Drax signs agreement to acquire Pinnacle Renewable Energy
February 8, 2021
BY Erin Voegele
Drax Group plc announced on Feb. 8 it has signed an agreement to acquire Canada-based pellet producer Pinnacle Renewable Energy Inc. The acquisition will more than double Drax’s pellet production capacity.
Under the agreement, Drax Canadian Holdings Inc., an indirect, wholly owned subsidiary of Drax, will acquire Pinnacle at a price of C$11.30 per share, valuing Pinnacle at C$385. The acquisition is subject to Drax and Pinnacle shareholders approval, court approval, regulatory approvals and the satisfaction of other customary conditions. The acquisition is expected to be complete in the second or third quarter of this year.
The transaction will boost Drax’s wood pellet production capacity by 2.9 million metric tons. With the addition of Pinnacle’s 11 sites, Drax will own 17 pellet plants and development projects. This will give Drax the capacity to produce 4.9 million metric tons of wood pellets annually from 2022, with access to four deep water port facilities and three major wood fibre baskets.
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The acquisition accelerates Drax’s strategic objective to increase its available self-supply of sustainable biomass to 5 million metric tons per year and reduce the cost of biomass to £50/MWh by 2027. Of the total production capacity, 2.9 million metric tons will be available for Drax’s self-supply requirements in 2022, increasing to 3.4 million metric tons by 2027. Drax said it aims to increase the level of third-party sales and further expand its capacity to meet its target of 5 million metric tons of self-supply by 2027.
"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,” said Will Gardiner, CEO of Drax.
"We expect to benefit greatly from Pinnacle's operational and commercial expertise, and I am looking forward to what we can achieve together."
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"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,” Gardiner added. “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."
Duncan Davies, CEO 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."
Additional details of the proposed transaction are available on the Drax website.
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