Drax (LSE:DRX) reported record renewable electricity generation in 2025, strengthening shareholder returns and outlining long-term growth plans backed by a new low-carbon dispatchable Contract for Difference (CfD) agreement aimed at supporting UK energy security.
The company generated enough renewable power during the year to supply around 6% of the UK’s total electricity demand and 11% of its renewable output. Biomass pellet production also increased by 5%, reflecting continued operational expansion. Despite strong generation performance, adjusted EBITDA declined to £947m, while operating profit fell significantly following a £378m impairment charge.
Drax continued to reinforce its financial position during the year, increasing its dividend by 11.5% and completing a £300m share buyback programme. The group has also launched a further £450m repurchase initiative, supported by improved earnings visibility stemming from the newly agreed CfD framework.
Management said the agreement enhances long-term revenue certainty while reinforcing the company’s role in delivering reliable low-carbon power to the UK grid.
Looking ahead, Drax is targeting annual adjusted EBITDA of between £600m and £700m beyond 2027 and expects to generate roughly £3bn in free cash flow between 2025 and 2031. Of this, more than £1bn is planned for shareholder distributions, while up to £2bn will be invested in growth initiatives including flexible renewable generation capacity and battery storage assets.
The company is also advancing plans to develop data centre and battery projects at its 4GW power station site, positioning the location to benefit from rising electricity demand linked to digital infrastructure and artificial intelligence workloads. In parallel, Drax is pursuing cost efficiencies expected to exceed £150m annually from 2027.
These initiatives are intended to strengthen the group’s role in the energy transition while increasing exposure to growing system flexibility requirements across the UK power market.
Drax Group plc’s overall outlook is supported by robust cash generation, solid profitability metrics and favourable valuation indicators, alongside strategic initiatives such as buybacks and government-backed agreements. However, management acknowledged that slower revenue growth and evolving dynamics within the biomass pellet market present risks that will require careful oversight.
More about Drax Group plc
Drax Group plc is a UK-based renewable energy company focused on biomass generation, pumped storage, hydroelectric assets and other flexible power solutions. The group also operates a large North American biomass pellet production business and is expanding into battery energy storage systems and energy optimisation services designed to enhance grid stability and support the broader transition to low-carbon energy.
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