Drax Gets $306 Million From Share Sale for Plant Conversion
Drax Group Plc (DRX) raised 190 million pounds ($306 million) in a share placement and is seeking 500 million pounds of new financing deals to change Western Europe’s largest coal-fired power station into one fueled by biomass.
The company placed 9.99 percent of its existing share capital at 520 pence a share today in a sale managed by Deutsche Bank AG and UBS AG, according to a statement. Drax exceeded the amount it targeted to raise by 10 million pounds.
Drax plans to spend 650 million pounds to 700 million pounds to fund the plant conversion, aided by a new 100 million- pound loan and a larger credit line from banks, the Selby, England-based company said in an earlier statement. It signed a 100 million-pound term loan with Prudential M&G UK Companies Financing Fund in July, according to data compiled by Bloomberg.
Drax is converting the power station to take advantage of higher margins on biomass fuel compared with coal, the company said.
“The path is now clear for transformation of Drax from the largest coal generator in the U.K. into one of the largest renewable power plants in Europe,” according to the statement.
The shares will be listed on the London Stock Exchange by Oct. 30 pending the Financial Services Authority’s approval, Drax said. Invesco Asset Management Ltd. and Schroder Investment Management Ltd. are among investors supporting the share placement, the company said earlier today. The new shares will rank equally with the existing stock and are eligible for dividends.
Drax surged as much as 28 pence, or 5.4 percent, to 548 pence in London at 4:24 p.m., the biggest intraday gain since July 26. The company has a market value of 2 billion pounds.
Drax is seeking to increase its revolving credit facility to about 400 million pounds from 310 million pounds and push its maturity to 2016 from 2014. The outstanding revolving credit facility pays interest of 200 basis points more than the London interbank offered rate, Bloomberg data show. Under a revolver, money can be borrowed again once it’s repaid. A basis point is 0.01 percentage point.
The company raised 108 million pounds in 2009 to help maintain its investment-grade credit rating as a downgrade to junk would have increased costs. Drax has since restructured its business and trading arrangements to allow it to operate with either an investment grade or sub-investment grade rating, according to today’s earlier statement.
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