Analyst Upgrade
Goldman Sachs upgraded British power generator Drax Group plc to "Buy" from "Neutral" on 1 September 2026, raising its 12‑month price target to 1,020 pence from 924 pence. The new target implies an upside of roughly 31.6 % from the stock’s closing price of 775 pence on the prior trading day.
Cash‑Flow Outlook
The bank forecasts that Drax will generate approximately £3.5 billion of cumulative free cash flow between fiscal 2025 and 2031, which is about 1.4 times the company’s current market capitalisation. Goldman Sachs expects Drax to return about one‑third of this cash – equivalent to 50 % of its current market cap – to shareholders through dividends and share buy‑backs. The analyst notes that the paused £450 million share‑buy‑back programme is slated to restart in the third quarter of 2027 once leverage returns to the target of 2.0 × net‑debt‑to‑EBITDA.
Strategic Assets and Growth Drivers
By 2032, the firm projects that renewables, flexible generation and supply assets will contribute roughly 90 % of group EBITDA, with about half of that EBITDA derived from investments made in the preceding twelve months, including the July 2026 acquisition of Bluefield Solar Income Fund.
Goldman Sachs identified three specific catalysts that could add further valuation upside:
- Data‑center development – Converting part of the Drax Power Station site – which comprises more than 1,000 acres, 4 GW of grid access and existing cooling towers – into a large‑scale data centre could generate up to 207 pence per share of sum‑of‑the‑parts value.
- Balance‑sheet deployment – Deploying the remaining balance‑sheet capacity into Drax’s 2.2 GW net development pipeline could contribute an additional 103 pence per share.
- Subsidised CfD extension – An extension of Contracts for Difference at the Drax Power Station beyond 2031 could deliver up to £200 million of incremental annual EBITDA by 2035.
Analyst Commentary
Goldman Sachs analyst Ajay Patel wrote that “this creates a picture with a risk‑reward skewed to the upside.”