Why BlackRock may not need to pay a big premium for a $38 billion energy acquisition

By Jules Rimmer

Data centres are making huge demands on energy infrastructure

Shares in U.S. power company AES Corp. spiked 14% on Wednesday after BlackRock-owned GIP was reported by the Financial Times to have launched a bid worth around $38 billion.

AES' (AES) market capitalization on Tuesday's close was $9.5 billion but, staggering under a debt load of $29 billion, its enterprise value - the market cap and total debt minus cash on hand - was just shy of $41 billion, according to FactSet.

AES operates a fleet of renewable assets and utilities in Indiana and Ohio and imports U.S. liquified natural gas in Central America and the Caribbean.

Before Wednesday's move, AES stock had plummeted 34% in the last 12 months and almost halved in the past three years, a reflection of the disfavor into which renewable energy plays had fallen. Having made significant investments in this area in recent years, asset managers shunned AES as the Trump administration had signaled a lack of enthusiasm for the sector and then Congress completely axed green energy tax credits in July.

AES had already jumped about 40% from its summer lows when rumors of acquisitors circling were first mooted by Bloomberg. At the time, GIP, bought by BlackRock (BLK) in 2024 for $12.5 billion, and Brookfield Asset Management were suggested as likely bidders.

Why would BlackRock be so keen to buy a stock that has fallen out of fashion, especially when it owns utilities in sixteen different countries as well as the U.S.? The rationale lies in the huge and unprecedented power demands of the new data centers being constructed by hyperscalers like Microsoft (MSFT) , Meta (META) and Alphabet (GOOG).

The deal could be a way of rationalizing AES's complex operational structure and, over the long term, benefiting from the transition from fossil fuels to renewables.

The size of the transaction, one of the largest infrastructure acquisitions on record, may discourage alternative bidders and so the possibility of a bidding war.

At present, no formal statement has been made by either company.

Of the dozen or so analysts contributing a recommendation to FactSet only one was calling a sell on the stock. However, the mean target price was only $13.90, suggesting analysts saw minimal upside to the stock.

-Jules Rimmer

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10-01-25 1022ET