Drax ready to fund biomass plans

POWER generator Drax is confident it can raise the capital it needs to fund its vision to move from coal to biomass.

The change is heavily dependant on Government support for renewable energy and an announcement last week on future subsidy levels appeared to hit market confidence with the share price plunging from 521p to 396p although it has since significantly recovered and opened this morning at 478.90p.

Drax believes the technical work needed to turn the power station into one predominantly fuelled by biomass will cost up to £700m.

Production director Peter Emery told TheBusinessDesk.com the market reaction was largely a misunderstanding of how the changes to subsidies would impact on Drax’s plans.

“We have already sounded out the market on how we will finance this. We have a significant amount of cash on the balance sheet which is helpful but we will be seeking funding in the next three to four months as things become clearer.

“We are confident we can raise the funding to transform the business to a predominantly biomass-fuelled generator.”

The changes to subsidies means the Government will be offering more support for transforming existing coal power generating units to run on biomass than for new dedicated biomass plants.

Drax has already announced it will not be going ahead with plans for a dedicated biomass plat at its main site and Mr Emery said proposals for another at Immingham are still being considered.

“The economics of the Immingham plant are challenging but we are working with our partners Siemens and others to see what we could do with that project so it is still alive while we decide how we can get value from it.”