Drax Group expected to benefit from U.K. biomass incentive for power companies; Drax plans to use up to 50% biomass at Selby coal-fired facility

Audrey Dixon

LOS ANGELES , October 28, 2011 (Industry Intelligence) – Drax Group Plc had a boost to its stock valuation by a Goldman Sachs analyst this week on news the U.K. government planned to increase incentives for power firms to burn biomass to reduce carbon dioxide emissions, Proactiveinvestors UK reported Oct. 27.

The company, operator of the U.K.’s largest coal-fired power station through its Drax Power Ltd. subsidiary, wants to increase its biomass burn up to 50% of output by 2015. The Drax Power facility in Selby, North Yorkshire, will burn the biomass with coal.

The government in August approved Drax proposals for two biomass plants.

Goldman Sachs analyst Andrew Mead said Thursday the firm was raising its price target for Drax by 10%, Proactiveinvestors UK reported.

Mead said the valuation for Drax was shifted to a base of 100% biomass following the publication of the government’s consultation paper, which supported Drax’s biomass plans, Proactiveinvestors UK reported.

As Selby-based Drax becomes a large renewable fuel facility over time, it will emerge as a more likely merger or acquisition target, said Mead.

In an Oct. 20 release, Drax commended the government for proposing specific support levels for increased use of biomass in existing coal-fired power stations through co-firing, conversion, in its Renewables Obligation (RO) Banding Review Consultation. Drax said the proposed levels would allow the company to increase biomass use.

The primary source of this article is Proactiveinvestors, Bournemouth, England, on Oct. 27,2011.

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