Drax admits defeat on state subsidy as court of appeal rules for government

http://www.theguardian.com/business/2014/aug/07/drax-defeat-government-subsidy-court-appeal

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Power generator Drax has admitted defeat in a row over the government's decision to pull the plug on a lucrative subsidy after the court of appeal ruled in favour of ministers.

Shares in the company fell 10% after it surprised markets with the news that the department of energy and climate change (Decc) had won its appeal against a high court judgment last month declaring Drax eligible for the state subsidy. Drax said it would not be appealing against the latest decision.

In December, the company was told it could receive government funding under a new subsidy scheme for converting two of its coal-powered units into biomass-fuelled generators. The dispute arose in April, when ministers unexpectedly announced funding was being denied for one unit on the grounds it was ineligible for the scheme.

The high court subsequently ruled in favour of Drax, saying the second unit was eligible for the so-called investment contract.

But on Thursday the company said: "Drax confirms that the court of appeal has reached a decision in relation to the appeal by the department of energy and climate change against the high court judgment that Drax's second unit conversion is eligible for an investment contract.

"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."

The firm added it will now consider its options for the planned biomass conversion, which is still eligible for a lower subsidy under the renewables obligation scheme.

Drax is responsible for meeting about 7-8% of the UK's electricity demand, and owns and operates Britain's largest coal-fired power station in Selby, north Yorkshire.