Research Update: Calpine Corp. 'BB-' Ratings Placed On CreditWatch Positive Following Constellation Energy Corp.'s All-Stock Bid

Constellation Energy Corp. (CEG) announced it will acquire Calpine Corp. (Calpine) in a stock-for-stock exchange of about $26.6 billion, in effective enterprise value. The transaction includes the assumption of about $12.7 billion of Calpine's debt. Transaction terms include total equity consideration of $16.4 billion that will be financed with $11.9 billion of CEG's wholly owned subsidiary Constellation Energy Generation LLC?s (Constellation) stock and $4.5 billion cash on the balance sheet, including about $1.8 billion of Calpine's 2025 cash flow generation. No incremental acquisition debt is contemplated. Calpine's leverage is higher than Constellation's as of September 2024 and as a result, the company's pro forma leverage will increase once the acquisition closes. We expect Constellation will deleverage within two years of

...We see the generation fleets as complementary. Our assessment of Constellation's standalone business risk profile reflects its strong position as one of the largest wholesale electricity producers in the U.S. On a stand-alone basis, the company has a large footprint, with approximately 33 gigawatts (GW) of generating capacity and adequate geographic diversity, although its assets are concentrated (approximately 67%) in the Midwest and Mid-Atlantic regions. It mostly derives its output from nuclear generation (at about 87% of aggregate); the balance is a mix of natural gas, oil, and renewable assets....

Research Update