Drax Group Reports Record Renewable Generation and Strategic CfD in 2025 Full Year Results

Drax 2025 results: record renewable output and a pivotal CfD

Drax Group’s 2025 full-year numbers mix operational strength with a cleaner earnings runway. The company generated record renewable power, signed a new low carbon dispatchable Contract for Difference (CfD) that stabilises part of future revenues, and tightened the balance sheet, all while returning capital to shareholders.

The headline dip in statutory profit is driven by non-cash impairments, not trading weakness. Under the hood, cash generation and leverage look robust, and the strategy is tilting towards flexible generation and batteries alongside the core biomass fleet.

Key figures investors need to know

Leverage was low at 0.8x Net debt to Adjusted EBITDA, with £942 million of cash and committed facilities.

What drove the results: strong operations, lower prices and no EGL

Adjusted EBITDA fell 11% year-on-year to £947 million, mainly due to lower achieved power prices versus 2024. Operationally, the assets worked hard: renewable generation hit a record 15.0 TWh and Drax responded to system stress in December.

Adjusted EPS rose to 137.7 pence, helped by buybacks and lower finance costs. The Electricity Generator Levy (EGL) was £nil in 2025 (2024: £161 million), which also supported the effective tax rate. Statutory operating profit dropped to £241 million, largely because of non-cash impairments of £378 million, chiefly in Canadian pellets and the paused Longview project, plus a UK BECCS write-down where policy support is lacking.

New low carbon dispatchable CfD: why it matters for visibility

Drax signed a low carbon dispatchable CfD in November 2025 covering all four biomass units from April 2027 to March 2031. Headline terms:

• c.6 TWh of contracted biomass generation per year (about 30% of baseload output).
• Strike price £109.90/MWh (2012 real).
• Option to run merchant generation above the cap and to provide system services.
• A mechanism to request up to 500 MW to power a data centre, subject to Government agreement.

In plain English: a CfD (contract that tops up or pays back vs a reference power price) should smooth earnings for 2027-2031 and anchor cash flows through the energy transition. Drax expects the station to retain a role into the 2030s.

FlexGen and batteries: building a broader earnings base

Drax’s “FlexGen” platform spans pumped storage, run-of-river hydro, Open Cycle Gas Turbines (OCGTs) and Energy Solutions. The strategic direction is clear – more flexible, dispatchable capacity to balance a wind- and solar-heavy grid.

• BESS (battery energy storage systems): 710 MW in development, including 260 MW via an agreement with Apatura, plus tolling deals for 250 MW with Fidra (10 years from 2028) and 200 MW with Zenobē (15 years from 2028). Drax also agreed to acquire Flexitricity, an optimisation platform, for c.£36 million (completion expected around March 2026).
• OCGTs: c.900 MW across three sites with 15-year Capacity Market revenues worth over £260 million. Hirwaun began commissioning in October 2025 and is expected under Drax’s commercial control in March 2026; the other two sites are commissioning in 2026 after grid-connection delays. Drax now intends to retain these assets.
• Pumped storage and hydro: Adjusted EBITDA was £111 million (2024: £138 million), reflecting a heavy outage programme. Units 3 and 4 at Cruachan are currently unavailable due to a grid connection failure on SPEN-owned assets in late December 2025. Drax is awaiting SPEN’s repair timetable while progressing planned work to minimise downtime. A 15-year Capacity Market agreement supports refurbishment and should add 40 MW by 2027.

Pellet production: record volumes, shifting profit mix and Canadian headwinds

Pellet production rose 5% to 4.2 Mt. Adjusted EBITDA of £129 million was lower, but this largely reflects Drax’s intercompany cost-plus pricing – cost savings in US pellets reduce pellet segment revenue but cut fuel costs for UK generation, a net Group benefit. The US pellet chain is now highly integrated with Drax Power Station.

Canada is tougher: constrained fibre availability and lower margins triggered a strategic review and non-cash impairments. Drax closed the Williams Lake plant in British Columbia and two small US satellites, and has paused the Longview project. With the CfD implying lower biomass burn than historic levels, management does not expect near-term pellet capacity expansion.

Balance sheet, dividends and buybacks

• Net debt fell to £784 million, just 0.8x Adjusted EBITDA.
• Dividend up 11.5% to 29.0 pence per share, continuing a nine-year growth streak.
• £300 million buyback completed in October 2025; a new £450 million three-year programme is underway (c.£57 million completed by 24 February 2026). Since 2017, c.£558 million has been returned via buybacks at an average £5.9 per share.
• 2025 capital investment was £202 million; 2026 guidance is c.£210-250 million, with growth spend focussed on BESS, Cruachan upgrades and OCGTs.

Outlook and medium-term targets

• 2026 Adjusted EBITDA expected in line with analyst consensus as of 20 February 2026 (£662 million; range £629-684 million).
• Post-2027 Adjusted EBITDA target: £600-700 million per year from Pellet Production, Biomass Generation and FlexGen.
• Targeting c.£3 billion of free cash flow from 2025-2031 (pre growth investment). Over £1 billion earmarked for dividends and buybacks, and up to c.£2 billion for growth, including c.£0.5 billion already committed to BESS and optimisation.
• Structural savings of >£150 million per year from 2027 vs a 2024 cost base.
• Forward power sales (as at 24 February 2026): 13.3 TWh across 2026-2028 at an average £78.0/MWh, with Renewables Obligation generation fully hedged in 2026 and substantially hedged to March 2027.

Data centre optionality at Drax Power Station

Drax is exploring a 1.2 GW-scale data centre opportunity, with an initial 100 MW phase targeted from 2027, subject to consents, capital assessment and commercial structures. The CfD also includes a mechanism for Drax to request up to 500 MW for data centre supply, if agreed with Government. This leverages the site’s 4 GW grid connection, land and cooling infrastructure – early-stage but potentially meaningful if power demand from AI continues to climb.

Risks and watch-outs

• FCA investigation opened in August 2025 into historic biomass sourcing statements and annual report compliance (period January 2022 to March 2024) – process ongoing.
• Cruachan connection issue: repair timetable from SPEN awaited; Drax is mitigating via planned work sequencing.
• OCGTs reliant on timely grid connections; commissioning slippage already evident.
• Canada pellet margins and fibre supply remain challenging; strategic options under review.
• UK BECCS impaired; future depends on policy and commercial frameworks for carbon removals.

My take: quality cash flows, clearer path, but execution still matters

On balance, this is a solid set of results. Operational delivery was strong, leverage is low, and the dividend is rising. The new low carbon dispatchable CfD is the strategic pivot – it underpins earnings through 2031 and lets Drax lean into higher-value flexibility (batteries, pumped storage, OCGTs) as the grid decarbonises.

Negatives are mostly non-cash today: Canadian pellet impairments and a UK BECCS write-down. The near-term questions are practical ones – fixing Cruachan’s grid connection, getting OCGTs fully operational, and converting the BESS pipeline and tolling deals into optimised cash flow. If Drax executes on those, the medium-term targets look achievable.

Useful resources

• Full results materials: https://www.drax.com/results-reports-presentations/
• Webcast link: Results webcast