26 January 2016
Drax Group plc
("Drax" or the "Company"; Symbol:DRX)
Drax CfD - Further Details of EC Formal Investigation
On 5 January the European Commission (EC) announced that it had opened a formal (Phase 2) State aid investigation into the award of an Investment Contract(1) to Drax for its third coal-to-biomass unit conversion. This was as expected.
The EC has now published further details, including confirmation that the contract was notified with a strike price of £100/MWh(2), in line with current market expectations.
http://ec.europa.eu/competition/state_aid/cases/257954/257954_1720554_105_2.pdf
Drax welcomes the opportunity to work with the UK Government and the EC to complete the State aid clearance process.
Enquiries:
Drax Investor Relations: Mark Strafford
+44 (0) 1757 612 491
Media:
Drax External Communications: Andrew Brown
+44 (0) 7721 513 777
Website: www.drax.com
Note:
(1) The Government introduced Contracts for Difference (CfDs), which are long-term contracts, to support the development of low carbon electricity generation. To avoid an investment hiatus in the renewables sector before CfDs become available under the enduring regime, the Government introduced a scheme for Investment Contracts under the Final Investment Decision Enabling ("FID Enabling") for Renewables mechanism. These were 'early' CfDs intended to provide greater confidence for investors in advance of the enduring CfD.
Early CfD contracts for biomass developments were granted to the Lynemouth conversion, Drax's third unit conversion and the MGT dedicated biomass CHP project. They were each subject to individual State aid approval by the European Commission. The MGT contract was approved in January 2015 and the Lynemouth contract in December 2015.
(2) Price in 2012 terms.
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