Power grid expansion to boost infrastructure groups -BlackRock

Wed Dec 12, 2012 8:45am EST

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* German strategy shift to trigger infrastructure spending

* Sees oil price in $90-120 range next year

By Christoph Steitz

FRANKFURT, Dec 12 (Reuters) - The need for power grid expansion will be a boon for infrastructure companies in the coming years, according to fund managers at BlackRock, the world's biggest money manager.

"We are very bullish on energy infrastructure," Alastair Bishop told Reuters. "The need for investments in the area of energy infrastructure will be one of the clearest themes in the next three years and beyond."

Bishop is a member of BlackRock's Natural Resources Equity team, which, among others, manages the BGF World Energy and BGF New Energy funds.

Rising investments for energy infrastructure have already attracted companies such as U.S.-based Quanta Services, which installs and maintains infrastructure for electric and gas utilities, one of the top holdings in the New Energy fund.

The New Energy fund -- a fifth of which is invested in stocks in the area of renewable energy and infrastructure -- also holds shares in power transmission firm ITC Holdings .

Billions of euros of investments are needed to build, expand and maintain existing power grids in the next decades, above all in Europe's top economy Germany, which last year decided to pull out of nuclear energy.

A study by Deutsche Energie Agentur (Dena) released on Tuesday suggested that up to 42.5 billion euros ($55.3 billion) of investment is required on distribution infrastructure until 2030.

To also benefit from companies active in the oil sector, BlackRock's $3-billion World Energy fund has put a heavy focus on exploration and production firms, with a strong overweight in this area compared to its benchmark, the MSCI World Energy NR .

The fund counts oil heavyweights Chevron Corp, Exxon Mobil and BP among its top holdings but manager Robin Batchelor said uncertainty over oil prices would continue to dominate the sector next year.

"There are many moving parts, for example Iran, where it is unclear how production will develop next year," Batchelor, who is also joint chief investment officer of BlackRock's Natural Resources Equity team, said.

Iran, one of the world's largest oil suppliers, on Wednesday said it would prefer OPEC adopt a much lower 28-million barrel-a-day oil output target but was happy for now to back an unchanged cartel target of 30 million bpd.

Due to ongoing uncertainty over supply and demand next year, Batchelor said he expects Brent crude oil prices to move in a range of $90-120 per barrel next year, compared with a current $109. ($1 = 0.7693 euros) (Editing by Keiron Henderson)

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