Constellation stock up 2.3% on Amazon's 690-megawatt nuclear deal; only 190 megawatts of it is new power

Constellation Energy shares rose 2.3% to $259.89 by late morning on Thursday after the company and Amazon announced a 20-year power purchase agreement tied to the Calvert Cliffs nuclear plant in Maryland. Amazon will take 690 megawatts of power, including a 190-megawatt uprate of the plant, and Constellation said the deal will enable more than $3 billion of investment at the site, according to Constellation's release, dated September 30.

Talen Energy, another nuclear owner selling into the same grid, rose 3.7% to $324.09, while Vistra was up 0.8%. Amazon shares were down 1.0% at $246.55, according to Nasdaq quotes at 11:51 a.m. ET.

The number behind the number: most of the 690 megawatts already exists

The headline figure is 690 megawatts, but only 190 of them are new. The other 500 megawatts come from a plant that is already running. Working it through from the release:

Constellation says the plant produces enough electricity for the equivalent of more than 1.3 million homes. Scaling that down, Amazon's 690 megawatts would cover roughly 500,000 homes. That is a proportional estimate, not a company figure.

The main thing the deal buys is not the new 190 megawatts. It is time. The two reactors came online in 1975 and 1976 and are licensed to run until 2034 and 2036, World Nuclear News noted. Constellation said Amazon's commitment gives it "the revenue certainty to relicense the plant for another 20 years." Keeping 1,790 megawatts running into the 2050s is a much bigger change than adding 190.

What was not disclosed

Neither company gave a price per megawatt-hour, and that is the figure investors would need to value the contract. The $3 billion is also not a build cost for the uprate. It covers improvements "across the entire 1,790-megawatt plant," so dividing it by 190 megawatts gives a misleadingly high number. The two companies also signed a separate retail supply agreement covering Amazon sites in the 13-state PJM market, with no terms given.

Why the grid's shortfall is a separate problem

Constellation stressed that all of Calvert Cliffs' electricity will keep flowing into the PJM grid as it does now. The contract is a financial arrangement, not a private power line to a data center. That matters because PJM is short of supply. One day before the deal was announced, it shelved a backstop auction for 6.8 gigawatts of capacity it needs for the 2028/29 delivery year.

The Calvert Cliffs uprate is equal to about 2.8% of that 6.8-gigawatt gap, and it arrives in 2030 to 2032, after the delivery year in question. The deal secures supply for the next decade. It does not fix the squeeze in the nearer term.

Who it hits

For businesses buying power in Maryland and the rest of PJM, the most useful part of this deal is that the reactors stay open. Losing Calvert Cliffs in the mid-2030s would have removed the source of about 40% of Maryland's power generation, according to World Nuclear News, from a market already short of capacity. A long contract with one buyer keeps that supply in the market. For a manufacturer, a cold-storage warehouse or a restaurant group on a fixed-price supply contract, it means one less source of upward pressure on renewal prices in the 2030s. It does nothing for the capacity charges that are driving bills now.

For Constellation shareholders, the deal fits a familiar pattern: a large technology buyer signing long-dated contracts with existing nuclear plants. The thing to watch is whether the price ever comes out, in a filing or on the next earnings call.

Sources: Constellation; World Nuclear News; Nasdaq quotes, 11:51 a.m. ET. Percentages and homes-equivalent figures are Chronicle calculations. This is market information, not investment advice.