Friday, October 26, 2012

[biofuelwatch] Drax raises £190m for "eco conversion"



http://www.ft.com/cms/s/0/cccd46b4-1eb8-11e2-be82-00144feabdc0.html#axzz2AP0gOQ59

Drax raises £190m for eco conversion

By Pilita Clark, Environment Correspondent

Drax, the owner of the UK's biggest coal-fired power station, has raised £190m in a share placing in its latest effort to transform itself into one of Europe's biggest renewable energy plants.

In a sign of how changes to UK energy subsidies are affecting the green power market, Drax will spend the money converting three of the six generating units at its Selby plant in North Yorkshire so they can burn biomass, or plant matter, instead of coal.

The previously announced conversion programme will cost between £650m and £700m, backed by the placing of 9.99 per cent of existing share capital on Thursday at 520p, representing a zero discount to the opening price.

Shares in Drax closed up 5.4 per cent on Thursday at 548p.

Additional funding will come from £230m of cash; a new £100m loan and by increasing a bank credit line from £310m to £400m.

The first converted generating unit is due to be up and running by April next year and the last by 2016. This will create 2,000MW of capacity, making Drax one of Europe's biggest clean energy generators.

The company is already a leading importer of wood pellets, which it burns with coal in a process known as "co-firing".

Its move follows subsidy changes announced in July that make it more attractive to fully convert coal-fired power stations into biomass, rather than co-firing or building brand new dedicated biomass power plants.

Those changes led Centrica, the owner of British Gas, to announce on Wednesday it was ditching plans to build dedicated biomass power stations at Roosecote in Barrow-in-Furness and at Glanford Brigg in North Lincolnshire.

Drax had also been planning to spend at least £2bn on three dedicated biomass plants – one at its Selby site; one in Humberside and a third at another site in northern England – but made clear after the July subsidy changes that these would not go ahead.

Drax's moves meant it could end up importing as much as 8m tonnes of wood pellets a year, said Hannes Lechner of Pöyry Management Consulting's global bioenergy practice, up from 1m tonnes last year.

"If they go for up to 8m tonnes they would be by far the biggest biomass consumer for energy worldwide," he said.

Drax's existing conversion plans mean it will be responsible for meeting 10 per cent of the UK's target of producing 30 per cent of electricity from renewables by 2020.

About half its £650m-£700m biomass investment will be spent on the Selby site modifying boilers, storage facilities and other equipment. The other half will be used to upgrade port facilities and build new wood pellet plants in North America.




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Biofuels are a wide range of fuels which are in some way derived from biomass.

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