By Sam Elfström, Elliot Christophers and Jens Bager (Stockholm School of Economics); Zoe Thaller, Nesrine Gharbe, Stanislas Chamaud, and Arthus Marande (ESCP)
Photo: Viktor Kiryanov (Unsplash)
Overview of the deal
Acquirer: Constellation Energy (Nasdaq: CEG)
Target: Calpine Corp.
Implied Equity Value: $16.4bn
Total Transaction Size: $26.6bn (EV)
Closed date: Q1 2026 (targeted)
Target advisor: Evercore, Morgan Stanley & Co. LLC, Goldman Sachs & Co. LLC., and Barclays US (financial), Latham & Watkins and White & Case (legal)
Acquirer advisor: Lazard and J.P. Morgan Securities LLC (financial), Kirkland & Ellis (legal)
Constellation acquires Energy Capital Partners (ECP) and CPP investments portfolio company Calpine Corp. in a deal that expands Constellation to become the largest clean energy provider in America. The combination of the entities establishes a group with ~308 million MWh in generation output, up 80 million from its closest competitor NextEra, with a lower carbon intensity per MWh creating a leading energy platform to serve customers sustainably. The addition of Calpine further increases the market diversification by substantially strengthening the Company’s market presence in California and Texas within natural gas power plants, creating a strong generation fleet within fast-growing American markets.
The consideration paid is made up of 73% of Constellation shares and 27% cash, sharing a large portion of the up/downside with the shareholders of Calpine. Constellation forecast EPS accretion to mount to 20% in 2026 and more than $2 per share in 2029.
“By combining Constellation’s unmatched expertise in zero-emission nuclear energy with Calpine’s industry-leading, best-in-class, low-carbon natural gas and geothermal generation fleets, we will be able to offer the broadest array of energy products and services available in the industry” - Joseph Dominguez (President and CEO, Constellation)
Company Details (Acquirer - Constellation Energy)
Constellation Energy is the largest producer (10% market share) of carbon-free energy in the U.S., aiming to be 100% carbon-free by 2040. With 32,500 MW of capacity, it serves nearly 2 million customers and two-thirds of Fortune 100 companies. With 60% of capacity and 86% of output being nuclear-generated, Constellation Energy also has natural gas, hydroelectric, oil, wind and solar plants in their portfolio, owning electricity-generating assets across the U.S.
Founded in 1999, headquartered in Baltimore, Maryland, USA
CEO: Joseph Dominguez
Number of employees: ~14,000
Market Cap: $95.12bn (as of 04/02/2025)
EV: $105.96bn
LTM Revenue: $23.98bn
LTM EBITDA: $6.00bn
LTM EV/Revenue: 4.4x
LTM EV/EBITDA: 17.7x
Recent Transactions: $2.8m acquisition of Bill Identity Inc’s rebate business (Nov 2022), Exelon Generation Company $885m acquisition of Electricité de France’s remaining 49.99% stake in Constellation Energy Nuclear Group (Nov 2019).
Company Details (Target - Calpine)
Calpine Corporation is the largest producer of natural gas and geothermal electricity in the United States. Its 79 energy facilities have a joint generation capacity of 27,000 megawatts, allowing Calpine to serve customers across 22 US states, Canada, and Mexico. Thanks to their advanced technologies, such as cogeneration, Calpine generates power in a low-carbon and environmentally responsible manner.
Founded in 1984, headquartered in Houston, Texas, USA
CEO: Thad Hill
Number of employees: 2,600 (2019)
Market Cap: $16.4bn
EV: $26.6bn
LTM Revenue: N/A
LTM EBITDA: $3.4bn
LTM EV/Revenue: N/A
LTM EV/EBITDA: 7.8x
Projections and Assumptions
Short-Term Consequences
Constellation Energy’s acquisition of Calpine will result in an aggregated electricity generation capacity of approximately 59,400 megawatts, an 83% increase. The acquisition entails a significantly expanded presence in California and Texas, the latter being a state where electricity demand is expected to grow at one of the fastest rates in the US. Much of this demand is driven by expected investments in large-scale computing facilities such as data centers and cryptocurrency mining facilities.
The majority of the capacity increase comes from natural gas and geothermal sources, which, like Constellation Energy’s existing nuclear assets, provide reliable electricity generation regardless of weather or time of day, making them suitable for computing facilities.
With the new energy mix, Constellation Energy’s share of zero-carbon power, which was nearly 90% in 2024, will drop to 58%. Following Donald Trump’s recent inauguration as President of the United States and the subsequent withdrawal from the Paris Agreement, it remains to be seen to what extent technology giants are willing to deemphasize carbon footprint targets in favor of increased data center capacity.
Long-Term Upsides
The acquisition of Calpine by Constellation Energy is a turning point in the energy sector in North America. This merger between two of the largest electricity generators in the region is going to form the largest independent electricity provider, serving 2.5 million customers, making Constellation the largest coast to coast energy provider. This acquisition aligns with the increasing electricity demand in the U.S. driven by the development of major Data centres, electric transportation, sustainable building, and others. The combination of Constellation expertise in zero-emission nuclear energy with Calpine's ability to produce low carbon electricity sources such as natural gas and geothermal. The new entity will offer an increasing range of energy products and services for the North America markets. The shared portfolio will include nearly 60 GW of capacity across nuclear, natural gas, geothermal, hydro, wind, and solar.
Financially, the transaction will have the effect of adding more than $2bn in annual free cash flow (non-GAAP), creating further capital to reinvest in nuclear energy and new ways to produce electricity. Moving on, the cost synergies are estimated to be around $300m per year, with revenue synergies up to $150m annually due to the expansion of the offering. After the full implementation of Calpine, the revenue is expected to grow from 10% to 15%.
Eventually, the acquisition will also enable further technological innovation, with Constellation to invest $2bn each year in developing green hydrogen projects. This market is projected to reach $700bn by 2050, representing a significant opportunity for Constellation. The firm is aiming to reach 1 GW of green hydrogen capacity by 2030. This deal positions Constellation Energy to capture a significant share of this emerging market.
Risks and Uncertainties
One potential risk is the challenge of integrating Calpine into Constellation Energy. Large-cap acquisitions in the energy sector typically incur high integration costs, ranging from 1% to 3% of the total deal value. If this range holds for this transaction, Constellation Energy could face integration expenses between $160m to $490m. Additionally, Calpine is highly dependent on natural gas prices, with over 60% of its generation capacity tied to natural gas.
Moving forward, regulatory risk is likely reduced under the new leadership of the Federal Trade Commission (FTC), though it remains a consideration. The combined entity of Constellation Energy and Calpine is expected to hold a market share of approximately 15% to 18% in key states such as Texas and California, the largest energy consumers in the U.S. Given this market presence, the acquisition is expected to undergo regulatory scrutiny. A recent example of such scrutiny is ExxonMobil’s $59.5bn acquisition of oil producer Pioneer Natural Resources in May 2024, which initially faced antitrust concerns that were not resolved until January 24, 2025.
Finally, in reaction to the launch of DeepSeek, the share price of Constellation Energy decreased by 21% from $347 to $275 in late 2025. This drop reflects market concerns over shifting energy demand expectations following DeepSeek’s announcement of a more energy-efficient AI model. Investors had anticipated a surge in electricity consumption from AI data centers, benefiting energy providers such as Constellation. However, DeepSeek’s innovation suggests AI advancements may not require as much power as previously thought, leading to a reassessment of growth forecasts. Despite this, some analysts argue that overall AI adoption could still drive higher energy consumption in the long run, aligning with the Jevons Paradox, which suggests efficiency gains can sometimes increase total demand.