The deal will lead to terminal improvements worth up to £100m to handle shipments through ABP ports at Immingham, Hull and Goole. It will also generate 100 new jobs when the facilities become fully operational in the next few years.

The Drax Power Station at Selby is the UK’s largest single producer of electricity and three of its existing coal-fired units are to be converted to burn biomass under government plans to subsidise a switch away from using fossil fuels.

The proposals led to protests from the timber and forest products industry fearing competition for limited wood supplies.

However, Drax is to import 90% of the wood pellets required from Canada and the US where it is to build two wood pellet plants in the southern US.

A dedicated import facility will be created at the Humber International Terminal at Immingham. The Immingham Renewable Fuels Terminal will handle Panamax-size bulk carriers shipping up to three million tonnes of wood pellets a year.

The investment will require new quayside discharge plant with conveying equipment to new silos capable of storing 100,000 tonnes and a new train loading facility.

At Hull dedicated handling equipment and storage facilities for one million tonnes of pellets will be added and at Goole, seven miles from Drax, warehousing is to be added.

“We are very pleased to be able to announce that we have signed this contract with Drax," said ABP chief executive James Cooper. "This investment at Hull, Immingham and Goole looks set to secure the Humber region’s position as a centre of excellence for the development of the low carbon energy future.”