New investments in infrastructure by private asset managers are changing the way the world finances its cities, power systems, and transportation links.
The deal was inked in 2007, and at the time it garnered little attention. The New York–based private equity firm Blackstone Group Holdings had cobbled together a group of financiers to put up US$120 million for a two-thirds stake in a dam on the White Nile in Uganda.
Any way you looked at it, the move was risky. The hydroelectric project had kicked off more than a decade earlier and had languished ever since. Progress had been hindered by construction delays, cost overruns, corruption, and even pirate attacks. Nonetheless, Blackstone decided to take a chance. It hammered out a deal that would provide the firm with a cash annuity from energy fees in a country badly in need of electric power. When Blackstone signed the agreement, only 10 percent of Uganda’s population had electricity.
The investment made a difference — especially because of the expertise and oversight that Blackstone added. In 2013, the 100-foot dam was completed, and it now supplies half of the Ugandan population with electricity. Blackstone may sell the asset in a few years, in keeping with its usual short-term approach to buying businesses. Or it may hold on to it and enjoy the reliable and plentiful cash flow, which is hard to come by in the global low-interest-rate environment. Either way, Blackstone’s success with the Ugandan dam represents an investment trend that is changing the way infrastructure projects are planned and funded.
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