Constellation Energy to Buy Power Producer Calpine

Constellation Energy, the nation’s largest nuclear power plant operator, has agreed to buy another power generator, Calpine, for $16.4 billion. The deal shows how quickly electricity demand is growing, driven in part by the construction of data centers for artificial intelligence. has far-reaching consequences for the economy.

The deal announced Friday is among the largest in the energy sector and indicates that natural gas is likely to play a larger role than many expected a few years ago in meeting the nation’s electricity needs. That could undermine efforts to address climate change unless companies quickly figure out how to capture and store emissions from gas-fired power plants.

The combination will expand Constellation’s portfolio as companies such as Microsoft, Google and Amazon try to provide power to data centers used to run artificial intelligence and other services. Demand for electricity is also rising due to the construction of new factories in the United States and the increased use of electric vehicles and heat pumps. This growth is upending a traditionally dormant industry that is unaccustomed to accelerated growth.

“Many people who weren’t paying any attention to energy a year ago are now trying to figure out how to participate in meeting the seemingly inevitable surge in demand,” said Daniel Yergin, vice chairman of S&P Global, who won a Pulitzer Prize for his book “The Prize: an epic quest for oil, money and power.”

Calpine, based in Houston and privately owned, operates a large fleet of gas-fired 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 gas assets to help ensure grid reliability. The combination will also expand the company’s presence in Texas, where electricity demand is high. growing rapidlyand add more renewable energy to your portfolio.

“We believe natural gas and geothermal energy, along with nuclear, will be critical to the country,” Joseph Dominguez, Constellation’s chief executive, said on a call with investors and analysts Friday morning.

He added that it was important to ensure that energy resources were not only sustainable but also reliable. “We believe natural gas and clean energy, when combined, will be very attractive to customers,” Mr. Dominguez said.

Constellation’s share price rose more than 20 percent in early trading Friday and closed the day up 25 percent, an unusually large jump for an acquiring company. Its shares have already more than doubled in the past year as expectations for U.S. electricity demand have risen.

As part of the deal, Constellation will pay $4.5 billion in cash and assume approximately $12.7 billion of Calpine’s debt.

Nuclear power plants, which can run around the clock without emitting planet-warming emissions, have been among the first to benefit from a surge in investment in artificial intelligence. Last year Constellation agreed spend $1.6 billion on relaunch the Three Mile Island nuclear reactor near Harrisburg, Pennsylvania, a project for which Microsoft is actually footing the bill.

But there are only a few mothballed nuclear power plants that can be restarted. Some companies are also betting on new, smaller reactors, but they are not expected to start producing significant amounts of power for at least several years if all goes well.

As a result of these problems, many energy and technology companies are increasingly turning to natural gas, even though its use emits carbon dioxide and methane, two major greenhouse gases that warm the planet.

“It will be difficult for utilities to provide the power these data centers need without gas,” said Andrew Gillick, energy strategist at data analytics firm Enverus.

Goldman Sachs estimated last year that power demand from data centers will increase by an average of 15 percent a year for the rest of the decade.

Andrew Novotny, Calpine’s chief executive, said the combined company will be able to invest in new power generation. “Together, we will be better positioned to accelerate investment in everything from zero-emission nuclear power to battery storage that will power our economy in a way that puts people and our environment first,” he said in a statement. in your statement.

A diverse group of power plants can allow a new company to manage its resources more efficiently as power needs change. However, adding more natural gas to its portfolio would expose Constellation to greater risk from fluctuating commodity prices, Enverus said.

The deal with Constellation is the culmination of a big turnaround for Calpine, which has come under pressure in recent years as California and other states have sought to divest from fossil fuels. A group of investors, including Energy Capital Partners, took ownership of Calpine several years ago. deal worth $5.6 billion.not counting the debt.

The companies said they expect the deal to close within a year, subject to regulatory approval. Constellation will address any potential concerns raised by antitrust officials about its market power through asset sales, Mr. Dominguez said.

John Penn provided reporting.