Windfall tax threat turns sentiment against Drax

From The Times
July 18, 2008
Market report
Robert Lindsay


A six-month surge for Drax Group, Britain’s single-biggest emitter of carbon dioxide, was choked yesterday by fears that the Government would hit the company with a windfall tax.
The owner of the giant coal-fired power station that produces 4 per cent of the country’s CO2 emissions lost 39½p to 714½p after analysts at Cazenove and JPMorgan both cautioned that the risk of tougher carbon taxes was growing. Cazenove reiterated its “underperform” advice saying that Drax, whose free carbon dioxide permits account for more than 40 per cent of its forecast earnings this year, was the generator most exposed to tougher carbon taxes.
Evolution said Drax’s recent strong run was driven by the rising oil price and if oil’s run came to an end, the company, which has benefited from relatively cheap coal and high electricity prices, would feel a disproportionate amount of pain.