BESS developer Apatura has signed an agreement with renewable energy company Drax Group, who will initially acquire three battery energy storage system (“BESS”) projects located in Scotland and Northern England.
Drax will pay a fixed cash amount of £157.2 million to Apatura, payable as staged payments between 2025 and 2028 according to Apatura’s delivery of the projects. Apatura will bring the three assets from ready to build to commercial operations under a construction services agreement, representing Apatura’s expanded capability to take projects through construction.
The two-hour duration development portfolio will provide capacity totalling 260MW. Construction of all three projects is scheduled to commence in 2026 with the first two completing in 2027 and the third completing in 2028.
As part of the transaction, Apatura has agreed with Drax the option of a right of first offer over a further eight planned sites with a total combined capacity of 289MW, creating optionality for the continued development of the FlexGen portfolio.
Commenting on the agreement, Giles Hanglin, CEO of Apatura, said, “This deal represents a strong strategic fit for Drax and Apatura, who are both closely aligned with UK energy objectives of energy security and decarbonisation.
“Apatura is responsible for Scotland’s largest energy storage pipeline, with 10GW of renewable energy capacity in development. The acquisition of this initial portfolio complements Drax’s ‘FlexGen’ strategy, which involves adding short duration and fast response capability.”
Drax Group CEO Will Gardiner said, “This acquisition is our first investment in short duration storage as part of our FlexGen portfolio to support UK energy security and a clean power system.
“We look forward to working with Apatura on the development of battery storage, which when commissioned will allow us to provide even more secure power to the country when it is needed. In combination with our long duration energy storage, flexible generation and renewable generation from biomass, we will be able to provide 4.4GW[2] of dispatchable generation to meet demand.
“Through the development of our strategy we are working to create value and growth in the short, medium and long term, aligned to the UK’s energy needs and underpinned by strong cash generation, a disciplined approach to capital allocation and attractive returns for shareholders, significantly in excess of our weighted average cost of capital.”
James Perry, CFO at Apatura, added, “Aligning with an organisation like Drax means we’re propelling the energy transition forward. The deal structure reflects our disciplined approach to capital and our ongoing role in delivering these projects, a model that creates value, strengthens collaboration, and supports long-term growth on the path to net zero.”
As the UK’s energy network increases its reliance on intermittent renewables like wind and solar, large-scale reliable battery storage is required to store surplus energy during times of high generation and then discharge it to to meet demand when generation dips.
The retirement of older thermal generation assets, the expanding contribution of abundant but intermittent renewable energy, and an increase in power demand is driving a growing need for dispatchable power and system support services.
This is in line with National Energy System Operator’s (NESO’s) Future Energy Scenarios which show a potential doubling of total demand for electricity in the UK over the coming decades, as well as an increase in curtailment of wind and reduction in dispatchable thermal generation.
Apatura was advised on the agreement by PwC as lead financial adviser and CMS as legal adviser.
