Drax shares tumble to all-time low as Osborne scraps climate levy exemption

8th Jul 2015 15:49

Shares in Drax fell a whopping 25% to an all-time low after Chancellor George Osborne said in the Budget that the government will remove the exemption for electricity from renewable sources.RBC Capital Markets said the move was "a big negative for renewable generators".It said the biggest impact within its coverage will be on Drax, which it rates at 'sector perform'. It expects an impact of around 50p a share, before offsetting with benefits from the lower corporate tax rates also announced in the budget.Goldman Sachs, meanwhile, said that owing to the high proportion of earnings derived from UK biomass-fuelled power generation, Drax is the most exposed stock to this change in its coverage.It noted that the company currently receives Levy Exemption Certificates (LECs) on its biomass-fuelled power generation."We estimate the value of these certificates is around £4/Mega-watt hours, on which basis our initial calculation suggests an impact on 2016-17E EBIT for Drax of around £50m."