Drax Group (LSE:DRX) will build two new bio-energy plants with carbon capture and storage (BECCS) in the US, following months of deliberation over where fresh investment should be placed.
FTSE 250-listed Drax is now set to invest around £7bn in carbon capture projects between 2024 and 2030, with £3bn of this being earmarked for the existing North Yorkshire biomass power plant in the UK, the energy generator announced on Tuesday.
“This is expected to significantly reduce the operating cost of new-build BECCS compared to retrofit, as well as carbon emissions in the supply chain,” the company noted.
Drax burns wooden pellets imported from the likes of the US, Canada and Brazil to produce power and has been looking to invest in carbon capture in recent years.
Despite threats that investments would be redirected to the US without public funding, Drax missed out on a government boost on the UK’s ‘Green Day’ in March.
However, Drax reassured investors that the £7bn needed could indeed be funded after “strong expected cash flow generation” and a “return to net debt”.
Nine other sites are also being explored for BECCS in the US, Drax added, given the “supportive investment environment created by the Inflation Reduction Act”, which offers subsidies for green companies under a US$396bn public fund.
Drax also updated on its £150mln share buyback, which will likely be completed by late 2023.