7th Aug 2014 10:09
LONDON (Alliance News) - Drax Group PLC Thursday said the UK Court of Appeal has backed the Department of Energy and Climate Change in its decision not to allow the conversion of the second unit at Drax's power station to be eligible for new subsidies.
Drax shares fell 10% to 639.00 pence, making it the biggest FTSE 250 loser on Thursday.
The UK energy provider started legal proceedings earlier this year against the UK government, after it said the second unit at the power station, which is due to be converted to burning biomass rather than coal, will not be eligible for investment contracts under a new contracts-for-difference scheme, a subsidy for low-carbon electricity generation.
The UK High Court recently ruled against the UK government's decision to deem the conversion of the second Drax power plant as ineligible for subsidies under a new government support programme, but that has now been overturned by the Court of Appeal ruling.
The Court of Appeal also dismissed Drax's application for a judicial review. The company said that after taking legal advice, it will not appeal against the decision.
Drax said it will now consider its options for the full conversion of the unit, which already has support under the less-valuable Renewables Obligation investment regime.
The conversion of a third Drax power plant was granted under the contracts-for-difference scheme earlier this year. However, despite the second unit conversion being granted as eligible in December, the decision was then overturned and Drax was told the second site would only receive government support through the Renewables Obligation regime.
There are six units at the Drax Power Station, and the company intended to convert three of these to burn sustainable biomass.
By Tom McIvor; [email protected]; @TomMcIvor1
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