Last checked at 4 Dec 2013 14:05
4 December 2013
DRAX GROUP PLC
(Symbol: DRX)
TWO DRAX BIOMASS UNITS ELIGIBLE FOR EARLY CFDs
CFD STRIKE PRICES CONFIRMED
In 2012, the Government confirmed support under the Renewables Obligation ("RO") of 1.0 ROC/MWh for generating units that are converted to burn sustainable biomass in place of coal, grandfathered through to 2027.
Drax is transforming into a predominantly biomass-fuelled electricity generator, initially by converting three of its six generating units. The first unit was converted successfully in April 2013. Support for this unit will remain under the RO.
Through the Electricity Market Reform, the Government is introducing Contracts for Difference ("CFDs"), which are fixed price long-term contracts, to support the development of low-carbon electricity generation. CFDs will replace the RO for all new renewable investments from April 2017. They are expected to become available in late 2014, at which point renewable developers will have the choice to apply for support under either the RO or a CFD.
In June 2013, the Government published information, including draft strike prices and contract term principles, in relation to Final Investment Decision Enabling ("FID Enabling") Investment Contracts. These are early CFDs which will provide an alternative to the RO in advance of the normal CFDs becoming available.
In September 2013, Drax applied for Investment Contracts under the FID Enabling process for the conversion of two of our units.
The Government has today confirmed that both Drax units meet the eligibility and minimum evaluation criteria for Investment Contracts under the FID Enabling process. The Government has also confirmed the final strike prices for Investment Contracts, including £105/MWh for biomass conversion (in 2012 prices) and set a budget for support under this mechanism through to 2021 to ensure that it meets affordability criteria.
Commenting on the news, Dorothy Thompson, Chief Executive of Drax, said:
"We are pleased that both Drax unit applications have satisfied the eligibility and evaluation criteria for the award of Investment Contracts. Further, we welcome the certainty delivered by confirmation of the strike price at £105/MWh.
"We will now participate in the next stages of the FID Enabling process, which includes the selection of appropriate projects to meet the affordability criteria.
"In the meantime, our first converted unit continues to operate very well and commissioning of the new on-site biomass receipt, storage and distribution infrastructure for the first converted unit is on schedule to be complete by year end."
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Enquiries:
Drax Investor Relations: Michael Scott
+44 (0) 1757 612 230
Media:
Drax External Communications: Melanie Wedgbury
+44 (0) 1757 612 438
Brunswick: Richard Jacques / Nina Coad
+44 (0) 207 404 5959
Website: www.drax.com
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