Drax agrees £702m acquisition of Scottish Power's gas and hydro power stations
By Hull Daily Mail | Posted: 16 Oct 2018
Drax Power Station has agreed a £702m acquisition of Scottish Power’s gas and hydro stations.
The country’s biggest power station has said it expects the portfolio – which includes four gas power stations in England, and two hydro schemes in Scotland – will generate profits as high as £110m in 2019.
The deal means Scottish Power has become the first of the ‘Big Six’ energy providers to fully ditch fossil fuels.
Will Gardiner, chief executive officer of Drax Group, said: "I am excited by the opportunity to acquire this unique and complementary portfolio of flexible, low-carbon and renewable generation 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.”
Drax is currently pushing forwards with its move away from coal power, ahead of the government’s deadline of 2025.
The power station, between Goole and Selby, has already converted four of its six generating units to burn wood pellets rather than coal.
Scottish Power has closed all of its coal plants in the past decade, and currently has 2,700 megawatts of wind power capacity operating or under construction in the UK.
“This acquisition makes great financial and strategic sense, delivering material value to our shareholders through long-term earnings and attractive returns,” Mr Gardiner said.
“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."
Drax has announced it expects capital expenditure in 2019 to be in the region of £30-35m.
The chief executive of Scottish Power has described the sale as “a pivotal shift” for the energy provider.
Keith Anderson said: “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.
“Every working day we are investing over £4m to deliver cleaner, smarter power for customers.
“From today we can focus solely on making energy generation cheaper, cutting carbon quicker, building smart grids and connecting customers to renewable electric future for transportation and heating.”
The assets are:
- Cruachan Pumped Storage Hydro: 440MW of large-scale storage and flexible low-carbon generation situated in Argyll and Bute, Scotland. Cruachan provides a wide range of system support services to the UK energy market, in addition to providing merchant power generation. Cruachan has £35 million of contracted capacity payments for the period 2019 to 2022. It provides more than 35 per cent of the UK’s pumped storage by volume, can provide long-duration storage with the ability to achieve full load in 30 seconds, which it can maintain for over 16 hours, making it a strategically important asset remunerated by a broad range of non-commodity based revenues.
- Galloway and Lanark Run-of-River Hydro: 126MW of stable and reliable renewable generation situated in South-west Scotland. Both locations benefit from index-linked ROC revenues extending to 2027 and Galloway, in addition to renewable power generation, operates a reservoir and dam system providing storage capabilities and opportunities for peaking generation and system support services. It also has £4 million of contracted capacity payments for the period 2019 to 2022.
- Damhead Creek (805MW), Rye House (715MW) and Shoreham (420MW), all combined cycle gas turbine power stations, strategically located in South East England. Damhead includes an option for the development of a second CCGT asset, Damhead Creek II, which provides additional gas generation potential. A 60MW site in Blackburn, Lancashire.
- A 50,000 tonne biomass-from-waste facility in Daldowie, which benefits from a firm offtake contract agreement with Scottish Water until 2026.