South Texas nuclear plant : Constellation to acquire NRG Energy’s stake in $1.7bn deal

Constellation Energy has announced an agreement to acquire NRG Energy’s 44% stake in the South Texas Project Electric Generating Station, a 2.64GW dual-unit nuclear plant located approximately 90 miles southwest of Houston.

The deal, valued at $1.75 billion, solidifies Constellation Energy‘s position in the nuclear energy sector and expands its portfolio of clean and reliable power generation assets.

The effective purchase price, factoring in the present value of tax benefits for Constellation Energy, is estimated to be $1.4 billion. The transaction will be financed through a combination of cash and debt. NRG Energy’s 44% interest in the South Texas Project represents an approximate capacity of 1.1GW.

Mauricio Gutierrez — NRG Energy President and CEO said: “Today’s announcement is the continuation of our strategy to optimize our portfolio while creating significant shareholder value.

“The work on this transaction over the last several months will release significant capital to be deployed at value—accelerating and upsizing our current share repurchase program while achieving our balance sheet targets.”

Constellation Energy to acquire NRG Energy’s stake in South Texas Project Electric Generating Station. Photo courtesy of United States Nuclear Regulatory Commission/Wikimedia Commons.

The South Texas Project Electric Generating Station was originally developed through a partnership between NRG Energy and the City Public Service of San Antonio. Construction on the two nuclear units began in the late 1970s, and they commenced commercial operation in the late 1980s and early 1990s, respectively. Over the years, the South Texas nuclear plant has established itself as one of the largest and most advanced nuclear plants in the US, consistently generating a substantial amount of clean, carbon-free electricity for approximately two million average households.

Upon completion of the acquisition of the South Texas nuclear plant, Constellation Energy will become one of three owners overseeing the South Texas Project Nuclear Operating Company (STPNOC), which will continue to operate the plant. The City of San Antonio and the City of Austin hold stakes of 40% and 16%, respectively in the South Texas nuclear plant.

Constellation Energy has established itself as an industry leader in operating nuclear plants safely, efficiently, and reliably. Over the past decade, the company has maintained a fleetwide capacity factor of more than 94%, which is approximately 4% higher than the industry average.

With ownership interests in 13 generating stations and 23 nuclear units, Constellation Energy has a total capacity of around 21GW, providing clean energy to approximately 15 million homes.

Constellation Energy’s presence in Texas is already substantial, making it a significant employer, taxpayer, and electricity provider in the region. The Baltimore-based energy company operates natural gas-fired generation facilities with a capacity of 3.5GW at the Colorado Bend II, Wolf Hollow II, and Handley stations, along with 169MW of wind energy from the Whitetail and Sendero projects.

Additionally, Constellation Energy is a prominent supplier in Texas’ competitive retail energy market, serving approximately 200,000 residential and commercial customers across the state with electricity, natural gas, energy efficiency solutions, and other services.

The acquisition of NRG Energy’s stake in the South Texas Project underscores Constellation Energy’s dedication to expanding its clean energy footprint and driving sustainable power generation for the benefit of communities and the environment.

Joe Dominguez — Constellation Energy president and CEO said: “The South Texas Project is an exceptionally well-maintained plant and its ability to produce resilient, carbon-free energy 24/7 makes it among the most valuable power sources in the world.

“With the potential to run for at least 46 more years with the right policy support, we look forward to working with the South Texas Project’s other owners to continue bringing clean, reliable electricity to this growing region for decades to come.”

BofA Securities is serving as the exclusive financial advisor to Constellation, while Sidley Austin LLP is acting as the lead transaction counsel for the company.

The transaction is subject to approval by the Nuclear Regulatory Commission and the Department of Justice, with the expected closing scheduled by the end of the year.