Dealmakers are buzzing with anticipation: 2025 is set to be a blockbuster year for mergers and acquisitions in the U.S. power industry. The driving force? A voracious appetite for assets as the sector braces to meet the colossal demand from data centers powering artificial intelligence. This isn’t just a blip on the radar; it’s a full-blown feeding frenzy, with record power demand and staggering projections for AI-driven electricity consumption making power generation and infrastructure assets hot property.
The first few months of the year have already seen a deal bonanza, with 27 U.S. power deals worth a combined $36.4 billion in January and February alone. This surge is unprecedented, eclipsing the first two months of almost every year in the past two decades. The highlight? Constellation Energy’s $16.4 billion acquisition of Calpine, a deal that sent Constellation’s shares soaring 25% on announcement day—a rare market applause for a buyer in a stock-funded deal.
This flurry of activity is in stark contrast to the broader M&A market, which has limped out of the gate amidst volatility and policy uncertainties. But the power sector is a different beast, turbocharged by President Donald Trump’s declaration of an energy emergency. The administration’s stance has electrified the market, calling the power sector build-out an immediate priority for national and economic security.
Opportunities abound, stretching across the power sector. “I don’t think we have ever been busier,” said Kathleen Lawler, managing director at KKR. The investment firm, along with Canadian pension fund PSP Investments, snapped up a 20% stake in American Electric Power’s transmission network for $2.8 billion in January. This deal is just a taste of what’s to come, as private equity firms, pension, and infrastructure funds sit on a mountain of dry powder—$334 billion at the end of 2024, according to Preqin.
The cash-rich environment is emboldening acquirers. Strong price increases have boosted power companies’ shares, enabling them to execute larger transactions or give up less equity in stock-fueled deals. Even with recent market dips, independent power producers like Vistra, Constellation, and NRG Energy are trading significantly higher than at the start of 2024.
But it’s not just about snapping up power generation assets. David Foley, global head of Blackstone Energy Transition Partners, sees opportunities in equipment manufacturing and companies servicing existing energy infrastructure. The year has already witnessed Altus Power, a major U.S. commercial-scale solar plant owner, agreeing to a $2.2 billion sale to TPG’s climate investment arm.
The reasons for going private vary. Smaller utilities might struggle to compete for data center contracts, but backing from large investment firms could level the playing field. Long-term institutional investors could also offer higher valuations than public markets, especially for renewable power companies hit by policy shifts.
Utilities are also offloading business units or stakes to fund massive power infrastructure expansions. Eversource Energy and National Grid have already announced significant divestments this year. The deal frenzy is even allowing buyout firms to exit profitably from smaller portfolios or individual power plants, which previously saw limited interest.
Yet, challenges loom. Market volatility makes existing assets more prized, but Trump’s economic agenda could make permitting easier while driving up costs with tariffs on critical materials like steel, aluminum, and potentially copper. Uncertainty around renewable project tax credits and immigration reform threatening labor supply add to the complexities.
BlackRock CEO Larry Fink highlighted the labor issue at the CERAWeek conference, noting the potential shortage of electricians as data centers expand. This human factor adds a layer of unpredictability to the sector’s growth trajectory.
As the power sector stands on the cusp of transformative growth, the M&A frenzy is set to reshape the market landscape. The surge in demand from AI-driven data centers is not just a trend; it’s a tectonic shift that will redefine how energy is generated, distributed, and consumed. The sector is bracing for a seismic wave of deals, driven by an insatiable hunger for power assets. This is more than just a deal-making spree; it’
