Blackstone and the Public Investment Fund (“PIF”) of Saudi Arabia announced the execution of a memorandum of understanding in relation to the launch of a new investment vehicle dedicated to infrastructure with an anchor $20 billion contribution by PIF. Blackstone anticipates that the program will have $40 billion in total equity commitments in a permanent capital vehicle, including $20 billion to be raised from other investors. The MOU is non-binding and the parties will continue their negotiation to agree definitive documentation.
Overall, through the equity in this vehicle and additional debt financing, Blackstone expects to invest in more than $100 billion of infrastructure projects, principally in the United States.
Across its investment strategies, infrastructure investing has been one of Blackstone’s most successful and active areas. The firm has invested in more than $40 billion of infrastructure-related projects globally over the last 15 years. This vehicle launches a new business for Blackstone with PIF as a strategic partner. This collaboration between PIF and Blackstone is the culmination of a year’s discussions between the two institutions, which began in May 2016.
H.E. Yasir Al Rumayyan, Managing Director of the Public Investment Fund of the Kingdom of Saudi Arabia, said: “The Public Investment Fund’s international investment strategy is built upon establishing strong global partnerships and identifying opportunities to maximize sustainable returns for the people of Saudi Arabia. We look forward to partnering with Blackstone, a recognized leader with a strong record of achievement across its extensive infrastructure projects. This potential investment reflects our positive views around the ambitious infrastructure initiatives being undertaken in the United States as announced by President Trump, and the strategic opportunity for the Public Investment Fund to achieve long-term returns given historical investment shortfalls.”
Blackstone’s new program will help the United States address its significant need for infrastructure improvement. United States infrastructure is graded D+ by the American Society of Civil Engineers (ASCE), and the deteriorated state of its infrastructure is estimated to cost each American family $3,400 per year. Independent estimates put the country’s infrastructure funding gap at up to $2 trillion, requiring significant domestic and international private sector investment. Infrastructure investment plans currently under consideration at the Federal level in the United States are expected to create as many as 15 million jobs, while also enhancing America’s economic growth, productivity, and global competitiveness.
Blackstone President Hamilton E. James said: “There is broad agreement that the United States urgently needs to invest in its rapidly aging infrastructure. This will create well-paying American jobs and will lay the foundation for stronger long-term economic growth. Blackstone has the talent, scale and experience to be an effective private sector partner in filling the massive infrastructure funding gap. We thank PIF for its strong endorsement of the United States and its vote of confidence in our country and Blackstone in making this investment.”
M. Klein and Company advised PIF on the creation of this strategic partnership with Blackstone.