Private equity sees profits in power utilities as electric bills rise and Big Tech seeks more energy

Private investment firms are pouring billions into electric utilities and the data centers that power artificial intelligence, as energy demand grows and electricity bills rise for households and businesses. University of North Carolina finance professor Greg Brown said the motive is simple: there is a lot of money to be made in infrastructure and energy-related assets tied to the digitization of the economy.

BlackRock CEO Larry Fink reinforced that view in a July interview, saying infrastructure is at the beginning of a golden age and that trillions of dollars are needed to invest in power grids, AI and the digitization of the economy.

In recent weeks private equity firms have sought to expand into utilities by buying assets that deliver power or support its delivery. Blackstone has asked regulators to approve the purchases of Albuquerque-based Public Service Company of New Mexico and Texas New Mexico Power Co.; Wisconsin earlier this year approved the buyout of the parent company of Superior Water, Light and Power and last year sold a 19.9% stake in Northern Indiana Public Service Co. to Blackstone.

In Minnesota, BlackRock's subsidiary and the Canada Pension Plan Investment Board would acquire Allete, the publicly traded parent of Minnesota Power, which provides electricity to about 150,000 customers and operates a mix of coal, gas, wind and solar assets. The deal is valued at roughly $6.2 billion, including a premium of about $67 per share.

Regulators will weigh the Minnesota sale ahead of an Oct. 3 vote by the Minnesota Public Utilities Commission. The decision comes as Google has discussed the possibility of a data center in the state, a prospect that would raise the value of Minnesota Power and intensify the stakes for both sides.

Opponents warn that private equity owners tend to pursue higher profits by loading the utility with debt and shifting costs onto ratepayers. Advocates say the investment could help fund essential upgrades and meet long-term state goals. Analyst Karlee Weinmann of the Energy and Policy Institute said the profit motive in private equity-owned utilities can fall on ratepayers, particularly if debt burdens grow.

Allete argues that BlackRock would bring patient, long-horizon capital and would not change Minnesota Power's operations or values. It said the deal would help Minnesota Power raise money to meet Minnesota's 2040 carbon-free electricity standard and fund about $4.3 billion in transmission and clean-energy projects over the next five years.

In July an administrative law judge recommended that the commission reject the deal, saying the evidence shows BlackRock's intent to maximize profits through control of a regulated utility. A subsequent staff analysis echoed those concerns, warning that highly leveraged ownership could provide profits to owners while leaving ratepayers with risk if the deal succeeds or fails.

Support for the sale includes labor unions and Gov. Tim Walz's administration, while the state attorney general's office and industrial customers such as U.S. Steel and pulp-and-paper mills oppose the deal.

Industry observers see the Minnesota case as part of a broader trend in which private equity seeks to monetize regulated assets. Utilities are attractive because they offer regulated returns tied to capital investments rather than wholesale power prices.

The Oct. 3 decision could shape how similar deals unfold across the country as private equity firms race to capture long-term earnings in the U.S. electric-utility landscape while regulators assess the impact on ratepayer bills.