Experts predict 2025 will be a boom year for mergers and acquisitions (M&A) in the US energy industry.
Experts predict 2025 will be a boom year for mergers and acquisitions (M&A) in the US energy industry, as demand for asset acquisitions increases as well as meeting electricity needs for data centers serving artificial intelligence (AI).
Great opportunities in the energy industry
Record electricity demand coupled with forecasts of rapid growth in electricity consumption for AI have made power generation infrastructure and the companies that own them attractive to energy corporations, private equity funds, and other institutional investors.
The strongest growth in generations has fueled a wave of trading activity in the first months of this year, according to multiple sources in the energy and finance industry, including many attendees at the annual CERAWeek energy conference in Houston.
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| 2025 is expected to be a boom year for M&A activities in the US energy industry. Illustration photo |
There were 27 M&A deals in the US energy sector in January and February worth a total of $36.4 billion, including Constellation Energy’s $16.4 billion acquisition of Calpine. In both value and volume, this exceeded every year in the past two decades except one, according to LSEG data.
US President Donald Trump has declared an energy emergency to spur expansion of the industry, calling it an "urgent and vital priority for America's national and economic security."
Ms. Kathleen Lawler, CEO at investment fund KKR, commented that the opportunities in the energy industry are huge and spread across many fields.
In January, KKR and Canada's PSP Pension Plan agreed to acquire a 20% stake in American Electric Power's transmission network for $2.8 billion.
Increased demand and impact on the market
The surge in energy companies’ stock prices has helped them make larger deals by using their shares to finance M&A. Even with the recent stock market decline, independent power producers such as Vistra, Constellation and NRG Energy are trading between 82% and 220% higher than they were at the start of 2024.
Investors also became more confident after Constellation announced the Calpine deal. Constellation’s stock price jumped 25% on the day the deal was announced, which is unusual because the buyer’s stock price typically drops when they use stock to finance an M&A deal.
Private equity, pension funds, and infrastructure funds have mobilized huge amounts of capital for energy investments, with total unspent capital for infrastructure investments expected to reach $334 billion by the end of 2024, according to data from Preqin.
The capital could be invested in companies pioneering new energy technologies or acquiring businesses that provide services to existing energy infrastructure. David Foley, global head of Blackstone Energy Transition Partners, said the booming energy market has created “investment opportunities in equipment manufacturers and critical supply companies.”
Capital can also be used to take publicly traded energy companies private. A prime example is Altus Power, one of the largest owners of commercial-scale solar power plants in the US, which agreed to be sold to TPG for $2.2 billion.
Challenges and prospects
The wave of M&A transactions in the energy sector is expected to continue despite market volatility, as this only adds to the value of existing assets.
While the Trump administration may make it easier to get energy projects approved, the supply of key components remains challenging, with wait times for natural gas turbines, for example, expected to stretch into the end of the decade.
In addition, uncertainty over whether tax credits for renewable energy will continue to exist is also clouding the outlook for clean energy development.
Additionally, the Trump administration's immigration reform plan, which includes deporting millions of undocumented immigrants, could slow the construction of new energy projects due to a shortage of skilled workers.
Overall, despite facing many challenges, the boom in M&A deals in the US energy sector is opening up great opportunities for investors, especially in the context of soaring electricity demand due to the development of AI.
| In January and February this year, there were 27 M&A deals in the US energy industry with a total value of 36.4 billion USD, notably the deal of Constellation Energy acquiring Calpine worth 16.4 billion USD. |
Source: https://congthuong.vn/thuong-vu-ma-trong-nganh-nang-luong-my-se-bung-no-378066.html
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