Drax shares suffer £400m blow after a Government U-turn over subsidies

By Daily Mail Repoter

Updated: 04:17 EDT, 24 April 2014

Britain's biggest power station owner is suing the Government over a U-turn on subsidies.

Drax shares fell by 13 per cent, wiping more than £400million from the value of the group, after promised support was pulled by ministers.

The company is converting three of its six coal plants in Selby, North Yorkshire, to run on woodchips, a process known as biomass, in a £700million programme.

Conversion: The company is converting three of its six coal plants in Selby, North Yorkshire, to run on woodchips, a process known as biomass, in a £700million programme

One generator is already complete, and ministers last year shortlisted two others for generous subsidies – but yesterday revealed that only one would receive financial support.

‘There’s no basis on which they should be reversing that December decision,’ said chief executive Dorothy Thompson.

‘The Government’s position is they have assessed the second unit and consider it now to be ineligible. There has been absolutely no change to plans. We have commenced legal proceedings to challenge this decision.’

Analysts at JP Morgan said: ‘This is a very surprising announcement… we would not rule out potential for Drax’s legal challenge to succeed.’

The Department of Energy refused to comment on the reason for the move.
Projects offered subsidies include an offshore wind farm run by energy giant SSE.

Eight projects, including five offshore wind farms, were given the green light – with Drax being the only company to lose out.

‘These investments are critical to make sure we have got secure, clean energy,’ said Energy Secretary Ed Davey.

Thompson said biomass was ‘still seen as important part’ of Government strategy, but added: ‘I have to admit this has knocked our confidence a bit.’

Drax, which said it would continue with the work, generates 7 per cent of Britain’s electricity.
Shares closed 99p lower at 657.5p.