UK court rules Drax's second coal-to-biomass unit conversion at power station in Selby, England, is eligible for green energy support scheme, orders government to reconsider decision to exclude unit from program

LONDON , July 14, 2014 () – Drax Group PLC Monday said the UK High Court has ruled as incorrect the UK Department of Energy and Climate Change's decision to deem the conversion of a second Drax power plant to burn bio-mass in place of coal as ineligible for subsidies under a new government support programme.

The UK energy provider started legal proceeding 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.

On Monday, the company said the court has now declared that the second unit conversion was indeed eligible for an investment contract, and it has ordered the Department of Energy and Climate Change to quash their previous decision and reconsider the decision to reject its conversion.

The company said the UK government has been granted leave to appeal.

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 Group shares were up 5.4% to 716.50 pence, putting it top of the FTSE 250 risers on Monday.

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