Drax Group - Carbon Credit MoU in US

An offtake agreement for carbon credits on new biomass projects in the US shows that Drax is actively pursuing this option which can help to build diversity and create route to market options for the growing pellets business. We also think it shows that Drax can evidence to third parties that its biomass generation is a genuine low carbon solution which meets the increasingly demanding sustainability requirements of both voluntary and formal credit methodologies.

UK Energy Package - Energy Package Impacts on Clean Energy

UK Prime Minster Liz Truss has outlined a package to offset the impact of high gas prices on the UK electorate. While a lot of the initiatives focus on household bills, a number have a direct impact on clean energy companies. We see the amendment of the Renewables Obligation with a CfD mechanism as potentially de-risking for clean energy companies. Commitment to energy export is positive for hydrogen and e-fuel producers and the confirmation of no windfall tax is a relief for larger clean energy

Drax Group - CfD Option Plays to Drax's Strengths

The UK Government has published its consultation on supporting bioenergy carbon capture and storage (BECCS) in the UK. In doing so the Business Secretary Kwasi Kwarteng has reaffirmed that “The government is fully behind biomass energy to provide more power in Britain, for Britain”. Additionally, the government is “minded to” bring in contract for difference (CfD) based support which we think plays to Drax’s strengths.

Drax Group - New Pellet Capacity Well Timed

The acquisition of a new pellet plant in British Columbia shows Drax already delivering on its target to add 0.5Mt of capacity in the second half of 2022. The move is well timed with biomass demand growing, notably in Japan where biomass is showing signs of becoming a key solution to meet new efficiency standards brought in with recent legislation.

Inflation Reduction Act

The US Inflation Reduction Act of 2022 now has a chance of passing the Senate next week as it is being voted under the Reconciliation procedure which allows bills related to the budget to pass on a simple majority rather than the 60-vote majority required to overcome a filibuster. If the act does find its way onto the statue books it will bring US$369bn in clean energy tax credits, grants and other incentives. Much is directed to protecting clean energy manufacturing in the USA, but it is a wide

Review of Electricity Market Arrangements - REMA Could Bring Benefits

Last week, the UK government published the consultation paper on its Review of Electricity Market Arrangements (REMA). Any change potentially represents uncertainty in a market that has been wary of changes with a number of shares falling after early details of possible reforms were flagged in the press. We review the possible changes and conclude that while there is some risk, from what we can see at present the likely outcomes could be either minimal or beneficial for investors in clean energy

Drax Group - Benefiting From Position in Market

Drax’s interim results show strong growth with good performance across the company. Generation especially reflects the company’s leading position in UK dispatchable power. Support to GB system security continues with the making available of generation for next winter and the strong commitment to biomass energy with carbon capture and storage (BECCS) development both in the UK and now in North America. We see our recent upgrade with a new central case valuation of 945p as justified by these resul

Drax Group - Drax to Provide Winter Contingency

Drax continues to provide critical capacity to a stressed power market and now adds contingency this winter by delaying closure of its remaining coal-fired units at the government’s request. The agreement provides a useful fee for Drax. Additionally, prioritising winter running of biomass will also aid security when it is most needed and again Drax should benefit from this. Against these factors the revised guidance makes clear sense and we have increased our forecasts accordingly. Our central c

Drax Group - Windfall Tax Concerns

While it is difficult to predict the extent to which Drax could be impacted by any windfall tax, if at all, we think investors should remember that the company is also key to the delivery of both short and long term energy strategy in the UK. At the short end simply keeping the lights has seen Drax reportedly asked to delay the closure of the two remaining coal units at its Yorkshire site. In the longer term Drax has the only near term negative emissions solution of any scale in the UK with its

Active Net Zero Clean Energy Index - Recent Performance

In this note, we review the recent performance of the Active Net Zero Clean Energy Index. We also take a deeper dive into the composition of the Index in terms of market cap, constituent end market / business model and, finally, geographic exposure.

Drax Group - Q1 Sees Price Strength Continue

Drax Group has issued its Q1 trading. This has seen electricity prices remain strong and the company has improved its forward hedging on the back of this. Ancillary services revenues have also been strong in the period and the company now expects full year EBITDA to be at the top of the range of analyst expectations. As a result, we have increased our forecasts and our central case valuation rises to 903p from 846p.

IPCC/WG3 - IPCC Report is a Major Warning

The IPCC Working Group III (WG3) report is a major summary of how society can limit climate change by delivering a net zero emission outcome. It also represents a major warning that we are running out of time to limit global warming to 1.5oC. Coupled with growing energy security concerns we are already seeing some signs of policy moving to improve action such as the recently announced UK government’s Energy Security Strategy. And the relative inflation of fossil fuels (fossilflation) against cle

Drax Group - Better Near-Term Pricing

A better near-term pricing environment should result in better captured prices for Drax across the board and we have factored in an increase in our assumptions for FY23 and FY24. This follows our revised assumptions on capacity market pricing published earlier in the week. Our low base case valuation rises to 748p from 724p and if we include biomass expansion this rises to 902p from 846p. We now see this central case valuation as most relevant in assessing the company and our forecasts are based

Drax Group - Results Reflect Transition

Drax full year results were ahead of our forecasts with the company benefiting from strong wholesale pricing and a recovery in the customer business. These results were the last to see any revenue from fossil fuelled generation as the company completes its transformation into a renewable energy producer and moves towards being carbon negative by 2030. It produced 12% of the UK’s renewable output making it the largest renewable generator in the country by output.

Drax Group - Strong Capacity Market Pricing

Drax’s capacity market wins confirms good pricing in a tightening market. The narrow impact moves our central case valuation up marginally to 724p from 719p but we also see this as a wider signal of the how UK market is developing and that is supportive for Drax in our view.

ITM Power - Forecast and target price update

Forecast and target price update

LIBERUM: SigmaRoc* - On track & strategic JV

LIBERUM: Yü Group* - More upgrades and stand-out cheap – even in this market

Xpediator (XPD LN) - Under new management

XPD has a new management team, only recently appointed. They have a full plate, including fixing underperforming UK warehousing and freight forwarding units, cutting overheads, and improving management of working capital to reduce debt. But there are also some gems in the Group, the core Central & Eastern European (CEE) logistics operations continue to perform strongly despite the turbulence of the War in Ukraine. Hence H1 earnings show a mixed picture with Group revenue up nearly 50% to £189.3m

LIBERUM: SThree* - Strong Q3 leads to another upgrade

LIBERUM: Judges Scientific* - Geotek drives FY upgrades

EQTE - Heads of Terms toward Sale of Deeside Project

Heads of Terms toward Sale of Deeside Project

SHORE CAPITAL - Crestchic^ (LAOD) - House Stock at 274p

Water Intelligence - 1H22 interims, amending TP, reiterate Buy

Water Intelligence reported a strong increase in revenues for 1H22 but that did not translate into profits which were held back by a sharp increase in other administrative costs. We understand that cost trajectory should flatten in 2H22 which, together with an increase in our revenue forecasts, means we maintain our EPS forecasts. The revenue performance underscores the strength of the growth story but given current market conditions and the need for Water Intelligence to demonstrate bottom line

SIMEC Atlantis Energy* - MeyGen tidal turbine redeployment

MeyGen tidal turbine redeployment

EQTEC - Deeside Sale Terms Agreed

EQTEC continues to deliver on its strategy of realising value from its development projects and focusing on the delivery of its proprietary gasification technology. The agreement to sell Deeside for £15m represents value in our view and adjusting our forecasts for the transaction raises our central case valuation to 3.4p from 3.2p.

SHORE CAPITAL - Mpac Group+ (MPAC, House Stock at 305p)

EQTEC - Rationalisation at Southport

Rationalisation of project ownership at the Southport Hybrid Energy Park allows EQTEC to avoid major capital commitment while still benefiting from development services income, and helps to accelerate development of the project which, in Phase 2, will include EQTEC gasification technology.

LIBERUM: Safestyle* - Investing to maintain momentum

EQTEC - Southport project update

Southport project update