Citi has downgraded Constellation Energy after the power company signed a major deal with Meta that indicates nuclear plant owners might not receive that high of a price premium for their electricity. Meta agreed to buy about 1.1 gigawatts of power from the Clinton Clean Energy Center in Illinois for a 20-year period that begins in 2027. Constellation stock rose as much as 9% intraday Tuesday on the deal, before closing slightly lower at $313.03 per share. Citi now rates Constellation as neutral and high risk, setting a stock price target of $318, which implies upside of less than 2%. The company’s shares were trading about 3% lower on Wednesday. CEG 1Y mountain Constellation Energy shares over the past year. Meta and Constellation did not disclose the terms of the deal, but Citi estimates the tech company will pay between $75 and $90 per megawatt-hour of electricity. Analyst Ryan Levine told clients that the price is “not a big premium for low carbon power” and is “in line with new gas plants.” “This deal has broad implications on the power markets as it signals future contracting activity,” Levine said. The tech sector and other customers are likely to strike deals at a similar price point for Constellation’s Dresden, Nine Mile Point Unit 1 and Ginna plants, the analyst said. Citi’s downgrade likely won’t be the last, said Gordon Haskett analyst Don Bilson. Wall Street had been expecting tech companies to pay a significant premium for nuclear power as they seek to meet electricity demand for their data centers with reliable, zero-carbon power. Bilson said investors have likely concluded that Meta’s power purchase, which will not start for a few years, will likely be priced reasonably. NRG Energy , Vistra and Talen Energy actually gained more than Constellation in Tuesday’s session. They are all independent power producers that Wall Street expects to clinch future deals with tech companies to support data center demand. “While this deal will end up extending the life of a still useful nuclear plant, it will not provide CEG with some sort of above-market windfall,” Bilson told clients in a Wednesday note. “We are less inclined to believe future headlines in this area will be catalytic.” The Meta deal is the second agreement Constellation has struck with a tech company in less than a year. Microsoft signed an agreement with Constellation last fall to help bring Three Mile Island Unit back online in 2028.
