Dive Brief:
- The Federal Energy Regulatory Commission approved BlackRock’s $12.5 billion acquisition of Global Infrastructure Partners Friday, despite nonprofits contesting the transaction and concerns over the firm’s growing influence in the utility sector.
- BlackRock completes the deal for $3 billion in cash and 12 million common shares in a new BlackRock subsidiary that will acquire all of GIP’s limited liability assets, according to the Sept. 6 authorization. GIP was the largest global independent infrastructure manager by assets under management at the time of the deal, with $100 billion in AUM, which will be combined with BlackRock’s existing $50 billion infrastructure platform.
- FERC approved the transaction on the back of a previously granted blanket authorization to BlackRock that allows the asset manager to acquire up to 20% of voting securities of certain types of utility companies. BlackRock first received the authorization in 2010, and the Commission declined to reconsider it as part of the transaction.
Dive Insight:
BlackRock announced the acquisition of Global Infrastructure Partners in January, citing “a movement toward decarbonization and energy security in many parts of the world” as a reason for the transaction. After the deal was posted to the Federal Register, consumer advocacy nonprofit Public Citizen and private equity watchdog nonprofit Private Equity Stakeholder Project filed a joint protest of the deal in May, followed by another by environmental nonprofit Sierra Club.
FERC later sent BlackRock and GIP a letter in June, finding the filing and its supplements to date deficient and asking for additional information on the deal’s effects on competition and its compliance with BlackRock’s previously issued blanket authorization. After evaluating the protests and the investment firm’s responses, the commission determined that the deal will not adversely affect competition and the deal does not conflict with the terms set out in the prior blanket authorization.
“We decline to reassess BlackRock’s blanket authorization in this proceeding or to hold a hearing on BlackRock’s blanket authorization at this time,” the Sept. authorization said. “Questions about the conditions applicable to BlackRock’s blanket authorization are beyond the scope of this proceeding.”
In a separate concurrence, Commissioner Mark Christie also greenlit the acquisition due to the blanket authorization, which he said was consistent with precedent and policy, but expressed continued concern about “huge asset managers … seeking to acquire interests in public utilities, especially in traditional load-serving entities.”
“The influence that large shareholders, BlackRock or otherwise, can potentially exert across the consumer-serving utility industry should not be underestimated. …So this is an issue that deserves much greater scrutiny,” Christie wrote. “But, because of BlackRock’s blanket authorization, there is no further scrutiny.”
Among the issues raised by Public Citizen and PESP’s joint protest was BlackRock’s expanding control over assets that fall into FERC’s jurisdiction, according to Friday’s filing. The nonprofits argued the asset manager’s expanded presence in utilities, “materially shift[s] BlackRock’s management orientation from a ‘passive’ investment manager to an active owner of energy infrastructure,” according the filing.
In response, BlackRock said it has been a “passive” investor with active holdings since the blanket authorization was first granted. The firm said the transaction “does not change the facts and circumstances under which BlackRock’s blanket authorization was granted,” the filing said.
The Commission ultimately concurred, though Christie said in his concurrence that any next steps the regulatory body takes on its request for comments when companies seek blanket authorizations should include “serious scrutiny” on whether a company seeking those authorizations “is or will be on both sides of the fence.”
PESP maintained its opposition to the transaction, and Alissa Jean Schafer, the nonprofit’s climate director, said in a press release Monday that the deal will “deepen BlackRock’s influence over critical energy infrastructure, potentially threatening fair competition.”
“BlackRock’s control over large public utilities and the expansion of its infrastructure portfolio pose risks to market competition,” Schafer said. “BlackRock has failed to address how it can effectively separate its passive ownership in utilities from its active management of energy assets, raising concerns around prioritizing its income over fair regulation.”
The deal was reported to be BlackRock’s largest acquisition in over a decade, when it was announced in January. BlackRock CEO Larry Fink called infrastructure “one of the most exciting long-term investment opportunities” in the press release announcing the deal and expressed confidence that physical and digital infrastructure expansion will accelerate.
“Policymakers are only just beginning to implement once-in-a-generation financial incentives for new infrastructure technologies and projects,” Fink said.
FERC Commissioners Lindsay See and Judy Chang did not participate in the proceeding, according to the authorization. See and Chang were sworn in to their posts in June and July, respectively.
BlackRock did not respond to a request for comment in time for publication.
