Why BlackRock Wants to Buy Your Power Company
Utility costs are soaring from the AI boom — and asset managers want to cash in.
By Brock Hrehor, More Perfect Union
On everything from housing and education, to gas pipelines, asset managers and private equity firms have been snapping up essential infrastructure at an alarming pace. And now, they could be coming for your utility company.
BlackRock, the world’s largest asset manager, is trying to acquire Minnesota Power, a regional utility company that provides power to approximately 150,000 people in the state. If it succeeds, critics warn, there could be far-reaching consequences for the community, potentially driving up already-soaring utility costs and throwing a wrench in state decarbonization goals.
“There’s no requirement that they pursue this clean energy vision that the current executives in Minnesota Power have laid out,” Minnesota State Senator Jen McEwen told More Perfect Union. “We’re going into this sale on promises without any teeth in the guarantee that it’ll actually be carried forward.”
Just over a year ago, More Perfect Union released an investigation that dug into how BlackRock and other major asset managers have wormed their way into nearly every facet of Americans’ economic lives. Twelve days after the video’s release, BlackRock acquired Global Infrastructure Partners (GIP), an infrastructure investment firm that acquires stakes in water and waste systems, transportation, and airports.
Now, in a bid to increase their acquisition of so-called “real assets,” GIP is making a foray into the utility market, with its first target the Midwest. In a proposed $6.2 billion deal in conjunction with the Canada Pension Plan Investment Board, GIP is attempting to buy the investment firm Allete, which owns Minnesota Power.
Under Minnesota law, utilities are considered a regulated monopoly. In order for the deal to go through, final approval would have to come from the state’s five-member Public Utilities Commission before there’s any transfer of ownership, making the acquisition of power companies a bit more difficult than other deals that private equity firms and asset managers have struck. But some experts have argued that the monopolistic nature of the industry makes it an attractive option for investors seeking to cash in.
“One of the biggest incentives financially for potentially taking over a utility is the fact that utilities in regulated states such as Minnesota have a captive rate base. They have captive customers,” Alissa Jean Schafer, climate director of the Private Equity Stakeholder Project, told More Perfect Union. “Having a group of customers that have nowhere else to turn for access to electricity, that is a very attractive financial proposition.”
This isn’t just speculation. There are several examples of utility rate hikes after power companies are acquired by asset managers, which can often lead to rate hikes and layoffs. After Michigan’s Upper Peninsula Power Company was acquired by a private equity firm in 2014, residents experienced multiple rate hikes.
“The sales pitch [of the takeover] sounds pretty similar to the sales pitch that BlackRock is making to Minnesota Power, specifically, the private equity firm is promising to give capital to the utility so that the utility can do what it wants to do,” Schafer said. “But what happened with UPPCO is after the private equity firm took it over, shortly thereafter, they raised the bills. Since 2014, UPPCO being owned by private equity has seen four bill hikes.”
If the deal goes through, it could set a precedent for the future acquisition of public goods by massive firms like BlackRock. For a deeper look into this attempted acquisition and the local efforts trying to stop it, watch the video below.
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If you live in Minnesota, you can take action by emailing the Minnesota PUC about the BlackRock takeover at consumer.puc@state.mn.us and learn more about the problem of private equity at pestakeholder.org/energy.
For actions from the general public, contact Governor Walz by submitting a comment via this form: https://mn.gov/governor/connect/conta or calling his office at 651-201-3400 with a simple message: Don’t let this deal get approved by the MN PUC.
Reporting by Gabriella Spielberg and Sean Morrow. See below for a full transcript of the video:
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GABRIELLA SPIELBERG, MPU: This power plant is at the center of a battle between finance giants and the American people over who controls the basic necessities of everyday life. Almost exactly a year ago, we made a video about BlackRock, and remember how last time I was like, ‘calm down, guys, they don’t own the whole world. It depends on how you define ‘own,’ blah, blah, blah.’ Well, okay, that video was about how they invest in stocks. But what if I told you there’s a whole other side to this story, where they’re getting a lot closer to controlling some of the most critical parts of our everyday lives.
GABRIELLA: Just 12 days after we released that video, BlackRock acquired global infrastructure partners, and since that deal, they’ve been a lot more involved in infrastructure. You might have heard stuff like how they bought the Panama Canal, but now there’s another deal you might not have heard about. They’re trying to buy Minnesota Power, a company that owns this power plant and provides power to 150,000 people. This is a type of investment in what they like to call ‘real assets,’ which is finance code for literally anything tangible, basically everything we need to survive, like housing infrastructure and the land those things are built on. This is a test case for companies like BlackRock expanding into industries that we use every day, things like water, hospitals and electricity. And if they haven’t already, they could be coming to your town soon. So why is BlackRock trying to change course, and what will it mean if they succeed?
BOB TAMMEN: Last summer, I scattered my wife’s ashes on the South Kawishiwi river. I don’t want BlackRock to own it.
GABRIELLA: So, BlackRock bought Global Infrastructure Partners, which is a big investment fund that itself buys up things like water and waste systems, transportation companies and even large shares of entire airports. If you’ve flown in or out of London, congratulations. You’re probably a customer of GIP.
GABRIELLA: So BlackRock owns Global Infrastructure Partners, which is trying to buy Allete, which owns Minnesota Power, which owns infrastructure like power plants, dams and the land they’re on. But since people need power, it’s not that easy, even for BlackRock, and there’s a somewhat democratic process involved. This is state senator Jen McEwen, who represents many of the people who would be affected by the buyout.
JEN MCEWEN, MINNESOTA STATE SENATOR: Wisely and correctly, we have a public utilities commission, at the very least, to try to provide some regulatory oversight for these entities that have this monopoly over providing this essential service.
GABRIELLA: Usually, when private equity and asset managers buy stuff, they just do it behind closed doors, but because people would literally die without power, it’s considered a critical service, and therefore a regulated monopoly under Minnesota law.
GARNER MOFFAT, CITY COUNCIL MEMBER, Superior, WI: BlackRock doesn’t necessarily have the same amount of reporting responsibilities as a publicly traded corporation. We’ve had a lack of transparency already regarding our rates and the quality of services in our community in Superior.
GARNER: That ability to access that data would be decreased by the purchase, which would be a huge problem.
GABRIELLA: The community has made it clear that they oppose the deal, and a judge has already recommended against it. But it doesn’t end there. The final approval is going to come from the Public Utility Commission, a board made up of just five people appointed by the Governor. This could have huge implications for anyone who uses basic utilities like electricity or water, i.e. the things that keep us from freezing to death in the woods, because if they realize it’s profitable, nothing will stop them.
GABRIELLA, Duluth, Minnesota: I didn’t want to just sit around at my desk, so I came out here to Duluth to talk to some community members and leaders and hear what they had to say about the buyout. I went on a hike with longtime Minnesota Power employee and customer, Bob Tammen.
BOB: I should have asked if you want a walking stick. I got an extra walking stick. At your age, you don’t need a walking stick.
BOB: So I helped install the power lines that haul electricity from this powerhouse to my kitchen. This dam, the land we’re standing on right here, it’ll all go to the control of BlackRock.
GABRIELLA: Bob took us on a hike in the Boundary Waters to see some of the infrastructure that would be sold. He’s been canoeing out here for decades. But power plants, lines and dams aren’t all the GIP, and by extension, BlackRock, would get in the deal.
BOB: What concerns me about BlackRock purchasing Minnesota Power is that Minnesota Power owns a large amount of land where we’re parked right now. They own a lot of real estate. Some of that real estate has minerals. So if BlackRock acquires ownership of those minerals, will they develop those minerals for the long term benefit of northern Minnesota, or will they develop those minerals for the short term profit of BlackRock?
GABRIELLA: Back in Duluth, people were pretty concerned about their communities and bills.
HUDSON KINGSTON, Legal Director, CURE MN: We depend on Minnesota Power, for our regional economy, for our heat, for transportation, and indeed, for our clean water. We need this company to continue to make long term investments in our community. But that’s not what this acquisition is about. This acquisition is about maximizing short term profit.
JEN: There’s a whole host of decisions that they’re going to be making, and those decisions will no longer necessarily be just motivated by the board of directors working on behalf of the shareholders for Minnesota Power, a broad portfolio of people. It will just be these two private equity companies.
JEN: If the Minnesota PUC does a good job, and is able to hold down rate increases, the only outcome that I can imagine is that these two owners will say, well, we’re not making as much money as we thought we were going to make from this thing, and they’re going to sell it. And then who do they sell it to?
GABRIELLA: And this kind of thing has happened before in the Upper Peninsula of Michigan, with a power company called UPPCO. This is Alissa Jean Schafer, the director of climate and energy at the Private Equity Stakeholder Project.
ALISSA JEAN SCHAFER, Dir. of Climate and Energy at Private Equity Stakeholder Project: If we look at Northern Michigan, there’s a utility called the Upper Peninsula Power Company, or UPPCO. This was acquired by a private equity firm in 2014.
NEWS CLIP: UPPCO Customers have seen a spike in their rates many say they can’t afford.
ALISSA: After the private equity firm took it over, shortly thereafter, they raised the bills. A couple years later, bills went up again, then that private equity firm sold it to a different private equity firm. Once the new private equity owners were in control, they raised bills again. Since 2014, UPPCO, being owned by private equity, has seen four bill hikes.
GABRIELLA: There’s nothing stopping BlackRock from doing the same thing in Minnesota. And in addition to bill hikes, it could even trample existing laws.
NEWS CLIP: Well today, Governor Walz signed a bill that requires utility companies to provide 100% carbon free electricity by 2040.
GABRIELLA: But after the deal goes through, we don’t know if BlackRock will follow those laws. Their size and capital imbue them with the power to basically ignore this kind of thing. To them, the fees are chump change. And who do you think is more powerful? The Minnesota State legislature or BlackRock?
JEN: There’s no requirement that they pursue this clean energy vision. We’re going into the sale on promises.
GABRIELLA: But remember, BlackRock isn’t directly purchasing Minnesota Power. Global Infrastructure Partners is purchasing its parent company, Allete, which also owns Superior Water, Light and Power just over the border in Wisconsin.
GARNER: So we’ve been looking at double digit rate increases every two years, and our rates are already some of the highest in the entire state, and that’s not a coincidence.
GABRIELLA: So let’s zoom out for a minute. If you saw my last video about BlackRock, you know that they don’t really own everything, they just have a small percentage of ownership in everything, specifically publicly listed companies that you could buy shares of too. But this buyout shows a general shift in strategy. They’re looking to fully own or majority-own entire infrastructure systems by taking those companies off the public stock market altogether. And while BlackRock’s just been dipping their toes into real assets, and it’s still a relatively small slice of their giant portfolio, there have been some big players in this game for a while now.
GABRIELLA: Brookfield is the biggest owner of real assets, and real assets are the bread and butter of BlackRock’s doppelgänger, Blackstone. Even though Blackstone is overall smaller, they’re actually much more efficient at generating returns for their investors. So of course, BlackRock is now looking for their piece of the pie. Here are the totally not frightening categories of things these asset managers are trying to get as much control of and profit out of as possible: Water, farmland, housing, transportation, schools and hospitals and energy and telecommunications, including data centers. So that makes the list really all the things I, for one, wouldn’t last very long without. I don’t know about you, but I personally love food, housing, electricity and water, and want affordable access to it. Check out this house. It has lines bringing in electricity and phone and internet. It has pipes bringing water in and out. Roads bring in food and tenants pay rent. BlackRock wants a cut of all of those things.
ALISSA: In addition to potentially raising customers’ bills, they might be looking for ways to cut costs. This could look like a reduction in the job force, it could look at, like, reduction in operation and maintenance.
PROTESTOR: If you don’t have enough people to do a job, you know, you’re going to get people hurt.
GABRIELLA: And the Minnesota Power case is just one point on the map. If we zoom out, there’s a larger cycle we’re already in. Here’s the playbook. Asset managers buy the thing, often using debt, massive loans they get just because they’re already rich. Then they run the thing as cheaply as possible for a few years, and finally sell it, often to another asset manager or private equity firm, and ideally at a large profit. This is super profitable for guys like Larry Fink, but not so much for anyone who relies on the thing they bought. And there’s a reason necessities like apartment buildings, water and parking are all at the heart of this. They’re things where even if you maybe kind of have a choice to use a different provider, it’s logistically pretty hard or downright impossible. For BlackRock, that’s basically free money.
ALISSA: Utilities in regulated states such as Minnesota have a captive rate base. They have captive customers. Having a group of customers that have nowhere else to turn for access to electricity, that is a very attractive financial proposition.
GABRIELLA: So how exactly do these deals work? They bank on you not understanding, so let’s try to understand. Usually, they’ll set up an investment fund and give it a snazzy name like ‘BlackRock Global infrastructure Fund Four,’ and then they’ll get a bunch of big companies to sign on to invest with them. The asset manager itself will invest a little bit too, just to show everyone else they have some skin in the game, but usually only between one and 5 percent. And then the investment fund, this thing they just made up, like a group project for supervillains, goes and buys the thing. Investing is always about risk, but BlackRock’s risk to itself is minimized, because when they take out loans, they borrow against the company they’re buying, not themselves.
GABRIELLA: That’s like if I bought a Honda Civic on a loan, and then the car was in debt instead of me. And when that’s a public utility, it’s the customers, or taxpayers, even, paying off that debt for them. This means you’re not just paying for power or water or whatever. You’re also paying off an asset manager’s loan from a bank, which, if they default on, will sink the company they’re buying, but not the asset manager that took out the loan in the first place.
GABRIELLA: Isn’t it so cool how if you or I default on our student loans or medical debt, it can ruin our lives, but if bestie Larry, I don’t know, flubs an airport and can’t pay back $700 million dollars, the captain just gets to walk away from the ship? Love that for us.
GABRIELLA: Now apply this to housing and roads and tolls and everything. When this happens on a huge scale, what that means is that none of these companies exist to serve customers, they exist to maintain stuff that asset managers then own and rent back to us, and often, all these resources are intertwined. One reason BlackRock wants more control over energy is something we’ve all been hearing a lot about lately, America’s favorite rainbow copyright infringement machine. We’re in the midst of an arms race for who can own the most data center infrastructure, and never put it past BlackRock to try to get their pound of flesh. And if this isn’t already a problem in your area, buckle up.
ALISSA: It appears that BlackRock is moving very aggressively to insert themselves at just about every angle of the supply chain when it comes to AI and data centers, and that includes everything from the data center development itself, to the computer software, computer hardware, and now with this move into local utility companies, possibly even the power company that would be powering those data centers.
GABRIELLA: You don’t need to take Alissa Jean’s word for it. Here’s BlackRock’s own Larry Fink.
BRIAN SULLIVAN, CNBC Interview: We need energy, but we also need the last mile. We need a power line that goes from the energy source to the energy user. There’s only so much BlackRock can do about that.
LARRY FINK, CNBC Interview: This is really important to unlock, and if we can’t unlock that, we’re not going to grow. If we’re not going to unlock this, it’s going to be harder and harder to build out these AI data centers.
JEN: It just creates a lot more burden on our state. Are we going to have to have the fight at the state level to try to take on these private equity, trillion dollar investors who own more than the state of Minnesota?
GABRIELLA: So to come back to the literally eternal question, does BlackRock own your life? Kinda. They certainly want to. And this mode of ownership provides them way more direct control and profit than stock portfolios do. It also gives them a much more direct relationship with you and your bank account. Just because your bill doesn’t say BlackRock power, doesn’t mean they don’t get your money.
GARNER: The Public Works Committee over there has approved a contract to work with a consultant to help us look at the feasibility of purchasing our utility assets from superior water, light and power.
JEN: I’d like to see us moving in the direction of having more ownership distributed amongst the community, but what we’re moving toward is even more corporate consolidation, even more toward a monopoly model, even more toward a model where the control over this essential service is separated from our community, and the decisions that are made about it are going to be out of our hands.
GABRIELLA: But it doesn’t have to be this way. And everybody I spoke to seemed to want pretty much the same thing. In Wisconsin, they’re even trying to buy their power company back to get out of this BlackRock situation so that they won’t have to go through this kind of thing again.
BOB: We should remember that even though we might live a long way apart, we’re still all neighbors. Our grid is all connected together. We have a little powerhouse here. It’s connected into the grid that goes all over the United States, and generally, if people are good neighbors, everybody is careful that they don’t take more power than the grid can handle. The system works. I think we should all be good neighbors. We should have local control, local communication, and be neighbors on a national level.
GABRIELLA: The final hearing for the buyout is on September 25 and the actual decision is set to be made on October 3. So if you live in Minnesota or Wisconsin, now’s a great time to talk to your representatives and go to those meetings.
GABRIELLA: Thank you to the advocacy groups working on this issue: Cure, Sierra Club, private equity stakeholder project, and the Citizen’s Utility Board. And thank you for watching, and don’t forget to like and subscribe and send us your story ideas at stories@perfectunion.us.