The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Robert Cyran

NEW YORK, March 2 (Reuters Breakingviews) - Traditionally, private equity buyouts rest on slapping a huge amount of new leverage on a target company. A roughly $11 billion deal announced Monday will see a consortium led by BlackRock’s BLK.N Global Infrastructure Partners and EQT EQTAB.ST take power company AES AES.N private without immediate new debt. Instead, it’s a trade of skittish and costly public-investor capital for patient alternative funds.

AES is a complex beast, with sprawling domestic and international operations encompassing everything from utilities to liquefied natural gas infrastructure, while also developing solar and wind farms. The U.S. Energy Information Administration expects power demand to rise by 1% this year and 3% in 2027, as voracious data centers reignite long-dormant growth. That’s a strain on electricity producers, which haven’t seen this pace of expansion since 2000. Keeping up requires hefty capital expenditures, forcing multiple companies to look for deals either with rivals or private equity as they exhaust their investing capacity. S&P Global estimated that, among the U.S. utilities it rates, spending was 24% higher in 2025 compared to a year earlier.

AES is poorly set to meet this challenge. The company is already heavily leveraged, with net debt of some $23 billion compared to expected EBITDA of $3.5 billion next year, according to analyst estimates gathered by LSEG. Sure, there’s always the option of an equity raise, or cutting its dividend, both of which the company said were on the table if a deal doesn’t go through. Dismal stock performance over the past 20 years – and the probable fleeing of income-focused investors – indicate that this fundraising would come at a dear cost.

Enter BlackRock and EQT. Infrastructure funds are looking for ways to put large sums of capital to work for long periods of time. For them, the mismatch of investing a lot upfront for solar or wind farms and only slowly reaping future cashflows isn’t a problem. And while recent market turmoil has dinged the value of alternative investment managers, there’s probably still faith that investments in power generation will be fruitful given rising demand. So the consortium is using equity for the entirety of its purchase price, and simply transferring over AES’s existing debt pile.

The price on offer isn’t bad. AES’s complexity makes it unappealing for other utilities, leaving few obvious bidders. Still, while the bid is 40% above the company’s share price prior to deal talks leaking, it’s also 13% below where shares closed on Friday. At about ten times next year’s EBITDA, the valuation roughly matches where peers trade. More importantly, this is a rare case where fixes really are better made in private.

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CONTEXT NEWS

AES said on March 2 that it had agreed to be acquired by a consortium led by BlackRock’s Global Infrastructure Partners and the EQT Infrastructure VI fund for $10.7 billion, or $15 a share in cash. Including assumed existing debt, the value of the deal is approximately $33.4 billion. The consortium will fund 100% of the purchase price to acquire the company with equity.

The company said the sale would help it meet the need for significant new investments in U.S. electricity generation and its utilities businesses, and that if there had been no transaction, it would probably have had to reduce or eliminate its dividend and issue a substantial amount of new equity.

JPMorgan is acting as lead financial advisor to AES, with Wells Fargo also advising. Goldman Sachs is providing advice to consortium members including GIP, while Citi is advising EQT.

(Editing by Jonathan Guilford; Production by Pranav Kiran)

((For previous columns by the author, Reuters customers can click on CYRAN/robert.cyran@thomsonreuters.com; Reuters Messaging: robert.cyran.thomsonreuters.com@reuters.net))