Energy company Drax has confirmed it has entered into a conditional agreement to acquire Opus Energy – one of the UK’s largest business energy suppliers – for a conditional sum of £340 million.
Drax said the deal marked a “significant milestone” in its strategy that would help it “change the way energy is generated, supplied and used for a better future”.
It went on to add that the acquisition would accelerate Drax’s retail strategy whilst also generating attractive returns. Drax insisted its return would be great than the current cost of capital and be “significantly” accretive to earnings, forecasting strong cash flow generation throughout the forthcoming year.
“Today we are pleased to announce the proposed acquisition of Opus Energy, the UK's leading challenger retail supplier in the SME market, creating a strong and competitive presence complementing our existing Haven Power offer.
“We are pleased that five of our leading shareholders representing over 45% of the issued share capital have indicated that they will support the transaction, and we thank them for their support,” Dorothy Thompson, CEO of Drax Group, said.
The acquisition is to fully funded through a new debt facility.
The proposed deal would however be subject to the approval of its CfD by the European Commission, however the company said it remains confident of receiving the green light.
As of 31 March 2016 Opus Energy had more than 129,000 customers in the UK with circa 265,000 meters, giving it an 8% share of the UK’s non-domestic electricity market.
Drax said the combination of Opus with its Haven Power division, which has an existing presence in the commercial and industrial energy market, represented an “exceptional opportunity” to grow its retail business and expand its customer base into the “profitable SME sector”.
Drax also said Opus would be able to benefit from wholesale electricity and gas sourcing from Drax Power should it become an operational division of the company. It forecasted wholesale energy purchasing costs over the past three years to have been roughly £6 million per year, the majority of which would be eliminated should the acquisition go through.
As well as acting as a supplier, Opus Energy also offers to purchase renewable power from generators as a means of decarbonising its own supply and collaborating with its customers.