Shares in power companies Drax Group, SSE PLC (LSE:SSE) and British Gas owner Centrica PLC (LSE:CNA) shrugged off a new temporary 45% levy on electricity generators and an increase to the energy profits levy.
The energy profits levy will be increased from 25% to 35% from January 1 until March 28, Hunt said as part of the autumn statement.
"The structure of our energy market also creates windfall profits for low carbon electricity generation. So from January 1st we’ve decided to introduce a new temporary 45% levy on electricity generators."
Together, the Treasury has calculated the measures will raise £14bn, with total revenue raised from energy profits levy of £7.2bn predicted to be drummed up in the current tax year, £10.8bn in the year to April 2024, falling to £8bn, £6bn and £5.5bn in the subsequent three years.
The 45% generators levy is expected to bring in £1bn in the current tax year, £4.08bn in the 2024 year, £3.45bn in 2024/25, £2.2bn in 25/26 and below £2bn the year after that.
Dan Mc Grail, RenewableUK's chief executive, said: “This windfall tax on low carbon power risks deterring investment, at a time when the Chancellor should be incentivising clean energy. Unlike in oil and gas, under this levy companies which are making significant investments in renewables will get no tax relief and will be hit by a higher windfall rate.”
Drax shares initially fell 4%, SSE 3.2% and Centrica dipped 1.5%, but in less than an hour all three were up higher.
Centrica, up 4.2%, was the top riser on the FTSE 100 in the early afternoon, while FTSE 250-listed Drax was up over 5%. SSE rose 1.5%.
The wording of the statement was important, analysts noted, as Hunt stated the new 45% levy will be on the excess profits of low-carbon electricity generators.
At 45% the rate was slightly higher than reported by the FT earlier in the week but the threshold of £75 per megawatt hour (MWh) was about 50% higher than the average UK power price over the last decade, according to analysts.
Earlier this week, JPMorgan said the three companies had nothing to fear from an energy profits levy and it would be good news near term for such owners of UK power generation assets.
With it being a windfall tax instead of a revenue cap, the analysts said investment allowances that companies will receive to offset the levy will be key, with energy companies currently getting a 91p tax saving on every £1 they invest.