BlackRock Inc. has announced a significant markdown in the value of its Global Renewable Power Fund III following the collapse of two major investments. The asset management giant is deploying executives from its recently acquired Global Infrastructure Partners (GIP) division to address the fund’s underperformance.
In a letter to clients, GIP executives attributed the “significant markdowns” to the failure of two renewable energy firms, Northvolt and SolarZero, which triggered a broader review of the fund’s projected performance.
The fund’s net internal rate of return plummeted to negative 0.3% at the end of Q3, compared to 11.5% in the previous quarter. The Global Renewable Power Fund III had a final close of $4.8 billion in 2021. Its predecessor, Global Renewable Power Fund II, also saw a decline, with its rate of return falling to 4.7% from 6.9%.
“These revisions reflect updated market assumptions and business plans for portfolio companies,” wrote GIP President Raj Rao and partner Bruce MacLennan in the letter. Adjustments to discount rates and exit valuations were made to align with the current market outlook.
MacLennan will now lead the turnaround efforts, working alongside David Giordano, the original architect of the investments, and a team from BlackRock and GIP.
The Global Renewable Power Fund III, focused on renewable generation, EV charging, and power storage across the Americas, Europe, and Asia, has faced challenges. Many of its investments are early-stage climate infrastructure projects that are yet to generate positive cash flow and remain highly sensitive to market fluctuations.
Northvolt, a Swedish electric vehicle supplier, filed for bankruptcy last month, citing $5.84 billion in debt and $30 million in available cash. Similarly, New Zealand-based SolarZero entered liquidation due to unsustainable losses and liquidity issues.
Grant Thornton has been brought in to assist in valuing the fund’s investments. Each company in the portfolio will undergo a detailed review, with adjustments made as necessary.
“We recognise this news is disappointing,” wrote Rao and MacLennan, emphasising BlackRock’s commitment to maximising value despite the challenges.
