UK Guarantees was announced in July 2012 with enabling legislation, the Infrastructure (Financial Assistance) Act 2012, receiving Royal Assent on 31 October 2012.
The Government are confirming that they have approved a guarantee for up to £75 million to Drax Finance Ltd for the partial conversion of a coal-fired power station to biomass.
UK Guarantees was launched in response to constraints in the long-term debt markets by providing a sovereign-backed guarantee to help infrastructure projects raise debt finance. In exchange for a guarantee a fee will be charged to the borrower, determined by the nature of the guarantee and the risks inherent in the project. Guarantees for up to £40 billion in aggregate can be offered under the initiative.
The Government will report to Parliament on the financial assistance given in line with the requirements set out in the Infrastructure (Financial Assistance) Act 2012.