Blackstone has made its first investment in renewable power from its infrastructure platform with a $3 billion injection into wind, solar and transmission line developer Invenergy Renewables.
The deal sees Blackstone Infrastructure Partners, the firm’s open-end infrastructure fund, take a minority stake in the company, alongside majority owners Caisse de dépôt et placement du Québec and management. While Blackstone declined to state the size of its stake, it said in a statement that it represented one of the largest renewable energy deals in North American history.
The Canadian pension first acquired a 24.7 percent stake in what was then known as Invenergy Wind in 2013 before increasing its stake to 52.4 percent in 2018. In December 2020, CDPQ invested a further $1 billion in the company, which has now developed about 25GW of renewable energy projects across four continents.
“We were at the point when Invenergy needed another capital provider with a long-term orientation that could come in alongside CDPQ and fund the business,” said Matthew Runkle, a senior managing director in Blackstone’s infrastructure team. “We spent quite a bit of time over the last six months hashing out what a deal would look like.”
Blackstone will now look to Invenergy Renewables as the primary vehicle for its utility-scale renewables investments, Runkle added, with potential investments in carbon capture and hydrogen likely to come from future investments.
“Renewables are 15 percent to 20 percent of US capacity and coal is a similar amount. Over the next decade, we expect that all to get retired,” outlined Runkle. “Because of its intermittency, you generally need 2MW to 3MW of renewables for every MW of coal you retire. That takes quite a bit of capital.”
Invenergy Renewables’ affiliate Invenergy Transmission is also building out new transmission lines to connect the group’s own projects, which include the largest wind and solar projects in the US.
“They have a proven capability that’s pretty unique, there’s really not many other renewable developers, if any, that take that approach of co-developing transmission with the resource,” explained Runkle. “Most developers focus on one technology and haven’t really branched out into other areas.”
Beating the ‘green premium’
While Blackstone has invested in renewable power projects via its Blackstone Energy Partners unit, the group had been unable to find suitable opportunities prior to the latest deal. In an interview with Infrastructure Investor last year, global head of infrastructure Sean Klimczak said there was a “meaningful green premium” affecting investments in the sector.
“As an equity owner, we benefit from setting up the projects at cost versus paying a premium on a project by project basis,” Runkle said, adding: “They start at the very beginning of a greenfield project. The way that they operate means they’re essentially an outsourced development arm of US utilities and corporates that are seeking renewable power but don’t have the expertise in-house to develop those projects. They look to contract that out to Invenergy.”
Runkle also brushed aside concern following the US Senate’s failure to pass the Biden administration’s Build Back Better bill, which was set to extend tax credit incentives for renewable energy projects, insisting the demand for renewable power would compensate for any loss of incentives.
The vast majority of Invenergy Renewables’ projects are based in the US, although it has also built sites in Canada, Mexico, Colombia, Japan, Poland and the UK.