British Finance Minister Rishi Sunak is seeking to raise cash to support households facing higher energy bills, the reported on Monday. Asked for comment, the Treasury did not provide a specific response to the article.
Shares of British power generators -- Drax, Centrica and SSE -- were down 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.
A Drax spokesperson pointed to the company's 5 billion pound investment programme featuring major infrastructure projects that would help create jobs and support the country's energy security, but did not comment specifically on the potential tax.
SSE declined to comment, while Centrica did not respond to Reuters requests.
Sunak and British Prime Minister Boris Johnson urgently want to set out measures to address rising energy bills and how to pay for them, the FT reported, citing unidentified officials. An announcement could come this week or in early June, it added.
"So far, the discussions by politicians have been exclusively focused on the oil and gas sector, but we believe the risk of this spilling over into the power sector is also rising," Citigroup said on Tuesday, downgrading its rating on Drax shares to "sell" from "neutral".
Sunak has said that if energy companies did not reinvest profits earned from soaring oil and gas prices back into jobs, growth and energy security then no option was off the table when it comes to the possibility of windfall taxes.
He told BBC television this month: "I'm not naturally attracted to the idea of them (windfall taxes) but what I do know is that these companies are making a significant amount of profit at the moment because of these very elevated prices."
The conflict in Ukraine, combined with a rapid recovery in demand for fuel as the COVID-19 pandemic has waned, helped drive oil and gas prices sky-high in recent months.
($1 = 0.7947 pounds)
(Reporting by Siddarth S and Jahnavi Nidumolu in BengaluruAdditional reporting by Akanksha KhushiEditing by Edmund Blair and Mark Potter)
By Siddarth S