DRAX has received a boost of up to £100m from the new Green Investment Bank to help it secure thousands of jobs by becoming one of the biggest renewable power plants in Europe.
Drax will use the cash to help it switch from burning coal, which is a huge pollutant, to burning biomass, which is far more environmentally friendly. It estimates that the move will safeguard or create about 4,000 jobs.
The £3bn UK Green Investment Bank, which opened its headquarters in Edinburgh last month, was set up to lend money to key environmental projects around the country to help them get off the ground.
Drax plans to convert into a mainly biomass-fuelled generator after the Department of Energy and Climate Change (DECC) recently confirmed its support for the plant-based fuel through so-called Renewables Obligation Certificates (ROCs).
Drax, which is Britain’s biggest single emitter of carbon dioxide, wants to burn more fuel such as wood chips and straw pellets as large power generators come under pressure to clean up emissions.
Biomass is a generic term covering the huge range of organic, plant-based materials which are burnt to create useful heat and power.
Drax will need seven to eight million tonnes of biomass annually, replacing about five million tonnes of coal.
In a statement issued yesterday, Drax, which is based near Selby, said it had secured the “committed financing” to support the group’s transformation into a predominantly biomass-fuelled electricity generator.
The company said it already held net cash of £233m on June 30, 2012, which provided “a strong foundation for investment in the business” and has now agreed a loan facility of up to £100m with the UK Green Investment Bank. It has also secured a £400m revolving credit facility, maturing in April 2016, which will replace the existing £310m revolving credit facility.
The company has successfully executed a new commodity trading facility.
Drax’s finance director, 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.
Mr Quinlan added: “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.”
The announcement was welcomed by Paul Hamer, the chairman of the Leeds City Region green economy panel. Mr Hamer said: “Today’s announcement clearly demonstrates the scale of investor confidence in the Leeds city region’s energy sector.
“Together with Government’s decision earlier in the year to shortlist Drax for £1bn of carbon capture and storage investment, the role that Leeds city region electricity generators will play in reducing emissions from the UK energy mix is becoming increasingly clear.”
In recent months, investors have been rallying around Drax’s plans to become green.
In October, it revealed it had raised £180m through a share placing.
Drax said it planned to spend the money on substantial work at its Selby site.