New Energy Weekly – Electric Power Renaissance

Electric Power Renaissance

There’s a new giant electric company in the U.S. now – energy giant Constellation Energy (NYSE: CEG) acquired the western regional electric company Calpine for $16.4 billion. I am a fan of both companies.

I visited Calpine’s Geysers geothermal power station in California way back in the mid-2000’s when it was a public company. A group of investors took it private for about $5.5 billion. This deal values the company at more than three times that price.

The merger makes Constellation the owner of the most U.S. power stations. The market loved the deal, sending Constellation shares to record highs:

That’s interesting, because acquiring companies usually see their stock price fall…unless the market approves. And the response is overwhelmingly positive. The market understands the growing demand for electricity. As Bloomberg wrote about the deal:

The stock surge underscores the value of reliable electricity. Constellation is expanding as energy consumption in the US is forecast to climb at the fastest pace in decades. Demand is expected to grow almost 16% over the next five years, driven by data centers running artificial intelligence operations, as well as the electrification of homes and cars and a shift away from fossil fuels in manufacturing.

As you know, we see the energy sector as an excellent place to invest in for the future. The growth in electricity from multiple sources – electric vehicles, artificial intelligence, etc. – plus the dynamic growth in suppliers makes it a fantastic new frontier for investors.

This deal and the market’s response to it support our thesis.

For the Good,
The Mangrove Investor Team