UK power company shares fall after windfall tax report

Britain’s Chancellor of the Exchequer Rishi Sunak arrives to speak at the annual Confederation of British Industry (CBI) dinner in London, Britain May 18, 2022. Peter Nicholls/REUTERS/File Picture – RC2U9U9T42GX

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  • Shares of UK power generation companies plunge in media
  • UK plans possible one-off tax on power producers – FT
  • Centrica, Drax and SSE are the worst performers on the STOXX Europe 600

May 24 (Reuters) – Shares of British power generation companies plunged on Tuesday after a report that Britain had ordered plans to be drawn up for a possible windfall tax on more than 10 billion pounds (12, $6 billion) in corporate excess profits.

UK Finance Minister Rishi Sunak is seeking to raise funds to support households facing higher energy bills, the Financial Times reported on Monday. Asked to comment, the Treasury did not provide a specific response to the article.

Shares of UK power producers – Drax (DRX.L), Centrica (CNA.L) and SSE (SSE.L) – fell between 11% and 19%. They are on track for their worst day since the start of the pandemic and were the worst performers on the STOXX Europe 600 (.STOXX).

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A spokesperson for Drax highlighted the company’s £5 billion investment program including major infrastructure projects that would help create jobs and support the country’s energy security, but did not comment specifically. the potential tax.

SSE declined to comment, while Centrica did not respond to inquiries from Reuters.

Sunak and British Prime Minister Boris Johnson urgently want to work out measures to deal with rising energy bills and how to pay them, the FT reported, citing unidentified officials. An announcement could come this week or early June, he added.

“So far, policymakers’ discussions have focused exclusively on the oil and gas sector, but we believe the risk of this spilling over into the power sector is also increasing,” Citigroup said Tuesday, lowering its rating. note on Drax stock to “sell” from “neutral”.

Sunak said that if energy companies do not reinvest profits from soaring oil and gas prices into jobs, growth and energy security, there is no option on the possibility of exceptional taxes. Read more

He told the BBC this month: “I’m not naturally drawn to their idea (windfall taxes) but what I do know is that these companies are currently making significant profits because of these very high prices. ” Read more

The conflict in Ukraine, combined with a rapid recovery in fuel demand as the COVID-19 pandemic subsided, has helped to send oil and gas prices skyrocketing in recent months.

($1 = 0.7947 pounds)

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Reporting by Siddarth S and Jahnavi Nidumolu in Bengaluru Additional reporting by Akanksha Khushi Editing by Edmund Blair and Mark Potter

Our standards: The Thomson Reuters Trust Principles.

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