PEP starts courting suitors for $2bn Zenith Energy

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

Pacific Equity Partners has fired the starting gun on a formal process to weigh options for its $2bn Zenith Energy, with promotional documents hitting the desks of prospective parties that may be keen to buy part or all of the business.

The understanding is that flyers are now in the market for the energy business, which 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 that the prime motivation of the process is to inject capital into the business to fund growth.

Advisers Royal Bank of Canada and Azure Capital are working on the sale process.

The understanding is that with the flyer out in the market, there have already been some informal discussions with prospective suitors, believed to be infrastructure buyers.

Players that have been active in the Australian market of late include AustralianSuper, GIP, Stonepeak, IFM, Kohlberg Kravis Roberts and EQT.

As well as PEP, Canadian pension fund OPTrust owns a stake in Zenith Energy, with its interest worth about $450m.

The talk in the market is that OPTrust is a motivated seller, so the question is whether PEP also divests its interest or opts to own the business with another party.

Zenith Energy has more than 710 megawatts of capacity under contract or in development. It describes itself as a company that helps clients reach net zero renewable energy goals.

It integrates a range of thermal and sustainable fuel sources with new technologies, and offers a build-own-operate service model.

It also specialises in 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, which was listed, in 2020 for $250m including debt, or about $150m equity, in a deal advised by Highbury Partnership and Minter Ellison.

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 join 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.