Drax plans to spend £702m on around 2.6GW of of pumped storage, hydro and gas-fired generation assets from Scottish Power parent Iberdrola.
The proposed transaction, reported last month, includes the Cruachan pumped storage hydro (440MW), run-of-river hydro locations at Galloway and Lanark (126MW), and four CCGT stations: Damhead Creek (805MW), Rye House (715MW), Shoreham (420MW) and Blackburn Mill (60MW). The Daldowie sludge drying plant is also part of the package.
Selling those plants sees Scottish Power exit fossil fuelled generation.
Drax has bridging finance in place to do the deal, and thinks the plants will deliver earnings of around £90-£110m per year. Most of that would come from non-commodity services such as subsidies and grid balancing, said Drax.
CEO Will Gardiner said the firm was “delighted” to begin the processes of acquiring the 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.”
He added that the “acquisition makes great financial and strategic sense”.
See further details here.
The transaction, when complete will mean Scottish Power’s generation portfolio is 100% renewables. It has 2,700 MW of wind power capacity (installed or under construction), plus a project pipeline in excess of 3,000 MW, of which 2,900 MW in offshore wind.
Iberdrola chairman Ignacio Galán, said the deal forms part of the company’s “standard rotation of assets”. He added that “the world is changing” and that “energy companies should be part of the solution to climate change and not part of the problem”.
See Iberdrola’s statement here.