Power producer Drax has announced a deal to acquire a portfolio of Scottish Power’s assets for £702m as it looks to add further flexible sources of energy to its offering.
The Selby-based firm has acquired the portfolio of pumped storage, hydro and gas-fired generation from utility company Iberdrola. The sale means that Scottish Power will now generate 100 per cent of electricity with clean wind power.
Will Gardiner, CEO of Drax Group, said: “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.”
Confirmation of the deal comes as Drax seeks to diversify beyond coal ahead of the 2025 national deadline to phase out the most carbon-intensive form of power generation.
Drax believes that there is a strong financial case for making the deal, which is subject to shareholder approval and clearance by the Competition and Markets Authority (CMA). The power producer expects earnings for the portfolio to be in the region of £90-110m for 2019, a figure based on recent power and commodity prices.
“This acquisition makes great financial and strategic sense, delivering material value to our shareholders through long-term earnings and attractive returns,” Mr Gardiner said.
He added: “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.”
The acquisition is expected to be completed on December 31, 2018.
Keith Anderson, chief executive of Scottish Power, said: “This is a pivotal shift for Scottish Power as we realise a long-term ambition. We are leaving carbon generation behind for a renewable future powered by cheaper green energy. We have closed coal, sold gas and built enough wind to power 1.2 million homes.”
Scottish Power reiterated its commitment to invest £5.2bn over the next four years in renewables, advanced grid networks and smart technology.