Constellation and GE Join Forces - Analyst Blog

Constellation Energy Group Inc. (CEG) signed a long-term services agreement with General Electric Company (GE). Per the long-term agreement, General Electric will oversee safety and reliability issues at the Nine Mile Point Nuclear Station in Scriba, New York. The Nine Mile Point is a two-unit, boiling water reactor nuclear plant. GE will oversee Units 1 and 2 till 2029 and 2046, respectively.

Constellation Energy said that under the multi-year, multi-outage agreement, GE will supply critical parts and technical services, and manage inventory. GE will also provide its full suite of reactor power monitoring instrumentation, including its most advanced Local Power Range Monitor or LPRM sensor, and associated technical service expertise.

Constellation Energy is a leading supplier of energy products and services to wholesale and retail electric and natural gas customers. It owns a diverse fleet of generating units in the United States and Canada, totaling approximately 7,118 megawatts of generating capacity, and is among the leaders in pursuing the development of new nuclear plants in the United States. The company delivers electricity and natural gas through Baltimore Gas and Electric Company, its regulated utility operating in Central Maryland.

Constellation Energy remains diversified among owned generation, contractual generation, regulated distribution and competitive supply of energy. Its diverse fleet of power generating units located across four U.S. states and Canada is a mix of coal, oil, natural gas and renewable sources (including geothermal, solar, hydro-electric and biomass).

Diversified generation assets help Constellation Energy minimize the impact of volatile commodity prices on its costs.

However, we believe that the above positives are already reflected in the current valuation of Constellation Energy leaving little room for above-market gain.

Also in the near-term, the fortunes of the company appear a little bleak due to the tepid economy, lower demand for electricity, over-exposure in the merchant power space and low-dividend yield compared to its peers. Thus we maintain our near-term Neutral recommendation on the Zacks #3 Rank stock.