23 July 2014
DRAX GROUP PLC
(Symbol: DRX)
LEGAL CHALLENGE UPDATE
The Department of Energy and Climate Change (DECC) has today informed Drax that following the recent High Court judgment, it has, as directed by the court, now completed a reconsideration of the application by Drax for an Investment Contract for its second unit conversion under the Final Investment Decision Enabling ("FID Enabling") mechanism. Following that reconsideration, DECC now intends to award Drax an Investment Contract for this unit.
However, DECC has now appealed against the High Court judgment to the Court of Appeal.
Any award of an Investment Contract for the second unit conversion will therefore be dependent on the final conclusion of the legal challenge and remains subject to EU State Aid clearance.
Enquiries:
Drax Investor Relations: Michael Scott / Mark Strafford
+44 (0) 1757 612 230 / +44 (0) 1757 612 491
Media:
Drax External Communications: Melanie Wedgbury
+44 (0) 1757 612 438
Brunswick: Richard Jacques / Nina Coad
+44 (0) 207 404 5959
Website: www.drax.com
END
Notes:
1. The Government is introducing Contracts for Difference (CfDs), which are long-term contracts, to support the development of low carbon electricity generation.
2. To avoid an investment hiatus in the renewables sector before the 'enduring' CfDs become available, the Government introduced a scheme for Investment Contracts under the FID Enabling for renewables mechanism. These are 'early' CfDs intended to provide greater confidence for investors in advance of the enduring CfD.
3. In December 2013, the Government advised that two generating units at Drax Power Station - the "second" and "third" unit conversions - were eligible for Investment Contracts. Both units were also provisionally ranked equal first of all the qualifying projects and deemed affordable.
4. In April 2014, the Government offered Drax an Investment Contract for the third unit conversion. This contract has now been signed and it remains subject to EU State Aid clearance.
5. Drax was also notified in April 2014 that the Government believed the second unit conversion was no longer eligible for an Investment Contract. However, Drax did not receive a satisfactory explanation for this decision by the Government and legal advice confirmed the company had a good foundation to challenge it. Proceedings were therefore initiated.
6. On 14 July 2014, following a High Court hearing, the Court made a declaration that the second unit conversion was in fact eligible for an Investment Contract. The Court ordered that the decision of DECC to deem the second unit conversion ineligible be quashed and the matter remitted to DECC for reconsideration. DECC was granted leave to appeal this judgment.
