SHARES in Drax Group rose three per cent yesterday after the firm agreed a tax deal to release £180m for the business.
Drax, which owns the Drax coal-fired power station in Yorkshire, has settled tax issues linked to its Eurobond financing and other “minor legacy tax issues”, the firm said in a statement.
Around £117m of cash that was ring-fenced last year will now be released onto the firm’s balance sheet, along with £63m remaining agreed losses that will be realised over the next few years.
The Eurobond debt structure was set up in 1999 during the purchase of the Drax power station from the National Grid. The firm pre-paid interest during its listing in 2005, and expected to get tax relief up to 2015 before HMRC changed the rules on tax deductibility.
The firm then wound up the Eurobond structure, crystallising losses of £220m, subject to HMRC confirmation.
“We are delighted to have brought these complex matters to a conclusion,” said finance director Tony Quinlan. “We would like to thank HMRC for their professionalism and commitment which has allowed an efficient resolution to this process.
“If we receive appropriate regulatory support, this cash will form an integral part of the capital required to deliver our biomass strategy, which in turn will provide the UK with cost effective, reliable and flexible renewable electricity.”
Shares in the FTSE 250-listed company bounced 3.1 per cent before settling 1.2 per cent higher.