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Generating giant Drax has slammed the Treasury’s shock decision to axe renewable energy exemptions to the Climate Change Levy, saying it stands to lose £90 million in earnings over the next two years.
In recent years the coal-fired site has invested heavily in converting its units to burn renewable biomass, exposing the firm to dramatic losses to both its earnings projections and share price.
The Drax share price plummeted almost 30 per cent in three hours on Wednesday afternoon, from an opening price of 350p/share which was steady through much of the morning before Osborne’s Budget speech sent the price tumbling down to around 250p/share just hours later.
A statement from Drax said the firm is still assessing the impact of this change but that its initial estimate is for a reduction in EBITDA in the region of £30 million in 2015 and £60 million in 2016.
“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 decisions,” said Drax chief executive Dorothy Thompson.
Renewable UK slammed the move as a “punitive measure” against the industry.
“The government had already announced an end to future financial support for onshore wind – even though it’s the most cost-effective form of clean energy we have. Now they’re imposing retrospective cuts on projects already up and running across the entire clean energy sector,” said Renewable UK director of policy Gordon Edge.
“Yet again the government is moving the goalposts, pushing some marginal projects from profit into loss. It’s another example of this government’s unfair, illogical and obsessive attacks on renewables,” he said.
The intraday share price losses were beyond the expectations of RBC Capital analyst John Musk who said Drax was likely to take the biggest knock at an estimated 50p/share impact. Meanwhile Citigroup analysts predicted a 100p/share hit.
By Thursday morning the price showed signs of stabilising between the two analyst views, inching almost 4 per cent higher within the first hour of the market opening to between 260-270p/share.
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