SSE PLC (LSE:SSE), Drax Group (LSE:DRX) and British Gas owner Centrica PLC all saw their share prices rise after the the government's release of draft legislation for a windfall tax on electricity generators.
Due to begin on January 1, the government outlined on Tuesday that firms generating electricity from nuclear, renewable, biomass, and waste sources will be taxed at 45% on “exceptional receipts.”
This means “wholesale electricity sold at an average price in excess of £75 per MWh,” equalling £10mln over 12 months, said the government
It also includes effective tax breaks for companies facing “exceptional” costs, after increased bills in line with hiked energy prices.
Jefferies analyst Ahmed Farman suggested this could benefit Drax in particular, which operates a North Yorkshire power station fuelled mainly by wood pellets.
Given a forecasted 2023 cost of £110/MWh for biomass, Farman predicted Drax would have to pay roughly £200mln less next year as a result.
He added Centrica might benefit too as it owns a 20% interest in the UK's nuclear capacity.
Barclays analysts suggested this could equal around 30p extra per share in earnings to Drax over the course of 2023.
Drax’s share price rose by 2.2% to 675p on the news, while SSE and Centrica also climbed 0.7% to 1,715p and 1% to 95p respectively.