Scottish Power goes 100% wind power after £700m Drax deal

Scottish Power on Tuesday sold the last of its fossil fuel operations to Drax for for £702m (€801m) as it became the first UK firm to generate 100% of its electricity from wind power.

Scottish's parent company Iberdrola said the deal represented a further step in its commitment to "a decarbonised economy, where the electricity sector should play a key role".

The 2.6 gigawatt portfolio is expected, based on recent power and commodity prices, to generate earnings before interest, tax, depreciation and amortisation (EBITDA) in a range of £90m-£110m from gross profits of £155m to £175m.

Drax said it had agreed a fully underwritten £725m secured loan to finance the deal. Included in the sale are four gas power stations in England, two hydro schemes and a pumped storage plant in Scotland.

“Assuming performance in line with current expectations, net debt to EBITDA is expected to fall to Drax's long-term target of around 2x by the end of 2019,” the company said.

The acquisition is expected to complete by the end of the year.

Iberdrola chairman Ignacio Galán said the UK was a key market "where we will invest £5.5bn by 2022, primarily in increasing our renewable capacity, developing more and smarter grids and offering more personalised and efficient solutions to our customers”.

"The world is changing. The energy companies should be part of the solution to climate change and not part of the problem,” he said

Drax chief executive Will Gardiner said the deal “makes great financial and strategic sense”.

"It's a critical time in the UK power sector. As the system transitions towards renewable technologies, the demand for flexible, secure energy sources is set to grow,” he said.

“We believe there is a compelling logic in our move to add further flexible sources of power to our offering, accelerating our strategic vision to deliver a lower-carbon, lower-cost energy future for the UK.”