Court of Appeal rules against Drax on eligibility to investment contract

7th Aug 2014 12:48

Shares in electricity producer Drax tumbled on Thursday after a UK court said one of its power-generating units wasn't eligible for a government incentive.The UK Court of Appeal has allowed the Department of Energy and Climate Change's (DECC) appeal against a previous court decision, meaning that Drax's second unit conversion is "no longer eligible for an investment contract", the company said.Investment contracts offer a government guarantee on electricity prices over the next 15 years - in effect providing a subsidy for the conversion from coal-fired generation to biomass. The UK Court of Appeal did however confirm that unit's eligibility under the previous support scheme known as Renewables Obligation - which offers less price certainty.As of 12:31 shares of Drax were falling 9.08% to 645.5p. AB