Drax has agreed to acquire Pinnacle Renewable Energy (Pinnacle), through its indirect, wholly-owned subsidiary Drax Canadian Holdings in a deal worth C$741m ($582m).

Pinnacle operates 2.5 million tonnes of biomass capacity at sites in Western Canada and the Southeastern US, with a further 0.4 million tonnes of capacity in development.

The company owns around 80% of the nameplate capacity, with the remaining 20% is jointly owned along with its forestry industry joint venture partners.

Also, the transaction would add a major biomass supply business to Drax supported by long-term contracts with Asian and European counterparties.

The acquisition is subject to Drax and Pinnacle shareholder approval, court approval, regulatory approvals and the satisfaction of certain other customary conditions.

Drax chief executive officer Will Gardiner said: “I am excited about this deal which positions Drax as the world’s leading sustainable biomass generation and supply business, progressing our strategy to increase our self-supply, reduce our biomass production cost and create a long-term future for sustainable biomass.

“We expect to benefit greatly from Pinnacle’s operational and commercial expertise, and I am looking forward to what we can achieve together.

“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.”

Pinnacle is a key supplier of wood pellets for Drax and other third parties in Asia and Europe.

It has ownership interests in ten operational plants and one in development plant, which is expected to be commissioned in 2021.

Drax said that the acquisition would enhance its biomass production capacity by almost more than doubling it, with the addition of 2.9 million tonnes capacity.

With the acquisition, Drax would strengthen its position as a sustainable biomass generation and supply business, with 17 pellets plants, three major fibre baskets, and four deep water ports.

The company said that the transaction will advance its objectives to increase its available self-supply of sustainable biomass to five million tonnes per annum.