Key facts
- The FCA has closed its investigation into Drax's biomass sourcing.
- The investigation focused on whether Drax's annual reports contained misleading statements to investors.
- The FCA found no evidence to justify further action.
- Drax previously paid £25m to Ofgem over data governance issues related to historical wood sourcing.
- Drax shares rose 1.2% following the announcement.
The Financial Conduct Authority (FCA) has concluded its nearly 10-month investigation into the power generator Drax regarding the sourcing of wood pellets for its biomass power station. The regulator stated it reviewed thousands of pages of documents but found no evidence to justify further action.
The investigation, launched last year, focused on concerns that Drax may have made misleading statements to the market about the origins of its biomass fuel. Drax operates the UK's largest biomass power station, importing millions of tonnes of wood pellets annually to generate electricity, which it argues is a reliable renewable source aiding the UK's transition from fossil fuels. The company has received substantial government subsidies for this operation.
However, campaigners and scientists have raised persistent claims that the wood pellets are not sourced sustainably and could be increasing carbon emissions. In a separate matter earlier in 2024, Drax agreed to pay £25 million to the energy regulator Ofgem after it was found to have lacked adequate data governance and controls when reporting the historical sourcing of wood from Canada. Ofgem at the time stated the breach was technical and not deliberate, and found no evidence of unsustainable sourcing or wrongful claims for renewable energy subsidies.
The FCA clarified its focus was on whether Drax's annual reports between 2021 and 2023 contained misleading statements or omitted crucial information for investors, emphasizing the importance of accurate reporting for market integrity. Drax CEO Will Gardiner expressed satisfaction that the investigation closed with no action taken, noting the company's constructive cooperation with the FCA.
Shares in Drax, listed in London, rose by 1.2% in early trading on Thursday, recovering from a sharp fall experienced when the FCA investigation initially opened last August.