Constellation Energy: Direct Cash-Out from U.S. Government Budget — 'S&P 500 Earnings Report #97'

Note: This Constellation Energy has absolutely nothing to do with the previously covered 'Constellation Brands: Windfall Profits — The Tragedy of Latin American National Capital' (S&P 500 Earnings Report #86), which produces beer. There is no relationship whatsoever between a nuclear power company and a beer producer—and they are not subsidiaries of the same parent conglomerate. Constellation Energy (CEG) spun off from Exelon—the largest U.S. electric utility—in early 2022, focusing on nuclear power and other new energy sources. It is now the largest nuclear and new-energy electricity generator in the United States. Constellation Energy’s Q4 2023 earnings report download links: investors.constellationenergy.com... investors.constellationenergy.com... Let’s first examine its revenue and profit statement. How does it strike you? To me, the core operations themselves generate little or no profit—essentially sustained by 'Other Income' ($349 million per quarter; $1.268 billion annually). (2022 was similar, with one key difference: As explained below, government support only began arriving in the second half of 2022—so Q4’s 'Other Income' was exceptionally large, offsetting operational losses and propping up net profit. But for the full year 2022, this support had not yet kicked in, so the effect wasn’t reflected across the entire year.) Why is this the case? Two main reasons: First, at its flagship nuclear facilities: 14 plants housing 23 reactors—averaging just two older-generation reactors per plant, each rated at ~1,000 MW—delivering low efficiency and zero economies of scale. For comparison, China’s newest nuclear plants typically host 4–6 units (some fewer due to ongoing construction). Second, although much of CEG’s fuel supply is secured via long-term contracts, uranium prices have tripled over the past few years—meaning newly negotiated long-term agreements must reflect correspondingly higher pricing. In summary: expensive raw materials + inefficient aging reactors + high maintenance costs + insufficient unit count to achieve scale economies = nuclear power generation effectively amounts to unpaid labor. The U.S. government fully understands this reality—which is why the following policy exists: The U.S. government says: 'Fine. When gross revenue falls below $43.75 per megawatt-hour (i.e., $0.04375 per kilowatt-hour—commonly called “per kWh”; U.S. electricity rates are actually quite low…), we’ll subsidize you—and the lower the price, the larger the subsidy. Once the wholesale price drops below $25/MWh, the subsidy amount stops increasing further. Moreover, that $43.75 threshold is adjusted annually for inflation!' This mechanism is known as the Nuclear Production Tax Credit (PTC), established under the Inflation Reduction Act passed in August 2022—a $390 billion bill. U.S. government subsidies are robust; criticism shouldn’t be directed solely at China—subsidies exist globally. One could even say that U.S. nuclear subsidies flow directly into CEG shareholders’ pockets…

U.S. Overnight Market Update | Markets Await Fed Rate Decision; Major Indices Rise; Tesla (TSLA) Shares Reclaim $400+

Seagate reports 61% quarterly revenue growth—but strong earnings fail to lift share price. Data storage equipment manufacturer Seagate Technology (STX) reported first-quarter fiscal year 2027 revenue of $4.23 billion—61% higher year-on-year and above market expectations. Its midpoint guidance for next quarter’s revenue stands at $4.8 billion, 6.7% above consensus estimates. This marks Seagate’s tenth consecutive quarter of revenue growth, signaling continued momentum in the current upcycle—typical industry upcycles lasting eight to ten quarters. Management expects next quarter’s revenue to rise 69.9% year-on-year. Days Inventory Outstanding (DIO)—a critical metric for chipmakers reflecting capital intensity and semiconductor supply-demand cyclicality—stood at 86 days this quarter, five days above its five-year average, indicating inventory levels have risen to historically high levels. Following the earnings release, Seagate’s after-hours stock price fell more than 8%. Oracle expands NVIDIA AI chip collaboration, adding Google, Cerebras, and others. Oracle (ORCL) announced an expansion of its cloud-based AI chip partnership with NVIDIA (NVDA), planning to deploy AI servers powered by NVIDIA’s next-generation Vera Rubin chips at multi-gigawatt scale. Simultaneously, Oracle will integrate Google’s TPU chips, alongside AI inference chips from SambaNova Systems and Cerebras Systems, to diversify its compute supply. Oracle also plans to incorporate its proprietary Acceleron networking chips into select NVIDIA servers, replacing some of NVIDIA’s networking components. The company stated that different AI workloads demand varying compute capabilities—and a diversified chip portfolio enables customers to select infrastructure optimized for performance, throughput, and cost. While NVIDIA dominates the AI training chip market, competition in the AI inference space is far more fragmented. Andrew Feldman, CEO of Cerebras, noted that the collaboration with Oracle will significantly expand Cerebras’ enterprise customer base, as the company scales deployments across other companies’ data centers. Oracle has not disclosed financing arrangements for this chip procurement. Last month, the company indicated that customers are increasingly bearing chip procurement costs—and reaffirmed its FY2027 capital expenditure target of $90–95 billion. U.S. to provide $5 billion financing to Constellation Energy to boost nuclear power generation. The Trump administration is considering offering Constellation Energy (CEG) up to $5 billion in financing to upgrade and modernize its nuclear reactor facilities in Illinois, Maryland, and Pennsylvania. The U.S. Department of Energy (DOE) stated that, supported by this conditional loan commitment, the related projects are expected to add nearly 1.1 gigawatts (GW) of electricity generation capacity—strengthening grid reliability and lowering costs. Secretary of Energy Chris Wright plans to announce this financing arrangement Tuesday evening at a nuclear power plant in Illinois. That plant will supply power to Google. In a statement, Wright said: 'The Department of Energy is accelerating President Trump’s “American Nuclear Renaissance” initiative and fully unlocking the potential of our nation’s existing nuclear infrastructure.'

Constellation gets conditional loan up to $5 billion for US nuclear plant upgrades

4 days ago

Constellation Energy secured a $5 billion conditional loan from the U.S. Department of Energy to upgrade nuclear plants, adding 1.1 gigawatts of capacity to meet surging power demand from AI and electrification.

reuters

Constellation gets conditional loan up to $5 billion for US nuclear plant upgrades

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