Google lands 3.59GW nuclear power order, Goldman Sachs maintains Constellation Energy (CEG.US) “neutral” price target of $305

The Zhitong Finance App learned that Goldman Sachs released a research report on October 6, 2026, focusing on Constellation Energy (CEG.US) and Google (GOOGL.US) signing a nuclear power purchase agreement (PPA) with a total size of about 3.59 GW. Goldman Sachs maintains Constellation Energy's “neutral” investment rating, with a 12-month target price of $305 and potential upside of 14%.

The agreement reached with Google this time consists of two parts. All electricity is connected to the PJM grid. The first part is a 20-year PPA, involving a total of 890 MW of upgrades to 11 nuclear power plants in Illinois, Pennsylvania, and New Jersey. The first batch of new electricity is expected to be put into operation in 2028. The project will drive Constellation Energy's capital investment of more than 4.3 billion US dollars. Some of these investments are already planned and not completely new.

The second part is a 15-year procurement contract to lock in Constellation Energy's 2,700 MW nuclear power production capacity in the PJM region and guarantee the economic benefits of existing nuclear power units. The contract also incorporates a flexible regulation mechanism for electricity use, which can shut down non-core loads during the grid pressure phase. The two sides also plan to expand cooperation on clean energy, energy storage and demand response across the US. Constellation Energy will also introduce Gemini tools to optimize power generation scheduling and infrastructure protection.

The report did not disclose the specific electricity price of this transaction. Analysts referred to the company's public estimates for sensitivity analysis: each 1 GW of nuclear PPA would bring an increase of 125 to 325 million US dollars in FCFBG. According to this estimate, the 3.59 GW contract will bring Constellation Energy an increase of 449 million to 1,167 million US dollars in FCFBG, accounting for 5%-14% of Goldman Sachs's 2030 FCFBG forecast.

The signing of this agreement increased the PPA lock in Constellation Energy's nuclear power installations from 13% to 28%, and the new contract scale in a single week accounts for about 19% of its total nuclear power installations. Compared with peers, Talen Energy (TLN.US) and Vistra Energy (VST.US) accounted for 86% and 52% of nuclear power PPA contracts respectively. Although Constellation Energy's contract ratio is still low, it has the largest number of nuclear power assets to be contracted in the industry.

In an industry environment where regional policy uncertainty in the PJM region is high and the market generally questions the viability of PPA implementation, this large contract has positive significance for Constellation Energy and the entire independent power producer (IPP) industry, and is expected to restore market sentiment in the sector. However, Goldman Sachs still maintains a neutral rating. The core reason is that compared to the IPP of peers, Constellation Energy's valuation appeal is limited.

Follow-up, we will focus on the third quarter earnings report, the October 12 RBP process in the PJM market, and the IRAS ruling. If there is no negative impact at the policy level, this transaction may start a continuous revaluation of the company's valuation. The report suggests three core risks: regulatory and grid-connection risks, fluctuating electricity prices, and falling short of expectations in data centers. The valuation uses a mixed valuation method combining price-earnings ratio and free cash flow return. The target price corresponds to 21 times P/E and 5% free cash flow return.

At the financial forecast level, the overall revenue, EBITDA, and EPS of Constellation Energy remained upward in 2025-2028. Revenue and EBITDA in 2026 ushered in phased increases, rising 41.9% and 67.4% year-on-year respectively. Subsequent growth rates declined. In 2028, EBITDA returned to a high growth rate of 19%, and diluted EPS rose to $17.09. Free cash flow will improve significantly in 2027-2028. In terms of leverage, net debt/EBITDA gradually rose to 2.7 times in 2026, driven by capital expenditure, and continued to decline in leverage for the next two years. The dividend maintained a steady increase of 10% per year.