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AI to Fuel Record Year for M&A in U.S. Power Sector

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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.

Japan’s METI Says DeepSeek’s Impact on Energy Demand is Hard to Predict

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Japan’s Ministry of Economy, Trade, and Industry (METI) has stated that it is currently difficult to predict the potential impact of DeepSeek, a Chinese AI startup, on electricity demand. While there is a prevailing view that the growth of data centers could lead to increased power consumption, METI highlighted the complexities involved in determining how emerging technologies like DeepSeek will influence future energy requirements.

In December, the Japanese government released a draft of its updated basic energy plan, a policy document reviewed every three years. The plan projected a 10-20% rise in electricity generation by 2040, driven in part by the growing use of AI technologies. However, the advent of DeepSeek, which is rumored to consume less power compared to its competitors, has led analysts to debate whether electricity demand will rise or decrease. While some suggest that DeepSeek’s efficiency could lower demand, others believe that as the technology becomes more accessible and widespread, its adoption may ultimately increase power consumption.

METI explained that the relationship between AI and energy demand is influenced by numerous factors, including improvements in AI performance, cost reductions, and the development of energy-efficient technologies. As such, it remains challenging to predict how specific technologies like DeepSeek will affect Japan’s future energy needs.

The ministry emphasized that Japan’s economic growth and industrial competitiveness will be closely tied to these evolving dynamics, underscoring the importance of considering various technological, economic, and energy-related variables when forecasting demand.

 

Brookfield Seeks Partner for Ascenty Amid Brazil’s Booming Data Center Market

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Brookfield Asset Management is reportedly looking for an investment bank to advise on the sale of a minority stake in Ascenty, a major data center operator in Latin America. This move comes as Brookfield, in partnership with Digital Realty, aims to attract a minority partner to fund Ascenty’s ongoing expansion, particularly in Brazil. The companies have approached local banks, such as Itaú BBA and Bradesco BBI, for the advisory role.

Ascenty’s growth plans align with Brazil’s rising status as a key global data center hub. Demand for cloud computing and artificial intelligence is driving substantial investments, with estimates suggesting that over $10 billion could be funneled into Brazil’s data center sector over the next decade. Despite having fewer than 200 data centers, Brazil already ranks among the top 15 global markets. A report by Santander projected a 7.1% annual revenue increase for the sector from 2024 to 2028, outpacing the global average.

Brookfield initiated discussions with potential banks in 2024, aiming to complete the sale by the end of 2025. Founded in 2010, Ascenty currently operates or is constructing 34 data centers across Brazil, Mexico, Chile, and Colombia. These facilities are connected by an extensive 5,000-kilometer fiber-optic network. Although the valuation of Ascenty remains uncertain, its rapid expansion since Brookfield and Digital Realty’s $1.8 billion acquisition in 2018 indicates significant growth.

Ascenty’s expansion in Brazil is facilitated by the country’s availability of land, solid global connectivity, and an increasing renewable energy capacity, which makes it an attractive location for future data center investments. While competitors like Tecto Data Centers, Equinix, and ODATA are active in the region, Brazil’s potential for data center growth remains high, especially as energy constraints challenge other markets like the U.S. and Europe.

Market projections suggest Brazil’s energy load from data centers could increase substantially over the next decade, highlighting both the opportunities and challenges in expanding the country’s infrastructure to meet this demand. Official estimates suggest data center energy demand could rise to 9 GW by 2035, a massive increase from the current load of 671 MW, necessitating careful planning in transmission and distribution networks.