By David French, Isla Binnie and Mrinalika Roy
(Reuters) – Dealmakers expect 2025 to be a bumper year for mergers and acquisitions in the U.S. power industry, with a voracious appetite for assets as the sector gears up to meet massive demand growth from data centers for artificial intelligence.
Record power demand and dizzying projections for electricity consumption for AI have made power generation and infrastructure assets, and companies which own them, attractive to energy companies, private equity and other institutional investors.
The biggest growth in the sector in generations has already fueled a deal bonanza in the first months of the year, according to a dozen industry and financial sources who spoke to Reuters. The sources included several attendees at the annual CERAWeek energy conference in Houston.
In January and February, there were 27 U.S. power deals worth a combined $36.4 billion, headlined by Constellation Energy’s $16.4 billion acquisition of Calpine. This surpasses, both by value and volume, the first two months of every year barring one during the last 20 years, according to data from LSEG.
Busy power sector deal-making is in contrast to the overall market for M&A, which recorded its weakest start since the global financial crisis, amid market volatility and uncertainty over the Trump administration’s policies and what they mean for the economy.
U.S. President Donald Trump has declared an energy emergency to facilitate the build out in the power sector, calling it “an immediate and pressing priority for the protection of the United States’ national and economic security.”
Opportunities are significant and stretch across the power sector, said Kathleen Lawler, managing director at investment firm KKR.
“I don’t think we have ever been busier,” said Lawler.
KKR and Canadian pension fund PSP Investments agreed in January to buy a 20% stake in some of American Electric Power’s transmission network for $2.8 billion.
DEMAND
Strong price increases have boosted power companies’ shares, meaning they can do bigger transactions or give up less of the company to clinch a stock-fueled deal. Even with stock market falls in recent days, independent power producers Vistra, Constellation and NRG Energy are trading between 82% and 220% higher than the start of 2024.
Potential acquirers may be emboldened too by the reaction of Constellation investors to the Calpine deal. Constellation’s share price rallied 25% on the day of the announcement – when typically buyers trade lower when announcing a large deal funded by the issuance of shares to the seller. That is because the share issuance dilutes existing shareholder positions.