Drax Group Plc received 100 million pounds ($163 million) from Britain’s Green Investment Bank to fund its $1 billion plan to convert the nation’s biggest coal-fired power plant to burn wood pellets.
The GIB is providing the amortizing term loan alongside Prudential Plc and the M&G U.K. Companies Financing Fund, which committed equivalent funding in July, according to an e-mailed statement today from the North Yorkshire-based utility. Drax also obtained a 400 million-pound revolving credit facility maturing in April 2016 from a group of banks to replace its existing 310 million-pound line, it said.
Drax has now raised 790 million pounds that will cover the cost of converting half its units at its site in Selby, northeast England, to burn biomass in the next three to four years. It plans to switch one of its six units to burn wood pellets by June. It’s following RWE AG of Germany and the Dutch utility Dong Energy A/S in switching to renewable fuels as they strive to meet European Union air-pollution standards.
“We’re making very good progress with our project to transform the largest coal plant in the U.K. into an electricity generator fueled predominantly by sustainable biomass,” Tony Quinlan, finance director of Drax, said in the statement. “The benefits are multiple, from securing jobs at Drax and across the U.K. in the supply chain to providing low-carbon, cost-effective and reliable renewable power.”
Britain’s biomass industry has gained momentum following clarification of government support levels in July, alleviating concerns from investors.
The Department of Energy and Climate Change estimates bioenergy plants using wood chips and organic waste to produce heat and power may meet 8 percent to 11 percent of the nation’s primary energy demand in eight years.