8th Jul 2015 16:26
LONDON (Alliance News) - Drax Group PLC late Wednesday said its earnings will be around GBP30 million less than expected in 2015 following the changes to the climate change levy announced by UK Chancellor George Osborne in his budget earlier Wednesday.
Following the budget, Drax shares plummeted, closing down 28% to 254.60 pence per share on Wednesday.
"We are surprised and disappointed at this retrospective change to a support regime which has been in place since 2001 specifically to encourage green energy and support renewable investment," said Chief Executive Dorothy Thompson.
Osborne said earlier Wednesday that he would remove the exemption that generators of renewable electricity have had from the climate change levy. Currently, tax is not paid on renewable electricity supplied to businesses and the public sector under renewable source contracts, regardless of whether it is generated in the UK or abroad.
The climate change levy was introduced in 2001 with the aim of improving industrial and commercial energy efficiency to reduce greenhouse gas emissions. It was originally put in place to encourage and increase demand for renewable energy.
But Osborne said the "change will correct an imbalance in the tax system by preventing taxpayers? money benefiting renewable electricity generated overseas" and will " ensure support for low-carbon generation provides better value for money for UK taxpayers."
Late Wednesday, Drax said it expects it earnings before interest, tax, depreciation and amortisation to be GBP30 million lower than expected in 2015, and GBP60 million less than expected in 2016 as a result of the changes.
"Thereafter we expect the impact to reduce. As noted by the government in its announcement today, the value of climate change levy exemptions is expected to be negligible by the early 2020s," said Drax.
By Joshua Warner; [email protected]; @JoshAlliance
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