Drax rises after EU approves state aid for MGT Power

The European Union has given the green light for the UK government to provide financial aid to MGT Power’s biomass power station in the North East of England.

Sector peer Drax, which owns the largest coal-fired power station in the UK that is switching to burn wood pellets, was performing well on London's stock market on hopes for EU support for biomass generation.

The European Commission said its decision to back MGT's Teeside project was due to the fact that the plant will reduce carbon dioxide emissions and provide a constant energy output throughout the day, rather than intermittently as is the case with wind energy.

MGT and Drax are among the developers to be awarded a contract for difference mechanism that is meant to insure the price clean energy generators receive for power over 15 years. Government funding is designed to ensure certainty for investors until a more permanent solution is introduced.

Drax shares fell 13% in December after the government announced it was considering withdrawing state aid to generators that are converting to burn biomass, but rose 3.91% to 372.10p at 14:16 on Tuesday on the back of the decision adopted by the executive arm of the European Union.