Market Report: Budget fears spread as investors turn off Drax

Fallers were in the minority yesterday, but Drax was one of them as fears were raised that the power station operator could face a large blow over carbon permits in tomorrow's Budget.

Last December the Government revealed plans to introduce a floor price for carbon emissions which would eventually rise to £70 a ton by 2030, and a decision on the proposals – including how it would be structured – is expected to be announced on Wednesday.

Warning that "there is no good outcome here for Drax", and noting the current carbon price is below £15 a ton, Angelos Anastasiou, an analyst at Investec, said he sees the decision "as varying degrees of bad news".

"The debate is on the path," said Mr Anastasiou, who added that the "toughest case is for a straight-line increase to £70 a ton from current levels".

He also pointed out that in 2013, as part of the EU emissions trading scheme, "fossil fuel generators will cease to get free carbon allocations". Once this disappears, the analyst calculated, if Drax produces the same amount of carbon as in 2010 "each £5 increase in the carbon price would lead to an increased cost of £110m".

There was some hope, he said, in the group's "plans to convert one, and then potentially more, of its six units to dedicated biomass burning [which] could extricate it from this carbon conundrum, but it does count on significant subsidies... coming from the Government".

Dipping 4.6p to 415.4p, Drax was also hit by JP Morgan Cazenove reiterating its "underweight" advice, saying that although rising power prices in the UK have helped its short-term outlook, things appear more challenging in the longer term.

The rest of the market, however, maintained its rally as worries over Japan's nuclear situation continued to recede. The FTSE 100 climbed 67.96 points to 5,786.09 and the FTSE 250 closed 165.42 higher at 11,511.24 despite – with air strikes in Libya ongoing – the price of oil rising.

Takeover news from across the Atlantic was having an effect following Sunday's announcement from AT&T that it is spending $39bn (£24bn) on T-Mobile USA. Vodafone – which is involved in the US through its joint venture Verizon Wireless – advanced 6.05p to 176p, although not everyone saw it as good news for the telecoms group.

Deutsche Bank said that, although it would usually view "this substantial consolidation event as unambiguously positive", it could prompt Verizon to make acquisitions itself, potentially delaying dividend payments to Vodafone.

Investec's Morten Singleton, however, said the deal "sidelines [Verizon Wireless's] major US competitors in a focus on integration and synergy extraction", and added that a possible merger between Vodafone and Verizon has now been made a "little more likely".

Elsewhere, Weir was driven up 73p to 1,708p by Credit Suisse giving it an "outperform" rating, with the broker saying that despite its recent under-performance it "remains a strong organic growth story". The rest of the engineering sector was also doing well, with Invensys – around which vague bid speculation has recently been seen yet again – taking top spot after moving 17.1p to 353.2p.



At the opposite end, Essar Energy plummeted 34.6p to 440.4p following its first full-year results since it listed last year. The energy group's earnings did beat expectations, but it also revealed three of its power stations have been delayed by three months because of recent heavy rain in India.

On the FTSE 250, there was a much better reaction to Regus's update, with the serviced office provider shooting up 16.1p to 116.6p following the release of its preliminary figures. The company enjoyed the jump despite its earnings falling in 2010 by more than two-thirds, as it predicted it would see its revenue grow in the year ahead. Punch Taverns was lifted 4.6p to 73.55p after responding to reports regarding the future of its spirits business. The group said it had thought about demerging the unit as part of its strategic review, and said it would announce its conclusions today.

Also issuing a statement was Gem Diamonds, which – following recent speculation – confirmed it is currently in preliminary discussions with Lucara Diamond over a potential merger, and investors bumped it up 14.2p to 284.2p.



On the Alternative Investment Market, Rockhopper spurted up 70.75p to 287.75p after the explorer said its Falkland Islands oil well "is highly likely to prove commercially viable". The news also helped other groups operating in the area, including Desire Petroleum, which increased 3.25p to 40p.

Meanwhile, on the small-cap index, the struggling retailer JJB Sports added 12p to finish at 26p ahead of today's crucial vote on its rescue plan. Over the weekend it emerged that Hammerson, one of the chain's biggest landlords, will support its proposals, which include the potential closure of as many as 89 of its shops.

PROMOTED VIDEO
Arts and Entertainment
Robert De Niro, Martin Scorsese and DiCaprio, at an awards show in 2010
filmsDe Niro, DiCaprio and Pitt to star
News
i100
News
In this photo illustration a school student eats a hamburger as part of his lunch which was brought from a fast food shop near his school, on October 5, 2005 in London, England. The British government has announced plans to remove junk food from school lunches. From September 2006, food that is high in fat, sugar or salt will be banned from meals and removed from vending machines in schools across England. The move comes in response to a campaign by celebrity TV chef Jamie Oliver to improve school meals.
science
Sport
England captain Wayne Rooney during training
FOOTBALLNew captain vows side will deliver against Norway for small crowd
Life and Style
Red or dead: An actor portrays Hungarian countess Elizabeth Báthory, rumoured to have bathed in blood to keep youthful
health
News
peopleJustin Bieber charged with assault and dangerous driving after crashing quad bike into a minivan
News
ebooksAn unforgettable anthology of contemporary reportage
News
peopleHis band Survivor was due to resume touring this month
News
people'It can last and it's terrifying'
Life and Style
fashionModel of the moment shoots for first time with catwalk veteran
Sport
Radamel Falcao poses with his United shirt
FOOTBALLRadamel Falcao's journey from teenage debutant in Colombia to Manchester United's star signing
Life and Style
fashionAngelina Jolie's wedding dressed revealed
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Front-Office Developer (C#, .NET, Java,Artificial Intelligence)

£30000 - £45000 per annum + benefits+bonus+package: Harrington Starr: Front-Of...

C++ Quant Developer

£700 per day: Harrington Starr: Quantitative Developer C++, Python, STL, R, PD...

Java/Calypso Developer

£700 per day: Harrington Starr: Java/Calypso Developer Java, Calypso, J2EE, J...

SQL Developer

£500 per day: Harrington Starr: SQL Developer SQL, C#, Stored Procedures, MDX...

Day In a Page

Chief inspector of GPs: ‘Most doctors don’t really know what bad practice can be like for patients’

Steve Field: ‘Most doctors don’t really know what bad practice can be like for patients’

The man charged with inspecting doctors explains why he may not be welcome in every surgery
Stolen youth: Younger blood can reverse many of the effects of ageing

Stolen youth

Younger blood can reverse many of the effects of ageing
Bob Willoughby: Hollywood's first behind the scenes photographer

Bob Willoughby: The reel deal

He was the photographer who brought documentary photojournalism to Hollywood, changing the way film stars would be portrayed for ever
Hollywood heavyweights produce world's most expensive corporate video - for Macau casino

Hollywood heavyweights produce world's most expensive corporate video - for Macau casino

Scorsese in the director's chair with De Niro, DiCaprio and Pitt to star
Angelina Jolie's wedding dress: made by Versace, designed by her children

Made by Versace, designed by her children

Angelina Jolie's wedding dressed revealed
Anyone for pulled chicken?

Pulling chicks

Pulled pork has gone from being a US barbecue secret to a regular on supermarket shelves. Now KFC is trying to tempt us with a chicken version
9 best steam generator irons

9 best steam generator irons

To get through your ironing as swiftly as possible, invest in one of these efficient gadgets
England v Norway: Wayne Rooney admits England must ‘put on a show’ to regain faith

Rooney admits England must ‘put on a show’ to regain faith

New captain vows side will deliver for small Wembley crowd
‘We knew he was something special:’ Radamel Falcao's journey from teenage debutant to Manchester United's star signing

‘We knew he was something special’

Radamel Falcao's journey from teenage debutant to Manchester United's star signing
'I’ll tell you what I would not serve - lamb and potatoes': US ambassador hits out at stodgy British food served at diplomatic dinners

'I’ll tell you what I would not serve - lamb and potatoes'

US ambassador hits out at stodgy British food
Radio Times female powerlist: A 'revolution' in TV gender roles

A 'revolution' in TV gender roles

Inside the Radio Times female powerlist
Endgame: James Frey's literary treasure hunt

James Frey's literary treasure hunt

Riddling trilogy could net you $3m
Fitbit: Because the tingle feels so good

Fitbit: Because the tingle feels so good

What David Sedaris learnt about the world from his fitness tracker
Saudis risk new Muslim division with proposal to move Mohamed’s tomb

Saudis risk new Muslim division with proposal to move Mohamed’s tomb

Second-holiest site in Islam attracts millions of pilgrims each year
Alexander Fury: The designer names to look for at fashion week this season

The big names to look for this fashion week

This week, designers begin to show their spring 2015 collections in New York