Shares in Drax, which converts coal and biomass to energy, plunged 22 per cent on Wednesday after the government announced that it has decided to create support levels for electricity generated from sustainable biomass at existing fossil fuelled power stations on an individual generating unit by unit basis, and not, as previously proposed, on a power station wide basis.
The firm insisted that it is confident that it can transform Drax into a predominantly biomass fuelled generator and that initially it expects to convert three of its six generating nits.
The firm said: "It will take some time to develop all of the sustainable biomass supply chain to fuel these units, but we believe that within approximately five years Drax could become a predominantly biomass fuelled plant.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
"We are currently refining our previously announced £650m to £700m strategic capital investment plan, but remain confident of the overall scale. We will continue to work with government and Ofgem on the design of practical and efficient regulations for the implementation of these decisions.
"This transformation will be achieved through major capital investments at Drax and across the supply chain, securing significant numbers of jobs, primarily in the North East. We remain keen to contribute fully to the UK's renewables and carbon reduction targets by producing low cost, reliable and flexible renewable electricity."
The company also said that the fuel purchased to support recent trails to convert Drax units to burn biomass at a single generating unit resulted in the group incurring around £20m more in research and development costs for 2012 than originally envisaged.
The share price fell 20.60% to 411.70p by 10:11.
NR
