Key Takeaways
- • LS Power closed a $6 billion private equity fundraise, up from an initial $4 billion target, with about $1.7 billion earmarked for its planned purchase of roughly 5 GW from Constellation Energy.
- • The fund is more than twice the size of LS Power's last fund, and the firm has raised more than $19 billion in private equity since its private equity arm launched after the early-2000s power plant bankruptcies.
- • COO Darpan Kapadia said LS Power sees opportunities across three categories: conventional generation (gas-fired combined-cycle and peaking), renewables and storage, and distributed resources such as efficiency, demand response and microgrids.
- • Kapadia argued that electricity demand growth of roughly 1% to 4-5% in many markets is real and durable, while new gas-fired supply faces longer lead times, with four to six years from start to energization for a large combined-cycle project in PJM.
- • Interest rates are a marginal factor in project economics, according to Kapadia, as construction cost inflation is the larger issue; a 1 GW combined-cycle plant now costs north of $3 billion, roughly double the cost six or seven years ago.
Summary
LS Power has closed on a $6 billion private equity funding round, up from an initial $4 billion target, the power infrastructure company said earlier this month. About $1.7 billion of the fund is dedicated to the planned purchase of about 5 GW from Constellation Energy. In an interview with Utility Dive, Chief Operating Officer Darpan Kapadia outlined the firm's views on power sector investment drivers, including data center demand, gas-fired and renewable generation, and transmission development.
Founded in 1990, LS Power built a roughly 5 GW gas-fired portfolio that it sold to Cogentrix and NRG Energy by 2001. After a series of power plant bankruptcies in the early 2000s, the company launched its private equity arm and rebuilt its portfolio by acquiring distressed assets. Since then, the privately held firm has raised more than $19 billion in private equity, according to Kapadia. Its holdings include Clearlight Energy, Endurant Energy, EVgo, LS Power Grid and REV Renewables. Kapadia said investors were drawn to the firm's differentiated platform spanning private equity, generation development and transmission development, as well as its long-term track record and current interest in power sector exposure.
On conventional generation, Kapadia said demand for firm capacity is growing faster than the market has seen in recent decades. He noted that electricity demand, which grew between zero and 0.5% over the last couple of decades, now ranges from roughly 1% to 4% or 5% depending on region. In renewables, he pointed to opportunities in operating, cash-flowing assets and select development platforms, citing LS Power's acquisition last year of Algonquin's North American renewable business, comprising 44 assets across a dozen states, five power markets, four Canadian provinces and two countries. He also said non-U.S. sellers are repositioning their businesses, creating deal flow.
On demand durability, Kapadia said growth is driven by manufacturing, electrification and compute beyond AI, not only data centers, and that the supply side is the bigger constraint. He said building new gas-fired generation has never been harder or more expensive, and that a large combined-cycle project in PJM, or any market, can take four to six years from start to energization. In the interim, he cited expansions, uprates, demand response and energy efficiency as tools to ease strain on the system. He said interest rates have a marginal effect on project viability because construction costs, which have roughly doubled in six or seven years for a 1 GW combined-cycle plant, dominate economics.
On transmission, Kapadia said competitive markets for independent transmission developers reduce congestion and costs for ratepayers, and that policymakers are receptive to that message amid affordability concerns. He said LS Power wants durable, undistorted market signals and supports permitting reform and faster interconnection processes, referencing transmission provisions in a permitting bill pending in the Senate. He also said battery storage can be deployed faster than conventional generation and can complement transmission by relieving congestion, and that LS Power is pursuing storage across multiple markets.
Founded in 1990, LS Power built a roughly 5 GW gas-fired portfolio that it sold to Cogentrix and NRG Energy by 2001. After a series of power plant bankruptcies in the early 2000s, the company launched its private equity arm and rebuilt its portfolio by acquiring distressed assets. Since then, the privately held firm has raised more than $19 billion in private equity, according to Kapadia. Its holdings include Clearlight Energy, Endurant Energy, EVgo, LS Power Grid and REV Renewables. Kapadia said investors were drawn to the firm's differentiated platform spanning private equity, generation development and transmission development, as well as its long-term track record and current interest in power sector exposure.
On conventional generation, Kapadia said demand for firm capacity is growing faster than the market has seen in recent decades. He noted that electricity demand, which grew between zero and 0.5% over the last couple of decades, now ranges from roughly 1% to 4% or 5% depending on region. In renewables, he pointed to opportunities in operating, cash-flowing assets and select development platforms, citing LS Power's acquisition last year of Algonquin's North American renewable business, comprising 44 assets across a dozen states, five power markets, four Canadian provinces and two countries. He also said non-U.S. sellers are repositioning their businesses, creating deal flow.
On demand durability, Kapadia said growth is driven by manufacturing, electrification and compute beyond AI, not only data centers, and that the supply side is the bigger constraint. He said building new gas-fired generation has never been harder or more expensive, and that a large combined-cycle project in PJM, or any market, can take four to six years from start to energization. In the interim, he cited expansions, uprates, demand response and energy efficiency as tools to ease strain on the system. He said interest rates have a marginal effect on project viability because construction costs, which have roughly doubled in six or seven years for a 1 GW combined-cycle plant, dominate economics.
On transmission, Kapadia said competitive markets for independent transmission developers reduce congestion and costs for ratepayers, and that policymakers are receptive to that message amid affordability concerns. He said LS Power wants durable, undistorted market signals and supports permitting reform and faster interconnection processes, referencing transmission provisions in a permitting bill pending in the Senate. He also said battery storage can be deployed faster than conventional generation and can complement transmission by relieving congestion, and that LS Power is pursuing storage across multiple markets.
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