BlackRock to deploy renewables Fund II by US tax credit deadline

BlackRock’s second renewable energy fund is on pace to fully invest its $1.65 billion by the time US production tax credits expire at the end of 2019.

David Giordano, a managing director for BlackRock’s Renewable Power Group, told Infrastructure Investor that Global Renewable Partners II has around $600 million of capital still to deploy. The firm will continue to follow its strategy to invest 50 percent of the fund in the US, 20 percent to 30 percent in Europe and the rest in other OECD markets.

Since closing last July, GRP II has invested $1.1 billion in wind and solar assets from the UK and Norway to Japan and Australia. In the US, BlackRock has acquired stakes in a 211MW capacity wind project in Texas and a portfolio of wind projects that generate a combined 752MW. The firm is hoping GRP II will post net returns of between 9 percent and 10 percent from in-construction or early-stage projects.

The US market is “on an absolute basis” where the most growth in renewables is happening, Giordano said. “It continues to be the biggest growth engine of both power and energy, but I’d say infrastructure even more broadly.”

US renewable energy capacity has been steadily rising over the years. Government tax credits and the price of fossil fuels have made it a competitive source of energy. Last year, the US Energy Information Administration said renewables now accounted for 10 percent of the country’s electricity generation.

Despite strong growth, government tax credits for renewables are being phased out. Support for solar and other technologies has ended and wind tax credits will stop by the end of next year.

Giordano said this shift will lead to a “recalibration of the market”, but he believes that renewables have become a sure enough bet in the eyes of lenders that the loss of tax credits will be offset by more widely available project finance.

“Capital structure around the projects will evolve accordingly,” he said.

He added that BlackRock’s renewables team isn’t feeling rushed to invest around half-a-billion dollars in just under two years. “We are pretty selective. We don’t have urgency to deploy capital.”