Constellation’s deal to acquire Calpine Corp. represented a big opportunity to diversify the Baltimore-based conglomerate’s fleet at a time when growing load demands and federal policy direction offer a unique opportunity to grow the combined business.

The acceleration of data centers and resultant growth load forecasts will allow Constellation to combine its fleet of nuclear plants with Calpine’s natural gas and battery energy storage facilities to offer baseload power nationwide, Constellation CEO Joe Dominguez said on a January 10th call to discuss the deal.

Dominguez pointed to the load demand—driven by data centers–of the combined companies’ largest markets in PJM and ERCOT where the “demand is real for reliable power assets and it is because of the composition of demand.”

To support this Dominguez pointed to Constellation restarting 830 MW Crane at Three Mile Island as part of its recent deal with Microsoft, while also forecasting an additional 160 MW from the Braidwood and Byron Generating Stations would be ready to go online by 2026. Constellation invested USD 800m in new equipment to increase the output at the two Illinois nuclear plants last year.

From a diversification perspective, Calpine will reduce Constellation’s exposure to the PJM market to 49% from 69% of its overall mix while increasing its exposure in both Texas and California.

“Many of our largest customers have grown in Texas and will continue to grow their business there,” said Dominguez. Last year, Constellation entered the market via an acquisition of NRG’s 44% stake in a nuclear plant known as STP.

The combined company also expects to divest assets in PJM as a result of this deal. Constellation would not specify which assets, but in response to an analyst question, indicated the eastern part of PJM is where they had the greatest concentration and that more details would be disclosed in filings made in the coming days.

Dominguez highlighted newer technologies as a highlight of the deal as Calpine is working on carbon capture sequestration (CCUS) at its natural gas sites.

He also mentioned the final 45V regulations issued by the Department of Treasury on January 3^rd as it concerns the Clean Hydrogen Production Tax Credit. Among the amendments in the final guidance is that “pink” hydrogen using nuclear would qualify.

“It allows merchant nuclear to participate at 200 MW per unit and we expect everyone of our units to participate at that level,” said Dominguez, adding that “it’s another instance where the government is recognizing that nuclear is worth preserving.”

The company noted in its presentation that it had 760 MW currently in the due diligence phase of the Texas Energy Fund program. NPM noted in September that Texas PUC recommended 17 projects advancing out of 72 applications submitted with an expected commercialization of between 2026 and December 2029.

NPM’s SIGNALS is tracking 2.6 GW pre-operational storage and natural gas projects in Calpine’s portfolio and 9.98 GW operational portfolio.

NPM SIGNALS is also tracking 24.06 GW of Constellation’s operational assets, comprised mostly of 1 GW+ nuclear plants.

Transaction details

Constellation struck a deal to acquire Calpine at USD 29.1bn in enterprise value or USD 26.6bn effective value after adjusting for forecasted 2025 free cash flow and NPV of tax attributes, according to a press release.

The equity considerations will be USD 16.4bn, comprised of the issuance of 50 million shares of Constellation stock, using the trailing 20-day VWAP of USD 237.98 per share, USD 4.5bn in cash plus the assumption of USD 12.7bn in Calpine net debt.

Calpine’s investors Energy Capital Partners, Canada Pension Plan Investments (CPP Investments) and Access Industries have agreed to an 18-month lock-up with respect to their equity ownership of Constellation common stock, subject to an agreed upon schedule for potential sales.

The transaction is expected to close within 12 months of signing, subject to the satisfaction of customary closing conditions, including the expiration or termination of the waiting period pursuant to the Hart-Scott-Rodino Act, and regulatory approvals from the Federal Energy Regulatory Commission, the Canadian Competition Bureau, the New York Public Service Commission, the Public Utility Commission of Texas and other regulatory agencies.

Following the close of the transaction, Constellation will continue to be headquartered in Baltimore and will continue to maintain a significant presence in Houston, where Calpine is currently headquartered.

Advisors

Lazard is serving as financial advisor to Constellation. J.P. Morgan Securities is also serving as financial advisor to Constellation, and Kirkland & Ellis is serving as legal counsel.

Evercore served as lead financial advisor to Calpine. Morgan Stanley & Co, Goldman Sachs, and Barclays are serving as additional financial advisors to Calpine and ECP, and Latham & Watkins and White & Case are serving as legal counsel.

*This story was originally published exclusively for NPM subscribers.

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