Market Report: Drax shareholders boosted by power station plan

The Drax coal-fired power station said that forward sales in 2016 were at a lower average achieved price than sales made for 2015 (Rex)

Weary shareholders of energy firm Drax were boosted when planned subsidies to turn another coal-fired power station into one powered by biomass fuel were approved by the European Commission.

RWE npower’s transformation of the Lynemouth plant in Northumberland can now be subsidised by the UK after the EU underlined the importance of cutting CO2 emissions and found it would not hurt global supply.

It bodes well for Drax, which fired up 28p or 12 per cent to 253.1p. The FTSE 250 firm is converting its own Drax Power Station in North Yorkshire to run on biomass instead of coal and investors are betting that it would also gain approval for state aid.

Drax shares have slumped 44 per cent this year since the Government said it was slashing green energy subsidies, reversing pledges by the coalition.

The FTSE 100 put on 39.56 points to 6,395.65, with the banks leading the charge after they passed the Bank of England’s stress tests. With investors all set for the Federal Reserve to hike interest rates this month, the first contraction for US manufacturing in three years put a spanner in the works.

Other blue-chip risers included property group Hammerson, which gained 17p to 627.5p as Goldman Sachs upgraded the stock to buy, urging clients to pile in.

The slippery slope continued for Morrisons, 1.2p off at 151.3p, with relegation from the top flight secured by the struggling supermarket group. G4S, the troubled security firm, was also demoted but rose 5.1p to 232p as Goldman removed its sell rating.

Petra Diamonds sparkled after it struck a deal to buy a 49.9 per cent stake in the legendary Kimberley Mine in South Africa from De Beers, but the 8.1p rise to 72.25p was not enough to save it from FTSE 250 relegation.

Sophos’s former private equity parent Pentagon dumped 60 million shares in the cyber security firm for £159m, taking advantage of a 28 per cent rise since floating in July. Shares of Sophos, in which Pentagon retains a 22 per cent stake, dropped 25.6p or 9 per cent to 258p.