Blackstone's Rob Horn discusses private credit in infrastructure

Welcome to Crossroads, the Infrastructure Podcast. This is your host, Andrew Vittelli, Senior Editor of Energy in the Americas for Infralogic. Today we are recording live from Blackstones offices in Manhattan, where I am joined by Rob Horn, Blackstones Global Head of Infrastructure, and Asset Based Credit. Rob, thank you for coming out to the podcast. Andrew, pleasure to be here. So Rob, to start, can you tell our listeners a little bit about Blackstones' infrastructure and credit practice? Sure. So Blackstones' infrastructure and asset based credit business manages over 100 billion of capital. We have over 80 people on our team, and we really cover the entirety of the real assets credit markets. So we invest in infrastructure, in residential real estate, in equipment finance, things like aviation. We even provide fund financing for other infrastructure funds and GPs. And we cover really the entirety of the credit capital structure. So we're active in investment grade capital, as well as non-investment grade capital. We manage the largest energy transition and infrastructure private credit fund in the world. And this base allows us to provide comprehensive solutions to infrastructure companies. And we're doing transactions anywhere from $100 million to over $10 billion. Well, very interesting, and Rob, I know you've spent pretty much your whole career, most of your career, at Blackstone, but I'm curious, what brought you to this sector? What made you pursue a career in infrastructure credit? So I started in the infrastructure markets in 2003. I joined Credit Suisse in their Power and Utilities Group. And if you think about what was going on around 2003, this was really the start of private credit as an institutional asset class, and really the start of infrastructure private equity as an institutional asset class. So really interesting time to get started in the business. And this time there was a lot of distress in the Power and Utilities market. You had Enron, had just gone bankrupt. You had a lot of bankruptcies across the energy markets in the U.S. because companies had taken on debt to build gas-fired power across the market. So as a young analyst, I worked on high yield and distress financing, mostly in the energy sector, and my stint at Credit Suisse in hindsight was actually quite short. I joined Blackstone in 2005, and have been here ever since growing our real assets credit activities. Well, very interesting. Thank you for that, Rob. Now, you talked about how, when you started your career, it was sort of the beginning of infrastructure credit, of private credit. And I do want to dive into the various sectors and narratives there, but one common theme across infrastructure, across energy and across sectors has been the rise of private credit. And obviously, you have had, and your firm has had a firsthand view of that. So what is driving that story? Why has private credit had such a dramatic rise in recent years? So some background there, if you look at the private credit markets today, it's about a $2 trillion market. But today, that is mostly corporate, and actually mostly financing buyouts. And you have this great big need for capital across the real economy, especially in the infrastructure markets. So there's several themes that are driving a need for capital in the infrastructure markets and credit capital in those markets. So if you look, for example, at digital, we all expect $7 trillion a capital needed over the next 10 years. In energy, we foresee a 40% growth in electricity in the next 10 years. And that's driving utility budgets, it's driving gas budgets, it's driving renewable budgets. You also have traditional capital sources like the banks increasingly very constrained. And they themselves are looking for solutions. So if you look at the public markets, they're very good at providing effectively liquid debt and equity, usually with several intermediaries in a very standardized format. What we're doing is we are going right up to the borrower, what we call our farm to table, business model, we're providing customized solutions. And particularly in infrastructure, we can fund large CAPEX programs, we can do that on a delayed raw basis. As I mentioned, we can provide that capital, both investment grade and non-investment grade. And we provide speed and certainty that the public markets are not able to provide. So you've seen us be incredibly active across the infrastructure markets. In the last 12 months, just for example, three transactions, we did deals with EQT, the largest natural gas company in the US, with Rogers, the largest wireless business in Canada, and with Sempra. That was 15 billion of capital just across those three businesses, just to give you a sense for the scale of the capital need. So we talked about the story around AI, the need for data. And that's been one of the drivers of activity across infrastructure the last, especially the last two to three years. The amount of money that is going into data centers and the build out of data centers that's needed for AI is pretty staggering. What's your view on how this build out is going to continue and what role Blackstone's going to play and the private credit market in general is going to play in that build out? So I think you set the table the right way. You've had more data created since 2022 than we've had in all of history. And that's only accelerating with what we're seeing with artificial intelligence. We expect just in the data center markets, a trillion of debt needed in the next five years to fund that build out. And that is really just the beginning, because if you look at a data center, that is really just the building. It's just the shell. We expect three to four times that amount in capital needed for the equipment and the compute in the data center. And we are active across, if you think about the unique nature of those needs, you really need private solutions to fund that holistically. At Blackstone, we are active across the life cycle there. We are active in providing construction financings for data centers. We're active in the warehouse phase. We're active in providing term financing, as well as in buying loans from banks, to give some tangible examples that have been announced publicly. We've done over a billion of financing for aligned data centers. In the GPU space, we did the first GPU financing that we're aware of. For CoreWeve, we've done close to 10 billion of financings for CoreWeve in the GPU space. We've done warehouse facilities for most of the biggest data center developers. And we've been active partnering with banks, so we publicly announced a billion dollar partnership with Santander, where we partnered with them with respect to loans on their balance sheet and a big chunk of those who are loans in the digital infrastructure sectors. And when you look forward at data centers, I think there's a little bit of a divergent view within the market. Is it going to keep this exponential growth? Is it going to keep up? Or are we going to see a leveling out? I mean, do you have a view there? What are your expectations? We are expecting to see continued growth. And for context, Blackstone is also an owner and operator of data centers through QTS. So we see all of the leasing activity. We continue to see very significant activity from the hyperscalers. Those hyperscalers have announced about 400 billion of CAPEX per year over the next several years, so we continue to see an acceleration. And if you think about trends around artificial intelligence, when you have a market that has 50 trillion of annual labor spend and AI making that labor spend more efficient, there are a lot of reasons for these companies to continue to invest in the infrastructure needed that's powering this theme. Well, one thing we've realized since at least the last two or three years is that you can't talk about data data centers without also talking about energy. The two are so tied in, and really when you talk about the AI data center picture, it's possible that the constraint might not be capital, might be the energy to power it. And I think that's the rise of AI, the understanding that there's going to be a much greater power demand moving forward, has really reshuffled what people are expecting from the energy sector in terms of the energy mix, in terms of the role of traditional energy and where renewables fits in. So I'd imagine that's been a major theme for you, for your firm as well. Where's the power going to come from to power those data centers? Absolutely. And we're very focused on this theme of the intersection between digital and energy. And I mentioned earlier this 40% growth in electric demand over the next 10 years. What's especially interesting about that is that that estimate has actually been revised higher twice in the last six months. So we continue to see this push on energy demand. And simply put, there's really two practical ways to provide that power. It's gas power and it's renewables. Those are your two choices. In renewables, we've seen a lot of news in the past year about changes in removing the subsidies in the U.S., we still continue to see that renewables will not slow down. First, we expect those renewable subsidies largely to stay in the system through 2030, through safe harboring and other means. And you're seeing the impact of continued growth in that sector. So 70% of capacity additions in the power sector in the first half of 2025 were renewable. You've seen nearly 300 billion of CAPEX in the last 12 months in renewables. So renewables today is 25% of supply. We expect that to increase to 45% of supply by 2030. And that's because it is competitive on cost with gas, even without subsidies. Inside that, we expect to see continued growth in battery capacity, so probably a five times increase in batteries to help effectively turn those renewables into more of a base load resource. While sticking on the theme of renewables, how has your approach changed in the last 12 months or so since it's become clear that there was going to be a less supportive administration, less supportive policy environment. And since those changes were put in effect, mostly through the one big beautiful bill that was signed over the summer. Our approach has actually stayed quite consistent, even as the market around us has changed a lot. We've always endeavored to minimize the regulatory risk in our investment activities and really focused on investing in high quality assets. If you look at the assets that we're financing in renewables, they tend to benefit from very long-term contracts. They tend to have very high margins because solar and wind don't have very significant variable cost. But we have continued to be very, very active and the need for our capital has continued to accelerate. So the areas where we are particularly active are, we actually provide tax credit capital into the market through our network of corporates and insurance company clients. And we're very active in providing capital at the asset level, and I would say the need for that capital has become even more urgent as companies are really focused on building and getting their assets online while they have the certainty of the regulatory environment that they're building into. And then the other side of that story has been traditional power, natural gas, gas fire generation. And I think that's a little bit of a reverse of that. If you go back a few years ago, there seemed to be a big focus on ESG, on clean energy, and there seemed to be an expectation that we were moving towards an environment where we're traditional, natural gas fired, non-renewable assets were going to become undesirable for investors. Where there was really, everybody was trying to pivot towards what's green, decarbonization. And I think there's been a little bit of a rollback. There's certainly been a little bit of a rollback, I guess the question is how much. And I think it started before Trump's election, honestly. I think it started really with the, when it became clear that data centers were going to need a lot more power and the idea that we were going to just start retiring while the traditional power assets became unfeasible. I'm curious how you think that has affected the market and how it's affected your approach in general. Yeah, it's really interesting to think about. I talked about earlier in my career where you had this major build out of gas fired power in the US, call it about 20 years ago. And when that was happening, a big driver was because it actually had half the emissions of coal. That was the ESG build out at that time. But if you look today, natural gas fired power is 40% of our electric supply and growing. And I think we've always felt that you do need a balanced energy system. Solar and wind have fantastic benefits, but they are intermittent. And gas brings that base load power to the market. So we have indeed seen this resurgence in demand for natural gas. And I think that is also creating a bit of a backup in our system. So the lead time to get a new gas turbine today is four to five years. The cost of a new gas turbine power plant is $2,500 a kilowatt. That's up two and a half times from five years ago. So we do see that as an attractive place for investment and very much an asset that's needed in this market to provide a stable and balanced energy system. It's interesting when you look at how the AI and greater power demand story has impacted renewables over the years. I mean, if you rewind a year or two ago when that narrative started taking hold, it was, well, what's this going to do to talk about decarbonization? On the one hand, there's a need for more power. And we are power. On the other hand, it makes the idea of getting to net zero much less feasible. Now with the policy shift away from support for renewables, the fact that there's a rising demand for power and the renewable sector seems to be the only option to meet that power in the near term, that's in some ways the saving grace for the industry. I think absolutely, and if you look at bringing on near term power, you can still bring on a solar project in 12 to 18 months. And you compare that to five years for a gas-fired power project. I think that's one of the major reasons you will continue to see significant growth in the renewable markets. So last week, I was in Lake Charles, Louisiana, for a conference on the LNG industry. When you talk about some of the massive dollar figures associated with data centers, LNG facilities are right up there also. We have a current wave of projects that's reached FID, approaching FID, that seem pretty likely to go forward. I'm curious what you think is going to happen both with this wave and with the next wave of LNG projects and how Blackstone is approaching the LNG market. Because I know your firm was one of the first actors in this space. Absolutely. So we financed Chenier, actually, when they were building their import facility. Now that was close to 20 years ago, and we did finance the first export facility in the United States with Sabine Pass at Chenier as well. And the US is a very constructive market for LNG. So we have a very large natural gas resource. We have a relatively stable permitting regime, particularly under the Trump administration. And so these assets are a key source of energy security across the market. I mentioned our earlier investments in the LNG markets, but we have continued. So we own a 49% stake in Elba Island in Georgia. That asset has been critical in providing natural gas to Europe. We provided construction financing to Rio Grande, LNG. And very recently announced an $8 billion investment to fund 50% interest in Port Arthur II. That's being built in Port Arthur, Texas. In the Chenier stories, really remarkable. That was a facility that was originally being built to be an importer. And over the time of construction, it became the natural gas revolution took place. And it became clear that we didn't really need another importer facility. We need to export. And it was converted into an export facility. A few years ago, I did a profile. If you're an infrologic subscriber, you can find that on our website. Another theme that we've seen the last few years has been what I'd say is the rise of parts of the capital stack that aren't clearly debt and aren't clearly equities. I've heard solutions, preferred equity and the like. I'm curious what you see as driving that trend towards these types of investment. And where Blackstone credit fits into that? Well, this is an area that we have been active in, in Blackstone credit since our inception 20 years ago. If you think about some of the challenges with the typical tools for capital raising in the market, if you are raising equity, you need to discuss valuation. You need to agree on valuation. The seller needs to get their arms around delusion. If you're raising regular debt, you might have rating agency pressures on the ability to do that. And so a hybrid solution can also be quite constructive in bridging those gaps. We are seeing public companies be particularly active with these solutions, so I mentioned earlier, our investments with EQT, Rogers and Sempra. These were preferred equity investments that effectively had a fixed income return. And for them, it provided large-scale capital without deluding their equity base. We're also seeing private companies be particularly active here, as interest rates arose over the last several years and valuations came under pressure. People were more reluctant to just sell assets or sell equity, and these hybrid solutions helped them continue to fund important growth projects that they had. I think that's a trend where it'll be interesting to see what happens moving forward with that also. Now we talked about the policy changes in the context of the shift from support for renewables, from the changes with the OB-3. But obviously, we are in many ways in a very different policy environment. You think about tariffs, you think about overall changes to federal policy. What are some of the main things, I guess, that either present you with opportunities or keep you up at night when it comes to the changes we've seen or the changes that are coming down the pike relating to policy? So we think that investing in infrastructure is a phenomenal place to invest in this kind of market environment. If you think about some of the issues that come to play with policy, whether it's tariffs, whether it's labor costs, there's no better place to invest than an in place infrastructure asset with a contract, oftentimes with an inflation escalator that's generating current income. It's a really stable, down-side protected place to invest. The area that we do focus on is we are building a lot of new assets and so often we need to focus on the supply chains and make sure the equipment can get to the site and the assets can get built. But once that happens, you have a long-term asset that's very durable and very safe for investors. So we're recording this, it's Q4 of 2025, year end is within site. We still have some time to go, but year end is within site. I want to look forward to 2026 for a minute. What do you think some of the major themes, stories, asset classes are going to be that we're not talking about enough yet today? So one major theme is around what we're seeing with the commercial banks. So the infrastructure markets predominantly have relied on the commercial banks for funding in the last several years. The commercial banks have over 90% market share. The commercial banks are getting quite full. It's very difficult to do hundreds of billions of dollars of data center finance every year. So this theme of how the commercial banks are going to interact with the rest of the markets to make sure that there is capital available to continue to fund infrastructure projects. And we are partnering with banks all the time in forming partnerships to buy their loans or to jointly finance companies together. So I think this constraint on the banks and the capital relief that they need and continuing to have capital flowing to the infrastructure markets is a major theme. Now how do you find synergies, how do you work with commercial banks rather than it being a one or the other type situation? So we view that our relationship with the banks are really a win-win synergistic relationship. In this context, the banks have done significant lending. As I mentioned, they really are the leaders in the market and infrastructure lending. But at a point, their balance sheets get full. And effectively, we partner with them to continue to keep money flowing to their clients in a way that's very consistent with how they've been doing. And in a way that's conducive to them continuing to grow their business. And are there any other trends for 2026 that we should be talking about, both in the world of credit and in the world of energy and infrastructure? Absolutely. I think as this spend in energy and digital continues, I think you're going to see a wide range of public companies in the sector that actually have access to the public markets, but choose to access private capital because of the limits in the public markets. So think about utilities whose budgets have just increased very significantly. They're expected to have a trillion dollars of cat-backs over the next five years. We talked about all the hyperscalers and the big capital needs that they have. I think we will see these public companies, these high-quality investment grade companies continuing to want to access private markets for their capital needs. So when companies are going to the private markets, is it more of a sense of going with what's available or is there a preference? Is it about finding the right fit? I'm curious, what are situations in which a company would need to go to the private markets for a solution that the public markets just might not be well suited for? So if you think about the public markets, you're really issuing corporate debt and equity, long-term corporate debt and equity. So the equity can be dilutive. The debt can put pressure on your balance sheet and on your rating. If you look at the private markets, we're able to fund very large capital programs. We're able to do it in different formats. We talked earlier about hybrid formats. And so we're able to do it on a non-delutive basis. We're able to do it in a way that doesn't pressure your credit. And importantly, we're able to do it in a way that can be repurchased in the future. So we don't need to be a permanent part of your capital structure. You can fund your growth project, get the asset online, and then we give you the ability to repay us in the future. And so companies don't need to sell assets or be diluted forever. They really can effectively rent our balance sheet. So Rob, you mentioned earlier in this conversation that the three biggest deals in Blackstone Credit History have been reached in the last 10 months in 2025. Looking forward to 2026, are the deals just going to get bigger? I expect they will continue to get bigger. If you look at what is happening in the data center space, the needs continue to get larger, the data centers continue to get larger, the compute that's going in to the data centers continues to get more and more capital intensive. And we're seeing greater acceptance of the private markets as a great solution for large companies. So I think with this growing capital need, with the increasing prevalence of private capital providers, I think we will continue to see larger and larger transactions. And Blackstone is one of few firms in the world that can complete a transaction that's over $10 billion as a single counterpart. Well Rob, thank you so much for joining the Crossroads podcast today. Thank you Andrew, it was a real pleasure to be here. And thank you listeners for tuning into Crossroads. If you enjoyed this podcast, please make sure to subscribe on your favorite podcast player and please give us a five star rating so others can find our podcast. Until next time, this has been Crossroads. [MUSIC]