* EC says state aid plan in line with EU environmental goals
* Drax CFD price of 100 pounds/MWh remains in place
* Contract is 50 mln pounds/yr earnings boost for Drax
(Adds details, background, comments from Drax and analysts)
By Julia Fioretti and Karolin Schaps
BRUSSELS/LONDON, Dec 19 Britain's largest coal
power producer Drax on Monday gained European Commission
approval to convert a third power plant unit to biomass from
coal, sending shares in the London-listed company to a
The Commission opened an investigation into government
support for the project in January and concluded that it was in
line with the European Union's environmental and energy targets.
Drax is in the process of converting its coal-fired power
generating plant in Yorkshire to biomass. The company announced
a shift away from coal earlier this month with the acquisition
of business energy supplier Opus Energy and four gas stations.
The deal had been contingent on the Commission's
state aid approval.
The British government has guaranteed a minimum electricity
price for Drax's biomass project of 100 pounds per magwatt-hour
(MWh) until 2027, which Drax said had not changed following the
"With the right conditions, we can do even more, converting
further units at Drax to use sustainable biomass in place of
coal," Drax Chief Executive Dorothy Thompson said in a
The company said it could convert its remaining three
coal-burning units to biomass in the next two to three years if
the government sets the right conditions.
Drax said the unit would be able to run 100 percent on
biomass instead of co-firing coal in the coming days.
Britain wants to close all of its coal-fired power plants by
Shares in Drax rose to 358.9 pence a share -- their highest
since July 22 -- following the announcement.
Analysts at Jefferies estimated the new contract would give
Drax an earnings boost of around 50 million pounds ($62.08
million) a year but that financial forecasts would not be
affected because the approval had been largely expected.
"This is a key milestone for Drax as it allows the
progression of the recently announced Opus Energy acquisition,"
Jefferies analysts said, who rate Drax as 'underperform'.
($1 = 0.8055 pounds)
(Editing by Jane Merriman)