Fiery Flash: Constellation Energy

 

A symbolic rebirth on the site of one of nuclear energy's historic setbacks

Last Friday, Constellation Energy made headlines, surging 22% in the markets and adding roughly $15 billion to its market cap. This dramatic rally followed the company's announcement of a $1.6 billion investment to restart Unit 1 of the Three Mile Island (TMI) nuclear plant, a facility situated on the site of the infamous 1979 partial reactor meltdown.

For those who recall, the meltdown at TMI Unit 2 became a turning point in the public perception of nuclear energy. However, with Unit 1 now set for a second life, the move signals just how much the global energy landscape has shifted. Five years ago, TMI Unit 1 was decommissioned, not because of technical failings, but due to economic reasons. Today, the same unit represents a key pillar in the transition to clean energy.

The renewed interest in nuclear energy aligns with a broader global push for decarbonization. Governments and corporations alike are seeking reliable, carbon-free power to meet both environmental goals and growing energy demands driven by data-intensive technologies like cloud computing and AI. Nuclear energy, with its ability to provide consistent, round-the-clock power, is regaining favor. Unlike renewable sources like wind or solar, nuclear is unaffected by weather conditions and can deliver a stable baseload power supply.

Once operational again, the 835MW unit is to return to service by mid-2028, with its entire energy output, enough to power 800,000 homes, already secured under a 20-year fixed-price power purchase agreement (PPA) with none other than Microsoft. 

This deal, according to industry experts, was struck at a significant premium compared to earlier market expectations. It highlights Microsoft’s willingness to pay a premium for zero-carbon, baseload power to ensure its data centers in the region are matched with clean energy, a strategic priority for companies focused on sustainability.

While the financial specifics of the PPA remain confidential due to commercial sensitivities, the impact on Constellation Energy’s outlook is clear. The deal prompted the company to revise its earnings guidance upward, increasing its projected earnings-per-share (EPS) compound annual growth rate (CAGR) through 2030 from 10%+ to at least 13%.

The Constellation Energy – Microsoft deal follows a similar agreement in March, when Amazon purchased a nuclear-powered datacenter from Talen Energy, more deals and / or re-starts could be in the cards, demonstrating that nuclear power, long seen as a relic of the past, could be one of the keys to a more sustainable future.