Low-carbon dispatchable CfD contract agreement
5 November 2025
This announcement contains inside information
Drax Group plc
("Drax"; Symbol: DRX)
Low-carbon dispatchable CfD contract agreement
Highlights
· Contract signed with UK Government (Low Carbon Contracts Company - LCCC) for operation of Drax Power Station (DPS) post March 2027 subject to usual CfD conditions precedent
· No significant changes from Heads of Terms agreed in February 2025
- Contract period April 2027 to March 2031
- CfD scheme with a strike price of £109.90/MWh (2012, real) applied to all four biomass units
- c.6TWh pa generation collar with flexible operation to support high and low demand periods
- Opportunity for unrestricted merchant generation above collar
Drax confirms that it has signed an agreement with the LCCC for a low-carbon dispatchable CfD to cover all four biomass units at DPS over the period April 2027 to March 2031, with a strike price of £109.90/MWh (2012, real). The terms are substantively as announced in the Heads of Terms (February 2025).
The strike price has reduced from the price referenced in the Heads of Terms, to reflect favourable movements in exchange rates which are expected to reduce the overall cost of biomass, resulting in no material impact on expectations for Adj. EBITDA, which remain unchanged.
Drax Group CEO, Will Gardiner, said: "We are pleased to have agreed this new contract with the UK Government, which will support UK energy security into the 2030s and deliver a net saving for consumers compared to alternative sources of dispatchable generation.
"The agreement will support the rollout of intermittent renewable generation across the UK and provides options to ensure Drax Power Station continues to play a long-term role in the regional economy and UK energy system.
"Independent analysis by Baringa estimates savings of up to £3.1 billion over the four-year term, all while ensuring Drax Power Station keeps the lights on for millions of homes and businesses, no matter the weather."
Details of the low-carbon dispatchable CfD
Under the agreement DPS will sell c.6TWh of power annually against a season ahead reference price (as per the current CfD scheme) and then seek to maximise generation from its four units at times of high demand and reduce generation at times of low demand, using the station's flexibility to support UK energy security and capture higher prices (similar to their operation under the Renewable Obligation Certificate scheme). The agreement allows for additional merchant generation above 6TWh, system support and ancillary services, where Drax continues to play an active role.
The agreement includes enhanced biomass sustainability requirements, including that all biomass used at Drax Power Station is sustainably sourced and verified through monitoring, reporting, and verification requirements, including enhanced auditing of the biomass supply chain. Drax welcomes these enhancements to its existing procedures, which demonstrate the Group's commitment to delivering climate, nature and people positive outcomes.
Enquiries:
Drax Investor Relations:
Mark Strafford
mark.strafford@drax.com
+44 (0) 7730 763 949
Chris Simpson
+44 (0) 7923 257 815
Media:
Drax External Communications:
Chris Mostyn
Chris.mostyn@drax.com
+44 (0) 7743 963 483
Andy Low
andy.low@drax.com
+44 (0) 7841 068 415
Website: www.drax.com
This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No 596/2014 which is part of UK law by virtue of the European Union (Withdrawal) Act 2018, as amended ("MAR"). The person responsible for the release of this information was Hillary Berger (Group General Counsel).
Forward-looking statements
This announcement may contain certain statements, expectations, statistics, projections and other information that are, or may be, forward-looking. The accuracy and completeness of all such statements, including, without limitation, statements regarding the future financial position, strategy, projected costs, plans, beliefs, and objectives for the management of future operations of Drax Group plc ("Drax") and its subsidiaries ("the Group"), are not warranted or guaranteed. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that may occur in the future. Although Drax believes that the statements, expectations, statistics and projections and other information reflected in such statements are reasonable, they reflect Drax's current view and no assurance can be given that they will prove to be correct. Such events and statements involve risks and uncertainties. Actual results and outcomes may differ materially from those expressed or implied by those forward-looking statements.
There are a number of factors, many of which are beyond the control of the Group, which could cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements. These include, but are not limited to, factors such as: future revenues being lower than expected; increasing competitive pressures in the industry; uncertainty as to future investment and support achieved in enabling the realisation of strategic aims and objectives; and/or general economic conditions or conditions affecting the relevant industry, both domestically and internationally, being less favourable than expected, including the impact of prevailing economic and political uncertainty; the impact of conflicts around the world; the impact of cyber-attacks on IT and systems infrastructure (whether operated directly by Drax or through third parties); the impact of strikes; the impact of adverse weather conditions or events such as wildfires; and changes to the regulatory and compliance environment within which the Group operates. We do not intend to publicly update or revise these projections or other forward-looking statements to reflect events or circumstances after the date hereof, and we do not assume any responsibility for doing so.
END
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