Blackstone tags $500m for new power deals

The Blackstone Group’s recent experience in the energy sector has left the New York-based firm wanting more.

According to a source, Blackstone has not experienced a return multiple below six times in any of its recent exits in the energy industry, including investments in petroleum refiner Premcor, mining outfit Foundation Coal and most recently Texas Genco, a wholesale power generation company that was sold earlier this week to NRG Energy.

There’s been an overall recognition that this is not a nationwide industry. There are imperfections and irregularities in each individual area and region. David Foley, senior managing director, The Blackstone Group

The latest energy play for the firm comes in the form of an equity infusion into electric power generation outfit Sithe Global Power. Blackstone will be investing alongside management, led by company CEO Bruce Wrobel, and Reservoir Capital Group, an existing investor in Sithe.

Blackstone and management will hold an 80 percent stake in the business, while Reservoir’s stake will be reduced to 20 percent.

Blackstone was chosen to lead the investment in part because of the firm’s ability to keep up with Sithe’s growing capital needs. According to a press release, the investors expect to invest over $500 million (€414 million) into the company, capital that will go toward the development and construction of new generation facilities.

Sithe already has a number of development projects in the works, including coal-fired projects in New Mexico, Nevada and Pennsylvania and a natural gas-fired facility that is being built in Toronto. The company also has plans to build new facilities in Italy, Uganda, and Yemen.

Speaking to the market opportunity, Blackstone senior managing director David Foley told PEO that Sithe sees its calling in providing differentiated services to each individual market. “There’s been an overall recognition that this is not a nationwide industry. There are imperfections and irregularities in each individual area and region,” he said.

The company, in the press release, indicated that it is specifically targeting areas confronting capacity shortfalls. To cater to that, Sithe needs to build out its facilities, and Blackstone was drawn to the company because it has already made significant headway in doing so.

“They’ve been working on some of these projects for years now,” Foley said. “This isn’t the normal lead time that occurs when you’re building the projects from scratch.”