Dealmakers anticipate that 2025 will be a record year for mergers and acquisitions (M&A) in the U.S. power sector, driven by the surging demand for electricity to support artificial intelligence (AI). This growing appetite for power generation and infrastructure assets is fueled by the massive energy needs of data centers that power AI technologies.
According to sources in the industry and at the CERAWeek energy conference in Houston, the first two months of 2025 have already seen significant deal-making activity, with 27 power deals valued at $36.4 billion. A standout transaction was Constellation Energy’s acquisition of Calpine for $16.4 billion. This surge in deal volume contrasts sharply with the broader M&A market, which has experienced its weakest start since the global financial crisis.
Power sector deal flow is expected to increase as companies race to meet growing electricity consumption. Private equity firms and institutional investors, such as KKR and PSP Investments, are actively pursuing investments, with KKR and PSP’s $2.8 billion acquisition of a 20% stake in American Electric Power’s (AEP) transmission network as one of the major recent deals. Strong electricity price increases have boosted the shares of power companies, enabling larger transactions.
The influx of capital into energy investments is substantial, with $334 billion in dry powder (capital raised but not yet deployed) by the end of 2024. Much of this capital is earmarked for investments in power generation, infrastructure technologies, and renewable energy projects. These funds are also fueling the increasing trend of taking public power companies private, as seen in the $2.2 billion sale of Altus Power to TPG’s climate investment arm.
The demand for power infrastructure has also driven utilities to divest non-core business units. In early 2025, Eversource Energy agreed to sell its Aquarion Water unit for $2.4 billion, while National Grid announced the sale of its U.S. renewables business to Brookfield Asset Management.
Despite challenges, such as rising costs for essential components like steel, aluminum, and copper, and uncertainties around tax credits for renewable projects, the deal-making momentum in the power sector is expected to continue. Market volatility, including potential impacts from Trump administration policies and immigration reform, will likely make existing power assets even more valuable, spurring more deals.