Citi downgrades Drax to sell amid overvaluation concerns

LONDON – Citi has issued a downgrade for energy company Drax from a neutral position to ‘sell’, citing concerns over the company’s valuation and potential challenges ahead. The bank’s analysts pointed to several factors that could impact Drax’s financial performance, including the current political climate and increased scrutiny from regulatory bodies.

Key issues raised by Citi include:

• The approaching general election, which brings uncertainty regarding future government support for the energy sector.
• The unsustainable cost structure of biomass production in a market where power prices are falling.
• Competition from other energy sources, such as nuclear power and new gas capacities, which could erode Drax’s market share.
• Ongoing investigations by the National Audit Office and Ofgem, which are examining aspects of Drax’s operations and could have financial repercussions.

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