Shares drop as Drax investigated by the City watchdog over “historical statements” made about the sourcing of wood pellets for its Yorkshire biomass power station.
The Financial Conduct Authority (FCA) has confirmed the investigation which will cover a period of more than two years from January 2022 to March 2024, and will examine whether the company complied with disclosure and transparency rules, including in three annual reports. Drax confirmed that the FCA investigation related to “certain historical statements regarding the company’s biomass sourcing and the compliance of Drax’s 2021, 2022 and 2023 annual reports with the listing rules and disclosure guidance and transparency rules. The company will cooperate with the FCA as part of their investigation.”
The news sent Drax shares down by 10% in early trading.
According to the think-tank Ember, Drax is expected to receive more than £10bn in renewable energy subsidies between 2012 and 2027. In February, Eneradata the independent research company, reported that the government and Drax had agreed to extend subsidies for the company’s 2,580 MW biomass-fired power from 2027 to 2031, halving them in comparison to the current period.
The power plant will be supported via a low-carbon dispatchable CfD (Contract for Difference) with a strike price of £113/MWh (2012 prices). Under the new agreement, Drax is expected to increase the share of woody biomass sourced from sustainable sources from 70% to 100%. In addition, the power plant will be limited to maximum load factor of 27%, less than half of current levels, only being allowed to run at times when the electricity grid really needs it.
The power plant comprises four 645MW biomass fired units and produces around 14 TWh/year, accounting for around 6% of the country’s electricity. With the help of government subsidies, Drax converted the four units from coal to biomass between 2013 and 2018.
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