Shares of British power generator Drax Group Plc rose after it announced a plan to buy back as much as £150 million ($187 million) worth of shares after a profitable year.
(Bloomberg) — Shares of British power generator Drax Group Plc rose after it announced a plan to buy back as much as £150 million ($187 million) worth of shares after a profitable year.
The decision to trigger a windfall for shareholders comes as the company said it will pause investment in its carbon-capture program, pending further details on subsidy options from the government, according to a trading update Wednesday.
Shares rose 3.8% to 642.80 pence by 2:15 p.m. in London.
The plan for buybacks occurs amid wider scrutiny of the power sector following record profits triggered by Europe’s energy crisis. Households are seeing mounting debt after UK energy bills more than doubled, while power companies have been able to sell energy at all-time highs.
Drax was rejected from the government’s Track-1 carbon capture program last month after broad expectations it would be given the status, which would open the door to subsidy conversations. The company says it’s “now commenced formal bilateral discussions” with the government on options to launch its plans.
Pausing plans has reduced its capital investment expectations this year by about £50 million to £520-£580 million.
Read: Drax to Hold Talks on UK Biomass Support After Funding Upset
The company is also facing renewed scrutiny over biomass sustainability concerns. Drax’s independent advisory board has recommended that the company move away from calling biomass “carbon neutral,” according to an update published on its website.
UK regulator energy Ofgem has commissioned a sustainability audit of the company, according to reports by the i newspaper earlier this month and the Financial Times on Wednesday.
The regulator “recently informed Drax that it will commence an audit to verify the information the business provides” related to renewable energy certificates, a spokesperson for the company said. “This a standard audit” by Ofgem, and isn’t being undertaken using investigative powers.
Drax, which was pressured by a major shareholder to drop Canadian logging licenses, has said it only sources sustainable biomass and champions local communities where it harvests residual wood to produce pellets.
The company is facing shareholders at its annual general meeting in London on Wednesday. Its share price has declined about 9% this year.
(Updates with shares from first paragraph, sustainability probe from seventh.)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.