£193m deal agreed for Drax to sell gas power stations to VPI
HUMBER power giant VPI has agreed a £193.3 million deal to buy Drax Group’s gas generating portfolio.
The company behind one of Europe’s cleanest operations within the region’s refining complex looks set to take on four sites early in the new year.
Located in the South East and Lancashire, they provide 2GW of electricity, and were bought by Drax two years ago as part of a deal with Iberdrola that also included pumped storage and hydro - the largest part of the transaction.
VPI’s accepted offer includes £29 million for the development of a new combined cycle gas turbine plant at the largest site in the portfolio, Damhead Creek, in Kent. It would represent a 1.8GW addition, while
Shoreham also has upgrade capability.
A total of 121 employees will transfer on completion, which forms the latest chapter in Drax’s green transformation, with coal - once everything to it - to be removed from the system in March after a huge switch to biomass. Described as an attractive proposition by VPI’s Dutch owner, Vitol, more than half of the purchase price is underwritten by capacity market contracts held through to 2024.
David Brignall, South Killingholme-based VPI manager, said: “VPI is committed to being part of the UK’s pathway to Net Zero. For the foreseeable future, renewables will need to be complemented by highly efficient gas generation. These assets, which both enable VPI to provide essential services to the grid across England and are developing their own carbon abatement programmes, will contribute to achieving Net Zero.” Completion is anticipated by the end of January, with Will Gardiner, chief executive of Drax, stating proceeds will be used to “develop its biomass supply chain and accelerate its ambition to become a carbon negative business by 2030,”.
The bulk of the fuel arrives metres from VPI’s existing UK plant, acquired from Phillips 66 in 2013. Will Gardiner, Drax Group chief executive, said: “We greatly value the contribution that our colleagues in gas generation have made to the group over the last two years. As we focus on a renewable and flexible portfolio, it is right that we divest these gas generation assets and in doing so create value for our shareholders.”
Alongside the 812MW Damhead Creek sits Rye House in Hertfordshire (715MW) and Shoreham in West Sussex (420MW) with Blackburn Mill in Lancashire (60MW).
Together they contributed £18 million of the group’s £179 million in earnings in the first six months of 2020.
The sites already have advanced CO2 abatement projects in place, leveraging both carbon capture and hydrogen solutions.