CPP Investments and Partners Sell Calpine to Constellation Energy
CPP Investments has announced the sale of its entire 15.75 percent stake in US power producer Calpine Corporation (Calpine) to Constellation Energy (Constellation).
The sale forms part of Constellation's acquisition of Calpine. The transaction is expected to generate approximately US$700m in cash and US$1.9bn in Constellation stock for CPP Investments.
The investment in Calpine was made in 2018 through a co-investment with Energy Capital Partners (ECP) and Access Industries.
Bill Rogers, managing director and head of Sustainable Energies at CPP Investments, expressed satisfaction with the outcome, stating, “We are pleased by the success of our investment in Calpine and view this transaction as an excellent opportunity to realize strong returns for the CPP Fund.”
He also highlighted CPP Investments' anticipation of Constellation's growth, enhanced by the increased scale and cash flow from the combination.
The merger will expand the footprint of the combined company across the continental US.
Texas, the fastest-growing market for power demand, will see a significantly larger presence, alongside other key markets such as California, Delaware, New York, Pennsylvania, and Virginia.
Rogers described Calpine as an example of CPP Investments' strategy, stating, “Calpine serves as a good example of CPP Investments' approach to investing across the energy spectrum.”
He explained that the approach involves investing in companies critical to delivering affordable, reliable power while supporting their progress toward decarbonising their portfolios.
The transaction is expected to close in the second half of 2025, subject to customary closing conditions and approvals from regulatory agencies.
These include the Federal Energy Regulatory Commission, the Department of Justice, the New York Public Service Commission, and the Public Utility Commission of Texas, among others.
Last week, Ryan Gould, Dinesh Nair, Matthew Monks and David Carnevali of Bloomberg reported that Constellation Energy nears US$30 billion deal for Calpine:
Constellation Energy Corp. is nearing an acquisition of Calpine Corp., people familiar with the matter said, in what would be one of the biggest ever deals in the power generation sector.
Baltimore-based Constellation is in discussions with Calpine’s private equity owners about the terms of a transaction that could value the company at about US$30 billion including debt, according to the people. A deal may be announced in the coming weeks, they said.
Energy Capital Partners, CPP Investments and Access Industries agreed to take Calpine private in 2017 in a deal valued at more than US$17 billion including debt. Shares in Constellation have doubled in New York trading over the last 12 months. They dropped as much as 11 per cent Wednesday on news of the potential Calpine transaction, giving Constellation a market value of about US$72 billion.
Founded in the 1980s, Calpine runs almost 80 facilities across 22 states and Canada, according to its website. The company generates electricity from natural gas and geothermal resources that helps power roughly 27 million homes every year.
After decades of flat power demand in the United States, the need for electricity is skyrocketing thanks to data centres running artificial intelligence operations, new factories and the electrification of everything from cars to home heating. U.S. demand for electricity will surge almost 16 per cent over the next five years, according to a December report for Grid Strategies.
Constellation’s deliberations over a deal for Calpine are ongoing and could still be delayed or falter, the people said, asking not to be identified discussing confidential information. The final price of a deal could still change, they said.
Representatives for Constellation and CPP declined to comment. Representatives for ECP, Access Industries and Calpine couldn’t immediately be reached for comment or didn’t immediately provide comment.
When Constellation was spun off from Exelon Corp. in 2022, chief executive Joe Dominguez said he was interested in growing the company through mergers and acquisitions. The following year, Constellation paid US$1.75 billion for NRG Energy Inc.’s 44 per cent stake in a Texas nuclear plant.
The value of deals in the power generation sector rose by a third last year to about US$129 billion, data compiled by Bloomberg show. Among the largest transactions was a takeover of Atlantica Sustainable Infrastructure Plc by ECP and a group of co-investors.
On Friday, CPP Investments released this statement on the Calpine sale to Constellation energy:
Toronto, CANADA (January 10, 2025) – CPP Investments today announced the sale of its entire stake in U.S. power producer Calpine Corporation (Calpine) to Constellation Energy (Constellation), as part of Constellation’s acquisition of Calpine. Net proceeds to CPP Investments are expected to be approximately US$700 million in cash and US$1.9 billion in Constellation stock.
CPP Investments holds a 15.75% ownership position in Calpine through a co-investment made alongside Energy Capital Partners (ECP) and Access Industries in 2018.
“We are pleased by the success of our investment in Calpine and view this transaction as an excellent opportunity to realize strong returns for the CPP Fund,” said Bill Rogers, Managing Director, Head of Sustainable Energies at CPP Investments. “We look forward to participating in Constellation’s future growth, enhanced by the increased scale and cash flow resulting from this combination.”
The combined company’s footprint will span the continental U.S. and include a significantly expanded presence in Texas, the fastest growing market for power demand, as well as other key strategic markets, including California, Delaware, New York, Pennsylvania and Virginia.
“Calpine serves as a good example of CPP Investments’ approach to investing across the energy spectrum, which is to invest in companies that play a critical role in delivering affordable, reliable power while helping them progress towards the decarbonisation of their portfolios,” Rogers added.
The transaction is expected to close in the second half of 2025, subject to the satisfaction of customary closing conditions and regulatory approvals from the Federal Energy Regulatory Commission, the Department of Justice, the New York Public Service Commission, the Public Utility Commission of Texas, and other regulatory agencies.
CPP Investments’ Sustainable Energies group is active across the global energy system, with net assets totaling approximately C$34.2 billion as at March 31, 2024, including investments in renewables, conventional energy, carbon capture and storage, distributed and energy services, and emerging and disruptive technologies.
About CPP Investments
Canada Pension Plan Investment Board (CPP Investments™) is a professional investment management organization that manages the Fund in the best interest of the more than 22 million contributors and beneficiaries of the Canada Pension Plan. In order to build diversified portfolios of assets, investments are made around the world in public equities, private equities, real estate, infrastructure and fixed income. Headquartered in Toronto, with offices in Hong Kong, London, Mumbai, New York City, San Francisco, São Paulo and Sydney, CPP Investments is governed and managed independently of the Canada Pension Plan and at arm’s length from governments. At September 30, 2024, the Fund totaled C$675.1 billion. For more information, please visit www.cppinvestments.com or follow us on LinkedIn, Instagram or on X @CPPInvestments.
Constellation Energy also put out a press release on this mega merger:
BALTIMORE and HOUSTON (Jan. 10, 2025) — Constellation (Nasdaq: CEG) and Calpine Corp. today announced they have entered into a definitive agreement under which Constellation will acquire Calpine in a cash and stock transaction valued at an equity purchase price of approximately $16.4 billion, composed of 50 million shares of Constellation stock and $4.5 billion in cash plus the assumption of approximately $12.7 billion of Calpine net debt. After accounting for cash that is expected to be generated by Calpine between signing and the expected closing date, as well as the value of tax attributes at Calpine, the net purchase price is $26.6 billion, reflecting an attractive acquisition multiple of 7.9x 2026 EV/EBITDA.
The agreement creates the nation’s largest clean energy provider, opening opportunities to serve more customers coast-to-coast with a broader array of energy and sustainability products. Already the nation’s largest producer of 24/7 emissions-free electricity, Constellation will add Calpine, the largest U.S. producer of energy from low-emission natural gas generation and an expanded renewable energy portfolio, including the largest geothermal generation operation in the U.S. The combination also forms the nation’s leading competitive retail electric supplier, providing 2.5 million customers with a broader array of customized energy and sustainability solutions and new product offerings to help them manage energy costs and achieve their sustainability goals.
“This acquisition will help us better serve our customers across America, from families to businesses and utilities,” said Joe Dominguez, president and CEO, Constellation. “By combining Constellation’s unmatched expertise in zero-emission nuclear energy with Calpine’s industry-leading, best-in-class, low-carbon natural gas and geothermal generation fleets, we will be able to offer the broadest array of energy products and services available in the industry. Both companies have been at the forefront of America’s transition to cleaner, more reliable and secure energy, and those shared values will guide us as we pursue investments in new and existing clean technologies to meet rising demand. What makes this combination even more special is it brings together two world-class teams, with the most talented women and men in the industry, who share a noble passion for safety, sustainability, operational excellence and helping America’s families, businesses and communities thrive and grow. We look forward to welcoming the Calpine team upon closing of this transaction.”
Calpine’s low-emission natural gas plants will play a key role in maintaining grid reliability for decades to come as customers transition to cleaner energy sources. Both companies have been early investors in carbon sequestration technology to help ensure America’s abundant natural gas can continue to reliably power customers. At the same time, Constellation will invest in adding more zero-emission energy to the grid by extending the life of existing clean energy sources, exploring new advanced nuclear projects, investing in renewables and increasing the output of existing nuclear plants, in addition to restarting the Crane Clean Energy Center in Pennsylvania.
Andrew Novotny, president and CEO of Calpine, said, “This is an incredible opportunity to bring together top tier generation fleets, leading retail customer businesses and the best people in our industry to help drive a stronger American economy for a cleaner, healthier and more sustainable future. Together, we will be better positioned to bring accelerated investment in everything from zero-emission nuclear to battery storage that will power our economy in a way that puts people and our environment first. It’s a win for every American family and business in our newly combined footprint that wants clean and reliable energy. ECP’s commitment to these goals over the last seven years was critical to the progress we have made as a company and to laying a foundation for future growth.”
Tyler Reeder, president & managing partner of ECP, said, “Since acquiring Calpine in 2018, we have focused on unlocking value and driving future potential growth avenues for the business, which we believe have been recognized through this combination. We truly cannot thank the Calpine team enough for their partnership and are excited to support their continued contributions to the Constellation team. Following the closing of the transaction, we will remain committed as a shareholder of Constellation, reflecting our high confidence in the continued value and growth potential created by this combination.”
The transaction will deliver benefits to Constellation’s owners, with expected immediate adjusted (non-GAAP) operating earnings per share (EPS) accretion of more than 20% in 2026 and at least $2 per share of EPS accretion in future years. The transaction is projected to add more than $2 billion (non-GAAP) of free cash flow annually, creating strategic capital and scale to reinvest in the business. Constellation’s base earnings outlook is expected to continue growing at a double-digit rate through the decade. Constellation remains committed to a strong, investment-grade balance sheet with current ratings expected to be affirmed by S&P and Moody’s.
Strategic Benefits:
- Creates the cleanest and most reliable generation portfolio in the U.S., with a diverse, coast-to-coast portfolio of zero- and low-emission generation assets and expands Constellation’s footprint in the fastest growing area of demand for power: Together, Constellation and Calpine will have nearly 60 gigawatts of capacity from zero- and low-emission sources, including nuclear, natural gas, geothermal, hydro, wind, solar, cogeneration and battery storage. The combined company’s footprint will span the continental U.S. and include a significantly expanded presence in Texas, the fastest growing market for power demand, as well as other key strategic states, including California, Delaware, New York, Pennsylvania and Virginia.
- Combines best-in-class retail and commercial businesses with a premier customer solutions platform, establishing a coast-to-coast presence and providing opportunities to serve more customers with a broader array of energy and sustainability products to meet increasing demand: The transaction will expand Constellation’s industry-leading customer solutions business to position the combined company as the leading U.S. retail electricity supplier, helping 2.5 million homes and businesses nationwide achieve their energy and sustainability needs. The combined company will offer customers a broader array of reliable energy solutions, including new product offerings that can integrate nuclear, renewable and natural gas technologies tailored to customers’ unique needs. Customers also will enjoy more predictability and competitive prices as a result of the two companies’ complementary generation assets, load, fuel diversity, geographies and product offerings.
- Reinforces Constellation’s position as the largest clean energy producer with the lowest carbon emissions intensity in the U.S.: Constellation is already the top clean energy producer in the U.S., providing 10% of the nation’s emissions-free energy. Joining Calpine with Constellation broadens this position by increasing Constellation’s renewable portfolio, including the Geysers facility in Northern California, the largest geothermal generator in the U.S. The combined company is poised for further growth, enhanced by its increased scale and cash flow.
- Joins proven, experienced, best-in-class teams with strong cultures of safety, operating excellence and commitment to serving customers, communities and the country. Constellation and Calpine’s people share a passion for powering America’s families and businesses with energy that is reliable, clean and available whenever it’s needed. Both companies are innovators recognized across the industry for operating at the highest levels of safety, efficiency and reliability, and for offering competitive products that allow customers to cost-effectively meet their energy needs. After closing, Calpine CEO Andrew Novotny will bring his decades of energy expertise and leadership to Constellation and continue to lead the Calpine business.
- Strengthens shared commitment to supporting clean, healthy and growing communities through workforce development, philanthropy and community investment: Together, the combined company will increase its positive impact, serving as an economic engine for local communities through jobs, tax payments and other economic activity. The combined company will continue its commitment to communities through more than $21.1 million in combined annual Foundation, corporate and employee philanthropy, in addition to thousands of employee volunteer hours, with a focus on economically disadvantaged communities.
Additional Transaction Details
The cash and stock transaction will have a value of approximately $16.4 billion, composed of 50 million shares of Constellation stock using the trailing 20-day VWAP of $237.98 and $4.5 billion in cash plus the assumption of approximately $12.7 billion of Calpine net debt. Constellation expects to fund the cash portion of the transaction through a combination of cash on hand and cash flow generated by Calpine in the period between signing and closing of the transaction (that will be assumed at closing).
Reflecting their confidence in Constellation’s growth and value creation through this acquisition, Calpine’s significant shareholders, including ECP, Canada Pension Plan Investments (CPP Investments) and Access Industries, have agreed to an 18-month lock-up with respect to their equity ownership of Constellation common stock, subject to an agreed upon schedule for potential sales.
The transaction is expected to close within 12 months of signing, subject to the satisfaction of customary closing conditions, including the expiration or termination of the waiting period pursuant to the Hart-Scott-Rodino Act, and regulatory approvals from the Federal Energy Regulatory Commission, the Canadian Competition Bureau, the New York Public Service Commission, the Public Utility Commission of Texas and other regulatory agencies.
Following the close of the transaction, Constellation will continue to be headquartered in Baltimore and will continue to maintain a significant presence in Houston, where Calpine is currently headquartered.
Advisors
Lazard is serving as financial advisor to Constellation. J.P. Morgan Securities LLC is also serving as financial advisor to Constellation, and Kirkland & Ellis is serving as legal counsel.
Evercore served as lead financial advisor to Calpine. Morgan Stanley & Co. LLC, Goldman Sachs & Co. LLC., and Barclays US are serving as additional financial advisors to Calpine and ECP, and Latham & Watkins and White & Case are serving as legal counsel.
Conference Call and Webcast Information
Constellation will host a conference call today, Jan. 10, 2025, at 8:30 a.m. Eastern Time to discuss this announcement.
The live audio webcast of the conference call, including presentation slides, will be available at https://investors.constellationenergy.com.
# # #
About Constellation
A Fortune 200 company headquartered in Baltimore, Constellation Energy Corporation (Nasdaq: CEG) is the nation’s largest producer of clean, emissions-free energy and a leading supplier of energy products and services to businesses, homes, community aggregations and public sector customers across the continental United States, including three fourths of Fortune 100 companies. With annual output that is nearly 90% carbon-free, our hydro, wind and solar facilities paired with the nation’s largest nuclear fleet have the generating capacity to power the equivalent of 16 million homes, providing about 10% of the nation’s clean energy. We are further accelerating the nation’s transition to a carbon-free future by helping our customers reach their sustainability goals, setting our own ambitious goal of achieving 100% carbon-free generation by 2040, and by investing in promising emerging technologies to eliminate carbon emissions across all sectors of the economy. Follow Constellation on LinkedIn and X.
About CalpineCalpine Corporation is America’s largest generator of electricity from natural gas and geothermal resources with operations in competitive power markets. Our fleet of 79 energy facilities in operation represents over 27,000 megawatts of generation capacity. Through wholesale power operations and our retail businesses, we serve customers in 22 states and Canada. Our clean, efficient, modern and flexible fleet uses advanced technologies to generate power in a low-carbon and environmentally responsible manner. We are uniquely positioned to benefit from the secular trends affecting our industry, including the abundant and affordable supply of clean natural gas, environmental regulation, aging power generation infrastructure and the increasing need for dispatchable power plants to successfully integrate intermittent renewables into the grid.
If you would like to learn more about Calpine follow us: Twitter.com/Calpine or Linkedin.com/Calpine
About Energy Capital Partners (ECP)
Energy Capital Partners (ECP), founded in 2005, is a leading equity and credit investor across energy transition, electrification and decarbonization infrastructure assets. The ECP team, comprised of 90 people with 800 years of collective industry experience, deep expertise and extensive relationships, has consummated more than 100 equity (representing nearly $60 billion of enterprise value) and over 20 credit transactions since inception. In 2024, ECP combined with London listed Bridgepoint Group Plc (LSE: BPT.L) to create a global leader in value added middle-market investing with a combined $73 billion of assets under management across private equity, credit and infrastructure. For more information, visit www.ecpgp.com and www.bridgepoint.eu.
Alright, we are kicking off the year with a pretty big deal, the sale of Calpine to Constellation Energy for a cash and stock deal valuing Calpine at $16.4 billion (all figures in USD).
That means CPP Investments will make roughly $2.6 billion in proceeds and part of those proceeds are in Constellation Energy stock which is locked up for 18 months (the transaction is expected to generate approximately US$700m in cash and US$1.9bn in Constellation stock for CPP Investments).
If you read the press releases above, especially the last one from Constellation Energy, you see why this truly is a great deal for all parties involved.
Importantly, the agreement creates America's largest clean energy provider, opening opportunities to serve more customers coast-to-coast with a broader array of energy and sustainability products.
Calpine is the largest US producer of energy from low-emission natural gas generation and Constellation is the nation’s largest producer of 24/7 emissions-free electricity.
Talk about synergies.
This acquisition will further propel Constellation into the top spot of clean energy provider, benefiting its clients and investors.
For CPP Investments, it once again proves the importance of strategic partnerships and how acquiring a stake in Calpine in 2018 through a co-investment with Energy Capital Partners (ECP) and Access Industries proved to be very profitable and timely.
Bill Rogers, Managing Director, Head of
Sustainable Energies at CPP Investments states this:
We are pleased by the success of our investment in Calpine and view this transaction as an excellent opportunity to realize strong returns for the CPP Fund. We look forward to participating in Constellation’s future growth, enhanced by the increased scale and cash flow resulting from this combination.
Calpine serves as a good example of CPP Investments’ approach to investing across the energy spectrum, which is to invest in companies that play a critical role in delivering affordable, reliable power while helping them progress towards the decarbonisation of their portfolios.
And Tyler Reeder, president & managing partner of ECP, said:
Since acquiring Calpine in 2018, we have focused on unlocking value and driving future potential growth avenues for the business, which we believe have been recognized through this combination. We truly cannot thank the Calpine team enough for their partnership and are excited to support their continued contributions to the Constellation team. Following the closing of the transaction, we will remain committed as a shareholder of Constellation, reflecting our high confidence in the continued value and growth potential created by this combination.
That pretty much says it all.
In other related news, CPP Investments announced today that it is forming a joint venture with leading Brazilian real estate developer Cyrela:
Toronto, CANADA and São Paulo, BRAZIL (Jan 13, 2025) – Canada Pension Plan Investment Board (CPP Investments) announced today that it has signed a joint venture agreement with Cyrela Brazil Realty (Cyrela), the largest residential real estate developer in Brazil. Cyrela’s fund management subsidiary, Cy.Capital, will act as the manager of the investment vehicle.
CPP Investments and Cyrela have established an investment target of 1.7 billion reais (C$400 million), on an equal partnership basis, to develop residential condominiums in São Paulo, Brazil’s largest city, targeting over 6 billion reais (C$1.44B) in potential sales value over the next several years.
“The residential market in São Paulo has strong fundamentals, supported by favorable demographics, low unemployment level and resilient household income growth in the city,” said Ricardo Szlejf, Managing Director, Head of Real Assets, Latin America, for CPP Investments. “We are pleased to expand our long-term partnership with Cyrela, a premier real estate developer in Brazil, to develop high-quality residential projects that we believe will deliver strong, risk-adjusted returns to CPP contributors and beneficiaries.”
Today’s announcement extends a successful partnership between CPP Investments and Cyrela dating to 2019, which also includes a joint venture with Cyrela and Greystar to develop multifamily properties in São Paulo.
“We are proud to count CPP Investments as one of our key investment partners and are excited about the opportunity to further expand what has been a very productive working relationship,” said Gustavo Vaz, CEO of Cy.Capital.
Alright, let me wrap it up there.
Below, Joseph Dominguez, Constellation Energy CEO, joins 'Squawk on the Street' to discuss the company's acquisition of Calpine, the chief executive's confidence in the deal and more
And John Graham, President and CEO of CPP Investments, recently sat down with David Blood, whose Generation Investment Management (with co-founder Al Gore) has repositioned sustainability as an opportunity to drive outsized returns through its approach to deal ideation, underwriting and pricing. This conversation was part of CPP Investments’ inaugural Sustainability Forum for employees.
Great conversation, take the time to listen to it, David Blood is a very interesting person with an interesting background, he shares a lot of insights here.
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