Drax has sold on Drax Generation Enterprise to VPI Holdings, passing on its four CCGT plants in the process.
This £193.3 million sale means Drax is “focusing on flexible and renewable generation”, according to CEO Will Gardiner.
The company is to retain its pumped storage and hydro assets, which are to be transferred out of Drax Generation Enterprise prior to the completion of the transaction, which is set to happen by 31 January 2021.
Gardiner pointed to the bioenergy with carbon capture and storage (BECCS) the company is developing at the Drax Power Station as part of the Zero Carbon Humber project, stating that 50,000 new jobs could be created and supported through this.
The proceeds of the sale of the CCGTs are expected to be used to support the development of Drax’s biomass strategy, with plans to expand its supply chain to five million tonnes of self-supply capacity by 2027, with this currently being 1.5 million today plus 0.5 million tonnes in development, and reducing the cost of biomass to £50/MWh.
It has three models that it believes can deliver a long-term future for biomass; BECCS, merchant biomass generation at Drax Power Station and third party biomass supply. Delivery of one or more of these will allow Drax to continue its biomass activities when the UK subsidies for biomass end in March 2027.
Gardiner added that while “we greatly value the contribution our gas colleagues have made” in the two years since Drax itself acquired the CCGT assets from Iberdrola, “it is right that we divest these gas generation assets”.
In 2019, Drax announced its plans to be a carbon negative company by 2030 and made the decision in February of this year to end coal generation in 2021, four years earlier than originally planned.