A British-based bio-energy company has reached a deal to buy Pinnacle Renewable Energy which owns half of the Houston pellet plant.
The deal will see the Drax Group spend $831 million for Pinnacle’s shares and assumption of its net debts.
Pinnacle is the second largest producer of industrial wood pellets in the world and operates nine production facilities in Western Canada and one in Alabama, with another one under construction in Alabama. It also operates the Westview Terminal in Prince Rupert through which it exports pellets made by its plants.
Drax, which got its start operating coal-fire power-generating plants in Great Britain, has developed into a power generating utility using biomass. In the process, it has been switching from coal to renewal energy sources and its holdings now include facilities using hydro power.
“The combination of Pinnacle and Drax will create a global leader in sustainable biomass with the vision, technical expertise and financial strength to help meet the growing demand for renewable energy products around the world,” said Pinnacle chief executive officer Duncan Davies.
Just this year Pinnacle extended an existing contract past 2023 with Mitsubishi Corp., to sell 80,000 to 90,000 tonnes of pellets a year to be used at a biomass power plant in Japan.
The deal is subject to shareholder approval and also requires the approval of regulators and of the B.C. supreme court.
Already, a private equity firm called Oncap, which owns 36 per cent of Pinnacle has indicated it is in favour of the deal. Oncap acquired a majority stake in Pinnacle in 2011 and then took the company public in 2018 while continuing to hold a significant position.
A Canfor official said the pending deal should not affect its half ownership of the Houston plant.
“Canfor does not anticipate any changes to our joint venture participation in Houston pellet, and if the acquisition is approved by shareholders, we look forward to continuing our partnership in the venture with the Drax Group,” said Michelle Ward.
