Drax Shares Fall On UK Plan To Change Biomass Subsidies

LONDON, Dec 12 (Reuters) - Shares in Drax fell to their lowest in more than two years, wiping as much as 300 million pounds ($471 million) off the power firm's market value, after Britain announced planned changes to one of its subsidy schemes for biomass plants.

Britain's Department for Energy and Climate Change (DECC) said in a consultation published on Friday it wanted to make changes to the subsidy system because more biomass generation was being developed than it initially planned, and to make sure enough cash is left to help support other types of low-carbon power generation.

Drax shares were down 9 percent to 514.5 pence at 0950 GMT, after trading as low as 490.1 pence.

As part of extensive reform of Britain's electricity market, the government is changing the way it supports renewable energy projects by replacing direct subsidies with a contracts-for-difference (CfD) system whereby qualifying projects are guaranteed a minimum price at which they can sell electricity.
DECC said on Friday it would no longer grandfather, or guarantee, the subsidies offered under its previous Renewables Obligation scheme, to biomass conversion projects.

"We believe that none of Drax's currently planned conversions should be affected by today's announcement. What would be affected is a fourth unit conversion that could potentially happen (in 2016/17)," said analyst Angelos Anastasiou at Whitman Howard.

Drax was not immediately available to comment.
($1 = 0.6367 pounds) (Reporting by Susanna Twidale and Karolin Schaps; Editing by Mark Potter)

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