BILBAO (dpa-AFX) - Drax Group plc. (DRX.L), engaged in the electricity generation, announced Tuesday that it has agreed to acquire Scottish Power's portfolio of pumped storage, hydro and gas-fired generation for 702 million pounds in cash from Spanish utility Iberdrola (IBDSF.PK), subject to Drax shareholder approval.
The acquisition is expected to deliver returns significantly in excess of the Group's WACC and to be highly accretive to underlying earnings in 2019.
The Acquisition is expected to complete on 31 December 2018 and is conditional upon the approval of the Acquisition by Drax's shareholders and clearance by UK Competition and Markets Authority.
The Portfolio consists of Cruachan pumped storage hydro, run-of-river hydro locations at Galloway and Lanark, four CCGT stations: Damhead Creek , Rye House, Shoreham and Blackburn Mill, and a biomass-from-waste facility.
The Portfolio is expected, based on recent power and commodity prices, to generate EBITDA in a range of 90 million pounds to 110 million pounds, from gross profits of 155 million pounds to 175 million pounds.
Capital expenditure in 2019 is expected to be in the region of 30 million pounds to 35 million pounds.
Drax said it remains committed to its capital allocation policy and to its current 50 million pounds share buy-back program.
Regarding its trading update, Drax said it has commenced operation of a fourth biomass unit at Drax Power Station, which is performing in line with plan, and availability across biomass units has been good.
Taking these factors into account, alongside a strong 2018 hedged position and assuming good operational availability for the remainder of the year, Drax's EBITDA expectations for the full year remain unchanged.
Biomass generation is now fully contracted for 2019.
In light of the acquisition and the expected timing of the general meeting to approve it, Drax will postpone the planned Capital Markets Day on 13 November 2018.
Drax expects to announce its full year results for the year ending 31 December 2018 on February 26, 2019.
Copyright RTT News/dpa-AFX