 42.8p in FY29.
Thoughts
Drax enters the remainder of FY26 with Longspur forecasting stronger earnings than previously expected, supported by summer trading conditions and the expanded renewable portfolio acquired through Bluefield Solar Income Fund.
The research places a central value of 1,141p on the shares, with potential developments in flexible generation, battery storage, solar projects and data centre power demand providing areas for further progress.
