Having evaluated the potential power and renewable energy development opportunities in the Middle East and North Africa since 2014, Blackstone has decided to launch new venture Zarou through its energy-focused private equity business, Blackstone Energy Partners.
“Blackstone sees an attractive regional opportunity and is backing a strong team to go after it, as it has done in other regions,” a source with knowledge of the firm’s plans told Infrastructure Investor, referring to Fisterra Energy, a company Blackstone launched in 2013 to identify, develop, finance, construct and operate independent power producers in Latin America, Europe and the Middle East.
Sameh Shenouda, who was previously head of infrastructure equity investments at CDC Group and has been involved in more than $6 billion of projects in the MENA region, will serve as the company’s chief executive, Blackstone said in a statement. He is joined by Meftaur Rahman, former president and chief executive of AES Jordan, who will serve as chief operating officer.
“We are excited to partner with such an exceptional team to help meet the MENA region’s growing demand for power and other critical facilities,” Blackstone senior managing director Mustafa Siddiqui said in the statement. “They have the outstanding experience, local expertise, and drive required to create a major new energy platform in the region.”
Asked about the composition and number of members on the leadership team, Blackstone declined to comment. However, the source Infrastructure Investor spoke with said the team will grow in tandem with the portfolio.
According to the same source, Blackstone chose to launch Zarou through its private equity business rather than its infrastructure arm since the development and greenfield construction of power generation assets in emerging and high-growth markets tend to have a higher-risk profile than the types of assets traditional infrastructure funds typically target.
“After these assets have been built, are operating and if they are under long-term revenue contracts with investment grade counter-parties, they are then viewed as having a risk profile consistent with traditional infrastructure and are bid to a lower expected return that is commensurate with the lower risk at the time of sale,” the source explained.
Zarou – headquartered in London, according to a Companies House filing – will focus primarily on thermal and renewable power opportunities, but might also invest in the oil and gas midstream and water sectors, on an opportunistic basis.
It will invest in projects throughout the development lifecycle from concept through the operating stage, with a typical average hold period of about five years, though that might differ depending on individual projects and their requirements, the source said.
“A minimum hold period would likely be the period required for construction plus a year or two to prove out operating reliability – then run an efficient auction process to find the optimal buyer who will pay a premium price,” this person added.
According to Blackstone, its energy-focused private equity business has invested more than $15 billion of equity globally across the energy sector. The firm, which also invests in real estate, public debt and equity, real assets and secondary funds, has approximately $440 billion in total AUM. It is in the process of raising a $40 billion open-ended infrastructure fund in partnership with Saudi Arabia’s Public Investment Fund. In July, it reached a first close on $5 billion.