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Analysis of the Week: Strategic divergence in M&A activity in US' storage space- analyzing the unique approaches adopted by PE firms, utilities & private players

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Mohit Kaul's picture
Founder, Enerdatics

Building Enerdatics. Leadership experience in a high growth SaaS company and secured a successful exit. A natural leader who cares about creating value for all stakeholders. Extensive experience...

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PE firms/PE-backed companies: The growth in M&A activity since 2021 indicates that PE-backed entities will likely continue to focus on development assets and pipelines. In addition, PE firms are expected to expand their portfolios by making growth equity investments in development platforms that offer significant future upside in the near term. This divergence in growth strategies is evident as companies like Cypress Creek and Gore Street Capital leverage their expertise and relationships to economically mature early-to-late-stage assets. On the other hand, major PE firms like Apollo and BlackRock prioritize maximizing fund returns by making big-ticket investments in GW-scale platforms such as Broad Reach Power and Jupiter Power.

Private companies: Companies such as Spearmint, Agilitas, Qcells, and Peregrine, are taking a unique approach in this industry. They are capitalizing on the high demand for top-notch development assets from private equity firms, PE-backed companies, and utilities. These private entities are divesting early- and late-stage assets at market premiums. Enerdatics believes that in an uncertain but improving financing environment, privately funded companies will reinvest the equity capital generated from divestments into the development of early-stage assets. This strategy allows them to take advantage of the ongoing cost declines and technological advancements in the field.

Listed IPPS/Utilities: Enerdatics has analyzed the M&A activity in the utility sector since 2021 and identified distinct strategies adopted by different companies. Regulated utilities like PGE are focused on acquiring individual assets from developers to meet the state's storage capacity requirements. Conversely, companies like ENGIE and Acciona are targeting large early-to-late-stage pipelines, utilizing their expertise in development and power trading to enhance the value of these assets. We believe that they will divest a portion of the assets at later stages to private equity firms and PE-backed companies, reinvesting the proceeds in future development initiatives.

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