Drax Share Discussion Threads

[nick rubens] 10/11/2015 16:26

Drax have had profits declining for years continuously. Dividends reduced also. The dividend will likely disappear with the excuse to strengthen the balance sheet IMO. A rights issue looks likely eventually as I've mentioned before. This is one stock that has not caught me out with it's continued erosion of value.

Others have though. The business model here is against it. Dirty emission tax and expensive Biomass with no subsidy?

[via con] 10/11/2015 14:16

So DB downgrades after being positive a week ago. A bit of a volte- face by them it would seem

"Power price crunch becoming increasingly severe
Capacity concerns have been in focus over the last week, with National Grid’s NISM signaling a tightening UK power market. However, weakening gas prices have driven a further material leg down in UK power prices which is likely to heighten the pressure on Drax’s earnings and cashflows. We may see a capacity driven bounce in power prices, although in the medium-term we expect more LNG exports from the US to add to the pressure on gas prices. The shares have rallied by c.10% over the last month and now look expensive. We downgrade to Sell with an unchanged 220p/share target price.

Market pressures mounting
Drax has executed well on the parts of its biomass conversion strategy within its control. However, the company is suffering from low power prices and regulatory challenges. The EU state aid process is still ongoing for its fixed price biomass contract, leaving all of its units market exposed. Power prices have weakened by 5-10% over the last month alone, with gas prices dropping by greater than 10%. Our unchanged estimates assume a c.15% improvement in UK power prices versus forwards, as medium-term gas prices rise and the power market tightens, although the shares now look expensive even on this basis.
Financial projections: state aid approval and power prices key uncertainties
We forecast Drax making little in earnings over 2016-18, although we still forecast positive free cashflow of greater than 20p/share p.a. as capex spend moderates. Changes in power prices and the outcome of the state aid process for Drax’s fixed price contract could each have a significant impact on our estimates. If the EU approves the contract at the original strike price, power prices rise strongly, and/or Drax announces a significant cost cutting programme this could lift our estimates. If power prices remain in-line with current forwards or the fixed price contract is not approved, the squeeze could be more severe.

220p/share target price unchanged; downgrade to Sell; risks
We leave our DCF based target price unchanged at 220p, although the rally in the share price over the last month, and drop in UK power prices, makes us worry more about potential downside scenarios. Our DCF based valuation assumes Drax converts three of its six units to biomass with two operating under the RO and one under a CfD (with a contract price of GBP95/MWh real). The main upside risks are higher UK power prices, positive regulatory news, or cost cutting. If Drax secured its fixed price contract at the original strike price this could add 90/share to our valuation"

[zcaprd7] 05/11/2015 01:30

Well, emergency measure 2 involves bringing old stations back online, but what does that exactly entail? I guess high spot prices over the winter will benefit Drax whatever they decide to burn?

[spranson] 04/11/2015 22:11

prefect storm for the likes of Drax: no wind or sun. pity it wasn't a bit colder to further press the point, of the need for traditional generation, a bit further.

maybe the coal power outages were deliberately making that point?

[zcaprd7] 04/11/2015 18:25

Emergency measures used for the first time. Not even cold, or snowing yet...

[rburtn] 02/11/2015 17:57

Interesting exchange between Minerve and Boffster. Given that water vapour pressure can lead to 1-3 % of atmosphere, I reckon for every photon absorbed and converted to atmospheric kinetic energy by CO2 anything between 30 and 100 are absorbed by water vapour. And that's nothing to the ratio for H2O in the form of water droplets in clouds! CO2 and Greenhouse gases causing Climate Change, Bah, Humbug.

[liquidkid] 29/10/2015 14:44

How about this one as the got to be madder than 'the maddest of all the mad ideas'

DRAX reduce their CO2 emissions by burning trees.



'U.K. is ending some of its subsidy for new photovoltaic farms and new land-based wind farms. By contrast, it will leave all of the subsidy programs in place for wood burning. the U.K. expects to eventually provide more than $10bn of support to biomass energy.'

biomass = wood = trees

To put it simply if you chop down and burn enough trees then they will grow back faster and thus reduce the green house effect of you burning all the trees. All in the future of course because by that time we will all be going around on zero carbon hoverboards and living in zero rated houses.

Transcript of climate change board meeting....

“Fiscal policy. . .” he repeated, “that is what I said.”
“How can you have money,” demanded Ford, “if none of you actually produces anything? It doesn't grow on trees you know.”
“If you would allow me to continue.. .”
Ford nodded dejectedly.
“Thank you. Since we decided a few weeks ago to adopt the leaf as legal tender, we have, of course, all become immensely rich.”
Ford stared in disbelief at the crowd who were murmuring appreciatively at this and greedily fingering the wads of leaves with which their track suits were stuffed.
“But we have also,” continued the management consultant, “run into a small inflation problem on account of the high level of leaf availability, which means that, I gather, the current going rate has something like three deciduous forests buying one ship’s peanut."
Murmurs of alarm came from the crowd. The management consultant waved them down.
“So in order to obviate this problem,” he continued, “and effectively revalue the leaf, we are about to embark on a massive defoliation campaign, and. . .er, burn down all the forests.
I think you'll all agree that's a sensible move under the circumstances."

[bigdazzler] 21/10/2015 13:55

White Christmas I would be laying a bet against that at evens.

Only muppets/mug punters bet on a white Christmas.

Oh and as for the geese they are only moving so they don't get cooked at Christmas.

[zcaprd7] 20/10/2015 16:44

White Christmas odds slashed to evens...

[zcaprd7] 14/10/2015 14:57

In for a long, cold, winter if the geese are correct...

[grahamite2] 14/10/2015 10:51

Nice yield but a chart to run a mile from.

[cottoner] 02/10/2015 06:12

Article in today's Times

Biomass switch to rescue power station


Active Energy, a British biomass company, which claims it can convert the plant cheaply to burn biomass materials including woodchips or agricultural waste rather than coal, said it was in talks with EPH about a rescue deal.

“The biomass conversion costs for Eggborough with our technology would almost be nil, provided the plant has been maintained in good operating condition,” said Richard Spinks, chief executive of Active Energy.


Full article below

[cottoner] 01/10/2015 22:40

Beeks of Arabia 2 Sep'15 - 21:41 - 775 of 805 0 0

Eggborough on its way today.

Bye bye coal.

....................

Perhaps not - Eggborough in discussions with AEG (Active Energy)

[boffster] 01/10/2015 09:42

I'm not, but I know that good science is based on solid facts rather than majority consensus. Remember that not so long ago the consensus was that the earth was flat!

Some interesting articles around such as the one below


Basically saying that elevated co2 levels result in plants which grow faster whilst consuming less water!

So maybe we should be thanking plants like Drax for helping to feed our ever expanding population?!

[minerve] 30/9/2015 19:45

Are you a scientific expert then? One of the few contrarian scientists who wants his name known for all the wrong reasons?

[boffster] 30/9/2015 14:55

Minerve, well we shall agree to disagree on that one, I really don't believe that the minute atmospheric concentration (circa 0.04%, of which I think humans contribute about 0.01% at present) of what is actually a pretty naff greenhouse gas, can make much difference to anything. Aside from the fact that other nations emit far more of this 'nasty' stuff into the atmosphere, why should we cripple ourselves?

I would agree that nuclear is the way forward for providing baseload in the long term, but that is many, many years away.

[minerve] 29/9/2015 20:02

Boffster

I completely disagree! That is why I have marked you down, as it is a poor attitude to have if I may say so.

It is very sad news and White Rose was certainly not a white elephant. Co2 is causing global warming whether you want to believe it or not. This was a method of utilising cheap, always available energy that is 'sustainable' whilst proper green alternatives are developed and/or we get back to realising nuclear energy is the future. Years of political incompetence, world-wide I might add, has cost this planet dearly.

[boffster] 28/9/2015 13:54

Drax giving up on that CCS white elephant has got to be the best news I've heard in a while. Trying to stuff Co2 underground as if its some sort of toxic gas has got to be the maddest of all the mad ideas spawned by this obsession with 'green' electricity generation.

[fangorn2] 25/9/2015 10:44

Indeed it is..Population decline in Germany is sole reason behind her generosity - not that the migrants theyre going to be getting are going assimilate.

[minerve] 25/9/2015 10:41

I was reading the other day about Germany. They have got some real problems looming with growth and the population demographic. Merkel knows this. This immigration issue isn't about her heart and care for them, it is all to do with solving Germany's growth problems long term.

[1corrado] 25/9/2015 09:53

Nice to see some hope..............