Shares in biomass energy company Drax (DRX) gained 1% to 580.6p on Tuesday after the company agreed to acquire the wood pellet sales contract book of Pacific BioEnergy Corporation.
Drax’s biomass pellet business, Pinnacle Renewable Energy, has acquired 2.8Mt of orders of sustainable biomass to ‘high quality’ counterparties in Japan and Europe for delivery between 2022 and the mid-2030’s.
The contracts are expected to generate incremental revenues of around C$675 million (£400 million) over the period. The deal complements existing supply contracts and increases the Group’s third-party sales book by around 15% to 23Mt, with total revenues of over $4.5 billion.
BUILDING SCALE
Energy analyst Adam Forsyth at Longspur Research commented: ‘The deal helps to underpin volumes over a long period and builds on existing market penetration in Japan and Europe.’
Japan is looking to double the use of biomass while Europe is expected to grow bioenergy use by 70% by 2050, providing long-term demand support from these regions.
Today’s deal builds on Drax’s aim to double sales of biomass to third parties to at least 4Mt a year by 2030 by developing its presence in Asia and Europe.
The company plans to create new business development teams in Tokyo and London next year.
Chief executive Will Gardiner said, ‘We look forward to working with our partners in Japan and other markets across Asia and Europe as part of our aim to be a global leader in sustainable biomass, making an even greater contribution to the world's efforts to reach net zero.’
