Drax Group - Flexibility Revealed

We think the strong performance from the Drax pumped storage gives grounds for upside as it demonstrates the flexibility the company has across its GB portfolio. We have upgraded our numbers on a better, long term storage spread compared with FY 21 and our central case valuation rises to 1,111p from 1,030p as a result. Our central case now also includes the assumption of CCS on two units at Drax.

Drax Group - Pumped Storage Drives Strong Results

Drax has beaten expectations with its full year results largely as a result of strong performance from its pumped storage asset at Cruachan in Scotland. With the GB system seeing a higher spread between peak and off peak prices the asset has benefited from trading but also from more provision of system support services. While these effects may not be so pronounced in FY 23 we see the asset continuing to perform strongly. Combined with the dispatchable biomass assets, Drax is fulfilling its ambit

Drax Group - Capacity Market Success

Success in the T-4 Capacity Market auction for Drax adds to the existing benefits of the company’s pumped storage and hydro assets. This auction was largely driven by other battery storage assets entering the market and we see this as potentially positive for pricing in future auctions. Drax has already signalled that the Cruachan Pumped Storage project did well in FY 22 and we expect this to be confirmed in the preliminary results statement due tomorrow.

A Car Without Brakes - Opportunities in Electricity Storage

Electricity storage and especially long duration storage is essential to deliver decarbonisation with a total addressable market of a similar order of magnitude to that for hydrogen, biofuels or carbon capture. It has the potential to become a major sub sector of the energy market.

Where Clean Energy Develops In 2023

We see three key sectors of the clean energy universe as making progress in 2023. Carbon capture and storage (CCS) will benefit from US tax incentives, long duration energy storage will benefit from volatile pricing and higher lithium prices and hydrogen has the potential to recover from demand uncertainty driven by a rather polarised debate on its uses. The markets will be challenging but the strengths of the opportunity remain strong.

Drax Group - Hiccup In An Unprecedented Market

A fine for an inadvertent rules breach feels to us like a symptom of an unusually volatile market in which Drax is working hard to maximise value. We continue to see the Cruachan asset as benefiting strongly in the current market because it can deliver the flexibility that volatile demand and supply require. Drax has already reviewed procedures, but we do not see changes as materially affecting the value of the asset or the company’s trading ability.

Drax Group - The Government Giveth

The mitigation of the Electricity Generator Levy to take account of exceptional fuel costs is clearly positive for Drax and reflects the need for policy to support dispatchable generation in an increasingly volatile energy system. We have updated our forecasts to reflect this change and to update for current pricing. Our central case valuation rises to 1,030p from 963p.

Drax Group - Trading Update Confirms Position

The trading update from Drax confirms its position at the heights of the GB electricity system with the company playing a crucial role in providing support during stressful times. The company expects EBTIDA for FY 22 to be slightly above the top end of the analysts’ range. While some uncertainty exists over how biomass prices will be treated in the Electricity Generators Levy windfall tax there is at least acknowledgement that there will be some relief. Continued development of Bioenergy Carbon

Where There's Muck - Bioenergy

Energy from biomass or waste can be genuinely low carbon and sustainable, representing a major tool in the decarbonisation toolbox. The ability to add carbon capture technology creates an immediately available negative emissions solution and adding liquid fuels allows the decarbonisation of sectors previously seen as challenging. Demand for all these solutions is likely to grow as decarbonisation and energy security become essential requirements in the energy mix.

Drax Group - Known Unknown Now A Known

The Electricity Generator Levy has been set at 45% of profit above a power price of £75/MWh. While slightly higher than some expectations, when we update for higher current prices, the overall impact on our valuation is negligible. The long-term impact is also minimal in our view and the removal of uncertainty over the extent of the taxation is beneficial. Drax remains essential to the decarbonisation of the UK power industry as the main viable route to negative emissions at scale.

Drax Group - Ro Price Cap But Cfd Option Remains

The UK government’s announcement of a renewables price cap remains short on detail. Drax remains a key strategic element in the GB power system and should have a strong bargaining case. We continue to see the potential switch from the Renewables Obligation to the greater price certainty of a Contract for Difference as a possible win-win outcome but the introduction of the cap suggests that strike price negotiations with the wider industry have proved difficult. The recognition of the need for di

Drax Group - Tidying up in Pellets

Drax’s acquisition of the remaining 10% stake in Alabama Pellets is a useful tidying up of the holding in our view, bringing control over additional capacity and increasing economic exposure to this valuable business. With the potential to develop BECCs capacity in North America, we see additional pellet supply as important in de-risking that development process.

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.

Somero Enterprises - FY22 results in line, a fairly flat year ahead

FY results were in line with the January trading update, with modest revenue growth and higher overheads resulting in a slight profit decline. Australia and Europe delivered record revenues, while US sales were marginally off last year’s record. The Houghton expansion was delivered on budget and is now operational, increasing capacity and capabilities for future growth. We reduce FY23 EPS by 4.8% with TP lowered from 760p to 705p. The shares remain at a significant discount to peers on a P/E of

Morning Note – 8 March 2023

FY22 Financials

Capital Limited (LSE: CAPD) released its full year results (YE Dec 2022) this morning. The company had already released the operational figures for the year including revenue so focus is on EBITDA and below as well guidance. Having said that it is impressive that this is the third consecutive year Capital has delivered material growth in revenue, with full year sales increasing 28%, following 68% YoY growth in 2021 and 18% YoY growth in 2020. Moreover the company is guiding to $320-340m for FY23

Hybridan Small Cap Feast - 21 Feb 23

21 February 2023 @HybridanLLP Status of this Note and Disclaimer This document has been issued to you by Hybridan LLP for information purposes only and should not be construed in any circumstances as an offer to sell or solicitation of any offer to buy any security or other financial instrument, nor shall it, or the fact of its distribution, form the basis of, or be relied upon in connection with, any contract relating to such action. This document has no regard for the specific investment objec

Revised forecasts

LIBERUM: Costain Group* - Free cash more than 50% market cap

LIBERUM: Yü Group* - Strong momentum and cash flow

LIBERUM: Wincanton - Contract loss and closed book headwinds

Probability of strategic change increases - revising PT to 12p (from 20p) on a break-up basis

Supreme plc: disposal of T-Juice intellectual property

Supreme reports that it has entered into an agreement with an associated company of La Vape Professionelle Distribution (LVP), a leading French wholesaler of e-cigarettes and e-liquids, for the disposal of the intellectual property (IP) of T-Juice, inclusive of the Red Astaire brand. Supreme will receive an upfront payment of €4.5m (£3.97m) in respect of T-Juice brand IP, with the addition of income from consultancy services. The agreement ushers in a new strategic partnership in which Supreme

Cenkos: Smart Metering Systems Plc -- Strong results - FY23E & FY24E upgrades

Smart Metering Systems (SMS) has announced strong FY22 results in-line with January 2023 upgraded forecasts. The smart meter installation run-rate accelerated during FY22, with 480,000 meters installed, ahead of expectations. With the installation run-rate reaching 45,000 meters per month during H2/22, SMS is on track to install an expected 600,000 meters in FY23E. The battery storage portfolio increased to 760MW by FY22 and has grown further to 860MW as of 13 March 2023. The first 140MW of batt

ITM Power - Test Capacity To Remove Blocks

The increase in power capacity at Bessemer Park is a positive sign that action is being taken to address the causes of the historic production delays that ITM has faced. Improved testing from one to two 2MW stacks and the scope for this to increase further combined with increased power availability throughout Bessemer Park ought to help ITM in reducing their order backlog and scaling up production over the coming year.

LIBERUM: Kier Group - Strong H1 performance but some headwinds expected in H2

Hybridan Small Cap Feast 08/03/22

What’s cooking in the IPO kitchen?** Fadel Partners, a developer of cloud based brand compliance and rights and royalty management software, working with some of the world's leading licensors and licensees across media, entertainment, publishing, consumer brands and hi-tech/gaming companies intends to join the AIM market. FADEL has two solutions, being IPM Suite and Brand Vision. Expected Admission date is late March 2023. Onward Opportunities Limited intends to join the AIM market. The Company'

ITM Power (ITM LN) - Bessemer Park power supply upgrade

Immediate higher power supply to increase module testing capacity. ITM has announced an agreement to significantly increase the power supply into its Bessemer Park manufacturing facility in the UK. Existing power supplies are now 7.5MVA, reflecting a recent increase from 5.0MVA. This will now allow testing of two 2MW modules at the same time.