Drax Group — Grid access opens a data centre option

Drax Group (LSE: DRX)

Last close As at 11/11/2026

GBP8.50

▲ 1.50 (0.18%)

Market capitalisation

GBP2,864m

More on this equity

Research: Industrials

Drax Group — Grid access opens a data centre option

Drax Group is a UK power generator built around the 2.6GW biomass-fired Drax Power Station. Its partnership with Brookfield and Radiant to develop a data centre of more than 1GW in aggregate on the Drax estate offers a route to monetising the site’s 4GW of grid access, with a first phase of up to 100MW targeted for Q128. This follows completion of the Bluefield Solar Income Fund (BSIF) acquisition at a £1,082m enterprise value and a September upgrade that put FY26 EBITDA expectations around the top of the £680–711m consensus range. The 23 November capital markets day should add detail on its growth plan.

Written by

Harry Kilby

Analyst

Industrials

QuickView

12 November 2026

Price 851.00p
Market cap £2,870m
Price Performance
Share details
Code DRX
Listing LSE

Shares in issue

336.8m

Net cash/(debt) at 30 June 2026

£(1,025.0)m

1Note: Net debt does not include H226 acquisition.

Business description

Drax Group is a renewable energy company based in the UK. It operates the Drax Power Station in North Yorkshire, manufactures sustainable wood pellets across North America and manages flexible hydroelectric and pumped storage assets while supplying renewable electricity to commercial customers.

Bull points

  • Data-centre partnership offers potential to monetise existing grid access.
  • Solar, batteries and flexible generation diversify earnings.
  • Delivery of growth plans could narrow the valuation discount.

Bear points

  • Consensus earnings decline through the 2027 biomass support transition.
  • Data-centre economics remain undisclosed, with key approvals outstanding.
  • Higher debt and investment requirements constrain financial flexibility.

Analysts

Harry Kilby
+44 (0)20 3077 5700
Finlay Mathers
+44 (0)20 3077 5700

EDISON QUICKVIEWS ARE NORMALLY ONE-OFF PUBLICATIONS WITH NO COMMITMENT TO WRITING ANY FOLLOW UP. QUICKVIEW NOTES USE CONSENSUS EARNINGS ESTIMATES.

Partnership targets GW-scale data centre at Drax

On 3 November, Drax agreed a partnership with Brookfield and Radiant. Phase 1 targets up to 100MW. Phase 2 aims to add 500MW between 2028 and 2031, supplied directly from existing power generation. It would use a mechanism in Drax’s biomass Contract for Difference (CfD) that allows up to 500MW to power a data centre, subject to government agreement. Phase 1 still needs planning and network approvals, an anchor tenant and final investment decisions, and Drax’s economic terms are not yet disclosed.

Earnings base broadens through the CfD transition

From April 2027, Drax Power Station moves onto a low-carbon dispatchable CfD covering c 6TWh per year to March 2031, c 30% of baseload output. Consensus EBITDA dips from £710m in FY26e to £638m in FY27e, then recovers to £702m in FY28e as new capacity arrives. That capacity comprises c 0.9GW of open-cycle gas turbines under 15-year Capacity Market agreements and 710MW of battery storage from 2027. The FY29 EBITDA target of £650–800m excludes BSIF, which generated c £130m EBITDA in the year to June 2025 from predominantly contracted revenues. Net debt/EBITDA is guided above the c 2x target in FY26, falling back to it by end FY27.

Valuation: Discount reflects earnings transition

At 851p, Drax trades on consensus FY26/FY27 EV/EBITDA multiples of 5.5x/6.1x and P/E multiples of 10.3x/15.4x. These represent discounts of c 51%/37% and c 43%/13%, respectively, to European peers, although its broad mix of energy and industrial businesses limits comparability. The rising FY27 multiples reflect an expected earnings decline as Drax moves into its new biomass support contract. Delivery of Bluefield integration benefits growth in flexible power generation and progress towards management’s end-2027 leverage target could support a further re-rating.

Source: Bloomberg Intelligence

Consensus estimates

Year end Revenue (£m) EBITDA (£m) PBT (£m) EPS (p) P/E (x) EV/EBITDA (x)
12/25 5,355.4 947.0 623.3 137.70 6.2 4.1
12/26e 5,238.0 709.6 370.7 83.00 10.3 5.5
12/27e 4,711.0 638.3 241.3 55.40 15.4 6.1

General disclaimer and copyright

This report has been prepared and issued by Edison. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright 2026 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or sol icitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

More on Drax Group

View All

Latest from the Industrials sector

View All Industrials content

Research: Industrials

Metlen Energy & Metals — METKA: A distinct identity via intended IPO

Metlen’s dedicated infrastructure platform has announced its intention to proceed with an IPO on Euronext Athens. METKA brings together Metlen’s infrastructure activities (construction, PPP/concessions, facility management) on one integrated platform covering the full lifecycle of infrastructure projects. The proposed offer is expected to consist of new shares in METKA worth c €250m issued via a share capital increase and a secondary offering with the proceeds intended primarily to fund new PPPs and concession investments and provide additional financial flexibility to pursue selected opportunities in adjacent activities. METKA’s intended IPO should be a positive catalyst for Metlen as 2026 continues to shape up well. Our unchanged €75.3/share valuation offers more than 60% upside.

Continue Reading
Cookie Policy Overview
Edison Group

This website uses cookies so that we can provide you with the best user experience possible. Cookie information is stored in your browser and performs functions such as recognising you when you return to our website and helping us understand which section of the website you find more interesting and useful. See our Cookie Policy for more information.

Strictly necessary and functional

These cookies are used to deliver our website and content. Strictly necessary cookies relate to our hosting environment, and functional cookies are used to facilitate social logins, social sharing and rich-media content embeds.

Advertising

Advertising Cookies collect information about your browsing habits such as the pages you visit and links you follow. These audience insights are used to make our website more relevant.

Performance

Performance Cookies collect anonymous information designed to help us improve the site and respond to the needs of our audiences. We use this information to make our site faster, more relevant and improve the navigation for all users.