"We view the grid as an indirect beneficiary of a number of secular trends, including the growth of renewables, the need to replace aging infrastructure and the need to increase grid capacity to support the power consumption associated with technological innovation," said John-Paul Munfa, Blackstone senior managing director, in a written statement.
This a change for Blackstone's private equity series that had invested in the oil and gas sectors in earlier vintages. Even its flagship buyout funds had invested in coal and natural gas plants, including the 2017 acquisition by a joint venture of Blackstone Capital Partners VII and ArcLight Capital Partners of the General James M. Gavin Coal Plant, a 2,600-megawatt, coal-fired plant, located in Cheshire, Ohio, along with two natural gas plants in Ohio and another natural gas plant in Indiana.
These days, Blackstone is leaning in on the energy transition theme, not only in its private equity energy business but also in its infrastructure and credit funds, said Jonathan Gray, Blackstone president and chief operating officer, in the firm's July 20 second quarter earnings call.
"In energy transition, decarbonization is projected to require $4.5 trillion of annual investment over the next 25 years, further supported by legislative action globally. This has been one of our busiest areas," Gray said during the call.
Blackstone's two largest investments in the second quarter were a 19.9% stake in NiSource, for $2.2 billion by Blackstone's infrastructure fund to support the utility's transition from coal-power generation in five years; and $1 billion in additional growth capital for its portfolio company Invenergy, a U.S. private renewables developer. Blackstone's infrastructure business acquired a minority stake in Invenergy from the company and co-majority owner, Caisse de dépôt et placement du Québec, for C$424 billion ($307 billion), investing nearly $3 billion in growth capital in 2021 and 2022.
Examples of energy transition companies acquired by Blackstone's private equity business include its October investment with Vista Equity Partners in Energy Exemplar, a grid software planning company, and its 2021 acquisition of Sabre Industries, a manufacturer of steel pools, towers and battery storage solutions for utilities. Terms of those deals were not disclosed.
"We believe the need for scale capital and expertise in this area will only increase over time," Gray said.