23rd Apr 2014 07:44
LONDON (Alliance News) - Drax Group PLC said Wednesday that it has commenced legal proceedings against the UK government after it overturned a decision advising that two generating units at Drax Power Station - the "second" and "third" unit conversions - were eligible for investment contracts under a new contracts for difference scheme.
Drax said it has been notified by the UK government that the second unit conversion at the Drax Power Station is no longer eligible for an investment contract, adding that support for conversion instead is available under the existing Renewables Obligation regime, where eligibility has been confirmed.
In December, the government advised that two generating units at Drax Power Station - the "second" and "third" unit conversions - were eligible for conversion under the early contracts for difference mechanism, to support the conversion of the coal units to sustainable biomass under a new subsidy scheme.
Originally, both units were also provisionally ranked equal first of all the qualifying projects and deemed affordable, said Drax. The Government is introducing Contracts for Difference, which are long-term contracts, to support the development of low carbon electricity generation.
Following the decision and subsequent legal advice, Drax said it has now initiated legal proceedings over the exclusion of the second unit.
"Nothing has changed, as far as our plans are concerned, between being deemed eligible in December and now. We have, therefore, commenced legal proceedings to challenge the decision," said Dorothy Thompson, Chief Executive of Drax.
"Sustainable biomass provides a very reliable, flexible and cost effective renewable power source for the UK consumer. The performance of our first converted unit, which was converted last year to burn sustainable biomass in place of coal, continues to be strong," she added.
The conversion of a third Drax power plant unit has been granted support by the government Wednesday under its contract for difference scheme, said the electricity producer.
Drax Group shares fell to the bottom of the FTSE 250 shortly after the open Wednesday, trading 8.26% lower at 694 pence per share.
By Alice Attwood; [email protected]; @AliceAtAlliance
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