Drax is currently under scrutiny for potential discrepancies in its accounting practices, particularly regarding the classification of transporting wood pellets from North America as a “carbon neutral” activity. This stance has drawn criticism, as Drax is identified as the UK’s largest emitter of carbon despite qualifying for renewable subsidies, according to the research group Ember.
The Financial Conduct Authority (FCA) is investigating Drax’s historical statements about its sourcing of wood pellets, specifically focusing on the company’s annual accounts from 2021 to 2023. This inquiry seeks to ensure adherence to listing rules and transparency disclosures required of quoted companies.
This investigation follows a previous situation involving Rowaa Ahmar, Drax’s former head of public affairs, who alleged that the company misled various stakeholders about the sourcing of its wood. Her claims were made during an unfair dismissal case presented at an employment tribunal. Ofgem, the energy regulator, had earlier concluded that Drax did not show evidence of deliberately misreporting its data to obtain subsidies. However, it did identify failures in Drax’s compliance with its profiling data obligations during a specific period, resulting in a £25 million voluntary penalty amidst significant subsidies totaling £7 billion.
The FCA’s current investigation could provide a clearer understanding of Drax’s reporting practices, which are critical for investor confidence and market integrity. Following the announcement of the investigation, Drax’s shares fell by 7%.
Additionally, the government is in a position of negotiation with Drax regarding subsidies, having reached an agreement in February to extend support from 2027 to 2031. Energy Minister Michael Shanks expressed concerns about Drax’s substantial profits but acknowledged the necessity of continued support for energy security, given Drax’s role in generating about 5% of the nation’s electricity. The pending nature of the agreement raises questions about whether the government will wait for the FCA’s findings before finalizing the deal, with the energy security department indicating that it will review the results when available.
Source: https://www.theguardian.com/business/nils-pratley-on-finance/2025/aug/28/make-drax-wait-subsidy-deal-fca-investigation-serious