By Avi Salzman

The hottest energy deals of 2025 haven't been in oil or fast-growing segments like solar power. They are for power plants, and particularly ones fueled by natural gas.

Large power companies have inked three major deals since the start of the year to acquire natural gas power plants around the country, looking to cash in on the growing demand for electricity from data centers and other users. A fourth deal, announced by private-equity giant Blackstone on Monday, also could benefit from growing power demand, fueled by natural gas, renewables and other sources.

It's another sign that the race to power the AI and electric vehicle revolutions will depend heavily on natural gas, which is already the largest source of electricity generation in the U.S. Power plants haven't historically been very exciting investments. They mostly sell electricity into regulated markets that are designed to keep consumer prices low. Electricity use and retail prices didn't change much in the decade before 2021. But power prices have soared since 2022, as rising natural-gas prices caused retail prices to rise and electricity use has begun to increase. Between 2021 and 2024, retail electricity prices rose 21%. Several companies are looking to build new power plants to meet rising demand, but there aren't enough gas turbines to accommodate them all. That's why existing plants are getting more attractive.

Constellation Energy, a Baltimore power company that's best-known for owning the nation's largest fleet of nuclear plants, kicked off the dealmaking in January by agreeing to buy Calpine, a major Houston-based owner of natural gas power plants, for about $27 billion.

Vistra, based in Irving, Tex., said it would buy 2.6 gigawatts worth of power plants all over the country from private firm Lotus Infrastructure Partners for $1.9 billion last week. And NRG, another Houston company, agreed to buy 13 gigawatts worth of natural gas plants from private company LS Power last week for about $12 billion.

The deals value each gigawatt worth of existing natural gas power capacity at around $1 billion, and sometimes less. By comparison, it can cost between $1.5 billion and $3 billion per gigawatt to build a new plant, according to Bloomberg Intelligence.

A fourth deal also looks to be capitalizing on similar trends. On Monday, Blackstone Infrastructure, a unit of private-equity firm Blackstone, said it would buy publicly traded Albuquerque company TXNM Energy, an owner of utilities in New Mexico and Texas, for a total enterprise value of $11.5 billion. The purchase price represents a 23% premium to the average stock price over the past 30 days. TXNM isn't primarily a natural gas company, but it does own some natural gas plants. Blackstone said in a press release that it is looking to invest in TXNM's "industry-leading growth rates" as power use grows in the Southwest; the company declined to comment on the appeal of TXNM's natural gas assets.

Write to Avi Salzman at avi.salzman@barrons.com

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May 20, 2025 00:01 ET (04:01 GMT)

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