Drax Share Discussion Threads

[nick rubens] 14/7/2015 22:26

Sounds like if DRX start turning off the lights in future the government shouldn't expect shareholders to keep them switched on after letting DRX down on CCL levy.

I'm just wondering what the way ahead is, if there is one. It's an awful predicament here.

[wipo1] 14/7/2015 20:35

Does Woodford mean he would not support rights issue if new funding was needed?

[scotches] 14/7/2015 12:47

Woodford comments on levy cut



"The Drax transformation has been a large, ambitious and pioneering project. As such, it has involved a great deal of risk. Nevertheless, we were supportive of management’s plans but recognised there would be a need for Government support for the project to ensure that risk capital would be rewarded with an appropriately attractive long-term return. Alongside, Dorothy Thompson, chief executive of Drax, I met several ministers and civil servants in an intensive lobbying campaign aimed to get the project off the ground with the deserved level of support, both political and financial.

Having achieved this support and the necessary Government commitments, investment in the project commenced with considerable capital being deployed. To date, in net present value terms, the transformation project has cost approximately £1bn of investors’ money. That capital was committed by shareholders as a result of the long-term commitment from Government to allow an appropriately attractive long-term return.

...the Government has, in abolishing the Climate Change Levy, gone back on its commitment.

...Drax’s shareholders would have been better off if the company had simply continued to generate power by burning coal.

If Government cannot be trusted to fulfil its long-term commitments then it will have to accept that it cannot rely on support from institutional investors."

[deanroberthunt] 14/7/2015 09:51

reckon this is getting dumped big time by funds and IIs et al...

[deanroberthunt] 14/7/2015 09:48

might be worth a punt sub £2

[deanroberthunt] 14/7/2015 09:40

lower than the worst of the credit crunch

ipo'd £5, high just over £10....now £2.45 and still falling

good ol' british mgt strikes again...

[nick rubens] 14/7/2015 09:23

The subsidy being taken away has exposed DRX's earnings capability in biomass and the fall in electricity prices combined with carbon tax on it's coal fired stations is crippling it's earnings.

In the immediate years ahead the dividend will likely be cut further, they have every reason/necessity to do so at the moment.

Whether you jump in at 270p, 260p, 250p, 230p 200p etc What is the way ahead for DRX?

[scotches] 14/7/2015 08:32

"The investment case for biomass power generator Drax Group "remains intact" despite the recently announced changes to the climate change levy...says an analyst from Investec.

...the UK government's renewables policy is "of critical importance" to Drax's share price and says despite the changes, the attractiveness of the company is still there although there is now higher political risks. "We still believe that, in the context of 'affordable' UK decarbonisation paths, Drax is an attractive asset given its biomass conversions, and its option on carbon capture and storage," he says. Investec says Drax remains "just" as a Buy on its rating system, but it lowers its price target to 300.0 pence from 450.0 pence."

[wipo1] 13/7/2015 18:11

Yeah interesting fund managers averaging down. Might be worth a punt at these levels?

[nick rubens] 13/7/2015 15:52

jamesie Yes, like myself. I think we both would like a reason to buy DRX as it seems like a blue chip on the face of it, but the signs are clear that it's a declining business.

I think a White Knight is needed and there aren't any around.

Another Institution averaged down I think, rather than a sudden 5% plus holding.

Glad to see them make investment mistakes (buying DRX at much higher levels). It's not only me that gets sucked in to blue chips that plunge, though not DRX.

[audigger] 13/7/2015 15:48

Shcroders adding, someone has belief! I had a punt on these last week which so far is looking rather ill!

[jamesiebabie] 13/7/2015 14:52

FY - I do not and have not had a position on DRX; just an interested onlooker.

[jamesiebabie] 13/7/2015 14:48

And another? It is a slow painful death. The interesting thing for me is seeing the sale of Eggborough; will the new owners build a new CCGT as with the removal of CCL for biomass it is unlikely they will convert to biomass. It think there will be a race to gas between Drax, Ferrybridge and Eggborough to get first mover advantage. The capacity market is changing things.

[jamesiebabie] 13/7/2015 14:29

Oldish article but still relevant and the closure of Ferrybridge was one such victim.

[nick rubens] 13/7/2015 14:16

Boffster "my investment here is partly a bet on oil prices rising."

A rise in oil and gas prices will put a rise in electricity prices and for DRX the input costs are not affected with a gas cost.

I would have liked another reason to invest to reduce the risk of that being the only hope for progress from this level.

Anything that could attract a predator here?

[jamesiebabie] 13/7/2015 12:59

Sorry about the link, now got the right one as per my above post.

Below is a link to NG's forward looking documents for supply and demand.

[boffster] 13/7/2015 12:04

Since oil and gas prices tend to be linked, my investment here is partly a bet on oil prices rising.

[jamesiebabie] 13/7/2015 11:04

Some may find this document interesting from NG and it highlights what has happened to demand and where they expect it to be in the future.

[nick rubens] 13/7/2015 10:53

I would love to find a reason to buy Drax shares, but I can't. It's fallen this far for a very valid reason.

A takeover seems the only 'hope' but who would want to buy this (and what would they be willing to pay), unless they could somehow sell off any potential land assets to help pay for new modern generating plant?

Like everyone else, I am ready to buy for the right reason but can't see one and neither can the market, hence the price fall.

[jamesiebabie] 13/7/2015 10:41

As I type this I can see that the CCGT's are producing 48% of the countries supply. coal 18.23%, nuclear 19.31% and wind 1.78%, the interconnectors are c.9%, hydro 2%, biomass 0.45%.

Please note the wind number are those that are directly connected to grid and not the majority of embedded generation, so there will be a significant amount of that let alone the new solar.

[jamesiebabie] 13/7/2015 10:36

Boff - what I can say is that there are many large new CCGT's out there operating at well below their design capacity.

This is not just about generation [supply], but also demand which has markedly changed. Many large consumers [refineries/steel works, etc] have closed, general usage believe it or not has also decreased. Peak generation was back in 2005 and the introduction of fee loft insulation [as one example] is having a real impact on demand.

We will ultimately have a lot more smaller [local] Combined Heat and Power plants, aimho.

[nick rubens] 13/7/2015 10:25

Looks like Drax will just have to endure dwindling profitability in the years ahead.

I can't see them cutting costs(jobs?)etc, so it's going to take something drastic to turn this around and with no one having any ideas here, it doesn't look like a long term investment anymore.

I see Schroder's have added 1% to it's funds under management.

[boffster] 11/7/2015 14:40

Regardless of your stance on the CO2 / climate change argument, I think it's gone too far when we're putting the security of the country's power supply at risk because of it. Unlike coal, of which we have vast reserves, North sea gas supplies are dwindling and we already import around 50% of the natural gas we use.

The Chinese must be having a right chuckle at us, busily crippling ourselves on some pointless crusade whilst they belch out pretty much whatever they like into the atmosphere.

This latest government interference has taken away the carrot for 'green' energy supply whilst leaving the stick intact, that isn't fair.

We ought to abandon this carbon pricing nonsense and look at opening some new pits to ease unemployment and bolster the manufacturing industry.

[jamesiebabie] 10/7/2015 19:28

The carbon floor tax is the killer Drax and all other coal fired stations; CFD's for Drax, well that's another story and then you have the capacity market; guaranteed for only one year at a time for existing plant and the levels achieved in the last bid round were way lower than many thought.

Build a new CCGT onsite, well not a bad option whilst commodity prices are low and you'd guarantee capacity payments [linked to RPI] for 15 years. Just one problem do DRX have a spare £1B to build a 2000MW plant?