Pinnacle Renewable Energy Inc. has announced that it has entered into an arrangement agreement with Drax Group and its wholly-owned subsidiary, Drax Canadian Holdings Inc., pursuant to which Drax will acquire all of the issued and outstanding common shares of Pinnacle in an all-cash transaction valued at C$831 million, including the assumption of net debt and Pinnacle's non-controlling interests in its joint ventures.
Working forest in LaSalle BioEnergy catchment area, Louisiana (Drax)
Duncan Davies, Pinnacle's CEO, said "Pinnacle's Board of Directors has unanimously determined that the transaction represents the best course of action for the company and its shareholders. On closing, the transaction will deliver immediate, significant and certain cash value to our shareholders. At the same time, the combination of Pinnacle and Drax 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 around the world."
Gregory Baylin, Chair of Pinnacle's Board of Directors, added, "The transaction is a testament to the hard work of Pinnacle's management team and employees in building the strong business we have today. We believe the transaction represents attractive value for our shareholders and positions the business for continued success for the benefit of our customers, suppliers, and other stakeholders."
Sustainable biomass has an important role to play in global energy markets as a flexible and sustainable source of renewable energy, as well as having the potential to deliver negative emissions. Drax believes that the acquisition accelerates the Group’s strategic objectives to increase its available self-supply of sustainable biomass to five million tons per annum (Drax currently operates 1.6 million tons of capacity with 0.4 million tons in development) and reduce the cost of biomass to £50/MWh(4) by 2027. Through the delivery of these strategic objectives Drax aims to create a long-term future for sustainable biomass, including third-party supply, BECCS and merchant biomass generation.
Will Gardiner, Chief Executive Officer of Drax remarked, "I am excited about this deal which will reinforce Drax's position as the world's leading sustainable biomass generation and supply business, delivering against our strategy to increase self-supply, reduce our biomass production cost and create a long-term future for sustainable biomass. We expect to benefit greatly from Pinnacle's operational and commercial expertise, and I am looking forward to what we can achieve together."
Pinnacle is the second largest producer of industrial wood pellets in the world. The company's products are used to displace fossil fuels in the production of baseload electrical power in key markets around the world. The company operates nine production facilities in Western Canada and one in Alabama, with one additional facility under construction in Alabama and more in development. The company also owns a port terminal in Prince Rupert, BC. Pinnacle has entered into long-term, take-or-pay contracts with utilities in the U.K., Europe and Asia that represent an average of 99% of its production capacity through 2026.