Drax Group's (LSE:DRX) bioenergy with carbon capture storage (BECCS) business still holds “considerable importance” to the government’s net zero targets, Liberum analysts believe.
Rating the electricity company's shares a ‘buy,’ the broker shrugged off the government's decision not to support Drax’s BECCS project in last Thursday’s ‘green day,’ instead suggesting future funding is likely.
Under the BECCS plan, the company says it will incorporate carbon capture technology into its wood-pellet-fired-power station in North Yorkshire to reduce greenhouse gas emissions.
The government did say it would hold talks with Drax over the project after the FTSE 250-listed firm threatened to redirect £2bn worth of investment abroad if not offered support.
“The government has […] confirmed that it will work closely with electricity generators currently using biomass to facilitate a transition,” the Liberum's analysts noted.
“BECCS remains critical to UK government net zero targets,” they added, with a biomass strategy due from Downing Street before the end of June.
Liberum's share price target for Drax was cut to 940p from 951p, though this was still looking for almost 60% upside from Tuesday’s opening.
The case for Drax to build its BECCS power station in the US also “remains strong,” Liberum said, and could become an “even greater focus” for the company.