By Richard Johnstone | 24 April 2013
The Treasury is to underwrite £75m worth of investment in the Drax Power Station in North Yorkshire in the first confirmed deal using government-backed funding guarantees.
Chief Secretary to the Treasury Danny Alexander announced today that Drax Group’s scheme to convert the existing coal-fired power station to one predominantly burning biomass would be supported by UK Guarantees.
Launched last year, the programme is aimed at kick-starting schemes that might have stalled because of adverse credit conditions.
The Drax deal is the first to be signed off. An earlier attempt to use UK Guarantees to back the construction of trains for the new Crossrail route was abandoned.
Announcing the decision, the Treasury said the guarantee was critical to financing the conversion project, and would enable the Drax Group to reach a wider group of investors.
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.’
Lord Deighton, commercial secretary to the Treasury, added that the backing would give Drax ‘the security it needed to raise the finance and get on with delivering this major project’.
He said: ‘The power station is critical to the country's energy needs, and our UK Guarantee is a demonstration of the support that this government is prepared to give to infrastructure.’
