Fundraising

Blackstone to launch infrastructure, cleantech funds

The publicly listed alternative asset manager will later this year raise private equity funds for US and European developed infrastructure, as well as cleantech and renewable energies as the market for Blackstone’s core private equity business remains challenged.

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The Blackstone Group has put teams in place to raise a US and European developed infrastructure fund, as well as a separate fund for investment in cleantech and renewable energies, the firm’s president, Tony James, said on the firm’s second quarter earnings call.

Although the cleantech fund has not yet commenced fundraising, Blackstone has already agreed its two significant investments in the sector.

The firm will invest more than €1 billion ($1.5 billion) and partner with German engineering firm Windland Energieerzeugungs for a large scale wind farm project off the coast of Germany. The investment will provide capital to the German government-sanctioned “Meerwind” project to construct roughly 80 wind farms off the North Sea island of Helgoland.

Blackstone portfolio company, Sithe Global, struck a deal to construct an $870 million hydro electric powerstation in Uganda in December 2007.

The newly formed cleantech business group is headed by senior managing director James Kiggen who joined Blackstone from asset manager AllianceBernstein. At AllianceBernstein Kiggen created and managed a research team focused on emerging sciences and technologies. He also built a late-stage venture and growth equity business at the firm.

Kiggen is joined by AllianceBernstein colleagues Walter Vester and Richard Troyer who are principals in the new Blackstone practice.

The cleantech team will focus on private equity investing as well as providing counsel regarding renewable energy strategies across Blackstone’s other asset classes.

Blackstone has a long history of making investments that could be included under the heading of infrastructure but has yet to raise a dedicated fund.

In 1989, the firm made a $1.6 billion control investment in Chicago and North Western railroad. More recent investments have been made in electric power generation plant developer Sithe Global, electric power generator Texas Genco and water treatment services company Nalco.

A number of firms have begun looking to infrastructure of late, as mega-buyout firms find market conditions more challenging to execute and exit large deals.

In May, Kohlberg Kravis Roberts made public plans to launch a global infrastructure initiative and is reportedly planning to raise a $5 billion (€3.2 billion) infrastructure fund.

Global Infrastructure Partners, the General Electric- and Credit Suisse-backed firm, raised $5.6 billion for infrastructure, while Morgan Stanley, a US bank, closed a $4 billion fund.