The latest amortising loan, backed by the state Infrastructure U.K. Guarantee Scheme, was secured from Friends Life, and has a maturity date of June 2018.
Commenting on the new credit facility, Drax finance director Tony Quinlan said the loan backs the company’s transformation of the largest coal-fired power station in the UK into an electricity generator fuelled by sustainable biomass.
"The benefits are multiple, from securing jobs at Drax and across the UK in the supply chain to providing low carbon, cost effective and reliable renewable power for the consumer. We are delighted to secure the support of Friends Life and Infrastructure UK," added Quinlan.
Meanwhile, the total funds of £700m also comprises £190m proceeds from an equity placing, £100m from Prudential-M&G, £50m from UK Green Investment Bank, and Drax’s £400m revolving credit.
UK Treasury chief secretary Danny Alexander noted: "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."
The company, which has recently completed the conversion of its first plant, is scheduled to conclude the second transformation by 2014.
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By GlobalDataDrax spokesperson told BusinessGreen that the conversion of the third generator is expected to be completed by 2015, depending on the availability of biomass.
Further, the company is planning to convert its other three plants to bio-mass in the long-term.
Although Drax and the government have agreed to maintain sustainability criteria for biomass used by the site, few environmental groups have raised questions over increased reliability on imported wood chips citing fuel deforestation and increased greenhouse gas emissions.
