Drax Rises to 20-Year High After Earnings Beat Expectations

Cooling towers at Drax Power Station, operated by Drax Group Plc, where the coal-fired units 5 and 6 have been put on standby to generate electricity supplies during a cold snap,. near Selby, UK, on Monday, Jan. 23, 2023. Drax Power station is one of three stations that negotiated a winter contingency contract with National Grid Plc for this winter following a request from the government. Photographer: Ian Forsyth/Bloomberg Photo by Ian Forsyth /Bloomberg

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(Bloomberg) — Drax Group Plc’s profits last year exceeded analyst expectations, sending the share price to its highest in almost 20 years.

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Adjusted earnings before interest, taxes, depreciation and amortization totaled £947 million ($1.3 billion), beating analyst estimates for £913.7 million, even as the figure came in 11% lower than a year earlier.

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The results were helped by “supportive biomass generation conditions in December,” according to a note from Ahmed Farman, an analyst at Jefferies International Ltd. He added that an earnings-per-share beat was helped by lower financing costs and the impact from Drax’s share buyback.

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The share price rose as much as 6.2% to the highest since October 2006.

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Long known as a biomass heavyweight, Drax is repositioning itself as a flexible power and storage operator amid sustained political and regulatory scrutiny of its wood-pellet imports. The company saw record amounts of generation from its power station in 2025, supplying about 6% of the UK’s power.

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But with output at its flagship Yorkshire plant capped at about 6 terawatt-hours a year as of 2027 under a new subsidy deal, the company is leaning harder into batteries and plans for a data center at the site.

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Drax has quickly expanded into energy storage. The company recently signed a 15-year tolling agreement with Zenobē Coalburn Ltd. for 200 megawatts of battery capacity in Scotland, due to begin operating in 2028, and has agreed to acquire a battery portfolio from Apatura Ltd.

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Even so, the shift away from biomass is weighing on the business in the near term. The company booked a £337 million charge after pausing work on a North American pellet plant and citing weaker demand affecting its Canadian operations. It also wrote down £48 million on its UK power station, saying political and regulatory uncertainty has reduced the likelihood that its carbon capture and storage project will proceed in the short to medium term.

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Following the new subsidy deal, the company expects to use around 2 million tons a year of its own pellets under the new contract, reducing internal demand compared with previous levels. Drax also said it would have to cut dozens of roles at the power station, adapting to its reduced role in the UK’s power mix.

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Drax reaffirmed its target of £600 million to £700 million of annual adjusted EBITDA after 2027 and said it expects 2026 earnings to align with analyst forecasts of about £662 million. The company also expects to return £1 billion to shareholders through dividends and share buybacks from 2025 until 2031, with £2 billion invested in growth areas.

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In an interview with Bloomberg, Chief Executive Officer Will Gardiner signaled the company could broaden its scope beyond batteries and biomass, saying Drax was “not ruling anything out” when asked about potential investments in other renewables such as solar and wind.

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