Scotiabank Analyst Sees Opportunity in High Electricity Demand for Power Producers

Scotiabank analyst Andrew Weisel has a bullish view on electricity demand and recommends two utility-scale power producer stocks: Constellation Energy and another company. Weisel believes demand is coming from various sources, including data centers, electrification, manufacturers, and more. Both stocks have Buy ratings from the Street and present double-digit upside potentials.

Constellation Energy (CEG) has announced its acquisition of Calpine Corp. in a cash and stock transaction valued at approximately $16.4 billion, with an equity purchase price of $26.6 billion. The deal, which is expected to close within 12 months, will create the nation’s largest clean energy provider, positioning Constellation to meet growing demand for reliable and sustainable energy.

The acquisition will combine Constellation’s expertise in zero-emission nuclear energy with Calpine’s industry-leading, low-carbon natural gas and geothermal generation fleets. This strategic move will expand Constellation’s portfolio to include nearly 60 gigawatts of capacity from zero- and low-emission sources, spanning the continental U.S. and key strategic states such as Texas, California, and Pennsylvania Constellation to Acquire Calpine; Creates America’s Leading Producer of Clean and Reliable Energy to Meet Growing Demand for Customers and Communities^[1].

Constellation’s base earnings outlook is expected to grow at a double-digit rate through the decade, with the acquisition projected to add more than $2 billion in free cash flow annually. The transaction is also expected to deliver immediate adjusted (non-GAAP) operating earnings per share (EPS) accretion of more than 20% in 2026 and at least $2 per share of EPS accretion in future years.

Andrew Novotny, president and CEO of Calpine, stated, “This is an incredible opportunity to bring together top tier generation fleets, leading retail customer businesses, and the best people in our industry to help drive a stronger American economy for a cleaner, healthier, and more sustainable future.” Tyler Reeder, president & managing partner of ECP, added, “Since acquiring Calpine in 2018, we have focused on unlocking value and driving future potential growth avenues for the business, which we believe have been recognized through this combination.”

The combined company will offer a broader array of energy products and services, including new product offerings that can integrate nuclear, renewable, and natural gas technologies tailored to customers’ unique needs. This will provide customers with more predictability and competitive prices, as well as opportunities to achieve their sustainability goals.

Constellation remains committed to a strong, investment-grade balance sheet, with current ratings expected to be affirmed by S&P and Moody’s. The acquisition will reinforce Constellation’s position as the largest clean energy producer with the lowest carbon emissions intensity in the U.S.

The transaction is expected to close within 12 months of signing, subject to regulatory approvals from various agencies, including the Federal Energy Regulatory Commission, the Canadian Competition Bureau, and the New York Public Service Commission.