Government set to underwrite £75m Drax debt

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DRAX has won the backing of the Government’s infrastructure guarantee scheme for a £650m project to convert half its coal-fired plant to burn biomass.

The guarantee will be used to underwrite £75m of debt which Drax will raise from institutions.

The scheme was launched last summer to encourage up to £40bn of private sector investment in major projects, but has so far proved a flop.

Drax is only the second project to be backed. It plans to convert three of six units at the North Yorkshire plant to burn straw and wood. Drax’s £75m bond issue launches on Monday. It replaces £50m of funding from the Green Investment Bank, adding an extra £25m for liquidity.

Eligible infrastructure projects are meant to be “dependent” on a guarantee. However, Drax said in December it had secured “committed financing” for biomass.