7 August 2014
DRAX GROUP PLC
(Symbol: DRX)
COURT OF APPEAL DECISION
Drax today confirms that the Court of Appeal has reached a decision in relation to the appeal by the Department of Energy and Climate Change (DECC) against the High Court judgment that Drax's second unit conversion is eligible for an Investment Contact.
The Court of Appeal has allowed DECC's appeal and dismissed Drax's application for judicial review. Accordingly, the second unit conversion is no longer eligible for an Investment Contract. Having taken legal advice, Drax will not appeal against this decision.
Drax will now consider its options for the full conversion of this unit, where eligibility for support under the Renewables Obligation has been confirmed.
Enquiries:
Drax Investor Relations: Michael Scott / Mark Strafford
+44 (0) 1757 612 230 / +44 (0) 1757 612 491
Media:
Drax External Communications: Matt Willey
+44 (0) 1757 612 285
Brunswick: Richard Jacques / Nina Coad
+44 (0) 207 404 5959
Website: www.drax.com
END
Notes:
1. In accordance with standard practice, the decision will be made available on the following website in due course: http://www.bailii.org/
2. The Government is introducing Contracts for Difference (CfDs), which are long-term contracts, to support the development of low carbon electricity generation.
3. 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 Final Investment Decision Enabling ("FID Enabling") mechanism. These are 'early' CfDs intended to provide greater confidence for investors in advance of the enduring CfD.
4. 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.
5. In April 2014, the Government offered Drax an Investment Contract for the third unit conversion. This contract was subsequently awarded and it remains subject to EU State Aid clearance.
6. 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.
7. 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.
8. On 23 July 2014, Drax was informed that, following reconsideration, DECC intended to award an Investment Contract for this unit. However, DECC also appealed against the High Court judgment to the Court of Appeal.
