Nuclear Giant Constellation Closes Calpine Deal While Retail Investors Lose Faith - 24/7 Wall St.[S&P 5006,912.40 +0.31%][Dow Jones49,320.40 +0.32%][Nasdaq 10025,077.80 +0.39%][Russell 20002,667.81 +0.61%][FTSE 10010,783.30 +0.65%][Nikkei 22559,655.30 +2.98%][Investing]# Nuclear Giant Constellation Closes Calpine Deal While Retail Investors Lose Faith### Quick ReadConstellation Energy (CEG) is down 17% year-to-date to $293. Retail investor sentiment dropped from 54.7 to 41.1.Constellation closed the Calpine ...

| | 2000 Cycle | 2025 Cycle | | --- | --- | --- | | | Speculative: Market deregulation led investors | Concrete demand: Real-time electricity demand most | | Primary Demand Driver | to build power plants without guaranteed | notably Data Centers, but also underlying electricity | | | buyers. | consumption growth (EV, industrial) | | | U.S. Centric: Driven almost entirely by the | US driven, but relatively more globally diverse: US | | Regional Anchor | North American power market. | demand (DC driven) + Asi ...

Core Viewpoint - Constellation Energy is expected to report its fourth-quarter and full-year financial results soon, likely before February 20, which may present an investment opportunity if strong guidance is provided [1][8]. Financial Performance - In the last earnings report on November 7, Constellation Energy reported adjusted operating earnings of $3.04 per share, an increase from $2.74 per share year-over-year [3]. - The company narrowed its full-year guidance, projecting adjusted earnings per share of $9.05 to $9.45 for 2025, with an expectation of fourth-quarter earnings between $3.03 and $3.43 per share [3]. Market Data - The current stock price of Constellation Energy is $12.25, with a market capitalization of $90 billion [4]. - The stock has experienced a 4.44% increase recently, but has faced a decline over the past few months despite positive earnings and expansion initiatives [5][8]. Strategic Developments - Constellation Energy completed a significant $26.6 billion acquisition of Calpine, enhancing its position as a diversified power producer by combining its nuclear fleet with Calpine's natural gas and geothermal assets [5]. - The company has secured a 380-megawatt agreement with CyrusOne for a new data center, contributing to a total of 1.1 gigawatts of power agreements between the two [6]. - The U.S. Nuclear Regulatory Commission approved license amendments and renewals for several clean energy centers, allowing for over $500 million in investments to modernize these facilities [7]. Investment Outlook - Despite recent stock price declines, the company is well-positioned to capitalize on increasing power demand from data centers, making it a potentially attractive investment before the earnings report [9].

Group 1: Constellation Energy (CEG) - Constellation Energy is trading over 30% below its October records, despite being up 220% over the past three years, significantly outperforming the benchmark [1][4] - The company is positioned as a leader in the nuclear energy sector, with a strong outlook supported by a $27 billion acquisition of Calpine, enhancing its role in the AI energy landscape [8] - CEG's adjusted EPS is projected to grow by approximately 8% in 2025 and 22% in 2026, with a consistent dividend increase plan, raising dividends by 10% in 2025 after a 25% increase in 2024 [11][12] Group 2: Quanta Services (PWR) - Quanta Services has experienced a 75% increase in stock price over the past year, with a 24% year-to-date rise, driven by its involvement in the AI energy boom and grid expansion [3][16] - The company has doubled its revenue from $11.20 billion in 2020 to $23.67 billion in 2024, with a record backlog of $32.64 billion as of Q3 [22][23] - PWR is projected to grow its revenue by 18% in FY25 and 10% in 2026, reaching $30.84 billion, while also expanding its adjusted earnings by 18% and 17% respectively [24][27]

Core Insights - Key events for Constellation Energy (CEG) to watch include strategic developments and industry dynamics [1] Recent Events - The acquisition of Calpine is expected to be completed between the second half of 2025 and the first half of 2026, which will create the largest clean energy portfolio in the U.S. and enhance adaptability to fluctuations in electricity demand [2] Financial Performance - If the acquisition is successfully integrated, the earnings per share (EPS) is projected to grow by over 20% by 2026, potentially increasing the dividend payout ratio from the current 35% to 45% [3] Contract Developments - A long-term power purchase agreement with Microsoft, supporting the Three Mile Island nuclear plant, highlights the role of nuclear power as a baseload energy source in the AI era, with future electricity demand growth likely benefiting from data center expansion [4] Industry Policy and Environment - Nuclear power is expected to be included in federal subsidy policies by 2026, which could further support performance if implemented [5]

Core Viewpoint - Constellation Energy Corporation (NASDAQ: CEG) is recognized as a promising investment opportunity, particularly following its recent acquisition of Calpine for $16.4 billion, which is expected to enhance its growth potential despite regulatory risks [2]. Group 1: Acquisition and Financial Impact - The completed acquisition of Calpine is seen as a significant growth catalyst, with expectations of adding approximately $2 billion in annual free cash flow [3]. - The acquisition will expand Constellation's capacity to 55 GW of zero- and low-emission energy sources, including nuclear, natural gas, and geothermal generation [3]. Group 2: Regulatory Developments - The U.S. Nuclear Regulatory Commission has approved 20-year license renewals for the Clinton and Dresden clean energy centers, facilitating the company's operational longevity [3]. - Planned investments exceeding $370 million will be directed towards relicensing and upgrading reactors, allowing for extended operations through 2047 for Clinton and 2049-2051 for Dresden [3]. Group 3: Market Position and Services - Constellation Energy focuses on the generation, supply, and marketing of clean electricity, natural gas, and geothermal assets, along with wholesale and retail energy services [4].

Group 1: Company Overview - Constellation Energy is positioned to benefit from the rise of artificial intelligence (AI) in the U.S. nuclear energy sector [1] - The company operates the largest nuclear fleet in the U.S. and has secured long-term contracts extending over the next decade [4][3] - Constellation has completed its acquisition of Calpine, making it the largest producer of electricity in the U.S. [7] Group 2: Market Performance - Nuclear energy stocks, including Constellation Energy, were among the best-performing stocks in the energy sector in 2025, with significant gains reported [1] - The VanEck Uranium and Nuclear ETF ended the year with a 12-month gain of over 50% [1] Group 3: Future Prospects - Constellation may explore the development of next-generation reactors to meet the demand from AI data centers, as indicated by CEO Joe Dominguez [8] - While Constellation may not deliver the same growth potential as start-ups, it is well-positioned for growth over the next decade due to its operating assets and long-term contracts [9]

Core Viewpoint - An analyst at Wells Fargo has reduced the price target for Constellation Energy from $478 to $460 per share, leading to a 4% decline in the stock price on the day of the announcement, although the analyst maintained a buy recommendation [1][2][7]. Group 1: Analyst Actions - Shahriar Pourreza of Wells Fargo cut the fair value assessment of Constellation Energy to $460 per share from $478, while still recommending the stock as a buy [2][7]. - The reduction in price target coincided with a new initiative by the Trump administration to build new power-generation capacity in the Mid-Atlantic region, which may impact energy prices [3][4]. Group 2: Market Context - The National Energy Dominance Council (NEDC) announced measures to alleviate high energy prices, which could negatively affect top producers like Constellation Energy [3][4]. - The NEDC aims to urge PJM Interconnection to make electricity more affordable and strengthen grid reliability by investing over $15 billion in reliable baseload power generation [4]. Group 3: Company Position - Constellation Energy recently completed a $26.6 billion acquisition of Calpine, which included assuming approximately $12.7 billion in debt, adding pressure during a time of potential price caps on energy [4]. - Despite the recent price target cut, Constellation remains a leading player in the nuclear energy sector, which is currently experiencing growth [5].

Core Insights - Constellation Energy has evolved significantly since its spin-off from Exelon in early 2022, focusing on merchant power generation while Exelon manages regulated utilities [1] - The company has signed two major nuclear power deals and is in the process of acquiring Calpine for $26.6 billion, which will enhance its scale and capacity [4] Group 1: Company Overview - Constellation Energy is one of the largest clean power producers in the U.S., operating over 32.4 gigawatts (GW) of power generation capacity, sufficient to supply electricity to more than 20 million homes and businesses [3] - Approximately 90% of the power produced by Constellation comes from carbon-free sources, including the largest nuclear power fleet in the nation, along with hydro, wind, and solar energy assets [3] Group 2: Strategic Developments - The acquisition of Calpine will increase Constellation's capacity to nearly 60 GW, positioning the company to better meet the growing power demand driven by factors such as AI data centers and increased electrification [4][5] - Electricity demand is projected to grow by 58% by 2045, significantly outpacing the growth seen in the past two decades, creating a strong market for clean power, including natural gas [5] Group 3: Nuclear Energy Focus - Constellation Energy is capitalizing on the resurgence of nuclear energy by securing new power purchase agreements (PPAs) with technology companies, including a 20-year PPA with Microsoft for the Three Mile Island plant [7][8] - The company plans to restart the dormant Unit 1 reactor at Three Mile Island, which is expected to be operational by 2028, further enhancing its nuclear power capabilities [8]

Core Viewpoint - Shares of Constellation Energy fell 9.7% amid new regulatory developments that may limit pricing power for existing power generation assets [1][2] Group 1: Market Performance - Constellation Energy's stock had previously surged nearly 58% in 2025 due to increased electricity demand from AI data centers, benefiting from its nuclear power plant capacity [1] - The stock's recent decline reflects concerns over new regulatory measures that could impact revenue generation from existing power sources [1][2] Group 2: Regulatory Developments - The Trump Administration, along with local governors in the Mid-Atlantic PJM utility grid regions, announced a "statement of principles" that may complicate utilities' ability to charge higher rates for existing power generation [2][3] - The new plan involves large tech companies bidding for 15-year contracts to support the construction of new power plants, which could help address the undersupply in the PJM region [5][7] - While the plan aims to facilitate new construction, it may also impose price caps on existing power sources, potentially limiting profitability for companies like Constellation [5][8] Group 3: Company Positioning - Constellation derives approximately 69% of its power generation revenue from the PJM region, which will decrease following its acquisition of Calpine, but the PJM market will still represent 49% of the combined company's revenues [4] - The PJM region is currently undersupplied by about six gigawatts, equivalent to six nuclear power plants, indicating a need for new capacity [5]