Raising capital from across the world, over 75 percent of commitments are from investors who have invested in prior vintages of the strategy, the firm said in a statement. BlackRock began speaking to existing investors about the vehicle in Q1 this year, Mark Florian, BlackRock’s global head of diversified infrastructure, told Infrastructure Investor.
Infra IV, as the vehicle is also known, is the rebranded strategy of the Global Energy & Power Infrastructure Fund series, which first launched in 2009 under the management of First Reserve, before BlackRock acquired the business in February 2017. GEPIF III, which raised $5.1 billion in April 2020, is the only fund in the series to be launched since the acquisition and saw a gradual shift away from the more oil and gas-related nature of the two previous vintages towards investments such as carbon capture, renewable natural gas and smart meters.
“We were getting more and more diverse types of infrastructure investments in the fund. In Fund III while everything had an energy connection, we were doing ports [through Vopak Americas] and that’s a transportation asset, and we were doing more around the digital space. We want people to know we’re focused globally and [in] a diversified manner,” Florian explained, with regards to the name change.
“We’ve been really focused on what’s beyond wind and solar and decarbonising manufacturing, industrial, agriculture and transport businesses,” he added.
Digital infrastructure and transportation and logistics assets each have 10-15 percent of the fund’s total targeted allocation, although Florian maintained that every deal in the fund will “be linked in some shape or form” to energy and energy transition.
“We’re working on a couple of interesting data centre opportunities, where 70 percent of the capital cost and operating cost is energy, so it’s very natural [to us], although ultimately, we may be investing in a data centre. You may see assets that are tied to energy, but are typically seen as digital or transport assets,” Florian outlined. “In telecoms towers, they need backup power to make sure they work. A lot of the telecoms companies are interested in upgrading all the backup power systems they have across thousands of towers.”
While Infra IV is yet to commit capital to any deals, Florian said that the team’s investment committee has about $3 billion of opportunities in front of it, “the biggest opportunity set we’ve had in front of our investment committee ever”, he stated.
A low-carbon world
Florian said he expects fundraising to be wrapped up by the end of Q2 2023. The fund targets a 10 percent net return and a cash yield of 7 percent, charging a 20 percent carry, according to public pension documents.
The 2014 and 2018 vintages are generating an average 13.1 percent IRR, according to the New Mexico State Investment Council, which has re-upped to invest $100 million into the fund. The earlier vehicle was generating a 0.6 percent return, the NMSIC said in August.
Some LPs have enjoyed success recently heading back into the oil, gas and related infrastructure sectors, but Florian maintained BlackRock would be sticking to the energy transition element of Infra IV, which allocates 20-40 percent of its capital towards low carbon power and 30-50 percent towards energy and environmental assets.
“We’re investing a 12-year fund. Our asset base is going to be resilient as we move through an energy transition,” he said. “We do think natural gas has a place in the transition and it will be important. There’s been a huge increase in demand for natural gas in both Europe and APAC.”
The fund will also assess opportunities in waste and waste management, carbon capture, batteries, energy efficiency and clean fuels.
“Hydrogen is very interesting,” believes Florian. “It is newer and we have to bring down the cost curve for blue or green hydrogen. Then we need a lot of infrastructure to store it and move it to end users and then we need the end user and to see the end user demand. There’s a lot of pieces that need to come together to have a hydrogen-based economy, but we think it’s an exciting part of the future.”