BlackRock eyes North American power

BlackRock Real Assets has hired Pat Eilers from private equity firm Madison Dearborn Partners to build a North American strategy focused on conventional power, in a move that could lead to new products.

“We are extending our capability beyond renewable power and Pat is the first step,” Jim Barry, BlackRock’s head of real assets and leader of its infrastructure team, told Infrastructure Investor. “We are hiring a handful of people initially to work with Pat, but he is also leveraging the wider resources of the platform, whether on the renewables, debt or infrastructure solutions side.”

Eilers oversaw Madison Dearborn’s energy, power and chemicals practice. He served on the boards of several energy companies, including Magellan Midstream Partners, First Wind, US Power Generating Company and Green Plain Partners. Prior to his tenure at Madison Dearborn, he was a director at Jordan Industries and an associate at IAI Venture Capital.

BlackRock has so far only invested in renewables in North America, although it has made conventional power investments in Mexico. Barry says BlackRock has been seeing dealflow beyond renewables for years and is now ready to monetise some of those opportunities, doing deals in the $50 million to $100 million range.

“In the short term, we are using some pools of capital that we have – some in our infrastructure solutions business, but also more broadly across BlackRock’s alternatives business – where there are opportunistic pools of capital” to fund investments from the new power strategy, Barry explained. “But really that’s just a step with a view to going and raising new products. Whether we go there in one big step, or two steps through separate accounts first, the goal is to have commingled products.”

While Eilers worked at the the lower end of the private equity risk spectrum at Madison Dearborn, Barry said the new power strategy “will stay in the infrastructure end of the risk spectrum”, investing in the likes of highly contracted midstream and power generation.

In an interview in our March issue, Barry saw risk as key to the infrastructure proposition: “The big challenge in infrastructure equity is there’s no common language of equity risk. You put 20 investors in a room and ask them to define core [infrastructure] and you get 20 different definitions. Most people, when they talk infrastructure, use the language of low risk – the language of core. But I see balance sheets bleeding up the risk curve and that’s driving CIOs nuts. The challenge is people talking the language of low risk and then going up the risk spectrum.” 

BlackRock announced the formation of its real assets unit – which merges its infrastructure and real estate arms, with a combined $29 billion of assets under management – earlier this year. When Barry spoke to us in March, he explained the merger came about as a result of market demand. 

“I think what you are beginning to see on the client side is real assets becoming an allocation as a category before it ever gets split into its component parts. We are responding to that dynamic, because if your customers are going to be buying that way then you need to be able to talk to them in those terms.”

The asset manager invests in infrastructure, on the equity side, through dedicated renewable energy funds and separate accounts. It also has a sizeable infrastructure debt business, amounting to $4.4 billion of the infrastructure unit’s $8.6 billion of assets under management.