Buyout barons’ new data centre bet: dull utilities

Alliant Energy

15/12/2025 07:00

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

By Yawen Chen

LONDON, Dec 15 (Reuters Breakingviews) - Buyout firms will find an unlikely source of excitement in 2026. Dealmaking has come to the usually staid world of utilities, as evidenced by BlackRock’s BLK.N $38 billion bid for electricity operator AES Corporation AES.N. Whether or not that transaction closes, it highlights how businesses once dismissed as dull income stocks are being recast as scarce vehicles to ride the AI boom.

Three forces are driving a utilities investment supercycle: the green transition, rising grid investment, and the rapid increase in demand for energy from artificial intelligence players. McKinsey estimates global data centre power consumption will grow about 17% a year between 2022 and 2030. This is particularly true in the U.S., where AI server farms could account for 14% of total power demand by 2030. As a result, Goldman Sachs analysts now expect the need for U.S. electricity to grow by 2.6% a year through 2030, levels not seen since the 1990s. That gives utilities something they rarely offered before: growth.

The U.S. may be the easiest hunting ground for private capital. Mid-cap utilities and regional power producers such as Evergy EVRG.O, TXNM Energy TXNM.N, Portland General Electric POR.N, and Alliant Energy LNT.O are all worth less than $30 billion including debt, making them relatively easy to acquire. They also need money. S&P Global estimates that the U.S. utilities it rates will see capital expenditure in 2025 reach $215 billion, a 24% increase from the amount spent in 2024. Deal activity already reflects the shift. PwC counts 2,322 energy and utilities transactions in the first half of 2025, with transaction values up roughly 30% year-on-year and nine mega-deals above $5 billion.

The funding gap is not a U.S.-only problem. Globally, an estimated $670 billion of annual investment will need to be directed towards upgrading and expanding electricity grids between now and 2030, up from $390 billion in 2024, according to the International Renewable Energy Agency (IRENA). Europe may require different tactics, however. While utilities like Iberdrola IBE.MC, National Grid NG.L and SSE SSE.L all face ambitious capex targets, they are often controlled or backed by national governments, who are less likely to want to sell. They may instead be more willing to hive off ancillary assets in order to fund their core business, as seen in Apollo Global Management’s APO.N 3.2 billion euro investment in Amprion, the German transmission operator partly owned by RWE RWEG.DE. Similar deals could emerge as the likes of EnBW EBKG.DE, Vattenfall, Enel ENEI.MI and Fortum FORTUM.HE recycle capital by selling stakes in renewables platforms or grid subsidiaries. And European assets are relatively cheap: the continent’s utilities are valued at 9 times forward EBITDA including debt, while a U.S. peer group including AES trades at above 12 times 2026 EBITDA, analyst forecasts compiled by Visible Alpha show.

Politics remains a hazard. Utilities’ rising profit may attract the interest of cash-strapped governments, as evidenced by the UK’s proposal in 2025 to cut renewable subsidies by tweaking the formula used to calculate annual inflation increases. Rising energy bills may also stir popular discontent, and lead governments to impose taxes or stall projects. In the U.S., electricity costs have risen almost 30% since 2021, according to PowerLines. Still, with $200 billion of infrastructure fundraising in the first nine months of 2025, private equity has ample firepower that needs to be put to work. Utility buyouts may finally offer handsome rewards, as well as a little risk.

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This is a Reuters Breakingviews prediction for 2026.

US and EU-27 electricity consumption seen accelerating through 2030 https://www.reuters.com/graphics/BRV-BRV/gdpzjnddrpw/chart.png

(Editing by Neil Unmack; Production by Oliver Taslic)

((For previous columns by the author, Reuters customers can click on CHEN/yawen.chen@thomsonreuters.com))