WIND

BlackRock’s $12.5bn GIP buyout shows the lure of infrastructure

BlackRock and Global Infrastructure Partners started discussing their blockbuster $12.5bn takeover deal three months ago, and now they have agreed a deal. This highlights the vital role of infrastructure investment to support the transition to renewable energy.

RICHARD HEAP

January 16, 2024

  • BlackRock has bought Global Infrastructure Partners for $12.5bn
  • The deal triples BlackRock’s infrastructure portfolio to over $150bn
  • Infrastructure is a $1trn-plus asset class for institutional investors

 

It started over dinner at an Italian restaurant near New York’s Rockefeller Center last October – and three months later has resulted in a transformational deal.

On Friday (12th January), BlackRock revealed it has agreed to buy investment giant Global Infrastructure Partners for $12.5bn. The deal is made up of $3bn cash and shares worth $9.5bn; and means BlackRock can triple the value of its infrastructure assets under management to over $150bn.

With $10trn total assets under management at the end of 2023, BlackRock has long been a force in traditional asset management, including stocks and bonds. But in recent years its chief executive Larry Fink has sought build the group’s position in alternative investments, including infrastructure and private equity, to support the energy transition.

That’s why an acquisition of GIP appealed. Infrastructure is now a $1trn asset class for institutional investors, and both BlackRock and GIP have argued it is set to be one of the fastest-growing sectors for private investors in the coming years. Investment in this sector will be vital for the global energy transition, with money going into new renewables assets as well as essential supporting infrastructure like digital networks and ports.

This is where GIP can help BlackRock. Its $106bn assets under management include the Abu Dhabi joint venture ADNOC Gas Pipelines; UK waste management operator Biffa; airports including Edinburgh, Gatwick and London City; investments in ports and port operators including Peel Ports; and a host of other firms in the fuel and chemicals sectors. And that’s before you even get to GIP’s exposure to wind and related technologies.

 

High-profile assets

GIP has emerged as a major investor in both individual renewables assets, particularly offshore wind farms in Europe, and developers over the last decade.

The company owns stakes in the 1.2GW Hornsea 1, 465MW Borkum Riffgrund 2 and 330MW Gode Wind 1 projects in the North Sea; and in offshore developers Skyborn Renewables and Bluepoint Wind. The latter is a joint venture with Ocean Winds that is developing an offshore wind farm in the US to serve New York and New Jersey.

GIP is also an investor in US-focused onshore renewables developers such as Clearway Energy, Eolian and Terra-Gen Power; and those with a global focus, such as ACS Renewables, Atlas Renewable Energy, Naturgy and Vena Energy.

This is an interesting takeover because it means these assets will join the BlackRock portfolio – but there is also unlikely to be a major shift in GIP’s strategy. GIP may be the smaller partner, but this deal actually appears to be more a reverse takeover of BlackRock’s infrastructure arm.

For one thing, GIP will bring $106bn of the division’s combined $150bn assets under management (or around 70%). For another, GIP founding partner, chairman and chief executive Adebayo Ogunlesi is joining BlackRock with four of GIP’s other founding partners to lead the combined infrastructure platform

The deal is due to close in the third quarter of 2024.

BlackRock’s Fink told analysts on Friday that the combined company would be able to satisfy the growing demand from sovereign wealth funds and rich individuals for deals in the renewable energy, energy transition and other related sectors. And we don’t need to dig deep to see why this transaction appealed to GIP’s founders: it is highly lucrative.

 

Infrastructure M&A

BlackRock’s acquisition of GIP is the highest-profile example of the consolidation we are seeing in the infrastructure investment sector.

This follows the purchase by CVC Capital Partners of a majority stake in DIF Capital Partners in September 2023, with the option to buy the remaining shares over time. That was also a significant deal, but attracted less attention in the specialist renewables press because of the smaller numbers involved. And then there was the acquisition of Actis by General Atlantic that was announced on Tuesday (16th January). The trend is undeniable.

But what impact will BlackRock’s GIP takeover have on the wider market?

First, it may prompt more investment managers in the renewables world to consider whether they need to attract additional investment, either by bringing in a prominent partner or raising capital via a stock market listing.

Second, this acquisition may result in new players in the market. There is always churn following an M&A deal, and we are likely to see people coming out of BlackRock and GIP as a result of their reportedly different organisational cultures. We expect to see a few exciting firms led by alumni from both firms entering the market by the end of 2026.

This week, for instance, Skyborn’s ex-chief executive João Metelo launched a new venture called Gateway Zero to develop and gain investment in next-generation port infrastructure projects. The timing has nothing to do with the GIP deal: Metelo left Skyborn in May 2023 well before the conversations between Fink and Ogunlesi started. But this is worth sharing to illustrate the principle: organisational churn at BlackRock and GIP could lead to more experienced people entering the market with new innovative ventures in 2025 and 2026.

And third, this deal with drive greater attention in the investments by major institutions in the supporting infrastructure needed to enable renewables, not just the renewables itself. We are already seeing this with the growing importance of energy storage and power-to-X — and you should check out our sister title Energy Storage Report for more on that.

Overall, the acquisition of GIP shows that energy transition infrastructure it an opportunity too big to ignore for major institutions. We can expect more consolidation in 2024, even if not at this blockbuster scale.

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Have you done a deal that we shouldn’t ignore? Entries for our fifth annual Wind Investment Awards are open until 9th February. Submit your entries until now.