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UK’s largest coal powered plant to convert to biomass

UK power station Drax will plan to raise £180 million ($290 million) through a new share placing to support a change to becoming a predominately biomass-fuelled power generator.

Three of the six Drax units will be converted to biomass meaning the site will be one of the largest renewable energy plants in Europe.

The company is now looking to secure capital funding for the conversion, which it estimates will cost between £650 and £700 million. Drax also confirmed it will take on £100 million in new debt and increase its existing credit facility from £310 million to £400 million.

‘We now have the mandate, means and expertise to become a large renewable electricity generator,’ says Drax CEO Dorothy Thompson. ‘We will do this by transforming the largest coal plant in the UK into a power plant fuelled predominantly with sustainable biomass. The placing is one of the key building blocks in this transformation.’

Drax believes conversion to biomass would deliver attractive returns for investors thanks to significantly higher margins compared to a coal-only business. Company shares rose by 13.5p on 26 October to 533.50, valuing Drax at around £2 billion.

 ‘This is a significant move by Drax and one which is likely to go a long way towards meeting the UK's renewable energy obligations,’ says head of biomass and biogas at bioeconomy consultancy NNFCC, Lucy Hopwood.

‘By converting to biomass, Drax will prolong the lifespan of the existing power station, ensuring the UK maintains baseload energy capacity beyond 2015 when many coal-fired power plants are expected to close in order to meet the requirements of the large combustion plant directive.’