Drax in legal fight with Government
Updated 1:33pm Thursday 24th April 2014 in Business news
DRAX Power Station has confirmed it is taking legal action against the Government after it backed out of biomass conversion funding.
In December last year the Government advised that conversions of the second and third units from coal into biomass at Drax Power Station, near Selby, were eligible for Investment Contracts under the early Contracts for Difference (“CfDs”) mechanism.
However, yesterday the Government revealed that only the third unit will be offered an Investment Contract.
Drax was notified that the Government believes the second unit conversion is no longer eligible for an Investment Contract, but support for conversion instead is available under the existing Renewables Obligation (“RO”) regime, where eligibility has been confirmed, with support also possibly available under the enduring CfD mechanism.
Drax has taken legal advice over the decision to exclude this second unit from the award of an Investment Contract., and proceeding have been inititated after the advice confirmed Drax has a "good foundation" to challenge this decision by the Government.
Dorothy Thompson, chief executive of Drax, said: “While we are pleased to have been offered an Investment Contract for our third unit conversion, we are disappointed by today’s decision on the ineligibility of our 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.
"The performance of our first converted unit, which was converted last year to burn sustainable biomass in place of coal, continues to be strong.
“I am proud of what we have achieved to date and we remain fully committed to our strategy of transforming Drax into a predominantly biomass fuelled generator."
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