Drax goes on buying spree to ‘keep lights on when sun’s in’

The City rushed to back Britain’s biggest power station Drax today as it spent £360 million buying SME gas and electricity supplier Opus Energy and four gas turbines for back-up power “when the sun doesn’t shine or wind doesn’t blow”.

The two deals put FTSE 250-listed Drax’s shares on course for their biggest rise in eight years.

The £340 million acquisition of Opus particularly sees Drax lessen its reliance on coal-powered energy generation and government-renewable energy subsidies.

Drax was once known as Britain’s biggest polluter but chief executive Dorothy Thompson claimed today’s acquisitions confirmed “we’ve moved on from that”.

The firm now generates 70% of its electricity from renewable sources.

“It’s about diversifying the nature and quality of our earnings,” said Thompson of her acquisition of Britain’s sixth-biggest business energy supplier.

“The market to supply small and medium-sized businesses is a very significant one. There are 5.1 million SMEs in the UK, with a turnover of just over £2 trillion.”

The deal will provide a big payday for Opus’s management team, who own 50% of the business, and to FTSE 250-listed Telecom Plus, which holds a fifth of Opus and will see its full-year profits rise by some £60 million as a result.

Drax’s other deal, spending £18.5 million on “open-cycle gas turbine generators”, will provide back-up energy to renewable sources.

“Wind and solar are now a very significant part of our energy mix but they’re intermittent,” Thompson said. “We need a way to plug the gap when sun doesn’t shine or wind doesn’t blow, and with the flick of a switch [OCGTs] go from nothing to full load in 10 minutes.

“It’s about supporting the system at times of stress when there’s a reduction in generation.”

Drax shares surged 14%, or 38.8p, to 316.4p.