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Investors hit as windfall tax wipes £226m from value of green energy firms

·2-min read
Wind turbine
Wind turbine

The Government’s controversial proposals to impose a “windfall tax” on energy firms has wiped hundreds of millions of pounds off firms in the sector, including renewable energy companies.

More than £226m has been wiped off London’s leading renewable energy infrastructure trusts in recent days as Rishi Sunak's plans to impose a one-off tax on energy firms have gained traction. Fears have grown that the Treasury’s plans to impose a windfall tax on electricity generators could include clean energy businesses, rather than just those within the oil and gas industry. The Government has yet to rule out such a levy.

The largest green fund, Greencoat UK Wind, has lost 7pc from its peak in the past week, while the Renewable Infrastructure Group, has shed 5pc of its value, according to the wealth manager Brewin Dolphin.

Rob Burgeman, of Brewin Dolphin, said it would be illogical to punish businesses that could help Britain in its transition to renewable energy.

“It feels counter-intuitive to target the renewables sector given its role in facilitating and accelerating the transition to net zero,” he said.

Smaller trusts in the sector have suffered too, with the SDCL Energy Efficiency Income Trust dropping 2pc and NextEnergy Solar Fund slipping 1pc in the past five trading days.

Iain Scouller, of the broker Stifel, said the tax could end up punishing investors who had backed the Government’s "net zero" agenda.

“Applying a windfall tax to renewable generators gives the wrong message at a time when investors are being encouraged to make substantial new investments in renewables,” he said.

Mr Burgeman said the tax would also hit investors who had relied on renewable energy trusts as a protection from rampant inflation, which reached a 40-year high of 9pc in April. A key appeal of renewable infrastructure firms is that they typically generate significant income from inflation-linked Government subsidies, meaning they benefit in inflationary times.

While renewable energy trusts have suffered, shares in London’s oil giants BP and Shell remained largely unbothered by reports of a windfall tax, both ticking up 1pc in the past five days, due to huge demand for the companies' products.

However, shares in power companies including Drax, SSE and British Gas owner Centrica have all fallen, down 6pc, 3pc and 3pc respectively in the past five days.

Susannah Streeter, of the broker Hargreaves Lansdown, said energy stocks may continue to wobble as the market awaits confirmation of the windfall tax.

“The devil will be in the detail of any plan to scrape excess profits from power companies,” she said. “But it looks as though even renewable power operators may not escape a levy.”

Fund managers have already warned a windfall tax on the energy sector, one of the largest industries in Britain's stock market, could severely harm its ability to pay out dividends to shareholders.

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