Gold prices steady above $3,400/oz on rate cut bets; PCE data awaited
Investing.com -- Drax is facing a probe by the U.K.’s Financial Conduct Authority (FCA) over how it sources wood for biomass pellets, following whistleblower allegations.
The company said the investigation spans January 2022 to March 2024 and will review whether its annual reports for 2021 through 2023 complied with listing, disclosure and transparency rules.
Drax added it will “co-operate with the FCA as part of their investigation.”
Shares in the energy group tumbled around 9% in London trading on Thursday.
The move comes after Rowaa Ahmar, the firm’s former head of public affairs and policy, accused Drax earlier this year of misleading statements on wood sourcing as part of her unfair dismissal claim.
Drax denied the allegations.
“There is no current reason given as to why the FCA has decided to open this investigation at this time,” RBC Capital Markets analyst Alexander Wheeler said in a note.
He added that the scope may overlap with Ofgem’s earlier review that ended without findings of wrongdoing.
Wheeler said the focus will likely be on disclosures in the annual report and pointed out that the FCA does not have jurisdiction over ROC or CfD contracts, meaning retrospective action in those areas is unlikely.
Still, the analyst cautioned the process could inject “some uncertainty into the market around the signing of the final agreement” with the government over the future of the Drax power station.
Separately, Jefferies analysts said the probe is “at a very early stage” with only limited information available.
The broker said its discussions with the company suggest the FCA may examine similar themes to Ofgem but “with a focus on financial disclosures.”
Jefferies also flagged that the spotlight could draw additional political scrutiny on the post-2027 bridging mechanism, where Drax has agreed heads of terms with the government but has not yet finalized the process.
Drax and Rowaa Ahmar reached a settlement just over a week after the tribunal opened.
Weeks earlier, the government confirmed it would extend subsidies for the firm’s North Yorkshire plant, which generates about 5% of the U.K.’s electricity and was described by ministers as “important to delivering a secure, value-for-money power system.”
The new deal halves subsidies and introduces a profit-sharing mechanism, while critics argue Drax relies on government support and should lose funding in favor of wind and solar.
Environmental groups have also accused the company of using wood from sensitive forests, though Drax insists its biomass is sustainable and legally sourcedI