Global Merchant Batteries: Video – Future of Energy

Research evidence excerpt

Global Merchant Batteries: Video – Future of Energy

Global InsightMValuation Methodology and Risks

Drax Group Plc (DRX.L)

Our price target is derived from our base case sum of the parts, which values each of Drax's

business segments using a DCF approach. We use a WACC of 9.2%. The key assumptions

underpinning our base case valuation include:

n Forward curve UK power prices

n Drax Power Station extended to 2031

n DC / Grid connection sites valued at ~£0.6m/MW

Risks to Upside

n As a generation company, Drax stands to benefit from higher than anticipated power

prices

n BECCS as a technology gaining international traction

n Positive demand dynamics in pellet markets

Risks to Downside

n Power price risk to the downside

n No extension to Drax power station

n BECCS opportunities failing to materialise

n Deterioration in pellet margins

Solaria Energia y Medio Ambiente SA (SLRS.MC)

Our price target is derived from our base case SOTP, with each key segment valued via DCF.

We assume a 3.3% WACC for existing assets, a 5.3% WACC for secured projects and a 4.9%

WACC for unsecured solar growth, 4.9% for unsecured wind growth, 6.9% for unsecured bat-

tery growth and 5.0-5.5% WACC for data centres & infrastructure activities. We run those

DCFs until the end of the life of the assets and assume no terminal value thereafter.

n Significant asset monetisation, mainly via data centres deals

n Higher power prices & lower solar price cannibalisation

n Successful diversification

n Lower bond yields

n Renewed appetite for renewable stocks/consolidation in renewables

n Poor execution on diversification & data centres

n Lower power prices & high price cannibalisation

n Dilutive measures to reduce financial leverage

n Higher bond yields