Power company Drax is under investigation by the Financial Conduct Authority in the wake of allegations it misled over its sourcing of wood for biomass pellets.
The business confirmed to investors on the London Stock Exchange that it would cooperate with the watchdog, saying the probe relates to two years of paperwork on its biomass sourcing from January 2022 to March 2024. Investigators will also look at compliance surrounding three years' of annual reports from 2021.
It follows accusations by Drax’s former head of public affairs and policy, Rowaa Ahmar, in March that the company had misled over its sourcing of wood for biomass pellets, which were made as part of her claim for unfair dismissal at an employment tribunal. Drax denied her claims. The firm and Ms Ahmar reached a settlement just over a week after the case opened.
The tribunal began just before it emerged that the Government would continue subsidy for Drax's wood-burning power plant in North Yorkshire, albeit at a reduced level. A Contracts for Difference scheme between the Government and Drax was renewed until 2031, but in confirming the move, the Government said previous arrangements were not good value for the taxpayer and didn’t do enough to protect the environment.
Drax's Selby plant produces around 5% of the Ƶ’s electricity and ministers said at the time that it was “important to delivering a secure, value-for-money power system”. The new agreement halves the subsidies paid to Drax and includes a windfall mechanism that means that 30% to 60% of profits will be returned to consumers if they go above expected limits.
Energy Minister Michael Shanks said the subsidies would come with more stringent environmental conditions attached. He said the previous arrangement had "enabled Drax to make unacceptably large profits".
Environmentalists have questioned the use of biomass in cutting carbon emissions and accused Drax of sourcing wood pellets from environmentally important forests overseas. The company has maintained its biomass is sustainable.
In its brief update to shareholders and investors, Drax said: "The company was notified on August 26, 2025 that the Financial Conduct Authority has commenced an investigation into the company covering the period January 2022 to March 2024 relating to certain historical statements regarding Drax's biomass sourcing and the compliance of Drax's 2021, 2022 and 2023 annual reports with the listing rules and disclosure guidance and transparency rules. The company will cooperate with the FCA as part of their investigation."
