Drax Group (LON:DRX) executives highlighted record renewable power generation, strong cash flows, and progress on a broadened U.K. flexibility strategy during the company’s latest results call, while also addressing impairments tied to its Canadian pellet operations and a paused U.S. development project.
Record output and a new post-2027 operating framework
Management said the group delivered a “strong operational and underlying financial performance” in 2025, underpinned by safe and efficient operations. The company produced a record level of renewable power, primarily from Drax Power Station, and described itself as a major provider of renewable generation and flexibility in the U.K. The company said it accounts for around 6% of overall U.K. power and 11% of renewables, and in certain peak-demand periods has represented more than 50% of U.K. renewable power generation when wind output was limited.
2025 financial performance and shareholder returns
Finance leadership reported adjusted EBITDA of GBP 947 million for 2025. The company said a particularly strong December helped drive a record year for biomass power production of 15 terawatt-hours. Adjusted earnings per share were 137.7 pence, up 7% year over year, which management attributed to the impact of share buybacks and lower net finance costs offsetting lower EBITDA.
Drax ended the year with net debt of GBP 784 million, equivalent to 0.8x 2025 EBITDA, which management said was well below its long-term leverage target of around 2x. Total cash and permitted facilities were reported at GBP 942 million.
The company guided to an expected full-year dividend of 29 pence per share, an 11.5% increase from 2024. It also reiterated its focus on capital returns, noting that it completed a GBP 300 million buyback in 2025 and started a further GBP 450 million program; as of Feb. 24, it had repurchased GBP 57 million under the new plan.
Pellets, biomass generation, and impairments
Drax reported pellet production EBITDA of GBP 129 million in 2025, down from GBP 143 million in 2024, even as volumes rose to a record 4.2 million tons. Management emphasized that cost reductions in U.S. pellet production flow through to biomass generation via internal transfer pricing, shifting value within the group rather than destroying it. The company said that if pricing had remained at 2024 levels, pellet production EBITDA would have been above GBP 150 million.
Outside of EBITDA, Drax recorded significant charges tied to shifting pellet-market dynamics and project decisions:
- GBP 198 million charge reflecting reduced expectations for the Canadian pellet business, citing an expected softening in the global pellet market post-2027 and constrained fiber supply in parts of Canada.
- GBP 139 million impairment related to the paused Longview development project in Washington State; management said it retains the land and the option to restart if market conditions improve.
- GBP 48 million impairment related to BECCS at Drax Power Station, which the company linked to a lack of progress on U.K. commercial and regulatory support for carbon removals, while maintaining that removals remain important for net-zero goals and that Drax retains future optionality.
On questions about Canada, executives said the impairment largely formalized issues they had been communicating for multiple quarters and was “not an indication that things are getting worse.” Management said it is reviewing strategic options for the Canadian business, including cost management, contract management, supply optimization, and potentially disposal, while also stressing it intends to deliver on customer contracts in Japan and Korea.
FlexGen expansion: Cruachan upgrades, OCGTs, and batteries
The company pointed to growing importance of its Flexible Generation (FlexGen) strategy as the U.K. power system evolves. It said Cruachan pumped storage represents about a third of U.K. long-duration storage by megawatt-hours and has increased operating activity from 20% to 60% over six years under Drax ownership. Drax outlined an GBP 80 million investment program between 2025 and 2027 to replace two of Cruachan’s four turbines with larger machines.
Management noted that Cruachan units 3 and 4 were unavailable due to a grid connection failure in late December attributed to assets owned by Scottish network operator SPEN. The company said it is working with SPEN to restore the connection and is using the downtime to progress planned outage work.
Drax also discussed open-cycle gas turbines (OCGTs), saying it expects to take commercial control of the first site shortly, with one unit already receiving Capacity Market payments. The second and third sites are expected to commence commissioning in 2026, with earnings supported by around GBP 270 million of Capacity Market payments, plus system support services and peak power generation.
On batteries, management said it has moved quickly to build a gigawatt-scale pipeline. Over the past six months, it has purchased or reached agreements that would provide operational control of more than 700 megawatts of battery capacity across five sites, and committed roughly half a billion pounds in total across battery-related initiatives. This includes the acquisition of three Apatura development projects totaling 260 megawatts, tolling agreements covering 450 megawatts with Fidra and Zenobē, and the planned acquisition of Flexitricity for about GBP 36 million, expected to complete in March.
Executives said the company’s medium-term post-2027 adjusted EBITDA target of GBP 600 million to GBP 700 million across pellets, biomass generation, and FlexGen remains unchanged, but they now expect FlexGen to make up a greater portion of that mix over time. They also reiterated a goal of over GBP 150 million per year in structural cost savings by 2027 versus a 2024 base, emphasizing these savings are already embedded in the EBITDA target.
Data center plans at Drax Power Station and capital allocation priorities
Drax said it is exploring options to maximize value from the Drax Power Station site, including a potential data center development. Management described the site as having more than 1,000 acres and 4 gigawatts of grid access, alongside existing cooling systems and proximity to the U.K. fiber optic network. The company said it is in discussions with a developer, but did not provide further commercial details.
Executives outlined a three-phase concept: an initial ~100 megawatts phase using existing infrastructure with a planning application expected “shortly,” a second phase targeting 500 megawatts before 2031 (subject to agreement with the U.K. government during the CfD period), and a third phase from 2031 adding 600 megawatts or more. Management said it views the opportunity as potentially representing a multi-billion-dollar foreign investment into the U.K.
On cash deployment, Drax reiterated its expectation to generate about GBP 3 billion of free cash flow between 2025 and 2031 from the current business, before new growth cash flows. Management said it expects to allocate over GBP 1 billion initially to shareholder returns (including the ongoing buyback) and up to GBP 2 billion toward growth investments. Executives said batteries could potentially account for plus-or-minus GBP 1 billion of that growth capital over time, while also noting the company is assessing additional investments in flexible renewable energy and would provide further updates later in the year.
About Drax Group (LON:DRX)
Drax Group plc, together with its subsidiaries, engages in renewable power generation in the United Kingdom. It operates through three segments: Pellet Production, Generation, and Customers. The Pellet Production segment produces and sells biomass pellets. The Generation segment provides renewable, dispatchable power, and system support services to the electricity grid. The Customers segment supplies electricity and gas to non-domestic customers. The company owns and operates Drax Power Station located in Selby, North Yorkshire; Cruachan Power Station, a pumped storage hydro station, with an installed capacity of 440 megawatts (MW) located in Argyll and Bute; and Lanark and Galloway hydro-electric power stations with an installed capacity of 126 MW located in southwest Scotland.
