(Bloomberg) -- UK electricity generator Drax Group Plc soared in trading after earnings beat analyst expectations, although questions remain around the outcome of a government consultation on continued biomass subsidies. 

The utility posted £1.2 billion in adjusted earnings before interest, taxes, depreciation and amortization, beating analyst estimates of £1.1 billion according to data compiled by Bloomberg, even as the high prices from Europe’s energy crisis eased.

Shares jumped as much as 11%, the biggest intraday increase in almost three years. The company also issued guidance of about £968 million in earnings for 2024. 

Drax is seeking subsidies beyond 2027, when its current agreements expire, to tide it over until its carbon capture project can start in 2030. The government consultation closes at the end of February with a decision expected in April.  

The use of biomass has come under increasing scrutiny as a power source in the UK. The fuel, which generates about 10% of the country’s power, is considered low-carbon if the forests where it’s sourced are regrown and the wood would otherwise go to waste.

Drax has £639 million ($809 million) of cash and committed facilities on its balance sheet ready to invest in carbon removal technology at its biomass plant. 

A bridge subsidy “could provide multi-year certainty allowing Drax to secure long-term biomass supplies and continue to support energy security via flexible and reliable renewable biomass operations in advance of bioenergy with carbon capture and storage,” the company said in its earnings statement Thursday.

Drax also faces headwinds from a report last year that showed the company benefited from a loophole in a green-energy subsidy program that allegedly hurt UK consumers. The firm said it acted responsibly. Meanwhile, concerns over the carbon-neutral credentials of biomass were in focus again this week after a BBC report that said Drax sourced some of its fuel by cutting down primary forest.

Despite the increase in the stock price on Thursday, Drax has declined almost 30% during the past year. That compares with a 3.3% drop in the Stoxx Europe 600 Utilities Index over the same period.

Drax Group Chief Executive Officer Will Gardiner told analysts on a call Thursday morning he expects an agreement on the governments subsidies “by the end of the year” but said that a UK election could cause delays. “I would be foolish to promise something.” Gardiner said.

Drax paid £205 million in a windfall tax, introduced in December 2022, as a levy on excess profits made by generators during the energy crisis. The measure is expected to run until 2028.

(Updates with CEO comments from analyst call in penultimate paragraph.)

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