Fwd: + Drax Shares Retreat on U.K. Carbon Floor-Price Plan (Update1)

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Drax Shares Retreat on U.K. Carbon Floor-Price Plan (Update1)
2010-12-17 16:56:06.27 GMT

(Updates share price in second paragraph.)

By Kari Lundgren
Dec. 17 (Bloomberg) -- Drax Group Plc, operator of the
U.K.'s largest power plant, fell in London after the government
announced plans to set a floor price on carbon emissions.
Drax declined 8.3 pence, or 2.3 percent, to 359.2 pence,
valuing the Selby, England-based company at 1.3 billion pounds
($2 billion). The stock retreated 2.5 percent yesterday after
Secretary of State for Energy and Climate Change Chris Huhne
laid out plans to reform the U.K.'s energy markets.
Changes recommended by the government, which if approved by
Parliament will go into effect in 2013, include a carbon floor
price rising to a minimum of 20 pounds a ton by 2020 and 70
pounds a ton by 2030. The Treasury suggested using the climate
change levy and a duty on fossil fuels to implement the floor.
"Currently, coal is setting the U.K. gas price, which is
setting the U.K. electricity price," Evolution Securities
analyst Lakis Athanasiou said in a note to investors today. As
gas prices rise, electricity prices will also increase, boosting
Drax earnings, he said. Higher carbon costs would cut into any
profits Drax made from this energy price increase, he said.

For Related News and Information:
Stories on Drax's earnings: DRX LN <Equity> TCNI ERN <GO>
U.K. power market stories: TNI UK PWRMARKET <GO>
Top energy news: ETOP <GO>
U.K. electricity prices: ELEU <GO>

--Editors: Alex Devine, Stephen Cunningham.

To contact the reporter on this story:
Kari Lundgren in London at +44-20-7073-3442 or

To contact the editor responsible for this story:
Will Kennedy at +44-20-7073-3603 or