The sale of Drax’s portfolio of combined cycle gas turbines (CCGTs) removes some revenue in the near term but the ability to reinvest the proceeds in the pellet business should replace this quite quickly in our view. While the loss of near term income has an impact on valuation this should be offset by a better long term future in the pellet business. As a result our base case valuation increases from to 515p from 505p.
18 Dec 2020
Gas for Pellets
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Gas for Pellets
Drax Group plc (DRX:LON) | 489 30.3 1.3% | Mkt Cap: 1,892m
- Published:
18 Dec 2020 -
Author:
Adam Forsyth -
Pages:
6
The sale of Drax’s portfolio of combined cycle gas turbines (CCGTs) removes some revenue in the near term but the ability to reinvest the proceeds in the pellet business should replace this quite quickly in our view. While the loss of near term income has an impact on valuation this should be offset by a better long term future in the pellet business. As a result our base case valuation increases from to 515p from 505p.