PEP's secure assets fund to buy Australia-listed Zenith Energy

PEP is investing via a secure assets fund, which targets Australasian companies generating annuity income with potential for private equity-style operational improvements. 

The fund, which reached a first close of A$600 million on a target of A$750 million in 2018, has made at least one other investment in the power and utilities space with the acquisition of smart meters business Acumen from Origin Energy. Other areas of interest include Transportation, logistics, telecoms, and healthcare. 

PEP has agreed to pay A$1.01 per share for Zenith through a scheme of arrangement that suggests an enterprise multiple of 9.3x. Shares in the company have traded in a range of A$0.65 to A$0.75 since the start of the year and spiked 40% to A$0.97 following confirmation of the bid. The stock was trading at A$0.98 as of midday March 11, indicating a market capitalization of about A$147 million. 

Zenith management has agreed to vote in favor of the transaction, which is planned to be implemented in June. "PEP has a strong history in backing management teams in the remote power sector and with the additional capital firepower PEP can bring to Zenith, we are highly optimistic about the company's future," Andrew Charlier, a managing director at PEP, said in a release.

Zenith specializes in cost-effective power generation systems for installation in remote, off-grid areas of Australia and Southeast Asia. Fuel sources include diesel, gas, solar, and hydro technologies, with some projects being hybrids. Contact options include a build-own-operate model whereby Zenith takes full responsibility for an operation, and a manage-operate-maintain model, whereby clients maintain ownership. 

Income is generated primarily from sales of electricity and contracts for engineering, procurement and construction work. Revenue improved 7% during the 2019 financial year to about A$55 million, with the company citing strong growth in build-own-operate contracting. Profit declined 31% during the year to A$5.8 million. This was attributed in part to increases in project-related depreciation charges and finance costs.

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• Topics
• Australasia
• Industrials
• Infrastructure
• Buyouts
• Australia
• Pacific Equity Partners
• energy