BlackRock can keep big US utility stakes, regulator rules

By Ross Kerber

(Reuters) -U.S. energy regulators gave BlackRock (NYSE:BLK) renewed permission to own major stakes in public utility companies on Thursday, a win for the world’s top asset manager over politically-charged concerns that it wields too much influence.

The decision by the U.S. Federal Energy Regulatory Commission included a concurring opinion by Mark Christie, its Republican chairman. He wrote that while he holds concerns about BlackRock’s market power, public utilities need access to capital.

"It is a fact of economic life that public utilities regulated by the Commission must seek investment capital from wherever it is available, and much of it is now either owned or managed by huge asset managers," he wrote.

Technically the decision by the body known as FERC extends for three more years BlackRock’s permission to own up to 20% of the voting securities of any one U.S.-traded utility, higher than the traditional 10% baseline threshold. In addition, no single BlackRock fund can own more than 10% of a utility’s voting securities.

BlackRock has some $11.5 trillion under management. In a statement, BlackRock thanked FERC for the decision.

"At a time when energy affordability and reliability are especially important, we look forward to continuing to provide billions of dollars in capital for the American energy sector on behalf of our clients," BlackRock said.

The decision seemed in line with the wishes of utility trade groups and spares New York-based BlackRock from having to rejig utility index fund investments. But the application had drawn objections across the political spectrum.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads.

Republican state politicians and the conservative-leaning nonprofit Consumers’ Research had said BlackRock’s past participation in investor climate groups could violate its commitment to serve only as a passive investor.

Will Hild, the nonprofit’s executive director, called FERC’s decision disappointing.

"If the FERC members are going to flat out refuse to enforce the law, or even the conditions of their own agreements with asset managers like BlackRock, then President (Donald) Trump should remove the commissioners unwilling to follow their own policies," he said via email.

More liberal consumer groups, including nonprofit Public Citizen, also questioned the waiver. They argued, among other things, that BlackRock has become more of an active investor through deals like its $12.5 billion purchase of Global Infrastructure Partners.

Tyson Slocum, director of Public Citizen’s energy program, said FERC’s decision was based on politics and investment needs.

"What’s clear is that the Commission continues to have concerns, but that BlackRock is too big to mess with," Slocum said in a telephone interview.

Major utility and power trade groups did not immediately comment on Thursday.

In a related policy review last year, groups including the Edison Electric Institute and the Electric Power Supply Association said FERC did not need to change its ownership rules for big asset managers. "These policies have benefited the consuming public by removing unnecessary obstacles to investment," they wrote.

Should you invest $2,000 in BLK right now?

ProPicks AI are 6 model portfolios created by Investing.com which identify the best stocks for investors to buy now. The stocks that made the cut could produce monster returns in the coming years. Is BLK one of them?

Unlock ProPicks AI to find out