Broker snap: Still optimistic at Drax

28th Mar 2011 11:53

Coal-fired power station operator Drax has had its target price cut by broker Matrix after the government announced a carbon price floor on electricity generation in its budget last week."The carbon price floor will start at around £16 per tonne of carbon dioxide [from 1 April 2013] and follow a linear path to £30 per tonne in 2020 to drive investment in the low-carbon power sector," the budget said. However, the broker thinks the recent sell-off was overdone and "investors should look to the potential for positive policy changes in the next six months," said analyst Adam Forsyth.The target price is reduced to 428p, from 463p, but a 'buy' is retained as Matrix thinks that "the impact will be mitigated by higher efficiency, plant closures and higher energy commodity prices."BC