AI data center “electricity shortage” fuels traditional power asset private equity giant KKR (KKR.US) plans to buy US energy distributor UGI (UGI.US) for 9 billion US dollars

The Zhitong Finance App learned that according to reports, private equity giant KKR (KKR.US) recently submitted a non-binding acquisition proposal to gas and electricity distributor UGI Utilities (UGI.US), with a transaction valuation of about 9 billion US dollars.

People familiar with the matter said that the purchase offer proposed by KKR was $42.50 per share. The report also pointed out that it is currently uncertain whether UGI will accept this clause and whether it can eventually reach a definitive deal with KKR or other potential bidders.

According to information, UGI is headquartered in King Prussia, Pennsylvania. Its business covers the distribution of natural gas and electricity, the operation of long-distance gas pipelines and gas storage systems, and owns the propane retailer AmeriGas. In addition, the company also supplies LPG products in Europe.

UGI shares surged 9% on Tuesday, boosted by this news. Over the past year, UGI's stock price increased by less than 2%, while the S&P 500 index rose 20% during the same period.

Surging demand for data centers is driving the acceleration of mergers and acquisitions in the power industry

The core driving force behind the current acceleration of mergers and acquisitions in the natural gas and power generation sector is artificial intelligence (AI) workloads and the huge demand for electricity from hyperscale data centers. High-power density AI clusters require a stable and controlled supply of baseload electricity, which has brought investors' attention back to traditional power plants and natural gas infrastructure.

According to an energy analysis report recently released by the International Energy Agency (IEA), global data center electricity consumption is expected to double to about 945 to 1,000 terawatt-hours (TWh) by 2030, driven by AI computing demand.

After being snubbed by the market for many years, natural gas power generation companies that provide stable and reliable electricity for AI data centers are regaining capital favor. A case in point is natural gas generator Calpine — private equity firm Energy Capital Partners, which sold it to Constellation Energy (CEG.US) earlier this year. The deal is expected to become one of the most profitable private equity deals in history.