Drax Group PLC: Capitalising on the Data‑Centre Boom While Facing Sustainability Scrutiny
Drax Group PLC’s shares surged to their highest level in more than three years on 12 November, spurred by investor optimism that the United Kingdom’s burgeoning data‑centre market could unlock significant value for utilities. The rally followed the announcement that Germany’s RWE AG had realised a €225 million ($261 million) gain from the sale of a UK data‑centre project. Market participants interpreted this transaction as proof that former power‑plant sites could be repurposed into high‑density, energy‑intensive digital hubs, thereby elevating the intrinsic worth of assets such as Drax’s flagship 250‑acre (100‑hectare) biomass power station in North Yorkshire.
Barclays analysts Dominic Nash and Peter Crampton underscored the missed upside in Drax’s valuation. Their note, distributed to institutional clients, highlighted that the site already possesses the necessary grid connections to accommodate a large‑scale data‑centre. While the company had only floated plans to host a data hub, the RWE deal’s financial outcome reinforced the narrative that Drax’s asset portfolio could be leveraged for dual purposes—renewable power generation and data‑centre infrastructure.
Drax’s 2025‑11‑12 closing price of £750 sits comfortably above the 52‑week low of £534.5 but below the peak of £764 recorded the day before, reflecting a cautious yet optimistic investor stance. The company’s price‑to‑earnings ratio of 7.03, considerably lower than many peers in the utilities sector, suggests that the market has yet to fully price in the potential revenue streams from data‑centre leasing and the associated demand for stable, low‑carbon electricity.
Despite the bullish sentiment, Drax faces growing scrutiny over the environmental credentials of its biomass supply chain. On 15 November, Stand.earth released a report alleging that wood pellets produced at three of Drax’s mills in northern British Columbia were derived from old‑growth forests. The claim raises questions about the long‑term sustainability of Drax’s renewable portfolio and could influence ESG‑focused investors and rating agencies. Drax’s response has not yet been publicised, but the company will likely need to provide additional transparency regarding its sourcing practices and forest‑management protocols to mitigate reputational risk.
In the broader market context, Drax’s performance coincided with a modest uptick in the FTSE 100, which edged up by 0.1 % to 9 912.07 amid optimism that the United States would soon resolve its prolonged government shutdown. However, the lift in UK equities was muted, reflecting the uneven impact of global macroeconomic uncertainties on different sectors.
Looking forward, Drax’s strategic focus appears to remain twofold: maintaining its core renewable electricity generation while exploring ancillary revenue opportunities through data‑centre hosting. The RWE transaction has provided a tangible benchmark for the potential upside, yet the company must balance this growth ambition with the imperative to address emerging ESG concerns surrounding its biomass supply chain. For investors, the key question will be whether Drax can translate the data‑centre narrative into sustainable, long‑term profitability without compromising its renewable‑energy credentials.
