Company in the news: Drax
Have the prospects of power station owner Drax been transformed by the government? Phil Oakley reports.
In April last year, I said Draxwas a sell'. It looked expensive on 18 times expected earnings, and I thought future profits would be hit by carbon emissions allowances costs, and as it made its power station comply with regulations.A plan to convert from coal to biomass looked to be stuck in the starting gates.
But events have proved me wrong. Although profits in 2013 are set to be lower than in 2012, Drax's (LSE: DRX)prospects may have been transformed by the government, which last week agreed to let it charge a minimum of £105 per megawatt hour (more than twice the current market price) for the electricity it generates from burning biomass (mainly wood pellets).
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