UK-based energy company ScottishPower has announced the sale of its traditional generation business to DraxSmart Generation, a subsidiary of Drax Group, for £702 million, with the deal including pumped storage and hydropower assets.
The completion of the sale means that Scottish Power, which is part of the Iberdrola Group, will become the first integrated energy company in the UK to shift completely from coal, gas and hydro generation to wind power. Currently ScottishPower has 2700MW of wind power capacity operating or under construction in the UK, and a pipeline of future projects capable of generating more than 3000MW.
The generation assets included in the sale are the 440MW Cruachan pumped storage plant in Argyll & Bute, the 109MW Galloway hydro scheme in South West Scotland, the 17MW Lanark hydro scheme in Lanarkshire, together with four combined cycle gas turbine plants – 805MW Damhead Creek , 715MW Rye House, 420MW Shoreham and 60MW Blackburn Mill projects – and Daldowie fuel plant.
The sale forms part of Iberdrola’s €3 billion global asset rotation plan, which was announced to the market in February 2018 as part of the company’s strategic outlook, setting out core business objectives to 2022. The rotation of assets is designed to complement growth plans, and support a commitment to carbon reduction. Globally Iberdrola aims to reduce emissions by 30% by 2020, and 50% by 2030 compared to 2007 and be carbon neutral by 2050.
Commenting on the announcement 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.
“This acquisition makes great financial and strategic sense, delivering material value to our shareholders through long-term earnings and attractive returns.
“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.”
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.
