23rd Jul 2014 16:39
LONDON (Alliance News) - Drax Group PLC Wednesday said that following a recent High Court ruling in its favour, the UK Department of Energy and Climate Change (DECC) has announced that it intends to award Drax an investment contract for its second power plant conversion to burn bio-mass in place of coal.
The UK energy provider started legal proceedings against the UK government after it rejected Drax's second unit conversion at the Drax Power Station, saying it was not eligible for investment contracts under a new contracts-for-difference scheme, a subsidy for low-carbon electricity generation.
At the time, it said that the government decision had caused some uncertainty, leading to delays in its biomass supply and logistics development, but that its legal advisers had advised that it had good foundation to challenge the finding.
Last week, the company said the UK High Court had ruled as incorrect the DECC's decision to deem the conversion of a second Drax power plant as ineligible for subsidies under a new government support programme.
On Monday, Drax said that, as directed by the court, DECC completed a reconsideration of the application by Drax for an investment contract for its second unit conversion under the Final Investment Decision Enabling mechanism and decided to award to contract.
However, the company also noted Monday that DECC has now appealed against the High Court judgement to the Court of Appeal in the UK and that the award of an investment contract for the second unit conversion will therefore be dependent on the final conclusion of the legal challenge and also remains subject to EU State Aid clearance.
The conversion of a third Drax power plant was granted under the contracts-for-difference scheme earlier this year. However, despite the second unit conversion being granted as eligible in December, the decision was then overturned and Drax was told the second site would only receive government support through the previous less-valuable Renewables Obligation regime.
There are six units at the Drax Power Station, and the company intends to convert three of these to burn sustainable bio-mass.
Drax shares closed up 0.3% at 705.00 pence on Wednesday.
By Tom McIvor; [email protected]; @TomMcIvor1
Copyright 2014 Alliance News Limited. All Rights Reserved.
Related Shares:
Drax