Drax Group, the owners of the Drax Power Station in North Yorkshire, have secured a £75 ($A115)million loan from insurer Friends Life for the conversion.

The amortizing loan will mature in June 2018 and is supported by the state Infrastructure UK Guarantee Scheme.

“This further strengthens our balance sheet, as we progress our project to transform the largest coal-fired power station in the UK into an electricity generator fuelled predominantly by sustainable biomass,” Drax finance director Tony Quinlan said.

“The benefits are multiple, from securing jobs at Drax and across the UK in the supply chain to providing low carbon, cost effective and reliable renewable power for the consumer.

“We are delighted to secure the support of Friends Life and Infrastructure UK.”

The funding will account for a little under 11% of the total £700 million investment needed for the conversion.

The Treasury said the agreement was “the first of many projects” being considered as part of UK Guarantees, which was launched last year.

Under the UK Guarantees program, the UK government will use its balance sheet to underwrite £40 billion of debt to kick start infrastructure projects that might have stalled due to adverse credit conditions.

The Drax deal is the first to be signed off.

“The Drax conversion will be the first project of many to be enabled by this radical, innovative new approach,” chief secretary to the Treasury Danny Alexander said.

“I would strongly encourage any other investor who thinks a guarantee may help them to talk to the Treasury – the door is open.”