Constellation Power to purchase Calpine in blockbuster $16.4 billion US energy deal

By Laila Kearney and Seher Dareen

NEW YORK (Reuters) -U.S. nuclear energy supplier Constellation Power (NASDAQ:CEG) on Friday agreed to purchase privately held pure gasoline and geothermal firm Calpine Corp for $16.4 billion, one of many largest acquisitions in U.S. energy trade historical past.

The cash-and-stock deal comes at a time of rising electrical energy demand, pushed by the proliferation of energy-guzzling AI knowledge facilities and the electrification of transportation and buildings, that are anticipated to hit a document this 12 months. Together with debt, the transaction valued Calpine at $26.6 billion. 

“Demand for our merchandise is predicted to develop by ranges we have not seen in a lifetime,” Constellation CEO Joe Dominguez mentioned on a name with traders following the announcement.

The settlement will flip Constellation, the largest U.S. nuclear plant operator, into the most important U.S. impartial energy supplier, sharply rising its mixture of pure gas-fired electrical energy technology.

“Pure gasoline goes to see a major resurgence as a result of it’s essential to energy the grid,” Dominguez individually advised Reuters in an interview.

“That does not imply that simply any pure gasoline is required,” he mentioned, including that Calpine’s low carbon-intensity gasoline fleet and developments in carbon seize know-how have been a part of what made it a horny buy.

Shares of Constellation rose 25% to shut above $305, their largest ever each day proportion acquire. 

The transaction, which is predicted to shut this 12 months, may add $2 billion to Constellation’s free money circulate yearly, and collectively the businesses would have practically 60 gigawatts (GW) of capability from zero- and low-emission sources, together with nuclear, pure gasoline and geothermal, Constellation mentioned.

“General, the transaction creates the most important coast-to-coast energy generator,” S&P’s Aneesh Prabhu mentioned. 

BIGGER FOOTPRINT

With the acquisition, Constellation’s worker base will develop by practically 20% to 16,500.

“The mixture makes CEG larger in Texas (as much as 25% of capability from 15%), and reduces publicity to PJM (all the way down to 45% from 65%). The availability-demand scenario in these areas seems very favorable,” mentioned Tim Winter, portfolio supervisor at Gabelli Funds.

The association additionally will increase publicity to California to 10% from a negligible quantity. California and Texas are the 2 most populous and energy-consuming U.S. states.

Shares of Constellation have jumped by greater than 100% over the previous 12 months as Massive Tech, many with climate-related pledges requiring low-carbon energy purchases, boosted demand for nuclear energy, which produces nearly no international warming emissions.

In September, Constellation introduced an unprecedented energy buy settlement to renew operations at its Three Mile Island nuclear plant to produce electrical energy to Microsoft (NASDAQ:MSFT) knowledge facilities.

Final month, the corporate mentioned it might obtain a document $1 billion in nuclear energy provide and energy-efficiency contracts with the U.S. authorities.

With a restricted quantity of nuclear energy out there, pure gasoline has turn out to be a extra enticing choice for knowledge heart demand.

Reuters was the primary to report in Could final 12 months that the three funding companies that took Calpine personal in 2017 – Canada Pension Plan Funding Board, Power Capital Companions (WA:CPAP) and Entry Industries – have been contemplating a sale of Calpine.