Drax Group has been notified (26 August) that the UK’s Financial Conduct Authority has started an investigation into the company covering the period January 2022 to March 2024 ‘relating to certain historical statements regarding Drax’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’. Drax says it will co-operate with the FCA as part of its investigation. The news saw Drax shares fall by more than 12% on 27 August, later recovering to 9.2%.
The ’historical statements’ refers to biomass sourcing disclosures following last year’s investigation by the country’s energy regulator, Ofgem. Drax, which supplies about 5% of Britain’s electricity via biomass-converted coal plants and has received billions of pounds in green energy subsidies from the UK government, was fined £25 m ($33.77 million) by Ofgem for misreporting data on wood sourced from forests in Canada.
There has been criticism of Drax over sourcing wood from Canadian forests but the company has responded by insisting that it only uses wood residuals or byproducts from trees primarily used for lumber, and that demand for wood from sustainable managed forests can help to increase forest growth.
Investigation
The FCA’s investigation covers statements made between January 2022 and March 2024 and includes Drax’s 2021–2023 annual reports and their compliance with financial disclosure rules. However last year’s Ofgem investigation found no evidence of a breach of sustainability obligations by Drax or that it had incorrectly issued renewable obligation certificates.
Environmental groups have questioned the sustainability of biomass power plants, which generate electricity by burning wood pellets, and this investigation may increase political scrutiny of the UK government’s post-2027 biomass support plan, which will halve subsidies for the company during 2027–2031.
