29 March 2020:  Latest update:  I see no good reason why the PE takeover of ZEN at $1.01 in cash will NOT go ahead, i.e. I think it WILL go ahead.  I don't think there were too many conditions that would allow the PE (private equity) consortium to pull out of the deal.  It seem to me that it's really down to the ZEN shareholder vote, and that should be a resounding "YES" in the absence of a superior alternative offer.

See here, here or here.

They have said that they are also exploring the possibility of announcing a special dividend to release franking credits that they have, and that the $1.01 cash price offered for every ZEN share aquired would be reduced by the amount of any special dividend.  So, for those who can use the franking credits, they (the franking credits) would be in addition to the $1.01.  For those who can't use them, they would still get the $1.01 (+ franking credits that they can't use) - if the special dividend goes ahead.  

The market however seems skeptical that this deal will go ahead, with ZEN recently trading at around the 80c mark, implying a 25% upside to that price if the deal goes ahead at $1.01.  During the past week (23-Mar to 27-Mar 2020), ZEN has traded in a range between 79c and 90c, and they closed around the middle of that range at 85.5c.  Even at 85.5c, there is still 18% upside if you get paid $1.01 for your ZEN shares in a few months time.

If the deal does fall through, ZEN's SP would obviously fall, but they're still a good company that will most likely be taken over by somebody at some point (at a premium), particularly if they're trading at 80c or below.  Their main listed competitor Pacific Energy (ASX: PEA) were acquired by another PE group (QIC) after a bidding battle with a Canadian and Australian consortium.  These companies build, run and maintain remote area power stations, mostly for miners, and most of those miners in ZEN's case have been gold miners, who are less affected by the current lower base metals prices that have resulted from this COVID-19 crisis and the associated global downturn.  Gold is still flying.  There will likely be disruptions at some mines - particularly those who rely on FIFO workers - but the majority (if not all) of ZEN's contracts are multi-year "take or pay" contracts.  That means ZEN get paid regardless of whether the power they generate is used by their clients or not.  It's an attractive business model, particularly to PE groups who have medium to long term investment horizons.

Previous Updates:

Updated 22-Dec-2018:  Relatively new listing.  Providing stand-alone energy (electricity) solutions to gold miners like Northern Star (ASX: NST), Newmont (NYSE: NEM), Gascoyne Resources (ASX: GCY) and Dacian Gold (ASX: DCN), plus other public companies (like Incitec Pivot: ASX: IPL).  Their MD does a good presentation here (link below) at a recent Investment Forum hosted by the ASX for Alex Waislitz's Thorney Opportunities (TIGA, ASX: TOP, ASX: TEK) - scroll down to the Hamish Moffat - Zenith Energy video:

http://thorneyopportunities.com.au/sydney-investment-forum/

Thorney went in at the ZEN IPO, and recently bought more stock, and now hold 22.18% of ZEN.  John Rubino, the Chairman of Monadelphous Group (ASX: MND) is also a substantial shareholder of ZEN, holding 9.78%.

ZEN do have direct competition; the most obvious competitor is Pacific Energy (ASX: PEA).

There are other players who build/operate remote power plants including Monadelphous (MND) via their "Zenviron" JV with ZEM Energy.  CIMIC (CIM) and Downer EDI (DOW) also have interests in power/energy infrastructure construction, maintenance, & operations.  However, the two current main players (whose primary focus is on stand-alone energy solution provision - in remote areas) are PEA and ZEN.

ZEN are the new kids on the block.  They have Thorney backing them.  The have John Rubino backing them.  Their market cap is back under $70 million with an SP under 70 cents per share, despite being as high as $1.24 in July.  PEA has a market cap of around $250m.  ZEN look like a prime takeover target to me, for PEA or even MND.  Thorney have a blocking stake, so would have a big say in the outcome of any takeover attempt, but if the premium was big enough, who knows?

ZEN are only supplying energy (electricity) solutions to the mining and energy (oil/gas) sectors at this stage, but they have plans to expand their offering to communities who want to be self-sufficient, and who want to either disconnect from "the grid" (existing energy infrastructure) or else never got connected to "the grid" in the first place (which could be due to geographic isolation or other challenges).  Regardless of any possible M&A activity, it looks to me like ZEN have a lot of growth ahead of them.

http://www.zenithenergyltd.com/

Zenith Energy (ZEN) Corporate Presentation, May 2018

29 May: 2 New Power Stations Commissioned

Disclosure:  I hold ZEN shares.

They look like good buying below 80c.

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26-Mar-19:  ZEN has released a March 2019 Investor Presentation - see here - which gives a great overview of the company and the value proposition.  They provide electricity (power) solutions in remote areas, and their clients are predominantly miners.  They generally operate under a BOO (Build, Own & Operate) model, where Zenith (ZEN) build, own and operate the power stations over fixed terms at commercial rates.  Slide 6 shows their contract wins since they were founded in 2006 (yes, they are still quite young, only 13 years old in fact) and the average PPA (Power Purchase Agreement) term across those clients - which is 7.7 years.  Their average power station age is only a little over 1 year, and the average remaining term across all of their PPA's is 6.6 years.  They are in a very healthy position.

Their major clients include Northern Star (NST), Independence Group (IGO), Chevron, Newmont, Adaman Resources, Pantoro (PNR), Dacian Gold (DCN), Gascoyne Resources (GCY), Incitec Pivot (IPL), Ok Tedi Mining, Silver Lake Resources (SLR) and Billabong Gold (a Toronto-based miner who bought the Plutonic gold mine off Northern Star in 2016 - ZEN has provided power to Plutonic since 2014, for Northern Star for the first couple of years, and then for Billabong).

In other ZEN-related news, Moelis Australia Asset Management (MAAM) now own 5.09% of ZEN, TOP/TIGA/Thorney have sold down from 15.31% to 8.3% over the past 8 months (since August), and Westoz (WIC) have last month increased their stake in ZEN from 5.11% to 6.13%.

Disclosure:  I have a small holding in ZEN.

ZEN releases Preliminary FY2018 Results, from August 6th 2018

Also, on August 10th, TOP (the Thorney Opportunities Fund LIC) and their associated trading company TIGA Trading (TIGA = Thorney Investment Group Australia) notified the ASX that Thorney had sold some ZEN (between June 25th and August 10th), reducing their exposure from 15.31% to 14.13%.  

Thorney remain the third largest shareholders, behind Doug Walker, ZEN's executive Chairman and co-founder, who owns 23.92% of ZEN (through his company Zanea Pty Ltd), and Gavin Great, the other ZEN co-founder, who resigned as Operations Director in January, but still holds 18.73% of ZEN.  Those top 3 holders (Doug Walker, Gavin Great & Thorney Opportunities) together hold 56.78% of the shares on issue. 

With a reduced free float of only ~43%, + a low market cap of only $78m (at 99.5c/share @ 12-Aug-18), it's not easy for TOP to sell out, if that is indeed Thorney's intention, without crashing the share price.  They may just be locking in some profits, as ZEN had a very good run, before their recent 20% SP fall from $1.235.

I sold all of my ZEN shares on July 27th at $1.08, as they seemed to be getting a bit toppy up there.  Thorney is the only fund manager with a substantial holding now, and they have been reducing their exposure lately, after loading up in May when ZEN were around 75c.  Westoz (WIC) lodged a "ceasing to be a substantial holder" notice on August 2nd, and Microequities Asset Management did the same on July 26th.  BT Investment Management dropped off the list back in September.  

There's plenty of growth left in ZEN certainly, but at over $1 up to $1.235 (where they got up to on August 1st) there is already a lot of future growth priced in.  

Here's the announcement they made when co-founder Gavin Great left the company at the beginning of the year:

ZEN: 24-Jan-2018: Resignation of Director of Operations

No reason was given.  Bit of a mystery.  He hasn't sold any shares yet though.

ZEN is the ASX code for Zenith Energy, and is not the same as private company ZEN Energy, which has Ross Garnaut as their company President and Sanjeev Gupta as their Executive Chairman:

http://www.zenenergy.com.au/team/

This straw is not about ZEN Energy.  Or about ZEM Energy, who have a JV with MND called Zenviron.  It's about Zenith Energy, whose ASX stock code is ZEN.  Clear as mud?

http://www.zenviron.com/

http://www.zenithenergyltd.com/our-team.html

A public company with a bright future.

11-Mar-2019:  Zenith Energy (ZEN) have this morning announced the appointment of Peter Torre as an independent non-executive director - see here.  Peter has been advising and working for ZEN since before they IPO'd - as an independent contractor providing services as ZEN's joint company secretary.  He runs his own business, Torre Corporate, an advisory firm providing Corporate Governance Services to publicly-listed companies  This announcement is NOT regarded as market sensitive information, and I would not normally comment on it.  However, I found some of the wording in the announcement interesting, particularly the part that I've highlighted below:

Zenith Energy Chairman, Doug Walker commented: “Peter has been an integral part of the Zenith Board since its IPO, not only assisting with Corporate Secretarial advice, but providing insightful input to the Board’s deliberations with his public company governance experience and strategic thinking.”

Mr Torre commented: “It has been a pleasure seeing Zenith embrace the public company environment since its successful IPO. The transition from private to public, and listing on the stock exchange, can be a challenging process for existing owners and management. Zenith has made that transition smoothly, fully embracing the enhanced governance framework required as a listed company, without hindering the strategic and entrepreneurial vision to deliver strong shareholder returns. I look forward to actively supporting the next phase of growth for Zenith.” 

It is true that some companies do struggle to make that leap from a private to a public company, with the transparency and reporting requirements that are involved, and that maintaining their previous growth trajectory can also certainly be challenging, especially if management focus is distracted.  It would appear that ZEN are doing OK in that regard.

11-Mar-2019:  Zenith Energy (ZEN) have recently doubled their corporate debt facilities from $40m to $80m on quite reasonable terms for a company of this size and at this stage in their journey.  The debt facilities will assist Zenith with the financing of recently announced projects as well as providing further new project funding capacity.  You can view that announcement (made on Feb 28th) here.

I am usually quite wary of companies who rely on debt like this, especially smaller companies where downside risks are often increased, and my favourite companies tend to have zero net debt - most of them actually have substantial net cash positions.  However, due to the business that ZEN and PEA (Pacific Energy) are in, which is primarily to provide energy generation and supply solutions to remote mines on the basis of multi-year contracts that involve recurring revenue, debt funding of the assets they need to build and operate is often appropriate.  Their clients don't give them the cash up front to build these power stations - or they would just build them themselves;  they just sign contracts for the electricity supply over a number of years (usually 5 or more years).  This leaves ZEN and PEA to find the money to make the initial capital investment so they can build and then operate those facilities and realise that income stream over those years.  PEA has been around longer, and is bigger.  ZEN is the new kid on the block.  As you get bigger, and your cashflow increases, you rely less and less on debt, as we have seen with PEA.  ZEN is still at that early stage where more debt is required, and so I'm not particularly worried about this announcement, especially as - under the terms of the revised corporate debt funding - Zenith has been able to achieve an overall reduction in associated funding costs as well as extend the maturity date

What is more important in ZEN's case is that they keep winning more work - and announce more new supply contracts.

22-Aug-2019:  ZEN Announces FY19 Preliminary Results

Preliminary Final Report

Highlights

• Revenue up 7% to $55.04 million
• EBITDA up 14% to $20.73 million
• NPAT down 31% to $5.81 million
• Earnings Per Share of 5.80 cents (weighted average)

Leading independent power producer Zenith Energy Limited (ASX: ZEN) is pleased to report its preliminary unaudited financial results for the financial year ended 30 June 2019 (FY2019), with EBITDA of $20.73 million and Net Profit After Tax (NPAT) of $5.81 million.

Managing Director, Hamish Moffat, said the results marked a very successful 12-month period for Zenith Energy and its shareholders.

“Zenith Energy continues to grow shareholder value by successfully delivering on its Build-OwnOperate strategy, and running our existing contracts efficiently,” Mr Moffat said.

"This work has seen us successfully rebalance our segment portfolio to be predominantly Build Own Operate whilst delivering revenues of $55.04m against a forecast of $50m to $55m and EBITDA of $20.73m against a forecast of $19m to $21m. Along with these results being at the top of our forecast range we have also expanded our EBITDA margin by 2.5%, moving from 35% in the PCP to 37.5% this period.

“During the year we commissioned our largest project to date, the 62-megawatt (MW) Tanami Power Station, on time and on budget. Meanwhile we amended and extended contracts with leading operators such as Northern Star Resources, Chevron and Independence Group.

“In addition to our ongoing relationships, we executed Power Purchase Agreements with Silver Lake Resources for an 18.3MW power station at its Daisy Milano Project and Adaman Resources for a 14.4MW power station at its Kirkalocka Gold Project. These contracts take our total installed capacity to 403MW distributed across 12 locations, a result we are incredibly proud of.

“Zenith Energy’s financial position has been strengthened during the year, enabling the Company to increase its power generating assets by $72.31 million. The Company will continue to strengthen its balance sheet to sustain the growth of its generating assets and maintain sufficient working capital, through the application of our prudent capital management policy.” 

Zenith’s revenue was supported by new projects coming online during the period, including the Tanami Project. The benefits of these are now being realised thanks to a fast ramp-up, with the full financial impact to be seen in the Company’s FY2020 results.

NPAT was impacted by the Company’s historical accelerated depreciation policy, which writes power station assets down over the initial term of a Power Purchase Agreement (PPA), disregarding possible contract extensions. In  FY2019 a full year of depreciation was recognised on assets at the Mt Morgans and Dalgaranga sites,  as these were commissioned at the tail-end of FY2018.

The Company will continue to assess the relevance of its depreciation policy considering the number of recent contract extensions and a trend towards longer average PPA terms being agreed with clients.

FY2020 Outlook

Zenith Energy has entered FY2020 with a strong balance sheet and a qualified near-term Build-Own-Operate (BOO) project pipeline of more than 400MW, targeting new and existing clients, as well as opportunities to further leverage its extensive expertise to develop hybrid, renewable and micro-grid energy solutions.

“We are very pleased to have exceeded the objectives we outlined at the time of our listing on the ASX in 2017. Since then, we have seen a three-fold expansion of our business by BOO MW capacity and power generating assets. Our five-year strategy is in place to see us continue to migrate our existing business base towards BOO and build our portfolio with growth in new geographical territories, as a priority.

“We will continue to target new market segments, providing energy to isolated projects, clients and communities. We see a real opportunity to apply our expertise, developed through the extensive work in the mining and resources sector, to provide the bespoke solutions these segments require.

“We’re looking forward to building on our success in FY2020 and consolidating our position as one of Australia’s leading independent power producers,” Mr Moffat concluded. 

29 July 2019:  Zenith Energy (ZEN) Market Update regarding Incitec Pivot Phosphate Hill MOM Contract Completion of Term

23-Oct-2018:  ZEN-IGO sign PPA Amendment for Nova Solar Operation - see here

Nova is the main asset of Independence Group NL (IGO) and is a nickel/copper/cobalt mine that includes the Nova and Bollinger discoveries originally found by Sirius Resources (which was a Mark Creasy company).  IGO bought out Sirius, and Mark Creasy still owns 15.4% of IGO.

ZEN already had a PPA (power purchase agreement) in place with IGO, but that has now been amended to allow for the inclusion of solar energy production at Nova.

21-Jan-2019:  Disclosure:  I hold IGO shares, but not ZEN shares currently.  I have held ZEN shares previously, and may do so again in the future.

19 July 2019:  Completion of 6MW BOO Power Plant Expansion at Northern Star Resources’ (NST's) Jundee Gold Mine

03-Jul-19:  Thorney Opportunities (ASX:TOP) and Thorney Investment Group Australia (TIGA Trading) have lodged a notice today indicating that they are no longer substantial shareholders of ZEN (so now own less than 5% of the shares on issue).  TIGA/TOP were early supporters of ZEN, but they've been progressively selling down their ZEN holding this year. 

Meanwhile, in the past week, we've seen a notice lodged by Moelis Australia letting us know they've increased their own stake in ZEN from 5.09% to 6.4% having continued to accumulate more ZEN shares during March, April, May and June this year.  

Additionally, Microequities Asset Management have lodged a "Becoming a Substantial Holder" notice, as they've now reached 5.51% of ZEN, having been buying ZEN shares since February, mostly at around 58 cents.

Also, Pendal Group (the old BT) have lodged their own "Becoming a Substantial Holder" notice, showing that they bought 500,000 ZEN shares in March, and then bought a lot more in May & June, and now own 7,690,486 Zenith Energy (ZEN) shares, or 5.58% of the shares on issue.

Finally, Westoz Funds Management, who manage WIC, the Westoz Investment Company LIC (listed investment company), let the market know last week that they've increased their ZEN stake from 6.13% to 7.29%.

In summary, while Thorney have been selling down (and possibly out altogether), Moelis, Microequities, Pendal & Westoz have all been buying ZEN this year, particularly in May and June when ZEN shares have been trading below 60c.  ZEN got as high as $1.20 on August 1st last year, so they've more than halved in price since then.  Their main competition over at PEA (Pacific Energy) have been in the game a lot longer, are bigger, and are in an upgrade cycle now, and many retail investors would probably prefer to go with PEA rather than ZEN, since PEA are in a clear uptrend and ZEN's chart looks pretty horrible.  However, fund managers with an eye for value (excluding Thorney) are seeing value in ZEN it seems, and I can't say I blame them.  ZEN look oversold here to me.

Disclosure:  I hold ZEN shares.

05-Jul-19:  Pendal Group (PDL) have now informed the market that they increased their ZEN holding (on Tuesday 2nd July 2019) from 5.58% to 7.76% with the purchase of another 3 million ZEN shares, and most of those (if not all) would have come from the TOP/TIGA sell down (which extended through until July 2nd).  Thorney Investments (i.e. TOP/TIGA) is moving on, but Pendal (the old BT Group), Moelis, Microequities, and Westoz are all topping up their ZEN holdings at these lower levels.

05-June-2019:  ZEN Market and Outlook Update

Disclosure:  I had a small ZEN shareholding, and now I have a larger one, after buying another 10,500 ZEN shares at 52c each this afternoon.  They have a SPP (share purchase plan) in operation currently where I could have bought up to $15K worth of ZEN at 58c/share, and I had intended to buy $5K worth using that SPP, but today's announcement and the subsequent 8% drop in ZEN's SP provided an even lower price (52c).  As they have clearly stated in the announcement, the demise of GCY, should it go that way, would not have a material impact on ZEN, and they could easily redeploy those assets and personnel to other projects.  Zenith (ZEN) are still the new kids on the remote-energy-services-provider block, and they are still growing strongly (hence the capital raising to support that growth).  I have confidence that the market will positively re-rate them after their FY19 report in August, and they'll be trading substantially higher than 52c (IMHO) when they report again in August 2020.

21-Nov-2018:  ZEN & NST sign PPA Amendment for Jundee Project - see here.

14-Nov-2018:  Zenith Energy Operations Update - see here.

29-April-2019:  Full Completion of 62MW Power Plant at Newmont’s Tanami Gold Mine

29-Oct-2018:  ZEN's 2018 Annual Report is now available - see here.