One to Watch: Powerful investment

DRAX is a holding company that operates Europe's biggest power station. It is a major buyer of coal, as well as biomass and carbon allowances from both British and international suppliers.

Drax power station, in North Yorkshire, generates 7 per cent of the UK's electricity, nearly 4 gigawatts. Coal-fired power stations are something of a pariah in this climate changing world, perhaps not surprising given that the Chinese are apparently commissioning two projects every week.

Eventually most of our electricity will probably be generated by nuclear power; at least south of the Border, Gordon Brown has committed to this arena even if Scotland's First Minister is unwilling. For the time being, coal, gas and hydro will remain the sources of power generation and as a result the longer-term prospects for Drax look encouraging.

Although you would not know it from my gas bills, the price of gas has been falling for some time, which means it is cheaper than coal to generate electricity. The position is unlikely to reverse overnight although the political dimension has to be acknowledged, given the importance of the supply line that Russia controls.

Drax does face a challenging couple of years but this seems acknowledged in the share price, which has fallen from a peak of nearly 630p. The dividend is an issue, as it is likely to be cut back this year. However, next year Drax should follow a distribution policy of some 50 per cent, implying a prospective yield of over 7 per cent.

Drax may not be the most exciting investment but it offers income attractions and may yet appeal to one of the European power companies looking for further diversification.

The value of your investment could fall and you may get back less than you invested. You should take professional advice if you have any doubt about the suitability of this company for your portfolio.

Carnival

2,219p +13p

Broker says BUY

EVOLUTION Securities says "spectacular demand" for cruises aboard Carnival's new ship Queen Elizabeth has fuelled its investment argument.

The broker said: "Our 'buy' case is based on Carnival's strong cash-flow, but the demand for Queen Elizabeth is a reminder Carnival is highly geared to recovery."

AAM

134.1p +0.1p

Broker says ADD

ABERDEEN Asset Management's purchase of assets from Royal Bank of Scotland has prompted Numis to upgrade its recommendation from "add" to "buy", while keeping its 165p price target.

The broker said: "We do not view the deal as game-changing for Aberdeen, but it does provide entry to a fund of hedge funds."