Drax rockets on biomass power
A SUDDEN surge of buying activity in Drax helped the oversold FTSE 250 power station operator rocket to 265p before closing 28p or 12pc up at 253.1p.
The blue touch paper was lit when dealers heard that Britain had secured European Union regulatory approval for its plan to finance the conversion of a coal plant at Lynemouth in Northumberland to biomass.
Lynemouth is owned by Drax which is transforming itself into a predominantly biomass-fuelled generator through burning sustainable biomass in place of coal.
Drax has spent about £700m converting two of its six boilers to burn wood rather than coal and the conversion of a third is almost complete.
Drax has fallen 70pc from its January 2014 peak of 829p, with losses accelerating this year following growing uncertainty over funding for business conversions.
Broker RBC Capital Markets recently lowered its price target by 33pc to 180p and reiterated its underperform rating.
Analyst John Musk said it is difficult to see an attractive equity story. It is now a severely life-limited asset and he expects significant impairment charges. Coal units are likely to shut in 2025 at the latest, with biomass units to shut when return on capital subsidies expire in 2027. Drax needs to take a £650m impairment charge against coal assets to reduce their book value from £900m to £300m.
Mytrah Energy, the AIM-listed Indiafocused renewable energy company, jumped 3.62p or 7.5pc to 51.88p after buyers switched on comments made by Indian Prime Minister Narendra Modi at the Paris climate change summit. He repeated his earlier commitment for India to quadruple its renewable power capacity to 175 gigawatts by 2022 as part of the government’s plan to supply electricity to every household. Still in the energy sector, shares of UK independent gas and electricity services provider Fulcrum Utility Services were popular at 25.25p, up 5.38p or 27pc. Cenkos Securities advised clients to buy after it reported a maiden interim dividend with strong half-year results.
Wall Street traded higher after the first reading of the US manufacturing survey to come in below 50 in three years and a raft of other mixed-to-weak economic data suggested the US economy is not in the best of health after all and that a US interest rate rise on December 16 is no longer nailed on.
The Footsie closed 39.56 points higher at 6,395.65 and the FTSE 250 96.06 up at 17,516.76 with optimists of the opinion that a Santa Rally could yet be on the cards.
Investors heaved a sigh of relief after the major banks survived the Bank of England’s annual stress testing exercise. Barclays put on 10.3p to 233.5p, taxpayer owned Royal Bank of Scotland 9.8p to 312.2p and Lloyds Banking Group 1.75p to 74.71p.
A Goldman Sachs upgrade to buy from neutral and a 3pc increase in the 12-month target price to 770p lifted shopping centre property giant Hammerson 17p to 627.5p.
Cyber security company Sophos plummeted 25.6p to 258p after former private equity parent Pentagon Lock Funds sold 60m shares, or 13.3pc of the equity, at 265p a pop raising £159m. It retains a 22pc stake in the company which had soared 20pc-plus since floating in July.
Fusionex International rose 15p to 375p after announcing the latest contract for its GIANT software with an unnamed ‘ Asian regional patents registration office’. Panmure Gordon’s techno guru George O’Connor reiterated his 722p target price and repeated his long-term view that Fusionex is a superb play in the booming big data/analytics market and is his SMAC (social, mobile, analytics and cloud) top pick for 2016.
Green lights flashed for cash shell Eco City Vehicles and the shares accelerated 1.25p or 67pc to 3.12p after MXC Capital (0.05p dearer at 3.25p), the technology-focused merchant bank, took a 24.7pc stake in the firm for £1.3m and agreed to act as its financial adviser.
Acquisition news failed to inspire Caretech, a penny off at 238.5p. The specialist social care services provider is to acquire ROC North West and all of the children’s residential properties which it operates for up to £11.4m. ROC operates seven residential homes in the North West with a total of 41 places, alongside 25 education places at its school in Preston. WH Ireland is a buyer and has a target price of 345p.
Christmas savings and prepaid cards business Park Group firmed 1.25p to 96p following robust interims. The dividend was raised 6.3pc to 0.85p per share, while revenues climbed 23.2pc to £72.1m. The seasonal pretax loss was reduced to £1.4m from £2.4m in 2014. Chief executive Chris Houghton reported that the second-half has started well as the company enters the key delivery period. Orders are significantly ahead of the same period last year.