16th Oct 2018 09:34
LONDON (Alliance News) - Drax Group PLC said Tuesday it has acquired a portfolio of low-carbon power generation assets in the UK for GBP702 million in cash from ScottishPower, part of Spanish utility company Iberdrola SA.
The acquired portfolio consists of the Cruachan pumped storage hydro facility and run-of-river hydro locations at Galloway and Lanark, all in Scotland. It also includes four combined cycle gas turbine stations at Damhead Creek, Rye House, Shoreham and Blackburn Mill in South East England, as well as a biomass-from-waste facility in Daldowie in Scotland.
"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," Drax Chief Executive Will Gardiner said.
The UK power generation company has entered into a GBP725 million secured acquisition bridge facility agreement to finance the acquisition. The acquisition is expected to complete by end of current year.
The acquired portfolio is expected, based on recent power and commodity prices, to generate earnings before interest, taxes, depreciation and amortisation in a range of GBP90 to GBP110 million, from gross profits of GBP155 million to GBP175 million, in 2019. For 2017, the portfolio generated Ebitda of GBP36 million.
Drax has retained its group Ebitda expectations for the full year, with net debt to Ebitda now expected to be around 1.5 times for the full year, excluding the impact of the acquisition.
Shares in the company were trading 5.7% higher at 387.00 pence each on Tuesday morning. Drax expects to release its 2018 results on February 26.