Constellation Energy, the nation's largest nuclear power plant operator, has agreed to buy another power company, Calpine, for $16.4 billion. The deal shows how rapidly demand for electricity is growing, in part due to data centers being built for artificial intelligence. It has far-reaching effects on the economy.
The cash-and-stock deal announced Friday ranks among the largest in the power sector and signals that natural gas is likely to play a larger role in meeting the nation's power needs than many expected years ago. It shows. If companies don't quickly find a way to capture and store emissions from gas power plants, efforts to combat climate change could be undermined.
The partnership expands Constellation's portfolio as companies such as Microsoft, Google and Amazon scramble to secure energy for data centers used to run artificial intelligence and other services. Energy demand is also increasing due to the construction of new factories and the increased use of electric vehicles and heat pumps in the United States.
Calpine is a privately held Houston-based company that operates large natural gas power plants in several states as well as the Geysers geothermal energy complex in California.
Baltimore-based Constellation said in a statement that it expects Calpine's natural gas assets to help ensure grid reliability. The combination will also expand the company's presence in Texas, where electricity demand is rapidly growing, and add more renewable energy to its portfolio.
“We believe that natural gas and geothermal, along with nuclear power, will become very important to the nation,” Constellation CEO Joseph Dominguez said on a conference call with investors and analysts Friday morning. said.
He added that it is important to ensure that energy resources are not only sustainable but also reliable. “We believe that the combination of natural gas and clean energy is very attractive to customers,” Dominguez said.
Constellation's stock price soared more than 20% in early trading Friday, an unusually large jump for an acquired company. The company's stock price had already more than doubled over the past year as expectations for growth in U.S. electricity demand grew.
Constellation will pay $4.5 billion in cash and assume approximately $12.7 billion of Calpine's debt as part of the deal.
Nuclear power plants, which can operate 24 hours a day without emitting planet-warming emissions, have been early beneficiaries of soaring investment in artificial intelligence. Last year, Constellation agreed to spend $1.6 billion to restart its nuclear reactor at Three Mile Island, near Harrisburg, Pennsylvania. This project is effectively being paid for by Microsoft.
However, only a small number of idle nuclear power plants can be restarted. Some companies are betting on new small nuclear reactors, but even if all goes well, it will be at least several years before they start producing meaningful amounts of electricity.
As a result of these challenges, many energy and technology companies are increasingly turning to natural gas, even though its use emits carbon dioxide and methane, the main greenhouse gases that warm the planet. I started paying attention.
“It's going to be difficult for utilities to provide the power these data centers need without gas,” said Andrew Gillick, energy strategist at analytics firm Enverus.
Goldman Sachs estimated last year that electricity demand from data centers is expected to grow by an average of 15% a year through the end of 2010.
Calpine CEO Andrew Novotny said the combined company would be able to invest in new power generation. “Together, we will be in a position to accelerate investment in everything from zero-emission nuclear power to batteries that power the economy by putting people and the environment first,” he said in a statement. said.
A diverse group of power plants could allow the new company to manage its resources more efficiently as electricity demand changes. However, adding more natural gas to the portfolio exposes Constellation to additional risks related to commodity price fluctuations, Enbels said.
The deal with Constellation marks the culmination of a major turnaround for Calpine, which has come under pressure in recent years as California and other states look to transition away from fossil fuels. A group of investors, including Energy Capital Partners, took Calpine private several years ago in a deal valued at $5.6 billion, not including debt.
The companies said they expect the transaction to close within a year, subject to regulatory approval. Mr. Dominguez said that by selling the assets, Constellation would address potential concerns raised by antitrust authorities about its market power.
Ivan Penn contributed reporting.
