Drax Slumps on UK Probe Into Controversial Biomass Sourcing

(Bloomberg) -- Drax Group Plc fell the most in more than two years in London trading after saying it’s facing a probe by the UK’s Financial Conduct Authority.

The investigation relates to historical statements the power producer made about its biomass sourcing, as well as the compliance of its annual reports, Drax said Thursday.

The company has faced criticism in recent years over the sustainability of the wood it sources from North America to burn in its power station in northern England. The UK government in February agreed to new subsidies to keep the plant in operation, but acknowledged those concerns and limited the amount of time it can run.

Drax said it will cooperate with the FCA during the investigation, declining to comment further. The watchdog confirmed the probe, without providing any more details.

The shares sank as much as 12%, the biggest intraday decline since March 2023, and traded down 9.5% at 637 pence as of 9:29 a.m. in London.

The FCA doesn’t have jurisdiction over Drax’s main subsidy mechanisms, but its move may draw more political scrutiny just as a deal to extend the support package beyond 2027 is being finalized, Jefferies analyst Ahmed Farman said in a note.

Last year, Drax had to pay £25 million ($34 million) after industry regulator Ofgem found it had misreported data about its biomass. An investigation by Bloomberg in 2023 found that the company earned record profits while it avoided paying money back to consumers amid the country’s energy crisis.

The FCA probe covers the period from January 2022 to March last year, relating to statements regarding Drax’s biomass sourcing, as well as the compliance of its 2021, 2022 and 2023 annual reports, according to Thursday’s filing.

(Updates with chart and analyst comment in sixth paragraph.)

©2025 Bloomberg L.P.