Existing shareholders may exercise rights to lift Zenith Energy stake

Zenith Energy is owned by PEP, OP Trust and Foresight.

Private equity firms and infrastructure investors may be lining up to buy Zenith Energy but there’s a question mark over whether the business will be sold to an external group.

There is a strong possibility that one of Zenith Energy’s existing shareholders buys the business or takes a larger stake, exercising their pre-emptive rights.

That’s exactly what happened with data centre owner CDC this month. It had been running a sale process through Barrenjoey for the divestment of Commonwealth Super’s stake.

After CDPQ outpaced the Australian Retirement Trust in the contest to buy a 12 per cent stake in the business with the offer it put forward, existing owners Infratil and The Future Fund exercised their pre-emptive rights last week to buy it, paying a price that valued the asset at just over $12bn and taking their stakes to almost 50 per cent and 35 per cent respectively.

Zenith Energy is owned by Pacific Equity Partners, OP Trust and Foresight.

There have been suggestions that OP Trust is a keen seller, but PEP or its fund investors may be hoping to increase its holding.

The business is considered to be worth about $2bn and is up for sale through Azure Capital and RBC.

MSIP is working with Jefferies, EQT, UBS and KKR Gresham while Morrison is working through JPMorgan. Blackrock is also involved, possibly as an existing investor in a PEP fund.

Zenith Energy provides contracted power to miners in remote locations.

It is understood to generate well over $120m of annual earnings before interest, tax, depreciation and amortisation.

Sources say the sale process is intended to inject capital into the business to fund growth.

Zenith Energy has more than 710 megawatts of capacity under contract or in development.

It helps clients reach net zero renewable energy goals through sustainable fuel sources and new technologies. It offers tailored microgrids for remote off-grid power and grid-connected precincts.

The business was founded in 2006 by chairman Doug Walker, who was a founding director and key executive of StateWest Power, one of Australia’s largest privately owned independent power producer companies, which was subsequently acquired by Wesfarmers Energy.

Zenith’s first major contract was signed with Chevron in 2008 for the company’s Barrow Island facilities.

PEP purchased Zenith Energy in 2020 for $250m including debt, or about $150m equity, in a deal advised by Highbury Partnership and Minter Ellison.