British power producer Drax , which has converted some of its power plant capacity to run on cleaner biomass, has started a strategic review of its business after the government indicated changes to renewable energy subsidies, Reuters has reported.
Drax, which owns one of Britain’s largest power stations, is expected to take a £30m hit on core earnings this year after the government removed a climate change tax exemption from which Drax had benefited.
Additionally, the British government has thrown into doubt whether it will offer further subsidy handouts to renewable energy projects, including biomass conversion plants, as it is reviewing how much money it can spend. It has already cut subsidies for solar plants and wind farms.
“We have always expressed an interest in complete biomass conversion but it only works if it sits within the government’s renewable objectives,” Drax chief executive Dorothy Thompson told Reuters.
The power producer reported an 18% rise in first-half core earnings to £120m ($187 million) thanks to higher production at its power plant.
It made a £53m profit before tax, compared with an £11m loss a year earlier, allowing it to offer a half-year dividend payment of 5.1 pence per share, up from 4.7 pence last year.
Drax shares were trading up 1.3% just after the market open.