Evaluating Constellation Energy (CEG) Stock’s Actual Performance – The Motley Fool

Report on Constellation Energy’s Performance and Alignment with Sustainable Development Goals (SDGs)

Introduction

Constellation Energy, the largest producer of carbon-free energy in the United States, has demonstrated a remarkable performance since its separation from Exelon in February 2022. The company leads in nuclear energy generation and operates a diversified portfolio including hydro, wind, and solar energy assets. It supplies power to utilities, commercial and industrial customers, and residential users, contributing significantly to sustainable energy production.

Constellation Energy’s Returns Since Spinoff

Since becoming an independent public company, Constellation Energy has delivered exceptional financial returns, outperforming the broader market substantially.

Data source: Ycharts.

Unlocking Shareholder Value

• Exelon acquired Constellation Energy in 2011 for $7.9 billion but separated the company in 2022 to unlock shareholder value.
• Post-separation, Exelon retained transmission and distribution utilities, while Constellation focused on power generation and competitive energy markets.
• The separation has resulted in significant value creation for shareholders, as evidenced by the strong stock performance.

Drivers of Constellation Energy’s Growth and Sustainable Impact

Resurgence in Nuclear Energy Demand

Constellation Energy has capitalized on increased demand for nuclear energy, driven by the growth of AI data centers and technology companies seeking reliable, carbon-free power sources. This aligns with SDG 7: Affordable and Clean Energy and SDG 13: Climate Action.

1. Microsoft Partnership: In September 2024, Microsoft signed a 20-year power purchase agreement (PPA) with Constellation Energy for 100% of the power from the former Three Mile Island Unit 1 reactor. The plant, previously shut down in 2019, will be restarted by 2028 to meet Microsoft’s clean energy needs.
2. Meta Platforms Agreement: In June 2024, Meta Platforms entered a 20-year PPA for power from the Clinton Clean Energy Center starting mid-2027. This deal supports the continued operation of the plant, which was nearly retired in 2017, thereby promoting clean energy longevity.

Strategic Acquisition to Diversify Energy Portfolio

Constellation Energy agreed to acquire Calpine in a $26 billion deal, expanding its scale and diversifying into natural gas and geothermal power. This acquisition supports SDG 9: Industry, Innovation, and Infrastructure and SDG 12: Responsible Consumption and Production.

Projected Growth and Sustainable Development

• Constellation Energy is on track to achieve over 10% annual earnings-per-share growth through 2028.
• The company’s focus on carbon-free and renewable energy sources contributes directly to SDG 7 and SDG 13, promoting sustainable energy access and climate change mitigation.
• Long-term power agreements with leading technology firms demonstrate commitment to sustainable industrial growth and innovation.

Conclusion

Since its spinoff from Exelon, Constellation Energy has delivered outstanding financial returns while advancing sustainable energy solutions. Its leadership in nuclear and renewable energy generation aligns closely with several Sustainable Development Goals, particularly those related to clean energy and climate action. The company’s strategic partnerships and acquisitions position it well for continued growth and contribution to global sustainability objectives.

1. Sustainable Development Goals (SDGs) Addressed or Connected

1. SDG 7: Affordable and Clean Energy
   • Constellation Energy is the largest producer of carbon-free energy in the U.S., generating nuclear, hydro, wind, and solar power.
   • The article highlights the company’s role in providing clean energy to utilities, commercial, industrial, and residential customers.
2. SDG 9: Industry, Innovation, and Infrastructure
   • The resurgence in demand for nuclear energy driven by AI data centers and technology companies like Microsoft and Meta Platforms reflects innovation and infrastructure development.
3. SDG 13: Climate Action
   • By focusing on carbon-free energy sources and preventing early retirement of clean energy plants, the company contributes to climate change mitigation.

2. Specific Targets Under Identified SDGs

1. SDG 7: Affordable and Clean Energy
   • Target 7.2: Increase substantially the share of renewable energy in the global energy mix.
   • Target 7.3: Double the global rate of improvement in energy efficiency.
2. SDG 9: Industry, Innovation, and Infrastructure
   • Target 9.4: Upgrade infrastructure and retrofit industries to make them sustainable, with increased resource-use efficiency and greater adoption of clean and environmentally sound technologies.
3. SDG 13: Climate Action
   • Target 13.2: Integrate climate change measures into national policies, strategies, and planning.

3. Indicators Mentioned or Implied to Measure Progress

1. Indicator for SDG 7.2:
   • Share of renewable energy in total final energy consumption, implied by Constellation Energy’s production of nuclear, hydro, wind, and solar power.
2. Indicator for SDG 7.3:
   • Energy intensity measured in terms of primary energy and GDP, implied through the company’s ability to meet surging power demand efficiently, including long-term power purchase agreements with tech companies.
3. Indicator for SDG 9.4:
   • Proportion of industries using clean and environmentally sound technologies, implied by the acquisition of Calpine (natural gas and geothermal power) and the restart of nuclear plants.
4. Indicator for SDG 13.2:
   • Number of countries with national climate change policies, plans, and strategies, implied by the Future Energy Jobs Act supporting clean energy plants and long-term PPAs promoting sustainable energy use.
5. Additional Financial and Operational Indicators:
   • Annual earnings-per-share growth (more than 10% through 2028) as a measure of sustainable business growth supporting clean energy.
   • Power purchase agreements (PPAs) duration and volume as indicators of long-term commitment to clean energy supply.

4. Table: SDGs, Targets and Indicators

Source: fool.com