Drax secures funding for biomass conversion
The UK’s largest sole electricity generator Drax, yesterday (20 December) announced that it has secured ‘committed financing’ which will allow the group to produce its electricity primarily from burning biomass.
In addition to their net cash reserves, which stood at £233 million in June 2012, Drax have secured funding from a number of other sources, including an amoritising term loan of up to £100 million from the Green Investment Bank (GIB) that opened its doors for trading last month.
Additional funding includes a similar £100 million loan from the Prudential/M&G UK Companies Financing Fund in June 2012, £190 million (gross) from an equity placing in October 2012 and a £400 million revolving credit facility which is set to mature in 2016 and replaces their previous £310 million facility.
Finance Director of Drax, Tony Quinlan, said: “We are very pleased to have successfully secured this financing. We believe it is a clear demonstration of support from the investment community for our biomass strategy. We particularly welcome 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.
“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.”
Drax had previously announced that it intended to convert three of its six 660 MW boilers, based in Selby, Yorkshire, to burn biomass only. This will require seven million tonnes of plant material per annum, nearly three times more than the 2.75 million tonnes of wood that were burnt in all UK power stations combined in 2011/12.
However, a report published last month by the RSPB, Friends of the Earth and Greenpeace shows that burning trees, rather than coal, is actually worse for the environment, with the burning of typical conifer trees resulting in 49 per cent more emissions than coal.
In addition to funding, Drax has announced that it has ‘successfully executed a new commodity trading facility’, which will mean that the group is no longer required to post collateral when transacting prescribed volumes of commodity trades.
Read more about Drax’s plans for biomass.
