Drax Group (LSE:DRX) has agreed a deal to buy battery energy storage investor Harmony Energy Income Trust PLC (LSE:HEIT) for just under £200 million.
The 88p offer price agreed by the boards of the two companies is 5% higher than a possible offer from Foresight Group at 84p last Monday.
It is a 35% premium to the closing price of 65.2p on 14 March, which was the day before the Foresight offer.
The HEIT board had been pursuing a sale of its assets but said last week it believes Foresight’s proposal would be a better deal for shareholders and now has agreed that the Drax offer is the best on the table so far.
Drax said it believes that the acquisition "represents a highly attractive opportunity" and is complementary to its existing 'FlexGen' portfolio.
HEIT's two-hour battery energy storage system (BESS) assets allow "daily cycling" – charging and discharging the battery once per day – to capture the spread between overnight prices and peaks as well as benefit from market volatility events.
In other words, said Drax CEO Will Gardiner, battery storage "enables us to provide even more secure power to the country when it is needed".
It will do so by combining HEIT's two-hour storage with its own long-duration storage (generally over six hours) and flexible generation biomass burners to supply 4.5GW of generation to meet demand.
"As more intermittent renewable energy connects to the country's network, more dispatchable and reliable generation will be required to help keep the lights on when the wind isn't blowing or the sun isn't shining," he said.
HEIT's directors intend to recommend the deal unanimously to shareholders.