Drax sells gas assets for £193m

Power generator Drax said it had sold its gas assets to VPI Holding for £193.3m as it moved towards its 2030 target of becoming carbon negative.

The group’s, which runs Europe’s biggest biomass-fuelled power station in Yorkshire, also said expectations for 2020 adjusted core earnings remained in line with market expectations, inclusive of the impact of Covid-19.

Drax on Tuesday said the sale was expected to complete by the end of next January, subject to conditions, including anti-trust approval.

It added that the purchase price includes £29m of contingent consideration associated with the option to develop a new Combined Cycle Gas Turbine (CCGT) power station at Damhead Creek in Kent.

“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,” the company said in a statement.

Pumped storage and hydro assets, shares and staff held under the CCGTs being will be retained by Drax.

“As we focus on a renewable and flexible portfolio, it is right we divest these gas generation assets and in doing so create value for our shareholders,” said chief executive Will Gardiner.

"By focusing on our flexible and renewable generation activities in the UK we expect to deliver a further reduction in the group's CO2 emissions, which should accelerate our ambition to become not just carbon neutral but carbon negative by 2030.

In February 2020 Drax announced an end to commercial coal generation in 2021.