NORTH Yorkshire electricity producer Drax says it is likely to see £90 million cut from its earnings over the next two years after plans were revealed in the budget to axe the Climate Change Levy.

Chancellor George Osborne announced he will be cutting tax relief for businesses that rely on renewable energy, describing the Climate Change Levy as "outdated".

With the levy due to be dropped from August 1 this year, Selby-base power station operator Drax said it expects the move to result in a £30 million drop in its pre-tax earnings, and a further fall of £60 million in the following year.

Drax is in the process of converting its coal-fired power station to burning biomass as part of a £700 million investment programme to move to renewable energy.

Following the announcement Drax's share price slumped more than a quarter, having opened at 353.9p and closing on budget day at 254.6p. Yesterday the share price closed at 273p.

Following the budget revelation, Dorothy Thompson, chief executive of Drax, said: "We are surprised and disappointed at this retrospective change to a support regime which has been in place since 2001 specifically to encourage green energy and support renewable investment."

The announcement comes as Drax forges on with its conversion plans, having taken delivery of its 200th specially designed biomass rail freight wagon.

The wagons are the largest ever to be produced in the UK, and since entering operations in 2013, the wagons, designed by Lloyd’s Register Rail and manufactured by W H Davis, have collectively travelled more than 12 million miles between the Ports of Tyne, Hull and Immingham and Drax.

They have transported around 4.5 million tonnes of sustainable biomass, enough to power 2.5 million homes with low carbon, affordable and reliable renewable electricity.

The wagons are 30 per cent larger than any other rail freight wagon currently used in the UK, and are able to carry a biomass load weighing 71.6 tonnes.

Peter Emery, group operations director of Drax Group said: "This milestone demonstrates the sheer scale of our decarbonisation project as we replace coal with sustainable biomass providing a reliable and affordable source of electricity.

"The delivery of our 200th wagon marks a major stage in a process which has been a huge success both in terms of modifications to Drax’s supply chain and for UK engineering as a whole."