Publications

- August 1, 2017: Vol. 4, Number 8

Power Fund Gets Juiced: The world’s largest asset manager closes on $1.65b in commitments

by Jody Barhanovich and Mike Consol

BlackRock Real Assets has completed the final close for its Global Renewable Power II fund with $1.65 billion in commitments secured from 67 investors in North America, Europe and Asia. The final close has exceeded the initial fund target size of $1 billion, reflecting strong investor demand for the renewable power asset class.
Among the commitments received by the BlackRock fund were $50 million from the New Mexico State Investment Council, as well as unspecified commitments from the $13 billion Orange County (Calif.) Employees Retirement System, and the $85 billion Minnesota State Board of Investment. The fund opened its fundraising efforts in 2015.

Global Renewable Power II is an infrastructure fund that will invest in utility-scale wind and solar projects. The fund’s portfolio is expected to be roughly 85 percent solar and 15 percent wind, with about a third of the projects being in the construction phase. About 60 percent of the portfolio will be invested in the United States, with the rest in Europe and Canada.

Renewable power sources, most notably wind and solar, are producing a significant and growing portion of the world’s electricity. Multiple factors have pushed renewables to the mainstream of the power industry. First and foremost is their increasing cost competitiveness: According to Bloomberg New Energy Finance, unsubsidized costs for wind and solar power declined 15 percent and 55 percent, respectively, during the past five years.

Renewable power generation is also one of the most active sectors for infrastructure investment, according to BlackRock’s research into the asset class. Globally, the sector generated $268 billion in transactions over the five years ending second quarter 2015, reports Dealogic. North America and Europe are the most active regions for institutional investors, with several newer markets also beginning to develop.

Nick Knapp, managing director at CohnReznick Capital, told Reuters that utilities have a growing appetite for renewables. Wind and solar project developers have many more financing options now than traditional utility power purchase agreements, he said, and corporations are making agreements directly, and banks and other financers have developed hedges and other more nuanced financing options to attract investors.

Knapp also told Reuters that demand among U.S. corporations for renewables has “changed the dynamics of the industry” by forcing utilities to increase their exposure.

Said Knapp: “We’ve passed that inflection point.”

 

Jody Barhanovich (j.barhanovich@irei.com) is a reporter with Institutional Real Estate, Inc., and Mike Consol (m.consol@irei.com) is editor of Real Assets Adviser.

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