Drax biomass conversion all set with government-guaranteed £75m loan

Drax has secured a £75 million three-year loan from Friends Life, underpinned by a government guarantee, to fund its biomass conversion project.The loan replaces half a £100 million loan from the Green Investment Bank.

This latest finance means the firm is more than covered for the projected £650 million – £700 million cost of converting three units at its coal power plant to biomass.

Drax is the first confirmed recipient of Treasury support under the UK Infrastructure Guarantee scheme. Group finance director Tony Quinlan said he was “delighted” at the show of support.

With government backing, the cost of the Friends Life loan is just under 4 per cent. This compares favourably to just under 6 per cent on existing finance from the GIB and M&G.

Chief secretary to the Treasury Danny Alexander said: “The Drax conversion will be the first project of many to be enabled by this radical, innovative new approach. I would strongly encourage any other investor who thinks a guarantee may help them to talk to the Treasury – the door is open.”