KKR buys Pacific Equity Partners-backed Zenith Energy in $2bn-plus deal

Zenith Energy counts OPTrust, Pacific Equity Partners and Foresight as among its shareholders. Picture: iStock

Private equity firm Kohlberg Kravis Roberts has won the contest to buy Zenith Energy, securing the majority of the renewable energy provider for a price that values it at over $2bn.

It comes after final bids were due last week to buy the company largely owned by Pacific Equity Partners, OPTrust and Foresight.

The deal involves KKR buying the majority of Zenith Energy, with management retaining ownership.

Working on the transaction has been Azure Capital and Royal Bank of Canada.

KKR, advised by Gresham, bought the business after private equity firms EQT and CVC were thought to be among the final contenders in the contest.

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

Zenith Energy, which has $2bn of debt, provides contracted power to miners in remote locations.

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

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

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

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

It refinanced last year, adding a new $320m tranche to its existing $440m syndicated facilities that were established in October 2022.

Zenith attracted two new lenders, DBS Bank and Natixis CIB, which joined its existing lending syndicate of Westpac, NAB, Sumitomo Mitsui Banking Corporation, BNP Paribas, ANZ and Aware Super.

That refinancing was advised by Azure Capital and KPMG.

The funds were used to fund new growth projects, including the 96MW Kathleen Valley Hybrid Power Station for Liontown Resources, the 88MW Bellevue Gold Hybrid Power Station and a 53MW renewable retrofit of its existing Jundee Power Station for Northern Star Resources.

The sale is one of the few major infrastructure transactions to complete this year and it follows the announcement last week by AGL Energy that it is weighing a sale of a 20 per cent stake in Tilt Renewables through Bank of America.

AGL was part of a consortium that bought the business in 2021 for $2.8bn.

The Powering Australian Renewables consortium that purchased Tilt was made up of the Future Fund, AGL Energy, Queensland Investment Corporation and Mercury Energy.

Sources say that AGL is staging an exit because it has different investment objectives to its other shareholders.

AGL requires the business to provide cheap power to sell to its retail energy customers, whereas the other owners want to maximise returns.

Also on offer through Barrenjoey is a 60 per cent per cent stake in the Sydney Desalination Plant owned by Canadian pension fund Ontario Teachers’ Pension Plan.