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E&E News
4 days ago
- Business
- E&E News
How the AI rush is reshaping electric utilities
As electricity demand from the tech sector and manufacturing skyrockets, utilities are facing a stark reality: We're going to need a bigger fleet. And the pressure to add new generation quickly — and without imposing unrealistic costs on consumers — has the industry thinking about deal-making. 'There is a noticeable acceleration,' said Pavel Molchanov, an investment strategy analyst focusing on the utility sector for Raymond James. 'You can go back as far as you want and there have always been mergers and acquisitions in the electric power industry. But it is certainly accelerated by the universal recognition that the next decade and beyond will be a time of growth in electric power.' Advertisement Already this year, several power producers have reached into the market to vastly expand their gas fleets. Houston-based NRG, for example, said it would add 18 gas-fired power plants to nearly double the size of its current fleet in a $12 billion cash-and-stock deal with LS Power Equity Advisors. That came just months after NRG purchased six gas plants capable of producing 738 megawatts from Rockland Capital. Texas-based Vistra announced just days later its own deal to secure seven gas generators totalling 2,600 MW of capacity across five states from Lotus Infrastructure Partners. 'We believe natural gas fired generation will continue to play an ever-increasing role in the reliability, affordability, and flexibility of U.S. power grids for years to come,' said Vistra CEO Jim Burke in a statement on the $1.9 billion deal. He added that the 'attractive portfolio' of new gas assets would allow Vistra to meet growing power demand. In January, Baltimore-based Constellation said it would acquire Calpine Corp. in a $16.4 billion transaction, combining Constellation's nation-leading nuclear fleet with Calpine's fleet of 79 power generators that total some 27,000 MW of power. Canadian company Capital Power in April purchased two gas plants from LS Power for $2.2 billion, making it one of five North American independent power producers to have more than 10,000 MW of natural gas capacity. Earlier this month, TXNM, the parent company of New Mexico's largest utility, announced its acquisition by private equity firm Blackstone. The move, CEO Pat Collawn said, is designed to use an infusion of private capital to help TXNM build a lot more capacity without forcing customer bills to rise significantly. The operations may all have different details, but they share a common goal: getting as much reliable power on the grid as quickly as possible. And with supply chains for generation of all kinds, but especially gas, running behind schedule, Morningstar utilities analyst Travis Miller said that's forcing utilities to look anywhere they can. 'Utilities that need to serve load right away are going to have to do it with existing assets, whether it's theirs or someone else's,' Miller said. 'The recent moves are an attempt to be one of the first available suppliers for any kind of new load.' Utilities are facing unprecedented demand growth. A May report from consulting firm ICF projects that U.S. electricity demand will grow 25 percent by 2030 and 78 percent by 2050, compared with 2023 numbers. Meeting that, ICF said, would require utilities to double the pace of new generation. Other estimates have similarly said that data centers, electrification and onshoring of manufacturing could cause demand to rise at rates not seen in decades. While some utilities are looking to extend the life of their aging fossil fuel assets, many have had retirement plans in place for years. Building new plants is increasingly expensive and time-consuming as parts suppliers ramp up a supply chain that just years ago was in decline. According to Wood Mackenzie, it can take until 2030 for new gas plants to come online thanks to delays in the market. The analysts predict that about 890 gigawatts of new gas-fired generation will be added between 2025 and 2040, with nearly half of that in the U.S. and China. A May analysis by research firm Enverus notes that amid the 'sharp resurgence' of merger and acquisition action in the gas market, the per-megawatt cost of acquiring gas plants on the market has been running well above the $0.5 million average between 2021 and 2024. Yet the report found they're still cheaper than the estimated $2 million to $3 million it can cost to build each megawatt of new gas capacity. 'AI euphoria' That can be encouraging news to utilities already facing upward pressure on rates from the costs of maintaining infrastructure amid extreme weather and meeting new demand. Nationally, federal data shows that the average electricity price will rise 13 percent between 2022 and 2025, outpacing inflation. ICF says that nationally, rates could jump 15 percent to 40 percent between 2025 and 2030, depending on the market. A February report from consulting firm Deloitte said the growing need for capital combined with already rising utility rates means that regulated utilities are 'facing growing limitations' through the traditional method of raising funds. Retail electricity prices, Deloitte wrote, increased nearly 23 percent from 2019 to 2024 and utility requests for rate increases hit record highs between 2020 and 2024. That could make regulators skeptical of further rate increases. That, in turn, means that utilities are eyeing 'alternative funding avenues' such as mergers and acquisitions or infusions of private capital. Between 2016 and 2024, Deloitte found, the average annual investment in the power sector by private capital was up 113 percent compared with the previous eight-year period. The TXNM deal — which will see Blackstone invest $400 million in the short term while the sale is reviewed by regulators — is just the latest sign that Wall Street sees the electricity market as a growth sector. Earlier this year, private equity firm KKR acquired a stake in American Electric Power. On the renewables side, the climate investing arm of asset firm TPG made a $2.2 billion purchase of Altus Power, the largest commercial-scale solar owner in the U.S. In February, the U.K.'s National Grid divested its 3,100 MW of U.S. renewables in a sale to Brookfield Renewable Partners. Raymond James' Molchanov said that the 'AI euphoria' that has accelerated across the tech sector has reshaped the financial picture for the power sector in just a few short years. 'All generation assets have greater value than they did five years ago, or even three years ago,' he said. 'We understand that power demand is in growth mode for the next decade and beyond, and that means the entire category of assets, regardless of the type of generation, is a lot more in vogue.'
Yahoo
17-05-2025
- Business
- Yahoo
Vistra to buy 2.6GW generation capacity from Lotus for $1.9bn
Integrated retail electricity and power generation company Vistra has agreed with Lotus Infrastructure Partners to acquire its portfolio of natural gas generation facilities, with a combined capacity of 2.6GW, for $1.9bn. The move enhances the geographical diversification of Vistra's natural gas fleet. The acquisition includes five combined-cycle gas turbine facilities and two combustion turbine facilities strategically located across the Pennsylvania-New Jersey-Maryland region, New England, New York and California. Vistra president and CEO Jim Burke stated: "We believe natural gas-fired generation will continue to play an ever-increasing role in the reliability, affordability and flexibility of US power grids for years to come. The addition of this attractive portfolio of combined cycle and peaking assets allows Vistra to serve growing power demand while exceeding our mid-teens levered return target." The funding strategy for the acquisition involves assuming an existing term loan from Lotus and utilising cash on hand. The term loan is projected to cover 50% of the closing consideration. The purchase price of the assets suggests a multiple of around seven times the projected 2026 adjusted EBITDA (earnings before interest, taxation, depreciation and amortisation), not accounting for any potential synergies. The completion of the transaction is set for late 2025 or early 2026 and is contingent upon regulatory approvals from the Federal Energy Regulatory Commission and the Department of Justice, in compliance with the Hart-Scott-Rodino Act. Lotus Infrastructure Partners chairman and CEO Himanshu Saxena stated: "We are pleased to have reached an agreement to sell this gas plant portfolio to a proven operator like Vistra. "The Lotus team has acquired, developed and operated this portfolio of high-quality assets for many years, which has helped us deliver this win-win transaction for our investors." Barclays and Moelis & Company are acting as financial advisors, while Latham & Watkins and Cleary Gottlieb Steen & Hamilton are providing legal counsel to Vistra. Lazard is the exclusive financial advisor to Lotus Infrastructure Partners, with King & Spalding and Eversheds Sutherland offering legal advice. In September 2024, Vistra announced definitive agreements to acquire a 15% equity interest in its subsidiary Vistra Vision from affiliates of Nuveen Asset Management and Avenue Capital Management II. "Vistra to buy 2.6GW generation capacity from Lotus for $1.9bn" was originally created and published by Power Technology, a GlobalData owned brand. The information on this site has been included in good faith for general informational purposes only. It is not intended to amount to advice on which you should rely, and we give no representation, warranty or guarantee, whether express or implied as to its accuracy or completeness. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content on our site.
Globe and Mail
07-05-2025
- Business
- Globe and Mail
Why Vistra Stock Dropped After Earnings
The stock of electric and gas utility Vistra (NYSE: VST) fell 6.3% through 11:45 a.m. ET Wednesday, despite the company reporting a 30% jump in revenue this morning. Investors seem more concerned with how much Vistra lost while reporting the greater revenue. Vistra's Q1 earnings Vistra reported a $268 million net loss for the quarter. Cash from operations surged 92% year over year to $599 million, but the company spent $768 million on capital expenditures, including purchasing nuclear fuel, resulting in negative free cash flow of $169 million for the quarter. Despite the numbers, CEO Jim Burke insisted Vistra "kicked off 2025 with another strong quarter of business performance," and reaffirmed guidance for the rest of 2025 -- although I'm not sure how much that helps investors. Rather than guiding on revenue or earnings, Vistra gives guidance in the very company-specific formats of "ongoing operations adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization)," and "ongoing operations adjusted FCFbG," which refers to what free cash flow would be "bG," or before capital spending intended to grow the business. Is Vistra stock a buy? That's actually probably the more useful metric for investors, and Vistra is saying its free cash flow, before growth costs, will range from $3 billion to $3.6 billion this year, which sounds flat against last year's $3 billion in plain old free cash flow (after investments for growth). Relative to Vistra's market capitalization of just under $46 billion, it also means the stock costs somewhere between about 13 and 15 times FCF. And granted, that valuation will get a bit higher after growth investments are accounted for. Still, with analysts forecasting a long-term earnings growth rate of 20%, it seems a fair valuation to me -- maybe even cheap. Should you invest $1,000 in Vistra right now? Before you buy stock in Vistra, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Vistra wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $613,546!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $695,897!* Now, it's worth noting Stock Advisor 's total average return is893% — a market-crushing outperformance compared to162%for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of May 5, 2025
Yahoo
07-05-2025
- Business
- Yahoo
Why Vistra Stock Dropped After Earnings
Key Points Vistra reported a loss and negative free cash flow this morning. Investors aren't happy about that. The company reiterated guidance for $3 billion-plus in free cash flow this year, before growth costs. 10 stocks we like better than Vistra › The stock of electric and gas utility Vistra (NYSE: VST) fell 6.3% through 11:45 a.m. ET Wednesday, despite the company reporting a 30% jump in revenue this morning. Investors seem more concerned with how much Vistra lost while reporting the greater revenue. Image source: Getty Images. Vistra's Q1 earnings Vistra reported a $268 million net loss for the quarter. Cash from operations surged 92% year over year to $599 million, but the company spent $768 million on capital expenditures, including purchasing nuclear fuel, resulting in negative free cash flow of $169 million for the quarter. Despite the numbers, CEO Jim Burke insisted Vistra "kicked off 2025 with another strong quarter of business performance," and reaffirmed guidance for the rest of 2025 -- although I'm not sure how much that helps investors. Rather than guiding on revenue or earnings, Vistra gives guidance in the very company-specific formats of "ongoing operations adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization)," and "ongoing operations adjusted FCFbG," which refers to what free cash flow would be "bG," or before capital spending intended to grow the business. Is Vistra stock a buy? That's actually probably the more useful metric for investors, and Vistra is saying its free cash flow, before growth costs, will range from $3 billion to $3.6 billion this year, which sounds flat against last year's $3 billion in plain old free cash flow (after investments for growth). Relative to Vistra's market capitalization of just under $46 billion, it also means the stock costs somewhere between about 13 and 15 times FCF. And granted, that valuation will get a bit higher after growth investments are accounted for. Still, with analysts forecasting a long-term earnings growth rate of 20%, it seems a fair valuation to me -- maybe even cheap. Should you invest $1,000 in Vistra right now? Before you buy stock in Vistra, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Vistra wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $613,546!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $695,897!* Now, it's worth noting Stock Advisor's total average return is 893% — a market-crushing outperformance compared to 162% for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks »
Yahoo
22-03-2025
- Business
- Yahoo
2 Hidden AI Stocks to Buy in the S&P 500 Sell-Off
It's no secret that artificial intelligence (AI)-related stocks have sold off in the recent market correction. It's partly due to investors locking in gains, competitive concerns relating to Chinese start-up DeepSeek, and, most notably, valuation concerns. Consequently, focusing on companies with relatively secure market positions that trade on tempting valuations makes sense if you want to buy on the dip. Retail electricity and power-generation company, Vistra (NYSE: VST), and data center equipment maker, Vertiv (NYSE: VRT), fit the bill. Here's why. Vistra was one of the best performing stocks on the S&P 500 (SNPINDEX: ^GSPC) last year, so it's no surprise that investors took some profit on it this year. Still, that doesn't mean the power company isn't an alluring stock to buy right now. The excitement around the company is represented in the table below, which demonstrates how Vistra increased its generating capacity from nuclear and renewable energy last year. As a result of the acquisition of Energy Harbor and the acquisition of its outstanding 15% interest in Vistra Vision (the subsidiary that houses its nuclear business, and renewables and storage projects), Vistra significantly increased its nuclear powered generating capacity and also added to its renewable generating capacity. Fuel Source Type Net Capacity 2023 (MW) Net Capacity 2024 (MW) Growth Natural Gas Combustion, combined cycle, steam turbine 24,313 MW 24,120 MW (0.8)% Coal Steam turbine 8,428 MW 8,428 MW 0% Uranium Nuclear 2,400 MW 6,448 MW 169% Renewable Solar/Battery 1,358 MW 1,474 MW 8.5% Fuel Oil Combustion turbine 203 MW 187 MW -(8)% Total N/A 36,702 MW 40,657 10.8% Data source: Vistra SEC filings. MW=megawatts. It's good news because the market, and more importantly, the hyperscaler data centers (large data centers often optimized to support data-intensive AI-application growth), have warmed to the idea that nuclear-powered electricity is the solution to their long-term power needs to support AI growth. All three of the largest cloud service providers -- Microsoft's Azure, Amazon Web Services, and Alphabet's Google Cloud -- inked deals last year to procure power for their data centers from nuclear-powered plants. Nuclear power is carbon-free, reliable, available 24/7, and doesn't have the downside issues of intermittency that characterize renewable energy sources. It's a good solution for hyperscalers that want to solve their power needs and meet their emissions goals simultaneously. In addition, investors shouldn't overlook the ongoing electrification-of-everything megatrend (electric vehicles [EVs], web-connected devices, smart buildings/infrastructure, data centers, heat pumps, EV charging networks), which continues to drive electricity-demand growth before and after AI became a common talking point. Vistra investors can look forward to a deal with a hyperscaler, not least because CEO Jim Burke told investors on the last earnings call, "You can assume that we're speaking to all the major hyperscalers and that we're actively engaged with them and the major data center developers." As for the threat from DeepSeek (a lower-cost AI model from a Chinese start-up), Vertiv's Executive Chairman David Cote argued on Vertiv's last earnings call that a lower computing cost (as in DeepSeek's model) implies more data creation and ultimately more data center/electricity demand. That's good news for Vistra, and the stock looks like a good value when trading on 19 times estimated 2025 earnings and with a potential hyperscaler deal to be signed. Former Honeywell CEO, Cote is somewhat of an industrial sector legend, which gives investors reason to feel comfortable buying Vertiv stock. The Nvidia partner competes with the businesses housed in much larger companies in the market for critical power, thermal management, monitoring equipment, and services for data centers. These are critical solutions for data centers. Vertiv continues to enjoy a boom in demand, with organic sales up 18% in 2024 and a 30% increase in orders, leading to a 30% increase in backlog to $7.2 billion. While the company did see some weakness in orders from Europe in the fourth quarter, this comes down to what management describes as a delay due to bureaucratic "red tape" rather than a reflection on underlying demand. The dip in the share price has created a superb entry point into the stock, as Vertiv now trades on less than 24 times the midpoint of management's 2025 earnings expectations and less than 25 times its estimate for free cash flow in 2025. They are excellent valuations for a company expected to grow earnings at a 25% annual rate over the next few years. Ever feel like you missed the boat in buying the most successful stocks? Then you'll want to hear this. On rare occasions, our expert team of analysts issues a 'Double Down' stock recommendation for companies that they think are about to pop. If you're worried you've already missed your chance to invest, now is the best time to buy before it's too late. And the numbers speak for themselves: Nvidia: if you invested $1,000 when we doubled down in 2009, you'd have $307,378!* Apple: if you invested $1,000 when we doubled down in 2008, you'd have $40,591!* Netflix: if you invested $1,000 when we doubled down in 2004, you'd have $512,780!* Right now, we're issuing 'Double Down' alerts for three incredible companies, and there may not be another chance like this anytime soon.*Stock Advisor returns as of March 18, 2025 John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Johnson Controls International, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy. 2 Hidden AI Stocks to Buy in the S&P 500 Sell-Off was originally published by The Motley Fool Sign in to access your portfolio
