Constellation Energy (NASDAQ: CEG) has secured two major 20-year power purchase agreements (PPAs) in the past month, solidifying its position as a key energy supplier for data centers. On September 30, the company signed a deal with Amazon (NASDAQ: AMZN) for 690 megawatts (MW) of power, which will help fund a 190-MW uprate at its Maryland nuclear plant, with new capacity expected between 2030 and 2032. A week later, on October 6, Constellation locked in another 20-year PPA with Google, part of Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL), to bring 890 MW of new nuclear capacity online in the PJM Interconnection region.
These long-term agreements provide Constellation with revenue visibility and enable it to invest in nuclear equipment across its plants in Illinois, Pennsylvania, and New Jersey. As one of the largest independent power producers, Constellation owns the largest nuclear energy fleet in the U.S. and is seeing strong demand for electricity from data centers, known as hyperscalers.
The company's business model as an independent power producer allows it to capture upside from rising electricity demand but also exposes it to downside risks. By securing these long-term 'take-or-pay' agreements with major hyperscalers, Constellation locks in revenue on a large chunk of its assets, providing a floor for earnings.
Over the next decade, Constellation plans to execute projects including replacing turbines, adding nuclear capacity, extending nuclear plants, and bringing the Crane Clean Energy Center online as part of its deal with Microsoft. If the company successfully delivers on these initiatives, it could see double-digit growth and potentially reach $700 per share as contracts translate into long-term earnings growth.