2025-01-22 20:52
Mega-exits rare but stand out amid private equity's cash return struggles Favorable 2025 conditions could boost dealmaking, prospects for PE mega-exits Limited buyer universe, deal size among hurdles for mega-exits Only 27 such exits out of 2,900 U.S. PE sales between 2020-24 Jan 22 (Reuters) - Calpine Corp's $16.4 billion sale to Constellation Energy (CEG.O) , opens new tab is set to generate a handsome windfall for the power producer's owners, but has also stoked hopes within the private equity world that similar mega-exits may help an industry struggling to return investor cash. The trio of investors - Energy Capital Partners (ECP), Canadian pension fund CPP Investments and Access Industries - and their limited partners are expected to pocket a return of around four times their original outlay, according to people familiar with the matter. Not only was the Jan. 10 agreement the largest transaction in the U.S. power industry in nearly two decades, but the Calpine owners are also set to reward investors holding significant positions in their portfolios. In the case of ECP, liquidating around a quarter of its $5 billion third flagship fund, as well as stakes in other ECP vehicles, two of the sources said. This type of mega-exit is rare in the buyouts world: only 27 sales worth more than $10 billion were struck between 2020 and 2024, out of almost 2,900 U.S. companies divested by private equity in the time period, according to data provider Dealogic. Among the few in 2024 were GTCR and Apax Partners' deal to sell insurance brokerage AssuredPartners to Arthur J Gallagher (AJG.N) , opens new tab for $13.45 billion, and Home Depot's HD.N $18.25 billion purchase of hardware supplier SRS Distribution from Leonard Green & Partners and Berkshire Partners. Such large deals are gaining greater significance, though, amid the money management industry's struggles to offload bets made during the boom years of the late-2010s and into the early part of this decade, according to several private equity investors and advisers interviewed by Reuters. With the overall dealmaking environment expected to be favorable in 2025, industry participants are hoping even a small increase in such transactions could help improve the recycling of capital and head off impatient investors. "It's looking like 2025 is going to have a lot of the right conditions," said John Grand, co-head of the corporate practice at law firm Vinson & Elkins. "Public equities feel like they are somewhat overvalued, so people are looking for private deals. Interest rates are coming down, and you also have political predictability for the next few years." GOLDILOCKS DEALS The upbeat thinking comes after a lean couple of years for exits. Many sale processes failed amid a disconnect in price expectations between buyers and buyout firms wanting top dollar for assets - often bought during the period of historically low interest rates, when debt was cheap and valuations soared. For the largest deals, this environment compounded the fact they are harder to accomplish in the first place, given the limited universe of buyers. While an initial public offering (IPO) is an alternative, sellers can exit their investment immediately, rather than having to hold a sizable stake in publicly traded companies for several months or years. "Strategics only do deals at certain times, so the stars aligned around the Constellation deal, and we will achieve most of the IPO upside but with reduced execution risk," said Tyler Reeder, president and managing partner of ECP. Pressure to reward LPs is increasingly prominent. The ratio of exits by private equity versus new investments fell to a record low in 2024, while at the current pace it would take eight years for buyout firms to exit their existing U.S. portfolios, according to data from PitchBook. Against this backdrop, larger deals can be more efficient in returning cash versus the time needed to execute multiple smaller investments. "DPI is a priority for LPs right now, so being able to strike an all-cash deal of this magnitude is meaningful and appreciated by investors," said Aaron Cohen, head of financial services & technology at GTCR, of its AssuredPartners deal. Distributions to paid-in capital (DPI) is a metric that evaluates money managers in terms of how much cash is returned to investors. GTCR earned around 2.5 times its original investment made in 2019 when agreeing to sell AssuredPartners, according to a source familiar with the matter. Although mega-exits are highly prized, an increase in those transactions may not be a panacea for the industry, given that they are complicated to pull off. "They are Goldilocks transactions," said Bill Nelson, a partner at law firm A&O Shearman. Sign up here. https://www.reuters.com/markets/deals/private-equity-mega-exits-become-more-valuable-amid-slow-investor-payouts-2025-01-22/
2025-01-22 20:39
Jan 22 (Reuters) - Power grid operator PJM Interconnection on Wednesday said it hit a preliminary record for winter demand with a peak load of 145,000 megawatts (MW), while also exporting 8,000 MW, driven by extreme cold nationwide. This surpasses the previous record of 143,700 MW set in February 2015, pending data verification, said PJM, which serves nearly 65 million people in all or parts of 13 states from Illinois to New Jersey. High demand, nearly 140,000 MW, is expected on Wednesday evening and Thursday morning, Mike Bryson, PJM's senior vice president of operations, said in a statement. Soaring prices and record gas demand this week helped boost spot power prices to a record high of $275 per megawatt hour at the PJM West Hub in western Pennsylvania. Meanwhile, the Tennessee Valley Authority (TVA) said power demand in its seven-state region soared to an all-time peak of 35,319 MW on Wednesday, topping the previous peak of 34,577 MW set on Jan. 17, 2024. The peak occurred Wednesday morning as temperatures across the system dipped to 11 degrees Fahrenheit (-11.7 Celsius). To ease strain on the grid, TVA on Tuesday asked customers to conserve power Wednesday morning. TVA supplies electricity to 10 million people across seven southeastern states. Sign up here. https://www.reuters.com/business/energy/us-pjm-power-demand-hits-preliminary-winter-record-during-winter-freeze-2025-01-22/
2025-01-22 19:57
Rollins led Texas policy group that said ethanol raised emissions and food prices Trump had mixed record on ethanol in first term Rollins to face nomination hearing on Thursday Jan 22 (Reuters) - President Donald Trump's pick to run the Agriculture Department, Brooke Rollins, led an organization that opposed ethanol mandates and farm subsidies, major programs she could influence if confirmed, according to a Reuters review of the group's policy statements. That background may put Rollins at odds with farm state lawmakers at her nomination hearing on Thursday and revive concerns in the powerful corn and biofuel lobbies about Trump's mixed record on ethanol during his first term in office. "The hearing is a perfect occasion to renounce the misleading and demonstrably false statements made about ethanol by some of her colleagues more than a decade ago," said Geoff Cooper, president and CEO of the Renewable Fuels Association, an ethanol trade group. Rollins was president and CEO of the Texas Public Policy Foundation from 2003 to 2018, during which time the oil industry-backed nonprofit argued that government support for ethanol contributed to higher emissions and rising food and fuel prices. The oil industry has seen ethanol as a threat to its share in the gasoline market, and says a federal mandate requiring the biofuel to be blended in to the nation's fuel supply costs it a fortune in compliance costs. "As a way to save the planet, not many policies are worse than government-backed ethanol. It’s bad for the economy, bad for the environment, doesn’t reduce greenhouse gases, and has led to rapidly rising food prices," said one article published by the Texas group in 2012. In 2017, Rollins endorsed Kathleen Hartnett White, the longtime director of the group's energy program, to serve as Trump's chair of the White House's Council on Environmental Quality. The White House later withdrew her nomination after a contentious hearing that included criticism of her ethanol positions from farm state senators. White had supported a 2008 effort by then-Texas governor Rick Perry to partially waive the ethanol blending program, known as the Renewable Fuel Standard, in the state. The Environmental Protection Agency, which administers the program, denied Perry's request. During Rollins' tenure, the group also called for the elimination of farm subsidies in a 2016 report titled "The Policymaker's Guide to Corporate Welfare." The report said offering loan guarantees to farmers to start or expand their operations "introduces distortions into the marketplace." The USDA issues billions of dollars in direct and guaranteed loans each year to support the domestic farm economy. Rollins, who served as acting director of the White House Domestic Policy Council during Trump's first term, is set to appear before the Senate Agriculture Committee for her nomination hearing on Thursday. "Brooke Rollins will work to enact the President’s agenda, and you can look to President Trump’s past statements of support for biofuels to understand the Administration’s position on this issue," said Anna Kelly, a spokesperson for the Trump administration transition team. During his 2017-21 term, Trump boosted corn-based ethanol by enabling year-round sales of higher ethanol blends of gasoline, but also angered the ethanol industry by expanding the use of waivers exempting small refiners from the federal blending requirement. Ethanol trade group Growth Energy said it supports Rollins' nomination and believes the Trump administration will support the ethanol industry's priorities. During the Biden administration, Rollins led the America First Policy Institute, a policy organization closely tied to Trump which has expressed skepticism about climate change. More than 400 state and national agriculture groups wrote to Senate agriculture committee leaders John Boozman and Amy Klobuchar on Jan. 15 to endorse Rollins. "Her close working relationship with incoming President Trump will ensure that agriculture and rural America have a prominent and influential voice at the table when critical decisions are made in the White House," the letter said. Sign up here. https://www.reuters.com/world/us/trumps-usda-secretary-pick-led-group-opposed-ethanol-farm-subsidies-2025-01-22/
2025-01-22 19:54
CAIRO, Jan 22 (Reuters) - Egyptian President Abdel Fattah al-Sisi said on Wednesday that the state needs $20 billion annually to secure petroleum products, according to a video provided by Sisi's office. Sign up here. https://www.reuters.com/markets/commodities/egypts-sisi-says-state-needs-20-bln-annually-secure-petroleum-products-2025-01-22/
2025-01-22 19:16
Canadian dollar loses 0.3% against the greenback Trades in a range of 1.4302 to 1.4391 Price of U.S. oil hits a 12-day low 10-year yield rises 4.1 basis points to 3.304% TORONTO, Jan 22 (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Wednesday as investors braced for the Bank of Canada to cut its benchmark interest rate further below the Federal Reserve's key rate at a policy decision next week. The loonie was trading 0.3% lower at 1.4360 per U.S. dollar, or 69.64 U.S. cents, after trading in a range of 1.4302 to 1.4391. On Tuesday, the currency touched its weakest intraday level in nearly five years at 1.4515 after U.S. President Donald Trump said he was thinking about imposing a 25% tariff on goods from Canada on Feb. 1. "Today's market activity doesn't appear to be tariff-driven," said Tony Valente, senior FX dealer at AscendantFX. "Instead, it seems to reflect growing recognition of monetary policy divergence. Yesterday's lower inflation reading in Canada paves the way for the Bank of Canada to cut rates at next week's policy meeting, while the Federal Reserve is likely to hold steady." Data on Tuesday showed that Canadian inflation slowed to an annual rate of 1.8% in December. Investors see a roughly 80% chance that the Bank of Canada will cut by 25 basis points to 3% on Jan. 29. That would leave the rate 150 basis points below the upper end of the Federal Reserve's 4.25%-4.50% range for its policy rate, which is an historically wide gap. Canadian retail sales data for November, due on Thursday, could offer clues on the strength of the domestic economy. Economists forecast a month-over-month gain of 0.2%. The U.S. dollar (.DXY) , opens new tab edged higher against a basket of major currencies, while the price of oil, one of Canada's major exports, fell to a 12-day low. The Canadian 10-year bond yield was up 4.1 basis points at 3.304%, after touching its lowest level since Jan. 3 at 3.218% during Tuesday's session. Sign up here. https://www.reuters.com/markets/currencies/canadian-dollar-falls-investors-eye-wider-interest-rate-gap-2025-01-22/
2025-01-22 19:07
B2Gold to invest $10 million in Mali's Fekola complex Mali's new mining code causes disputes with gold miners B2Gold maintains dialogue with Mali officials post-settlement Jan 22 - Canadian miner B2Gold (BTO.TO) , opens new tab said it is moving forward with plans to invest $10 million in exploration at the Fekola gold complex in Mali this year after a settlement with the government over its mining code reduced the risk of disruption. Mali introduced the new mining code in August 2023, as other military-led governments in West Africa have done. The code gives the state a bigger share of mining revenues and removes tax exemptions for mining companies. B2Gold was one of the first companies to negotiate a settlement with Mali over its new code, settling an income tax demand in September and agreeing to move one part of its exploration to the new regulations. Fekola has a producing mine as well as ongoing exploration. "From a B2Gold perspective, we have seen a reduction in risk since the signing of our settlement agreement," said Clive Johnson, CEO of B2Gold, in an email late on Tuesday in response to Reuters questions. Malian officials have detained and arrested employees from companies that did not agree to the new code and tax payments. The country has issued arrest warrants for Mark Bristow, CEO of Barrick Gold - the biggest investor in the country. Mali this month seized $250 million of gold from Barrick's Loulo-Gounkoto mine, and Barrick has suspended its operations B2Gold's Johnson said that the company does not expect any government effort to detain its managers in Mali. "We have expatriate employees that move in and out of the country regularly, including some of the mine management, so there is no reason to think that any detention would ever be contemplated as it relates to B2Gold." Shares of B2Gold were trading up by 0.8% at the Toronto Stock Exchange on Wednesday at 1807 GMT. Sign up here. https://www.reuters.com/markets/commodities/b2gold-says-mali-risks-reduced-continue-exploration-spending-2025-01-22/
