20 December 2022

Drax Group plc

("Drax", "the Group", "Drax Group", "the Company"; Symbol: DRX)

Publication by UK Government of further details of Electricity Generators Levy

In November 2022, the UK Government ('Government') announced a windfall tax on renewable and low-carbon generators, termed the Electricity Generators Levy (EGL), to be implemented from 1 January 2023 and structured as a levy on power sales above a benchmark of £75/MWh.

Through November and December, Drax has engaged with the UK Government regarding the precise details of the EGL, including the treatment of fuel costs for dispatchable generators.

On 20 December 2022, Government published a technical note and draft legislation, which includes an allowable exceptional fuel cost element, increasing the underlying £75/MWh benchmark (indexed to CPI from April 2024).

The allowable exceptional fuel cost will be calculated retrospectively based on the actual cost above a baseline fuel cost of £65/MWh or historical levels, whichever is lower.

In its Trading Update, issued on 15 December 2022, Drax indicated an expectation for the cost of biomass generation in 2023 to be in excess of £100/MWh. 

The levy will apply to Drax's three biomass units operating under the Renewable Obligation scheme and its run of river hydro operations. The levy will not apply to Drax's CfD biomass unit, pumped storage hydro and coal generation.

A link to the Government's EGL Supplementary Technical note is included below.

Electricity_generator_levy_December_update__2_.pdf (publishing.service.gov.uk)

Outlook

In line with its past practice Drax will update on its expectations for 2023 at its full year results on 23 February 2023.

Enquiries:

Drax Investor Relations: Mark Strafford

+44 (0) 7730 763 949

Media:

Drax External Communications: Ali Lewis

+44 (0) 7712 670 888

Website: www.Drax.com

END