KKR backs desert-farming solution

Four years ago, Philipp Saumweber, founder and CEO of Sundrop Farms, set up a 2,000-square-meters greenhouse facility in the desert scrub outside Port Augusta, 300 kilometers north of Adelaide. He was testing a technology that relies on sunlight and seawater to grow vegetables even in coastal desert regions. Once proven, Saumweber sought out strategic investors to help commercialize the technology.

KKR had been looking for agribusiness investments in Australia. Through personal relationships, the PE firm got in touch with Saumweber and last week their negotiations bore fruit. KKR will invest around $100 million in Sundrop from its second pan-regional fund.

"The challenge with many agricultural investments in Australia is that the underlying operations are exposed to a number of volatile inputs, including weather, temperature and pests, and volatile outputs in the form of soft-commodity price fluctuations," says Leigh Oliver, a Sydney-based principal at KKR. "While you can utilize technology such as greenhouses to reduce these risks, this often comes with the burden of significant energy costs."

Sundrop can mitigate or stabilize each these volatile inputs. By using sun and desalinated seawater to heat and cool greenhouses, Sundrop has created an environment in which vegetables can be grown year-round, at low cost and without the use of pesticides. There is also reduced reliance on fossil fuels.

Furthermore, the company has signed a 10-year contract with Coles, one of Australia's leading supermarket chain, to supply truss tomatoes. This arrangement reduces soft-commodity price risks because 100% of Sundrop's tomato output will be used by Coles.

KKR's investment will allow Sundrop to scale up its exiting operation with the construction of a 200,000-square-meters greenhouse facility that will produce more than 15 million kilograms truss tomatoes - 100 times the capacity of the current greenhouse. The facility will be also able to grow other products.

Through its partnership with Saumweber, KKR also plans to take the technology overseas. As such, the private equity firm has deployed capital at holding company and project level.

"We think this technology is exportable. A number of other regions have arid climate conditions with high levels of sunlight and access to seawater, which make them optimal for the Sundrop system," says Oliver.

"The Middle East is a very good example. Parts of this geography face food-security issues, and also have strong support from governments and investors who want to find solutions to supply sustainable, locally-produced products."

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• Topics
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• Australia
• Agriculture
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• KKR
• Growth capital