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Authoritative Independent Monthly Share Selections Using Technical & Fundamental Analysis

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Drax Group - Locks in attractive electricity prices

April 2006

Investing in shares may lose you all or some of your money. Past performance is no indication of future performance. Some of the shares recommended here may be small company shares, which can be relatively illiquid and hard to trade and this makes such shares more risky than other investments.

  • Epic Code:
  • DRX
  • Price:
  • 680p
Shares in coal-fired power station operator Drax have surged 66p since last month’s article thanks to results which were usefully ahead of expectations. For the year ended 31 December, pretax profit was £264m from revenue of £849m. More significantly, Drax has disclosed that it has taken advantage of the high electricity prices to lock in 75% of this year’s expected output at an average price of £46.9 / MWh and a further 47% of expected 2007 output at £49.2 / MWh. Given that prices were just £15 in 2002, this clearly demonstrates that barring a spike in the price of coal (its key input), Drax is well on track to make bumper profits. It has also reiterated its plan to distribute substant ...

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With small companies there is an above average degree of risk compared to buying blue chips. Please be aware that we have not assessed the suitability of any of these investments for you. The newsletter simply states a personal view and diarises the editor’s investment decisions. Please speak to your stockbroker or other qualified individual to ascertain whether any of these companies mentioned would form useful additions to your own portfolios. Past performance is no indication of future success.

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