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Constellation Energy in Deal to Buy NRG’s Stake in South Texas Nuclear Project

Constellation Energy is acquiring NRG Energy’s 44 percent stake in the 2,645-megawatt South Texas Project nuclear plant in Texas.

The transaction is valued at $1.75 billion, with an effective purchase price of $1.4 billion after taking into consideration the present value of tax benefits to Constellation. Baltimore-based Constellation said the transaction would be financed with a combination of cash and debt.

CPS Energy, the public power utility serving San Antonio, Texas, owns a 40 percent stake in the South Texas plant. Texas public power utility Austin Energy owns a 16 percent stake in the dual reactor plant.

The addition of the roughly 1,163-MW stake in the South Texas Project in Bay City, about 90 miles southwest of Houston, would add to Constellation’s existing 3,520-MW portfolio of natural gas-fired generation at its Colorado Bend II, Wolf Hollow II and Handley stations in Texas and its 169 MW of wind energy at the Whitetail and Sendero projects.

Constellation also is a supplier in Texas’ competitive retail energy market, supplying electricity, natural gas, energy efficiency and other services to approximately 200,000 residential and commercial customers statewide.

After the transaction closes, Constellation and the other two owners of the plant will have oversight of the South Texas Project Nuclear Operating Company, which will continue to operate the plant.

The purchase is subject to approval by the Nuclear Regulatory Commission and Department of Justice. Constellation said it expects the deal to be completed by year end.

“With the potential to run for at least 46 more years with the right policy support, we look forward to working with the South Texas Project’s other owners to continue bringing clean, reliable electricity to this growing region for decades to come,” Joe Dominguez, president and chief executive officer of Constellation, said in a statement.

Constellation has ownership interests in 13 generating stations with 23 nuclear units capable of producing approximately 21,000 MW.

For NRG Energy, the sale of its stake in the South Texas Project is part of a wider strategy of raising cash by selling assets. In a statement, NRG said the South Texas Project sale exceeds the previously disclosed 2023 asset sale target of $500 million. NRG said that “after $500 million of deleveraging” it plans to use the cash proceeds from the sale primarily for share repurchases.

In May, Elliott Investment Management, which owns 13 percent stake in NRG, sent a letter to the company’s board of directors recommending, among other things, that NRG achieve at least $500 million of recurring cost reductions.