Graanul - comment

The Drax results yesterday, and management’s subsequent comments reaffirm our view that Graanul will remain under pressure post FY26. We view the restructuring proposal as postponing the inevitable, and we will examine the potential to short the bonds post-transaction. 

Drax released its half-year results yesterday, offering limited commentary on the UK renewables market. However, it reaffirmed what is already well understood: Drax is expanding its pellet production capacity in the United States, reaching a record level in the first half of the year, with further growth anticipated. At the same time, demand in the UK is expected to decline under the evolving regulatory framework. For Drax specifically, consumption is projected to fall from 8 million tonnes to 3 million tonnes. Internal discussions are ongoing, along with engagement with suppliers, to determine how future supply will be managed.