Constellation Energy has agreed to acquire the privately held energy company Calpine in a significant cash-and-stock deal valued at $26.6 billion, which includes the assumption of Calpine's debt. This acquisition signals a crucial step in the energy sector as Constellation aims to expand its portfolio in the low-carbon generation landscape. The deal involves a direct purchase of Calpine at an equity price of approximately $16.4 billion, structured through a combination of 50 million shares of Constellation stock and an infusion of $4.5 billion in cash.
In addition to this equity transaction, Constellation will take on about $12.7 billion of Calpine's existing debt, strengthening its operational capacity and market presence. According to joint statements released by the companies, the total net amount of $26.6 billion reflects not only the cash flow anticipated to come from Calpine by the time the transaction closes but also certain tax advantages tied to the firm.
Following the announcement, Constellation's stock surged by 20% during intraday trading, signaling strong investor confidence in the strategic implications of the merger. The Chief Executive Officer of Constellation, Joe Dominguez, articulated the strategic vision behind this merger, emphasizing that the combination of Constellation’s unparalleled expertise in zero-emission nuclear energy with Calpine’s leading position in low-carbon natural gas and geothermal generation will create a robust array of energy products and services available in the market.
With nearly 60 gigawatts of combined capacity expected from zero- and low-emission sources, the partnership aims to enhance service delivery across the continental United States, particularly with significant expansions planned in Texas and other key states such as California, Delaware, New York, Pennsylvania, and Virginia. The transaction hinges on approvals from regulatory bodies, including the Federal Energy Regulatory Commission and the Canadian Competition Bureau, and is anticipated to finalize within a 12-month period.
Constellation plans to maintain its headquarters in Baltimore following the successful completion of this acquisition. Financial projections indicate that this transaction will significantly benefit Constellation’s economics; it is forecasted to be accretive to the company's adjusted operating earnings per share by over 20% by 2026, with incremental growth of at least $2 in subsequent years.
Constellation is also targeting double-digit growth in its base earnings throughout the decade, with anticipations of adding more than $2 billion in adjusted free cash flow annually. Calpine's CEO, Andrew Novotny, who will retain leadership over Calpine post-acquisition, stated, "Together, we will be better positioned to bring accelerated investment in everything from zero-emission nuclear to battery storage that will power our economy in a way that puts people and our environment first." This strategic acquisition stands as a testament to the evolving landscape of the energy sector, aiming for sustainability and responsible energy solutions..