Drax PLC (LON:DRX) has agreed the acquisition of Canadian biomass group Pinnacle Renewable Energy for C$385mln (£226mln) plus debt.
Drax said the acquisition more than doubles its biomass production capacity, cuts its cost of supply and adds a supply business underpinned by long-term contracts with high-quality Asian and European counterparties.
Will Gardiner, Drax chief executive, added that the deal will also help its plans to become carbon neutral.
"It will pave the way for our plans to use Bioenergy with Carbon Capture and Storage (BECCS), and become a carbon negative company by 2030 - permanently removing millions of tonnes of carbon dioxide from the atmosphere each year.”
The UK power station owner has offered C$11.30 per share, a 13% premium to the last close, with the value of the transaction C$741mln including borrowings.
The deal is also expected to be cash generative in 2022 with Pinnacle forecast to make underlying profits (EBITDA) of C$99mln, according to consensus forecasts.
"I am excited about this deal which positions Drax as the world's leading sustainable biomass generation and supply business," Gardiner added.