Fueled by skyrocketing electricity demand from the artificial intelligence data center boom, energy infrastructure developer LS Power has raised its largest-ever fund to acquire power infrastructure across the U.S.
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LS Power has raised $6B for what it is calling LS Power Equity Partners IV, significantly exceeding its initial $4B target. First reported by Bloomberg, the fund will focus primarily on acquiring operating assets, including natural gas power plants, renewable energy resources and battery storage.
The firm also plans to invest in infrastructure supporting demand response, which allows data centers and other large electricity users to temporarily reduce consumption during periods of grid stress, often in exchange for compensation. Such programs are gaining traction as utilities and grid operators search for ways to connect data centers without compromising reliability or pushing up consumers’ utility bills.
“It’s a capital-intensive business, and the opportunity set has never been bigger,” LS Power Chief Operating Officer Darpan Kapadia told Bloomberg. “I think most of the capital we deploy will be into operating projects.”
LS Power said its latest fund has drawn commitments from pension funds, insurance companies, sovereign wealth funds, asset managers and family offices — investors that have historically been attracted to data centers and infrastructure assets that generate steady, low-risk, long-term returns.
Interest in such funds is surging as data centers drive unprecedented demand for power across the U.S. — demand that is vastly exceeding the capacity of regional power grids. With long timelines for building new power plants and supply chain constraints pushing wait times for gas turbines and other critical equipment, existing power plants have seen their valuations climb significantly.
LS Power has previously capitalized on this supply and demand dynamic, selling a portfolio of natural gas plants to NRG Energy in a $12B deal that closed in January.
“Power demand is growing at rates that we haven’t seen for decades,” Kapadia told Bloomberg.
According to Bloomberg, close to a third of the capital raised for LS Power’s latest fund has already been deployed. About $1.7B went toward the acquisition of natural gas plants from Constellation Energy in March in a deal that will ultimately see LS Power acquire $5B worth of power plants from Constellation.
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