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The value of shares in Drax are unlikely to be affected by the House of Lords vote last night to impose a tighter carbon emissions limit under the Emission Performance Standard (EPS), according to a market report.
Deutsche Bank said the vote, which was passed by 237 votes to 193, “does not undermine the basic investment case for Drax in our view”.
The report said the three generating units being converted to biomass at the power station would be unaffected by the new regulations, and while the remaining three coal units “might have their load factor constrained”, they are already expected to drop to a load factor of 40 per cent by 2018 which would be “consistent with the EPS”.
Martin Brough, analyst at Deutsche Bank, said: “The most likely future for Drax in our view is a progressive shift to biomass generation, with the remaining coal units operating at lower load factors.
“A tighter EPS could reduce the flexibility of Drax and the UK to respond to alternative scenarios, but would not change this vision.”
He added that Drax “remains a risky investment” due to the plant’s “significant exposure to wholesale prices and government policy”.
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