Zenith Energy targets Italian biogas expansion with construction-ready acquisition

Zenith Energy has taken its first step into Italian biogas, signing a binding letter of intent and exclusivity to acquire a development company that owns the rights to a fully permitted and engineered plant.

The proposed acquisition could add a new source of recurring energy revenue alongside Zenith's existing operations and solar development business. Management estimates that the plant could generate approximately €5 million of annual revenue and €2.5 million of annual EBITDA once running at full capacity.

EBITDA is earnings before interest, tax, depreciation and amortisation. It is commonly used as a measure of a project's underlying operating profitability before financing and certain accounting costs.

Those headline economics look attractive, but this remains a development-stage transaction. Zenith must complete due diligence, agree the final consideration, secure project financing, build the plant and successfully commission it before investors can expect those projected earnings.

The key figures

Measure	RNS disclosure
Interest being acquired	100% of the Target's issued share capital
Maximum purchase price	€1.6 million
Expected annual methane production	Approximately 3 million cubic metres
Projected annual revenue at full capacity	Approximately €5 million
Projected annual EBITDA	Approximately €2.5 million
Projected EBITDA margin	50%
Capital cost subsidy	40%
Methane sales incentive	20% uplift for 15 years
Green financing target	End of Q3 2026
Expected acquisition completion	Q4 2026
Expected operational date	Q3 2027

The maximum purchase price is capped at €1.6 million, although the final amount will depend on confirmatory due diligence. The Target's identity, location, vendor and final consideration have not yet been disclosed.

More importantly, the total cost of constructing and commissioning the plant has not been disclosed. That missing figure makes it impossible to calculate a meaningful projected return on total capital from the RNS alone.

What Zenith is acquiring

The Target owns the rights to develop a biogas facility in Italy. Zenith says the project is fully permitted, fully engineered and construction-ready, with the material permits, licences and engineering approvals already obtained.

That should remove some of the early-stage planning and regulatory uncertainty normally attached to development projects. It does not remove construction, financing or commissioning risk.

Once operational, the facility is expected to produce approximately 3 million cubic metres of methane gas annually. This would be injected into the Italian gas network and sold at Italian gas prices.

Zenith says it has produced and sold natural gas through the Snam Rete network since 2013 via its subsidiary Canoel Italia. Management therefore believes it can bring relevant operating and commercial experience to the project.

Feedstock security is an important detail

Biogas plants convert organic material into renewable gas. Their economics depend partly on obtaining a reliable supply of suitable feedstock at workable prices.

The project has a long-term feedstock supply contract with a major Italian regional authority. The expected mix is approximately 50% municipal waste and 50% agro-industrial waste.

Zenith describes feedstock availability as the principal operational risk associated with biogas projects. A secure long-term agreement could support more predictable production and make the development easier to finance.

However, the announcement does not disclose the duration, pricing structure, minimum volumes or other financial terms of this contract. Investors therefore cannot independently assess how much protection it provides against feedstock cost or availability risks.

The attraction of government support

The project is expected to benefit from two Italian support mechanisms: a 40% capital cost subsidy and a 15-year incentive providing a 20% uplift on methane sales.

These measures are central to the proposed economics. The capital subsidy should reduce the amount of funding required, while the sales incentive could improve revenue visibility after commissioning.

Zenith also pointed to Italy's National Energy and Climate Plan, which targets annual biomethane production of 5.7 billion cubic metres by 2030. According to the company, meeting this target requires national production to roughly double.

The wider market opportunity helps explain why Zenith intends to use this acquisition as the foundation for a broader Italian biogas and biomethane portfolio. Biomethane is a renewable gas upgraded to a standard suitable for injection into the natural gas network.

Financing is the next major test

Zenith expects both the acquisition and project development to be funded through non-dilutive green project financing. Non-dilutive funding means capital raised without issuing new shares, which would otherwise reduce existing shareholders' percentage ownership.

That is potentially positive for shareholders, but the financing has not yet been secured. The company is targeting green project financing by the end of Q3 2026, followed by completion of the acquisition during Q4 2026.

Construction is expected to begin immediately after completion, with the plant becoming operational in Q3 2027.

This is a relatively ambitious timetable. Any delay in financing, construction, equipment delivery, network connection or commissioning could push revenue generation beyond the current target.

The RNS does not disclose the planned financing amount, interest rate, repayment schedule, security arrangements or expected construction cost. Those terms will matter when assessing how much of the projected €2.5 million EBITDA could ultimately translate into cash attributable to Zenith.

What looks positive for investors

The project has several attractive features on paper:

• It is described as fully permitted, engineered and construction-ready.
• The purchase price is capped at €1.6 million.
• A long-term waste supply agreement could reduce feedstock risk.
• Government support includes a capital subsidy and a 15-year sales incentive.
• Management projects a 50% EBITDA margin at full capacity.
• Zenith intends to use project financing rather than equity issuance.
• The development could establish a second Italian renewable energy division alongside solar.

If Zenith completes the acquisition and delivers the stated economics, the project could materially broaden its future earnings profile.

What could go wrong

The main issue is that projected economics are not the same as delivered earnings. The €5 million revenue and €2.5 million EBITDA estimates are management projections and have not been independently verified in the announcement.

Completion also remains subject to confirmatory due diligence and final transaction terms. Investors do not yet know the identity or precise location of the Target, while total development expenditure is not disclosed.

Financing is another dependency. The intention to avoid shareholder dilution is welcome, but debt or project finance introduces interest costs, repayment obligations and potentially restrictive conditions.

Finally, Zenith must move from owning development rights to building and operating a functioning plant. Construction and commissioning can expose projects to delays and cost overruns, even when permits and engineering work are already in place.

The investor takeaway

This announcement has the potential to change Zenith's investment case, but it has not done so yet.

The proposed plant combines a capped acquisition price, government incentives, contracted feedstock and projected annual EBITDA of €2.5 million. That creates a credible route towards a new recurring revenue stream and a wider Italian biomethane portfolio.

The next announcements will be crucial. Investors need confirmation of due diligence, final consideration, financing terms, total construction costs and acquisition completion. Until those pieces are disclosed, the project's apparent profitability should be treated as a promising management estimate rather than secured future earnings.