Tag Archives: Blackstone

Loving Oil in Any Way, Shape or Form — Damn Climate Change!

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Many oil assets are ending up in the hands of private-equity (PE) firms. In the past two years alone these bought $60bn-worth of oil, gas and coal assets, through 500 transactions… Some have been multibillion-dollar deals, with giants such as Blackstone, Carlyle and KKR carving out huge oilfields, coal-fired power plants or gas grids from energy groups, miners and utilities. Many other deals, sealed by smaller rivals, get little publicity. This sits uncomfortably with the credo of many pension funds, universities and other investors in private funds, 1,485 of which, representing $39trn in assets, have pledged to divest fossil fuels. But few seem ready to leave juicy returns on the table.

As demand for oil and gas persists while dwindling investment in production limits supply, prices are rising again, boosting producers’ profits….And discounts imposed on “brown” assets by the stock market, linked to sustainability factors rather than financial… create even more pockets of opportunity…The Economist has looked at 8 PE firms that have closed fossil-fuel deals in 2020-2021 The investors in some of their latest energy-flavored vehicles include 53 pension funds, 23 universities and 32 foundations. Many are from America, such as Teacher Retirement System of Texas, the University of San Francisco and the Pritzker Traubert Foundation, but that is partly because more institutions based there disclose pe commitments. The list also features Britain’s West Yorkshire Pension Fund and China Life. Over time, some investors may decide to opt out of funding their portion of fossil-fuel deals.

But a third, yet more opaque class stands ready to step in: state-owned firms and sovereign funds operating in the shadows. Last month Saudi Aramco, the Kingdom’s national oil company, acquired a 30% stake in a refinery in Poland, and Somoil, an Angolan group, bought offshore oil assets from France’s Total. In 2020 Singapore’s GIC was part of the group that paid $10bn for a stake in an Emirati pipeline.

Excerpts from Who buys the dirty energy assets public companies no longer want?, Economist, Feb. 12, 2022

Blackstone, China, Secrecy: Guyana

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The government of Guyana wants to move forward with an $840m project at Amaila Falls, deep in the forested interior. At full capacity of 165MW, it could supply more power than Guyana’s present needs.  The lead developer is Sithe Global, part of the Blackstone Group. Sithe wants a guaranteed 19% return on its equity stake, and plans to start construction this year. China Railway First Group signed an engineering contract in September. The China Development Bank will lend most of the money. The Inter-American Development Bank has been asked to chip in $175m; the World Bank was initially involved, but has pulled out.

Amaila’s supporters point out that it will flood less than 55 square km (21 square miles). No villages will be displaced and little wildlife will be disturbed. Guyana would no longer rely on fossil fuels for electricity. After two decades, ownership would pass to the government, construction costs paid off.

Opponents worry that clean electricity will not come cheap. Guyana Power and Light (GPL), the state-owned electricity company, will pay about $100m a year to the Amaila consortium. Electricity bills are unlikely to fall (three people were killed last year in protests over electricity charges). And Amaila’s power may not be reliable. The El Niño weather pattern can bring a year-long drought. In normal years, the plant will run below capacity between October and April. GPL will have to pay for backup thermal power. The IMF has urged “careful consideration of the [financial] risks”.

Plans to build Amaila date from 1997, though Sithe only got involved in 2009. The estimated cost has risen steadily. An access road is unfinished. There is as yet no economic feasibility study for the project; when completed, the study will remain confidential, as is GPL’s outline power-purchase agreement. Opposition parties complain that the government is being “secretive” about Amaila. On April 24th they blocked funds for a government equity-stake in the project. If Amaila is as beneficial as its backers claim, an open debate might generate broader support for the project, and cut its $56m bill for political risk insurance.

Hydropower in Guyana: Shrouded in secrecy, Economist, May, 4, 2013, at 39