Key points
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Drax agreed to buy Bluefield Solar Income Fund for around £561 milliona deal that would expand its UK renewables footprint with approximately 900MW of solar and wind assets plus a 2.9GW development pipeline. The transaction still needs regulatory and BSIF shareholder approval and is expected to close in the third quarter if completed.
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The acquisition is expected to increase earnings and reduce risk. increasing Drax’s share of contracted revenue and diversifying its portfolio beyond biomass and flexible generation. Drax also highlighted potential commercial, operational and energy services synergies across the broader asset base.
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Drax will finance the purchase with bridge financing and pause its share buyback until the deal closes, maintaining its net debt target of around 2 times adjusted EBITDA. The company remains committed to dividends and longer-term capital returns, but is prioritizing balance sheet strength during the acquisition.
Drax Group (LON:DRX) chief executive Will Gardiner said the company’s recommended cash offer to acquire Bluefield Solar Income Fund would significantly expand Drax’s UK renewables business and broaden its generation portfolio, while triggering a pause on its current share buyback program pending completion.
In a phone call after the company issued an RNS, Gardiner said Drax had agreed a proposed acquisition of Bluefield Solar Income Fund, or BSIF, for approximately £561 million. The transaction remains subject to BSIF shareholder approval and other regulatory conditions. Shareholder voting requires 75% of votes cast to be in favor and a plan document is expected to be sent to BSIF shareholders within 28 days of the meeting. Drax expects the acquisition to become effective during the third quarter of this year.
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Gardiner described BSIF as “an attractive opportunity to substantially grow our UK renewables business”, adding that the deal is aligned with Drax’s strategy to allocate up to £2bn into flexible and renewable energy. He said the acquisition would take Drax into three major generation businesses: biomass, flexible generation and intermittent renewables.
Bluefield’s portfolio adds solar, wind and development projects
Bluefield Solar Income Fund is a UK-listed investment fund with around 900 megawatts of operational solar and wind assets across more than 200 sites in England, Scotland, Wales and Northern Ireland, Gardiner said. It also has a 2.9 gigawatt development pipeline that Drax would evaluate after taking control, in line with its capital allocation policy.
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For the financial year ending June 30, 2025, BSIF generated EBITDA of approximately £130 million and free cash flow from operations of approximately £118 million, according to Gardiner. He said the fund has no employees and that operations and maintenance are performed under contracts that Drax expects to continue.
Gardiner said 57% of BSIF’s revenue in 2025 was backed by renewable debenture certificates, contracts for difference, feed-in tariffs or other government schemes, with the remainder backed by power purchase agreements.
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Drax expects the transaction to be earnings accretive and improve the company’s risk profile by increasing the proportion of contracted revenue and diversifying its earnings mix. In response to a question from Barclays analyst Dominic Nash, Gardiner said BSIF’s EBITDA would add to Drax’s previously stated expectation of annual EBITDA of £600m to £700m between 2027 and 2031, although he declined to give a future forecast for Bluefield’s profits.
Drax sees commercial and operational synergies
Gardiner said Drax expects to unlock “significant synergies across commercial, operational and energy services” with the acquisition. He said Drax Energy Solutions already provides a route to market for more than 2,000 integrated generators, including wind and solar assets with about 1 gigawatt of capacity.
It said Bluefield’s assets could benefit from Drax’s trading capabilities, including renewable certificate trading, energy market access and 24/7 dispatch across the expanded portfolio. Drax also expects savings from the elimination of fund advisory and stock market listing costs, as well as potential savings in operations and maintenance.
Gardiner said BSIF currently pays third parties for services that Drax can provide internally, including route-to-market services and power purchase agreements. Responding to Citi analyst Jenny Ping, she said a more detailed discussion on the trading platform opportunity would likely come at a capital markets day later this year.
The deal will be financed with debt; Buyback on pause
Drax plans to fund the cash consideration entirely through a bridge financing facility, which Gardiner said the company expects to refinance in due course. He said Drax maintains its long-term target of net debt to adjusted EBITDA of approximately two times and remains committed to its current credit ratings.
Gardiner reiterated Drax’s capital allocation policy and said the company will maintain a strong balance sheet, invest in the core business, pay a sustainable and growing dividend and return excess capital to shareholders where appropriate.
Drax continues to plan to return more than £1bn to shareholders through dividends and buybacks between 2025 and 2031, including its ongoing £450m share buyback programme. The first tranche of £75 million was completed in April. However, Gardiner said Drax plans to pause the current buyback until the acquisition is complete while ensuring the strength of the balance sheet and meeting investment priorities.
Strategic fit with UK energy demand
Gardiner said the proposed acquisition aligns with the direction of the UK energy system, citing the system operator’s expectations that energy demand will double and that much of the demand will be met by renewables. He also noted the expected growth of data centers and broader electrification of transportation and industry.
He said adding wind and solar to Drax’s biomass and flexible generation portfolio would support energy security, decarbonization and the creation of 24/7 renewable products for customers.
Asked by UBS analyst Mark Freshney about Drax’s data center opportunity at its power station in Yorkshire, Gardiner said the company is continuing to work on it and sees it as “a very interesting opportunity”, but said any commercially disclosable information had already been provided.
Gardiner also said Drax is developing a portfolio of gigawatt-scale battery energy storage system opportunities. Over the past six months, the company has bought or struck deals that would give it operational control of more than 710 megawatts of batteries across five sites, with a balance sheet commitment of more than £500 million. Drax also acquired Flexitricity, an optimization platform that Gardiner said will support both Drax-owned and third-party flexible assets.
Concluding the call, Gardiner said the Bluefield acquisition represents the next step in building a more diversified Drax, adding solar and wind along with biomass, pumped storage, hydropower and flexible generation. He said Drax would provide more details on his prospects once the deal closes.
About Drax Group (LON:DRX)
Drax Group plc, together with its subsidiaries, is engaged in the generation of renewable energy in the United Kingdom. It operates through three segments: Pellet Production, Generation and Customers. The Pellet Production segment produces and markets biomass pellets. The Generation segment provides renewable, distributable energy and system support services to the electrical grid. The Customers segment supplies electricity and gas to non-domestic customers. The company owns and operates Drax Power Station located in Selby, North Yorkshire; Cruachan Power Station, a pumped storage hydroelectric power station, with an installed capacity of 440 megawatts (MW) located in Argyll and Bute; and the Lanark and Galloway hydroelectric plants, with an installed capacity of 126 MW, located in the southwest of Scotland.
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The article “Drax Group halts buyback as £561m Bluefield Solar deal boosts UK renewables” was originally published by MarketBeat.
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