Eurobond Tax Position Agreed

RNS Number : 2849E

Drax Group PLC

05 April 2011

 



5 April 2011                                       

DRAX GROUP PLC

(Symbol: DRX)

EUROBOND TAX POSITION AGREED

Drax Group plc today announces that it has reached agreement with HM Revenue & Customs ("HMRC") in relation to the group's Eurobond financing structure (note 1), which will result in the release of £180 million cash tax relief for the business.  In addition, a number of other minor legacy tax issues have also been agreed.

This agreement, and in particular the resolution of the Eurobond position, provides certainty over cash tax relief for the group now and in the future, as follows:

·      Cash ring fenced on the balance sheet at 31 December 2010 of £117 million now released to the 
business; and

·      Remaining agreed losses with cash tax value of approximately £63 million will be realised over the coming years (note 2).

Tony Quinlan, Finance Director at Drax said:

"We are delighted to have brought these complex matters to a conclusion.  We would like to thank HMRC for their professionalism and commitment which has allowed an efficient resolution to this process.

"We are pleased that we now have certainty in this area, enabling us to release £117 million of cash to the business today, and in the region of £63 million over the coming years as we realise the remaining losses.  

"If we receive appropriate regulatory support, this cash will form an integral part of the capital required to deliver our biomass strategy, which in turn will provide the UK with cost effective, reliable and flexible renewable electricity."

Notes:

(1)   Eurobond financing structure

·      The Eurobond debt structure was put in place under a previous financing in 1999 to acquire Drax Power Station.

·      Under this structure, the group prepaid an amount of interest which facilitated its refinancing and listing on the 
London Stock Exchange in 2005.  In accordance with accounting and tax rules, we would ordinarily have expected to obtain tax relief for this interest in the ensuing years to 2015.

·      In 2008, HMRC issued draft legislation which updated rules on the tax deductibility of such interest. As a 
consequence, the Eurobond structure was unwound in December 2008 in order to protect past benefits.  This resulted in the acceleration of interest deductions where tax losses with a cash tax value of approximately £220 million were crystallised, subject to the confirmation by HMRC.

(2)   Remaining losses

·      The remaining losses, which are calculated based on current corporation tax rates, are non-trade losses and can 
only be offset against future non-trade profits.

 

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Enquiries:

Drax Investor Relations: Michael Scott

[phone]

Media:

Drax External Affairs: Melanie Wedgbury

[phone]

Brunswick: Michael Harrison

[phone]

Website: www.draxgroup.plc.uk

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