The amortizing loan, which will mature in June 2018, is backed by the state Infrastructure UK Guarantee Scheme.
The financing will replace half of a GBP100m loan from the UK Green Investment Bank, with funds raised for the project GBP815m.
Drax plans to invest about $1bn to turn itself into a predominantly biomass-burning power generator, initially switching three of its six units to burn wood pellets in the next three to four years.
RWE AG in Germany and Dong Energy of the Netherlands are also switching to burning renewable fuels in an effort to meet European Union air-pollution standards.
Commenting on the new facility, Drax Finance Director Tony Quinlan said, "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."
"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," Quinlan added.
