Energy company Drax will face no action following an investigation by the UK’s financial watchdog into its sourcing of wood for biomass.
The Financial Conduct Authority (FCA) confirmed on Thursday it had closed the probe, which was launched in August last year.
It followed whistleblower claims the firm had misled the market over the sustainability of wood pellets sourced from Canada.
The London-listed group runs the UK’s largest power station in Yorkshire, which receives Government subsidies for burning biomass to generate power, classed as renewable.
It has long faced accusations of sourcing pellets from environmentally important forests around the world, though the company says it is confident the wood is sustainable and legally harvested.
The FCA investigation covered the period January 2022 to March 2024, looking into Drax’s statements on biomass sourcing and compliance of its 2021, 2022 and 2023 annual reports with rules over listing, disclosure and transparency.
In a notice published online on Thursday, the FCA said it reviewed thousands of pages of complex material and interviewed individuals from the company.
It added the probe was limited to the regulator’s legal remit, focusing on whether Drax’s annual reports and accounts contained misleading statements or left out important information investors needed to know.
The notice read: “We undertook an extensive investigation following concerns raised regarding disclosures to the market about the sustainability of Drax’s Canadian biomass.
“We did not find evidence that justified any further action.”
Last year, Drax’s former head of public affairs and policy, Rowaa Ahmar, made accusations the company had misled over its biomass sourcing as part of her claim for unfair dismissal at an employment tribunal.
Drax denied her claims.
The firm and Ms Ahmar reached a settlement with Drax just over a week after the case opened.
Will Gardiner, chief executive of Drax, said: “We recognise the importance of compliance with our regulatory obligations and have worked constructively with the FCA throughout this investigation.
“We are pleased to see the investigation closed with no action being taken.”
The investigation came weeks after the Government confirmed it would continue with new subsidies for Drax’s North Yorkshire power plant after the existing subsidy ends in 2027.
The major power station produces around 5% of the UK’s electricity and ministers said at the time the plant was “important to delivering a secure, value-for-money power system”.
But the new arrangements will halve the subsidies paid to Drax and include a windfall mechanism that means 30% to 60% of profits will be returned to consumers if they go above expected limits.
Drax would not be financially viable without the billions it has received in Government subsidies.
In theory, burning wood pellets should create carbon-neutral energy because the trees and other plants burnt first absorb carbon, then are burnt and release the same carbon back into the atmosphere.
But critics say this assumes the companies only use sustainable wood in their boilers.
Environmental groups and campaigners have long called for an end to all subsidies for burning wood from forests and energy crops in power stations, redirecting the money to wind and solar instead.
