Major shift for energy firm
ScottishPower wholly focused on wind after £702m Drax deal
The imposing Cruachan hydro station is part of the deal
ScottishPower has sold its hydro and gas-fired generation to Drax in a deal that will make the Glasgow-based company the UK’s first big energy provider to rely completely on wind power.
The £702 million cash deal with ScottishPower’s Spanish owner Iberdrola includes the landmark Cruachan pumped storage hydro station, together with Damhead Creek and Blackburn Mill as well as a biomass-from-waste facility (Daldowie).
Around 260 operational roles will transfer to Drax as part of the transaction which is expected to complete on 31 December.
ScottishPower chief Keith Anderson said: “This is a pivotal shift for ScottishPower 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.’
The portfolio is expected, based on recent power and commodity prices, to generate EBITDA in a range of £90-110m and 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. Pumped storage and hydro activities represent a significant proportion of the earnings associated with the portfolio.
The acquisition strengthens Drax’s ability to pay a growing and sustainable dividend.
Will Gardiner, chief executive of Drax Group, described the acquisition as a “unique and complementary portfolio of flexible, low-carbon and renewable generation assets”.
He 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.
“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.”