Drax Group (LON:DRX) Chief Executive Will Gardiner said the company’s recommended all-cash offer to acquire Bluefield Solar Income Fund would significantly expand Drax’s U.K. renewables business and broaden its generation portfolio, while prompting a pause in its current share buyback program pending completion.
Speaking on a 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 approval by BSIF shareholders and other regulatory conditions. The shareholder vote requires 75% of votes cast to be in favor, and a scheme document is expected to be posted 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 U.K. renewables business,” adding that the deal is aligned with Drax’s strategy to allocate up to £2 billion into flexible and renewable energy. He said the acquisition would move Drax toward three substantial generating businesses: biomass, flexible generation and intermittent renewables.
Bluefield Portfolio Adds Solar, Wind and Development Pipeline
Bluefield Solar Income Fund is a U.K.-listed investment fund with about 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 assess after taking control, in line with its capital allocation policy.
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For the financial year ended June 30, 2025, BSIF generated EBITDA of about £130 million and free cash flow from operations of approximately £118 million, according to Gardiner. He said the fund has no employees, with operations and maintenance provided under contracts that Drax expects to continue.
Gardiner said 57% of BSIF’s 2025 revenue was underpinned by renewable obligation certificates, contracts for difference, feed-in tariffs or other government schemes, with the balance supported by power purchase agreements.
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Drax expects the transaction to add to earnings and improve the company’s risk profile by increasing the proportion of contracted revenues and diversifying its earnings mix. In response to a question from Barclays analyst Dominic Nash, Gardiner said BSIF’s EBITDA would be additive to Drax’s previously stated expectation for annual EBITDA of £600 million to £700 million between 2027 and 2031, though he declined to give a future forecast for Bluefield’s earnings.
Drax Sees Trading and Operational Synergies
Gardiner said Drax expects to unlock “significant trading, operational, and energy services synergies” from the acquisition. He said Drax Energy Solutions already provides a route to market for more than 2,000 embedded generators, including wind and solar assets with close to 1 gigawatt of capacity.
He said the Bluefield assets could benefit from Drax’s trading capabilities, including renewable certificate trading, power market access and 24/7 dispatch across the enlarged portfolio. Drax also expects savings from the removal of fund advisory and stock market listing costs, as well as potential operations and maintenance savings.
Gardiner said BSIF currently pays third parties for services that Drax can provide internally, including route-to-market services and power purchase arrangements. In response to Citi analyst Jenny Ping, he said more detailed discussion of the trading platform opportunity would likely come at a capital markets day later in the year.
Deal to Be Debt-Financed; Buyback Paused
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 is maintaining its long-term target of net debt to adjusted EBITDA of around two times and remains committed to its current credit ratings.
Gardiner reiterated Drax’s capital allocation policy, saying the company will maintain a strong balance sheet, invest in the core business, pay a sustainable and growing dividend and return surplus capital to shareholders where appropriate.
Drax continues to plan to return more than £1 billion to shareholders through dividends and buybacks between 2025 and 2031, including its ongoing £450 million share buyback program. The first £75 million tranche was completed in April. However, Gardiner said Drax plans to pause the current buyback pending completion of the acquisition while it ensures balance sheet strength and delivery of investment priorities.
Strategic Fit With U.K. Energy Demand
Gardiner said the proposed acquisition aligns with the direction of the U.K. energy system, citing expectations from the system operator that power demand will double and that much of the demand will be met by renewables. He also pointed to expected growth from data centers and broader electrification of transport 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 continues to work on it and views it as “a very interesting opportunity,” but said any commercially disclosable information had already been provided.
Gardiner also said Drax is developing a gigawatt-scale pipeline of battery energy storage system opportunities. Over the past six months, the company has purchased or agreed 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 has 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 alongside biomass, pumped storage, hydro and flexible generation. He said Drax would provide more details on its outlook after the deal closes.
About Drax Group (LON:DRX)
Drax Group plc, together with its subsidiaries, engages in renewable power generation in the United Kingdom. It operates through three segments: Pellet Production, Generation, and Customers. The Pellet Production segment produces and sells biomass pellets. The Generation segment provides renewable, dispatchable power, and system support services to the electricity 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 hydro station, with an installed capacity of 440 megawatts (MW) located in Argyll and Bute; and Lanark and Galloway hydro-electric power stations with an installed capacity of 126 MW located in southwest Scotland.
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The article “Drax Group Pauses Buyback as £561M Bluefield Solar Deal Boosts UK Renewables” was originally published by MarketBeat.
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