NRG Energy Acquires LS Power Assets in $12 Billion Deal

The U.S. power sector is undergoing a major expansion to keep pace with the rising demand for electricity from data centers and other consumers, and trying to do a lot at once. Keep a lid on greenhouse gas (GHG) emissions by adding wind, solar and other renewables. Maintain grid reliability by supplementing variable renewable energy with more around-the-clock sources like natural gas-fired power plants. Oh, and keep power costs down, too. That’s a big collective ask, and to help make it possible, power grids are turning to so-called “virtual power plants” (aka VPPs) that, with an assist from computers and software, aggregate smaller power sources, batteries and flexible demand to provide power to the grid much like a traditional combined-cycle plant would. In today’s RBN blog, we’ll introduce VPPs and explain why they’re worth learning about. 

Growing power demand for data centers has been one of the biggest stories in energy markets over the past year, with natural gas-fired power plants emerging as the primary choice for developers seeking to provide the 24/7 power these massive, energy-intensive sites require. That has led many energy firms to unveil plans to sell power directly to data centers but many tech giants have also announced their own deals. In today’s RBN blog, we’ll dive into recent announcements from firms like Apple, Amazon, Google, Meta and Microsoft, which intend to collectively spend about $300 billion this year alone to boost their AI (artificial intelligence) capabilities. 

On July 20, 2020, Chevron struck the first major energy sector deal since the onset of the pandemic, announcing a $13 billion agreement to acquire U.S. E&P Noble Energy. The transaction comes 15 months after the oil major bowed out of a bidding war with Occidental Petroleum to acquire Anadarko Petroleum, a landmark, $56 billion deal in which the winner may eventually end up as the loser after taking on massive debt. Oxy is just one example of how the sharp decline in oil demand and prices has ravaged producer cash flows and earnings, virtually freezing the M&A market. Despite widespread speculation that a resumption in deal activity would target the most distressed E&Ps, Chevron has broken the market wide open with a blockbuster deal for a premier E&P. The target this time, Noble Energy, has a portfolio very similar to that of Anadarko, and is being acquired at a small fraction of the cost. Today, we examine the strategies that drove this transaction, the impacts on buyer and seller, and the implications for the upstream M&A market going forward.