City downgraded its constellation energy after signing a massive contract with Meta, which showed that nuclear power plant owners may not receive the price premium for electricity. Meta has agreed to purchase approximately 1.1 gigawatts of electricity from the Clinton Clean Energy Center in Illinois for 20 years starting in 2027. City currently values its constellations as neutral and high risk, with its stock price target set at $318, meaning a rise of less than 2%. The company’s shares were trading about 3% lower on Wednesday. We have shared CEG 1Y Mountain Constellation Energy over the past year. Meta and Constellation have not disclosed terms of the transaction, but Citi estimates that tech companies will pay between $75 and $90 per megawatt-hour power. Analyst Ryan Levine told clients that the prices “are not a huge premium for low-carbon electricity” and “along with the new gas plant.” “This transaction will have a broad impact on the electricity market as it marks future contract activities,” Levine said. According to analysts, the tech sector and other customers are likely to attack transactions in similar price ranges for Constellation’s Dresden, 9 Mile Point Unit 1 and Ginna Plant. Gordon Haskett analyst Don Bilson said City’s downgrade would not be the last time. Wall Street was hoping that high-tech companies would pay a huge premium to nuclear power as they tried to meet the power needs of their data centers with reliable zero carbon power. Bilson said investors have concluded that meta electricity purchases that are not launched for several years will likely be reasonably priced. NRG Energy, Vistra and Talen Energy actually earned more than a constellation in Tuesday’s session. They are all independent electricity producers who hope Wall Street will win future deals with high-tech companies to support data center demand. “The transaction will extend the lifespan of still useful nuclear power plants, but will not provide CEG with any market windfall,” Bilson told clients in a memo on Wednesday. “We are less likely to believe that future headlines in this sector are catalysts.” The Meta transaction is the second agreement that Constellation has collided with a high-tech company within a year. Microsoft signed a contract with Constellation last fall, helping to bring the three-mile island unit back online in 2028.
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