M&A activity in the US power sector is set for a record-breaking year in 2025, as surging electricity demand – driven by AI and data centres — fuels an unprecedented appetite for assets among energy firms, PE investors, and institutional funds, according to a report by Reuters.
The sector has already seen a flurry of deal activity, with $36.4bn worth of US power transactions recorded in the first two months of 2025, according to LSEG data. This includes Constellation Energy’s $16.4bn acquisition of Calpine, making the start of the year one of the most active in two decades.
Private equity firms and pension funds have amassed significant capital for energy infrastructure investments. As of the end of 2024, infrastructure-focused dry powder stood at $334bn, according to Preqin. Investors are deploying capital across various strategies, including: Acquiring stakes in energy infrastructure companies – KKR and PSP Investments purchased a 20% stake in American Electric Power’s transmission network for $2.8bn in January; investing in equipment manufacturers – Blackstone Energy Transition Partners sees opportunities in the “picks-and-shovels” companies supplying the industry; and taking listed power companies private – TPG’s climate arm announced a $2.2bn acquisition of Altus Power, a leading owner of US commercial-scale solar assets.
With power company valuations rising – independent producers like Vistra, Constellation, and NRG Energy have seen stock prices climb between 82% and 220% since the start of 2024 – potential acquirers are emboldened. The market reaction to Constellation’s Calpine deal, which sent its shares up 25%, suggests investors are increasingly supportive of large-scale M&A in the sector.
Utilities are actively restructuring portfolios to fund expansion efforts. Recent moves include: Eversource Energy’s $2.4bn sale of Aquarion Water; and National Grid’s divestment of its US renewables business to Brookfield Asset Management.
Private equity firms are also capitalising on the deal fervour, exiting power assets at attractive valuations. High-efficiency natural gas plants, built during a period of stagnant US power demand, have become particularly sought after. Blackstone recently acquired the Potomac Energy Center from Ares Management, highlighting the growing interest in gas-fired generation.
Despite strong deal momentum, potential headwinds remain. President Donald Trump’s energy policies — while easing permitting restrictions — have introduced uncertainties, including: tariffs on critical materials like steel, aluminium, and potentially copper, which could raise project costs; potential repeal of renewable energy tax credits, clouding the outlook for new clean energy investments; labour shortages due to proposed immigration reforms, which could impact data centre and energy infrastructure buildouts.
