Drax bolstering interest in Alabama Pellets in deal with Westervelt Company

Drax Group is acquiring a 20 per cent minority interest in Alabama Pellets from the Westervelt Company, increasing its interest in Alabama Pellets to 90 per cent and providing Drax with economic control over a further 130,000 tonnes of annual biomass production capacity.

Completion is expected this month, with the arrangement being for $29.7 million cash consideration. The Demopolis and Aliceville pellet plants are owned in the joint venture between Drax and Alabama Pellets. The plants have a combined nameplate production capacity of 660,000 tonnes annually. Aliceville was commissioned in 2018 while Demopolis is expected to be commissioned this year.

Westervelt is considered to be a related party under the U.K. listing rules, with the proposed transaction constituting a smaller related party transaction under listing rule 11.1.10.

The acquisition by Drax of Pinnacle Renewable Energy Inc. included a change of control provision over Alabama Pellets. Drax has been in discussions with Alabama Pellets joint venture partners regarding future working relationships, including their minority interests. The other joint venture partner, Two Rivers Lumber Co., has a 10 per cent economic interest.

Drax Group has 13 operational pellet plants (including Aliceville) plus satellite plant developments and Demopolis, with total nameplate production capacity of 4.9 million tonnes per annum once commissioned. The plants are geographically diverse and situated in three major fibre baskets (British Columbia, Alberta and the U.S. southeast) with access to four deep-water ports, providing routes to markets in Asia, Europe and the U.K.