Drax completes acquisition of Pinnacle

By Erin Voegele | April 13, 2021

Drax Group plc announced on April 13 that it has completed the previously announced acquisition of Pinnacle Renewable Energy Inc. The transaction increases Drax’s annual wood pellet production capacity to 4.9 million metric tons from 2022, up from 1.6 million metric tons pre-acquisition.

The two companies first announced the planned acquisition in February. Pinnacle and Drax on March 31 each announced shareholder approval for the planned transaction. Pinnacle announced on April 6 that it had obtained a final order from the Supreme Court of British Colombia approving the transaction. 

Drax said the completed acquisition has transformed the company into “a truly international business, trading bioenergy from the North America continent to Europe and Asia, and positions the enlarged Group to take advantage of global growth opportunities, with the market for biomass pellets for renewable generation in Europe and Asia expected to grow significantly.”

Pinnacle is the second largest producer of industrial wood pellets in the world. The company operates nine production facilities in Western Canada and one in Alabama. An additional facility is under construction in Alabama, with more in development. Pinnacle also owns a port terminal in Prince Rupert, British Columbia.

The transaction boosts Drax’s wood pellet production capacity by 2.9 million metric tons. With the addition of Pinnacle’s 11 sites, Drax owns 17 pellet plants and development projects. This will give Drax the capacity to produce 4.9 million metric tons of wood pellets annually from 2022, with access to four deep water port facilities and three major wood fiber baskets.

According to Drax, the acquisition advances its strategy to increase self-supply and reduce biomass production costs, paving the way for the company’s plans to deliver bioenergy carbon capture and storage (BECCS).

“This is an exciting and important acquisition which positions Drax as the world’s leading sustainable biomass generation and supply business,” said Will Gardiner, CEO of Drax Group. “I am delighted to welcome our new Pinnacle colleagues to the Drax family and look forward to what we can achieve together.

“As well as making Drax an international supplier of sustainable biomass, this deal advances our strategy to increase self-supply, reduce our own biomass production cost and create a long-term future for sustainable bioenergy,” he continued. “We expect to benefit greatly from Pinnacle’s operational and commercial expertise.

“Through this deal we are also advancing our plans to use BECCS to permanently remove millions of tonnes of carbon dioxide from the atmosphere each year and become a carbon negative company by 2030,” Gardiner added. “Negative emissions from BECCS are vital if we are to address the global climate emergency. BECCS will also provide a significant share of the renewable electricity needed in a net zero economy, support green jobs and drive growth in a post-COVID recovery.”

A statement released by Pinnacle explains that the company has now become an indirect wholly owned subsidiary of Drax. Drax, through its wholly owned subsidiary Drax Canadian Holdings Inc., acquired all of the issued and outstanding common shares of Pinnacle for C$11.30 in cash per share. Pinnacle’s shares are expected to be de-listed from the Toronto Stock Exchange on or about April 15.