Drax secures funds for biomass conversion plan

Drax, UK – Drax plc has secured committed financing to support group plans to transform its 4,000MW electricity-generation operation to burn mainly biomass.

The finance is to help Drax re-engineer some or all of the six 660MW generators coal-fired units at its Yorkshire power station, which can supply around 7% of UK electricity demand.

The backing now includes a £100-million amortising term loan facility with the UK Green Investment Bank, and a £400-million revolving credit facility, maturing in April 2016, that will replace an existing £310-million revolving credit facility.

Drax’ investment plans were also underpinned by the group’s net cash position – £233 million at 30 June 2012 – and a £100-million amortising term loan facility with the Prudential / M&G UK Companies Financing Fund. A recent equity placing has added a further £190 million in proceeds to the war-chest.

The Yorkshire energy group has also executed a new commodity trading facility, which allows it to transact prescribed volumes of commodity trades without the requirement to post collateral.

The new financing agreements indicates support from the investment community for the biomass strategy, said Drax finance director Tony Quinlan, who welcomed, in particular, the involvement of the UK Green Investment Bank.

“We are making very good progress with our project to transform the largest coal plant in the UK into an electricity generator fuelled predominantly by sustainable biomass” commented Quinlan.

The benefits are multiple, from securing jobs at Drax and across the UK in the supply chain to providing low carbon, cost effective and reliable renewable power for the consumer,” he added.

Drax’s biomass push comes as the UK faces up to the prospect of power shortages over the next decade, with many power stations set to close due to new EU regulations on emissions.