NEW YORK (Reuters) – U.S. nuclear power provider Constellation Energy on Friday agreed to buy privately-held natural gas and geothermal company Calpine Corp for $16.4 billion, marking one of the biggest acquisitions in the history of the U.S. power industry.
The cash-and-stock deal comes at a time of rising electricity demand, driven by the proliferation of energy-guzzling AI data centers and the electrification of transportation and buildings, which are expected to hit a record this year. Including debt, the transaction valued Calpine at $26.6 billion.
“Demand for our products is expected to grow by levels we haven’t seen in a lifetime,” Constellation CEO Joe Dominguez said on a call with investors following the announcement.
The agreement will turn Constellation, which is the biggest U.S. nuclear plant operator, into the largest U.S. independent power provider.
Shares of Constellation rose 24% in afternoon trading.
The transaction, which is expected to close this year, could add $2 billion to Constellation’s free cash flow annually, and together the companies would have nearly 60 gigawatts (GW) of capacity from zero- and low-emission sources, including nuclear, natural gas and geothermal, Constellation said.
“Overall, the transaction creates the largest coast-to-coast power generator,” S&P’s Aneesh Prabhu said.
With the acquisition, Constellation’s employee base will grow by nearly 20% to 16,500.
“The combination makes CEG bigger in Texas (up to 25% of capacity from 15%), and reduces exposure to PJM (down to 45% from 65%). The supply-demand situation in those regions appears very favorable,” said Tim Winter, portfolio manager at Gabelli Funds.
The arrangement also increases exposure to California to 10% from a negligible amount. Along with Texas, they’re the two most populous, and energy-consuming, in the United States.
Shares of Constellation have jumped by more than 100% over the past year as Big Tech, many with climate-related pledges that required low-carbon power purchases, has driven up demand for nuclear power, which produces virtually no global warming emissions.
In September, Constellation announced an unprecedented power purchase agreement to resume operations at its Three Mile Island nuclear plant to supply electricity to Microsoft data centers.
Last month, the company said it would receive a record $1 billion in nuclear power supply and energy-efficiency contracts with the U.S. government.
With a limited amount of nuclear power available, natural gas has become a more attractive option for data center demand.
Reuters was the first to report in May last year that the three investment firms that took Calpine private in 2017 – Canada Pension Plan Investment Board, Energy Capital Partners and Access Industries – were considering a sale of Calpine.
(Reporting by Seher Dareen in Bengaluru, additional reporting by Mrinalika Roy; Editing by Shilpi Majumdar, Shounak Dasgupta, Daniel Wallis and Nick Zieminski)
