Sev.en mulls JV partnerships to acquire “ESG-deprived assets” in Australia, US, UK

Press Release (May 16, 2023)

Sev.en Global Investments, a Czech Republic-based family office investment group, could consider joint venture (JV) partnerships for future acquisitions of “ESG-deprived assets” across Australia, the US and the UK, CEO Alan Svoboda said. 

The group, which manages a portfolio of assets worth around EUR 2bn (USD 2.17bn) in equity value, has bid alongside JV partners in the past and in future could find synergies with local partners, PE funds or owners looking for partial or staged exits from their assets, the CEO told Mergermarket.  

According to the group’s investment principles stated on its website, it often finds “opportunities in areas where institutional investors no longer show interest due to their ESG constraints, but which are still vital for our economies”. Using this framework, Sev.en can find opportunities where a vendor’s ESG guidelines require either a full or a partial divestment, while there is also a smaller pool of available debt funding for those assets, which may require more equity, he said. Therefore, the group would like to see a fast return from initial investments through dividends and cashflow from the acquired businesses, he added.

When asked about BHP’s [ASX:BHP] sale process of its Daunia and Blackwater coal mines in Queensland, Australia, the CEO said that the group is generally “monitoring all investment opportunities in Australia in thermal coal and met coal”. “When it makes sense for us to participate, we will,” he added.

Apart from ESG-deprived assets such as met and thermal coal, Sev.en is looking at acquiring sulphate of potash (SOP), nickel, copper and other metals assets, as well as assets in the uranium and steel industries in Australia, the US and Europe, Svoboda said.  

While Sev.en is focused on larger acquisitions with equity volumes in the low-to-high hundreds of millions of AUD/USD – its typical equity investment ticket is EUR 200m–EUR 500m, according to its website – it could also consider bolt-on acquisitions that can enhance an existing portfolio business, he said.

In Australia, Sev.en currently owns a minority interest in the Callide C and Millmerran coal-fired power stations in Queeensland. It 100% owns Delta Electric, the owner and operator of the coal-fired Vales Point Power Station and the Chain Valley Colliery mining complex in New South Wales, Australia, and bought SOP miner Salt Lake Potash in Western Australia in October 2022.

Callide C, Millmerran ownership  

Callide C is owned 50:50 by Queensland state-owned CS Energy and Genuity (formerly InterGen Australia), which itself is a 50:50 JV between between Sev.en and Chinese state-owned electricity generator China Huaneng Group. While Sev.en did not specify Genuity's overall stake in Millmerran, ASIC filings indicate that Genuity controls Millmerran.

The JV partners had planned to split the respective interests in the two plants, with Sev.en taking Genuity’s ownership of Callide C that is not held by CS Energy, and China Huaneng taking Millmerran, Svoboda said.

However, the process is currently on hold and may be dependent on the outcome of the voluntary administration of Genuity companies relating to Callide C, Svoboda said. 

On 5 April, Deloitte’s Richard Hughes and Grant Sparks were appointed as voluntary administrators over IG Energy Holdings (Australia) Pty Ltd, and three other group entities, through which Genuity controls 50% of the Callide C power station located in Queensland, regulatory filings show.  

Potash and other investments

In terms of Salt Lake Potash, which was bought out of administration and has the flagship Lake Way project in Western Australia, Svoboda said that Sev.en plans to first test production and if that goes well, Lake Way should be up-and-running before the end of the year. 

Meanwhile, Sev.en is looking for other potash opportunities outside Australia, including in Canada, although many projects are challenging as they require a lot of capital, he said. 

After recently acquiring mining royalties from Coca-Cola Europacific Partners for AUD 65m (USD 43.3m), Sev.en is looking for additional royalty acquisitions, including in gas and oil, especially in the US, Svoboda continued.    

US legislation makes royalties there more attractive than in other regions, as the royalties are not affected by a potential bankruptcy of the company, he said. "We are developing models in which we could be an interesting counter party to a project with ESG issues that require capital to go on," he said.

While Sev.en is currently looking at ESG-deprived commodities to acquire mining rights, it could also offer junior mining companies royalties for future mining volumes, he said, adding that it would help finance the miners to finish their projects in commodities like nickel, copper and lithium. 

Outside of Australia, Sev.en’s global portfolio includes met coal mining assets in the US and power generation assets in the UK, according to its website. It announced in June 2020 its acquisition of US met coal producer Blackhawk Mining, LLC, one of the largest US met coal producers. It also operates the CSA surface ligmite mine and the Vrsany mine, both in the Czech Rebublic, according to its website.  

Sev.en Global Investments reported EUR 780m in EBITDA in 2022, with EUR 511m EBITDA reported from metallurgical coal mining in the same period, the website states. 

by James Arbuthnott and Pranav Nambiar Mergermarket in Sydney.