Energy firm Drax has bought a Canadian wood pellet group as it drives forward a push towards renewable energy.
The Selby firm has announced a £226m deal for Pinnacle Renewable Energy, which is listed on the Toronto Stock Exchange and operates biomass sites in Canada and the US.
Drax said the deal would add 2.9m tonnes of biomass production capacity and significantly reduce its production costs, as well as giving it increased global reach. Pinnacle was already a supplier to Drax and the Yorkshire firm said the “large and well-established commercial forestry industry” in British Columbia was a good source of wood pellets.
The deal - which Drax said would be funded from cash and existing agreements - will mean the combined group has 17 pellet plants and 2.6GW of renewable biomass generation.
Chief executive officer Will Gardiner said: “I am excited about this deal which positions Drax as the world’s leading sustainable biomass generation and supply business, progressing our strategy to increase self-supply, reduce our biomass production cost and create a long-term future for sustainable biomass.”
“We expect to benefit greatly from Pinnacle’s operational and commercial expertise, and I am looking forward to what we can achieve together.
“It will pave the way for our plans to use Bioenergy with Carbon Capture and Storage (BECCS), and become a carbon negative company by 2030 - permanently removing millions of tonnes of carbon dioxide from the atmosphere each year.
“Negative emissions from BECCS are vital if we are to address the global climate emergency whilst also providing renewable electricity needed in a net zero economy, supporting jobs and clean growth in a post-Covid recovery.”
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Duncan Davies, chief executive officer of Pinnacle, said: “Pinnacle’s board of directors has unanimously determined that the transaction represents the best course of action for the company and its shareholders. On closing, the transaction will deliver immediate, significant and certain cash value to our shareholders.
“At the same time, the combination of Pinnacle and Drax will create a global leader in sustainable biomass with the vision, technical expertise and financial strength to help meet the growing demand for renewable energy products, which is exciting for our employees, customers and others around the world.”
Drax dates back to the 1970s when the massive coal-fired power station was set up after the discovery of the Selby coalfield.
The company, which went into private ownership in the 1990s, has been undergoing a major shift to renewable energy in recent years, using its last coal last March after a huge switch to biomass.
In December it agreed a £193m deal to sell its portfolio of gas-fired power stations.