Highlights
- Inbound investment signals a vote of confidence in Pinnacle's expertise in sustainable wood pellet production in Canada and the Southern US
- Combination positioned as the world's leading sustainable biomass generation and supply business
British energy company Drax has agreed to acquire Pinnacle at a price of C$11.30 per share, valuing Pinnacle at C$385 million.
The acquisition brings together Drax, which owns the world's largest sustainable biomass power station in the UK, with Pinnacle, one of the leading global producers of high-quality compressed wood pellets. This Canadian-UK combination will be positioned as the world's leading sustainable biomass supply and power generation business.
Drax already owns and operates wood pellet mills in the Southern US and, with the addition of Pinnacle's 11 sites, will own a total of 17 pellet plants and development projects. This will give Drax the capacity to produce 4.9 million tonnes of biomass wood pellets annually from 2022, with access to four deep water port facilities and three major wood fibre baskets.
Drax is the largest decarbonisation project in Europe having converted the UK's biggest coal-fired power station to use sustainable biomass, delivering carbon savings of more than 80%.
As the UK's biggest single-site renewable electricity generator, Drax produces enough renewable electricity for four million homes. Drax's world-leading sustainable biomass sourcing policy goes beyond UK and EU regulations and aims to drive up standards globally. It will use pellets produced at the Pinnacle facilities in its UK power station, ensuring it has a cost-effective supply.
Drax is committed to ensuring the safe, efficient and sustainable operation of the enlarged group's activities and intends to invest in Pinnacle accordingly to deliver this outcome.
Will Gardiner, Chief Executive Officer of Drax, said: "I am excited about this deal which positions Drax as the world's leading sustainable biomass generation and supply business, progressing our strategy to increase self-supply, reduce our biomass production cost and creating a long-term future for sustainable biomass.
"We expect to benefit greatly from Pinnacle's operational and commercial expertise. I look forward to welcoming the Pinnacle employees to the Drax Group and to what we can achieve together."
Duncan Davies, Chief Executive Officer of Pinnacle, said: "Drax and Pinnacle share a common focus on delivering good quality low-cost biomass which we both believe is critical to global decarbonisation. The combination will create a global leader in sustainable biomass with the vision, technical expertise and financial strength to help meet the growing demand for renewable energy products, which is exciting for our employees and customers."
Drax is committed to ensuring that its biomass sources are compliant with its well-established responsible sourcing policy. Drax expects to invest in, adapt and change sourcing practices as and when required to ensure compliance with its policies to deliver its biomass strategy and positive forest outcomes.
The acquisition, which remains subject to Drax and Pinnacle shareholder approval as well as regulatory approvals and receipt of certain third party consents, has been unanimously recommended by the board of Pinnacle and has the full support of Pinnacle's major shareholder, affiliates of ONCAP (which, together hold shares representing approximately 31% of Pinnacle's shares as at 5 February 2021). Completion is expected to occur in the second or third quarter of 2021.
Media contacts:
FTI Communications (PR Advisor):
Canadian Media
Shawn Hall
604-619-7913
shall@headwatersgroup.ca
FTI Communications (PR Advisor):
US Media
Shannon Banaga
202-320-3417
shannon.banaga@fticonsulting.com
John Glennon
202-826-7101
john.glennon@fticonsulting.com
