Research on Drax Group plc (DRX:LON) from Longspur Clean Energy
Despite a lower price outcome, new capacity market income for the pumped storage and other hydro assets will add c.£11m of useful income in FY 31 taking Drax’s total capacity market income value to £659m, with the bulk in longer term 15-year agreements for pumped storage and the OCGTs. In addition to this new long term income we also see a short term marginal benefit from the temporary impact of the disruption of the LNG market due to the conflict in Iran. We see this as marginally beneficial for the Flexgen assets and have factored in a small increase in peak pricing for FY26 which raises our central case valuation to 1,108p from 1,093p.