Constellation Energy

Pitched an equity stock, recommending a Buy on Constellation Energy, the largest U.S. producer of carbon-free power. The analysis focused on EPS growth potential, clean energy leadership, and synergies from the Calpine acquisition, supported by DCF and comparable valuation models.

Overview


Pitched Constellation Energy Group (NYSE: CEG) as a long-term buy based on its dominant position in clean energy, strong earnings growth, and strategic acquisition of Calpine. The stock is poised to benefit from rising AI-related power demand, federal incentives, and pricing power in deregulated markets.

Key Points from the Pitch

Company Snapshot

  • Largest carbon-free power producer in the U.S.

  • Operates 32,400+ MW of clean capacity (primarily nuclear)

  • Serves over 75% of Fortune 100 companies

  • 90% of the generation is carbon-free

Core Business Segments

  • Nuclear & Clean Firm Energy: 21 reactors, ~73% of total revenue

  • Renewables & Core+ Platform: Wind, solar, and hydro

  • Calpine Acquisition (2025): Adds 26 GW gas and geothermal capacity; expected EPS boost of $2/share by 2026

Revenue Breakdown

  • Generation Mix: 73% Nuclear, 15% Natural Gas, 10% Renewables

  • End Market: 80.5% Electric Utilities

Investment Thesis

  • EPS Growth: $8.67 in 2024, projected to hit ~$22 by 2030

  • Strong Cash Flow: $2B+ annual FCF expected post-Calpine

  • Tax Credit Tailwinds: PTCs, ZECs ensure baseline revenue and earnings visibility

  • Clean Energy Premium Pricing: Supports margin expansion and long-term contracts

  • Strategic Positioning: First-mover in AI/data center energy supply

Catalysts

  • AI-Driven Electricity Demand: Hyperscalers like Amazon, Meta, and Google expected to drive 200+ GW in demand by 2030

  • Calpine Acquisition: Strengthens dispatchable generation, expands retail footprint

  • PTC Floor Pricing: Locks in $44.75+/MWh for nuclear power through 2032

  • Crane Plant Restart (2028): Adds 800+ MW capacity

Risks & Mitigations

  • Commodity & Market Volatility: Offset by hedging and zero-marginal-cost nuclear base

  • Policy Changes: Mitigated by diversified regulatory exposure and lobbying strength

  • Acquisition Integration Risks: CEG has strong M&A track record

  • Grid Bottlenecks: Priority queue positions and interconnection experience offer advantages

Competitive Positioning

  • Outperforms peers like NextEra and Dominion in EPS growth and clean energy scale

  • EV/EBITDA of 10.73 vs. industry avg. ~13.5

  • Strong presence in PJM, NYISO, and ERCOT markets

Valuation & Outlook

  • 13%+ projected EPS CAGR through 2030

  • Conservative valuation excludes upside from inflation indexing and premium contracts

  • Clear visibility into long-term value creation

Conclusion
Constellation is a long-term compounder with unmatched scale in carbon-free power, pricing leverage, and exposure to megatrends like AI and electrification. A compelling buy based on both fundamentals and strategic positioning.