Britain’s financial regulator has opened an investigation into claims made by Drax Group following a spat over the taxpayer-funded group’s environmental credentials earlier this year.
Drax, which generates energy by burning wood pellets, has received billions of pounds of government funding in recent years for its Selby, North Yorkshire plant.
The process of burning wood pellets is considered a means of sourcing renewable energy. In theory, trees and plants first absorb carbon, then are burnt and release the same carbon back into the atmosphere.
But Drax’s critics are sceptical that all materials used by the firm are taken from renewable sources.
The FTSE 250 firm told investors in a short statement on Thursday that the Financial Conduct Authority had commenced an investigation into the company relating to ‘certain historical statements regarding Drax’s biomass sourcing’ made from January 2022 to March 2024.
The regulator is also probing the compliance of Drax’s 2021, 2022 and 2023 annual reports with City listing rules, and disclosure and transparency requirements.
Drax has received billions of pounds of government funding in recent years for its Selby, North Yorkshire plant
Drax said it would cooperate with the FCA and its investigation.
The FCA separately confirmed it had opened an investigation but did not comment further.
Drax’s Selby plant sources some wood pellets from forests in the US.
Activists from Gloster in Mississippi, where Drax runs a wood pellet factory, claimed earlier this year pollution from its plant has caused health issues for people nearby, including heart disease, cancer and respiratory problems.
Drax burns millions of tons of wood pellets each year and supplies about 5 per cent of Britain’s electricity.
In February, Environment Secretary Ed Miliband extended pre-existing taxpayer support for the firm by agreeing to hand Drax another £2billion over the next four years.
A spokesperson for the Department of Energy Security & Net Zero said: ‘The FCA is an independent regulatory body, and government is not involved in its investigation into Drax. We will review the investigation’s findings when they become available.
‘Drax will operate for less time under a clean power system and will need to use 100 per cent sustainably sourced biomass, with not a penny of subsidy paid for anything less.’
Drax shares slipped 6.7 per cent to 656.42p in early trading, wiping out 2025 gains so far.
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