Drax agrees to acquire Scottish Power assets in £702m deal
Power company Drax has agreed to acquire Scottish Power’s portfolio of pumped storage, hydro and gas-fired generation for £702m from Iberdrola – Scottish Power’s parent company.
The Portfolio consists of Cruachan pumped storage hydro (440MW), run-of-river hydro locations at Galloway and Lanark (126MW), four CCGT stations: Damhead Creek (805MW), Rye House (715MW), Shoreham (420MW) and Blackburn Mill (60MW), and a biomass-from-waste facility (Daldowie).
Drax has transformed the coal-powered station that lies halfway between Selby and Goole into Europe’s biggest decarbonisation project. In August, the company switched on its fourth biomass generating unit.
This acquisition is a major step in taking the North Yorkshire power station coal-free.
The addition of the portfolio is expected to generate EBITDA in a range of £90-110m, from gross profits of £155m to £175m, of which around two thirds is expected to come from non-commodity market sources, including system support services, capacity payments, Daldowie and ROCs.
Capital expenditure in 2019 is also expected to be in the region of £30-35m.
Drax entered into a fully underwritten £725m secured acquisition bridge facility agreement to finance the acquisition. Assuming performance in line with current expectations, net debt to EBITDA is expected to fall to Drax’s long-term target of around 2x by the end of 2019.
The acquisition is expected to complete on 31 December and is conditional upon the approval of the acquisition by Drax’s shareholders and clearance by UK Competition and Markets Authority.
Will Gardiner, CEO of Drax Group, said: “I am excited by the opportunity to acquire this unique and complementary portfolio of flexible, low-carbon and renewable generation assets. It’s a critical time in the UK power sector.
“As the system transitions towards renewable technologies, the demand for flexible, secure energy sources is set to grow. We believe there is a compelling logic in our move to add further flexible sources of power to our offering, accelerating our strategic vision to deliver a lower-carbon, lower-cost energy future for the UK.
“This acquisition makes great financial and strategic sense, delivering material value to our shareholders through long-term earnings and attractive returns. We are combining our existing operational expertise with the specialist technical skills of our new colleagues and I am looking forward to what we can achieve together.”
