Drax has announced that it has reached agreement for the sale of Drax Generation Enterprise Limited (“DGEL”), which holds four Combined Cycle Gas Turbine (“CCGT”) power stations, to VPI Holding Limited (“VPI”) for £193.3 million, subject to customary adjustments. This includes £29.0 million of contingent consideration associated with the option to develop a new CCGT at Damhead Creek.
The transaction is subject to certain customary closing conditions, including anti-trust approval, with completion to take place by 31 January 2021.
The CCGTs have performed well since acquisition by Drax in December 2018, but do not form part of the Group’s core flexible and renewable generation strategy. Drax expects to realise a premium on sale, use the proceeds to develop its biomass supply chain and accelerate its ambition to become a carbon negative business by 2030.
DGEL also holds the Group’s pumped storage and hydro assets and is the shareholder of SMW Limited (the owner of the Daldowie fuel plant). These assets, shares and employees are to be transferred out of DGEL prior to completion and will be retained by Drax.
Between 2012 and 2019, through investment in sustainable biomass and hydro, Drax has reduced its carbon emissions by over 85% and become the largest source of renewable electricity in the UK.
In December 2019 Drax announced an ambition to become a carbon negative company by 2030. The negative emissions provided by BECCS will offset carbon emissions within the Group’s supply chain and help to offset emissions in harder to abate sectors of the economy, such as aviation and agriculture.
In February 2020 Drax announced an end to commercial coal generation in 2021 and now, by divesting its existing gas generation assets, Drax will further reduce its carbon emissions.
Drax will continue to provide system support services alongside its decarbonisation strategy through its renewable generation portfolio, other development opportunities and demand-side response within its Customers business. These activities provide renewable electricity and a fully flexible generation and supply portfolio, which can support the UK power system as it becomes increasingly reliant on intermittent and inflexible generation sources.