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On Friday, Barclays reiterated its Overweight rating on Constellation Energy (NASDAQ:CEG) shares with a $211.00 price target. The firm highlighted the company's newly announced 20-year power purchase agreement (PPA) with Microsoft (NASDAQ:MSFT) for the revival of Three Mile Island Unit 1, soon to be known as the Crane Clean Energy Center.
The agreement is expected to boost Constellation Energy's base earnings per share growth rate from at least 10% to a minimum of 13% annually over the period from 2024 to 2030.
The company anticipates deploying approximately $1.6 billion in capital expenditures (CapEx) for the project, which aligns with its target for double-digit unlevered returns. The revised 2024-25 capital allocation plan was also released, showing $1.8 billion in available capital for those years, compared to the previous figure of $2.3 billion, with $400 million earmarked for Crane CapEx in 2024 and 2025.
The project's expected completion by 2028 and the projected increase in base earnings suggest a potential for earnings per share (EPS) to exceed $15 by 2028. Barclays noted that the deal may have come as a surprise to the market, especially after concerns over delays in behind-the-meter (BTM) transactions were expressed during the fall conference season.
Barclays views the announcement as a positive development not only for Constellation Energy but also for related companies such as Talen Energy and Public Service Enterprise Group (NYSE:PEG). Further details regarding fuel procurement, regulatory timelines, and the impact on the company's growth rate are anticipated during Constellation Energy's conference call scheduled for 8:30 AM ET.
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