British power company Drax will buy major Canadian biomass fuel producer Pinnacle for £226m, as it prepares for the closure of its coal power stations next year.
Once the biggest polluter in the UK, the firm will cease burning coal at its two North Yorkshire units in March this year and will eventually close the stations in September 2022.
The deal will more than double Drax’s biomass energy capacity, while reducing the cost of producing the wood pellets for energy.
Pinnacle has more efficient existing resources in the deep south of the US, where Drax’s operations will take place.
Cutting costs is key for Drax as the group will see green subsidies end in 2027.
Chief executive Will Gardiner said: “By using sustainable biomass we have not only continued generating the secure power millions of homes and businesses rely on, we have also played a significant role in enabling the UK’s power system to decarbonise faster than any other in the world.”
The firm is planning on becoming a carbon negative company by 2030, with much of its focus on the combination of biomass with carbon capture technology.
Biomass power has received criticism in the past for fuelling deforestation and unsustainable farming.
Despite this, Drax will add 11 pellet plants to its portfolio, boosting the business to 17 factories and four deep water shipping ports.
Listed on the Toronto Stock Exchange, Pinnacle and its board have accepted the offer priced at $11.30 a share.