Driving the Energy Transition: Role of a Leading Investment Bank

Published on February 5, 2025

The United States is currently at a critical juncture, facing escalating energy demands while striving to reduce its carbon footprint. The transition to clean energy is not merely an option; it is a necessity driven by urgent environmental considerations and technological imperatives. Energy finance professionals, such as Angad Dhamija, play a pivotal role in navigating these complexities. As a Senior Associate at PEI Global Partners (“PEI”), Mr. Dhamija works as a part of deal teams that strategize and implement essential energy transactions aligned with national energy objectives.

Since its inception in late 2021, PEI has established itself as a leading force in the energy sector, engaging in transactions that significantly influence the trajectory of investments and underscore the firm’s commitment to sustainability. In a short timeframe, the boutique investment bank has advised on several landmark transactions that have had important implications for the broader power and energy sectors.

One such transaction was the execution of the largest gas M&A deal between 2018 and 2023. This transaction involved the sale of four combined cycle gas turbine (“CCGT”) plants, totaling approximately 3,600 MW, located across four different states. This deal is significant for several reasons. First, it demonstrates the ongoing importance of efficient natural gas power plants in bridging the gap between rising electricity demands and the intermittency arising from regional solar and wind concentrations. In its September 2024 report, the Information Technology and Innovation Foundation (“ITIF”), a prominent public policy think tank focused on industry and technology, concluded that existing natural gas-fired power plants will remain essential for decades in addressing the country’s power deficits arising from the intermittent nature of renewable energy sources such as solar and wind. Seeing the narrative towards conventional power change over the last two years, Mr. Dhamija also explains, “instead of seeing natural gas power plants as competition to renewable power plants, these assets should be seen as renewable-enabling technology, especially as the demand for power surges with growing electrification needs as well as with the rapid scaling of data centers.” Second, it catalyzed a wave of M&A activity involving similar power plant portfolios, with over 35 GW of thermal power plant M&A deals initiated since PEI launched its transaction in May 2023. This highlights the far-reaching implications of the transaction on the broader energy sector, which has seen a strong advocacy for reliable conventional generation assets in the last twelve months driven by the needs of the economy. Finally, the complexity involved in executing transactions of this scale highlights the essential role investment banks like PEI play in facilitating such deals.

Successfully guiding this transaction to closing earned PEI the prestigious IJGlobal Power and Transmission Acquisition of the Year in North America award for 2024. This award underscores PEI’s outstanding achievement in executing one of the most transformative and high-impact transactions in the power industry. Mr. Dhamija was part of the core deal team that was involved in all aspects of the transaction, from initiation to closing, including conducting multiple analyses for both sellers and buyers, preparing and communicating the investment thesis to investors, negotiating legal aspects of the transaction, and overseeing daily tasks to ensure that all workstreams were completed within the desired timeline.

Another notable transaction that PEI advised on was raising a $650 million debt facility for Aypa Power (“Aypa”) in July 2024. Aypa, an owner and operator of battery storage assets, required this financing to support its growth initiatives for building and operating utility-scale battery storage systems in North America. Similar to conventional power assets that enable flexible generation, batteries can also supply the necessary power to address deficits during peak demand periods. According to ITIF research, battery storage systems can complement the available capacity from gas generators, effectively mitigating both predictable and unpredictable power shortages resulting from fluctuations in renewable energy generation.

This financing facility was designed to be highly flexible, incorporating several tranches tailored to Aypa’s specific needs. Mr. Dhamija, a member of the deal team for this transaction, explains, “the final facility ultimately consisted of a term loan, a letter of credit facility, and a revolving credit facility, all of which were highly specific to Aypa’s needs.”

PEI has been a pioneer in structuring such flexible financing solutions, having closed one of the first facilities of this kind in 2022 for Hecate Energy, for which the firm also received IJGlobal’s ESG Finance Innovation Award in 2023. What makes Aypa’s transaction particularly significant is its overall size, making it the largest battery storage financing to date, highlighting the willingness of capital sources to push boundaries in support of energy transition initiatives.

Looking Ahead

Energy transition is a long-term endeavor filled with opportunities for innovation and growth. Reflecting on the evolution he has witnessed, Mr. Dhamija states, “when I started working in the power space as an investment banker almost four years ago, battery storage was a nascent technology and did not receive as much attention as solar and wind technologies. Since then, battery storage deployment has surged, with almost all of my renewable deals including at least a minor battery storage component.” Similarly, stringent ESG goals from investors had driven gas M&A activity to multi-year lows at the beginning of the decade; however, there has since been a renaissance fueled by growing electricity needs and the recent data center driven demand for electricity.

Given the dynamic nature of the energy sector and its interdependence with other industries, advisory firms like PEI play a crucial role in navigating these changes and supporting businesses in adapting effectively. PEI’s extensive range of coverage within the power sector - including renewable and conventional generation technologies, as well as various services such as M&A, project financing, and corporate financing - provides the investment bank with the agility necessary to adapt to the evolving needs of the industry and effectively serve its clients. By integrating strategic M&A with innovative financing, PEI is helping in shaping the future landscape of sustainable energy in the United States.