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How Are Production Tax Credits Powering Constellation Energy's Growth?
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Key Takeaways
Constellation Energy is leveraging the nuclear PTC to support revenues and fund expansion projects.
The PTC helps CEG protect profitability when prices fall below $44.75/MWh, with inflation-adjusted safeguards.
CEG projects over 13% earnings growth through 2030, supported by PTC boosts and operational improvements.
Constellation Energy Corporation (CEG - Free Report) is benefiting from the Production Tax Credit (“PTC”) for nuclear energy. The PTC is a federal tax credit in the United States, particularly for renewable energy generation, specifically for electricity generated from eligible resources. After a facility is placed in operation, it offers a per-kilowatt-hour (kWh) incentive for a predetermined amount of time.
The Nuclear PTC, part of the Inflation Reduction Act, offers a substantial boost to Constellation Energy's revenues, particularly when power market prices are low. This credit helps protect the company's profitability and enables it to continue operating its nuclear plants, which are a major source of carbon-free electricity.
CEG’s consistent PTC earnings enable it to invest in a range of growth initiatives, including repowering wind assets, extending plant licenses, acquiring new assets and adding clean energy generation through uprates.
Constellation Energy expects more than 13% adjusted operating earnings growth on base earnings through 2030, driven by several factors like the PTC step-up, planned refueling outages, outage duration improvements and nuclear generation.
The company highlighted that when revenues drop below $44.75/MWh, the nuclear PTC supports nuclear plants, offering crucial downside protection. This protection is further strengthened by higher inflation adjustments to the PTC floor price. CEG expects $500 million in 2028 incremental base revenues when the 2025 inflation adjustment falls between 2.3% and 2.6%.
The PTC essentially plays a major role in Constellation Energy's capacity to seek expansion prospects in the renewable energy industry and maintain its financial stability.
PTCs Set to Assist Utilities
Some other companies that also substantially benefit from PTCs have been discussed below:
Duke Energy (DUK - Free Report) is benefiting from the PTC by receiving financial incentives for generating electricity from qualifying renewable sources. This helps DUK reduce the cost of the energy sources. DUK will flow back Nuclear PTC benefits of $50 million in 2025 and $100 million in 2026 to its customers.
The Southern Company (SO - Free Report) is benefiting from PTCs through reduced income tax expenses. A specific provision extending the nuclear PTCs benefits SO, especially as it works on completing new nuclear reactors in Georgia. SO is also utilizing the sale of these credits to other entities through transferability agreements to generate cash.
CEG Stock’s Price Performance
In the past three months, CEG’s shares have risen 39.4% compared with the industry’s 19.1% growth.
Image Source: Zacks Investment Research
CEG Stock’s Earnings Estimates on the Rise
The Zacks Consensus Estimate for Constellation Energy’s 2025 and 2026 earnings per share indicates an increase of 9% and 22.09%, respectively.
Image Source: Zacks Investment Research
CEG Stock Trading at a Premium
CEG is trading at a premium relative to the industry, with a forward 12-month price-to-earnings ratio of 29.43X compared with the industry average of 20.8X.
Image: Bigstock
How Are Production Tax Credits Powering Constellation Energy's Growth?
Key Takeaways
Constellation Energy Corporation (CEG - Free Report) is benefiting from the Production Tax Credit (“PTC”) for nuclear energy. The PTC is a federal tax credit in the United States, particularly for renewable energy generation, specifically for electricity generated from eligible resources. After a facility is placed in operation, it offers a per-kilowatt-hour (kWh) incentive for a predetermined amount of time.
The Nuclear PTC, part of the Inflation Reduction Act, offers a substantial boost to Constellation Energy's revenues, particularly when power market prices are low. This credit helps protect the company's profitability and enables it to continue operating its nuclear plants, which are a major source of carbon-free electricity.
CEG’s consistent PTC earnings enable it to invest in a range of growth initiatives, including repowering wind assets, extending plant licenses, acquiring new assets and adding clean energy generation through uprates.
Constellation Energy expects more than 13% adjusted operating earnings growth on base earnings through 2030, driven by several factors like the PTC step-up, planned refueling outages, outage duration improvements and nuclear generation.
The company highlighted that when revenues drop below $44.75/MWh, the nuclear PTC supports nuclear plants, offering crucial downside protection. This protection is further strengthened by higher inflation adjustments to the PTC floor price. CEG expects $500 million in 2028 incremental base revenues when the 2025 inflation adjustment falls between 2.3% and 2.6%.
The PTC essentially plays a major role in Constellation Energy's capacity to seek expansion prospects in the renewable energy industry and maintain its financial stability.
PTCs Set to Assist Utilities
Some other companies that also substantially benefit from PTCs have been discussed below:
Duke Energy (DUK - Free Report) is benefiting from the PTC by receiving financial incentives for generating electricity from qualifying renewable sources. This helps DUK reduce the cost of the energy sources. DUK will flow back Nuclear PTC benefits of $50 million in 2025 and $100 million in 2026 to its customers.
The Southern Company (SO - Free Report) is benefiting from PTCs through reduced income tax expenses. A specific provision extending the nuclear PTCs benefits SO, especially as it works on completing new nuclear reactors in Georgia. SO is also utilizing the sale of these credits to other entities through transferability agreements to generate cash.
CEG Stock’s Price Performance
In the past three months, CEG’s shares have risen 39.4% compared with the industry’s 19.1% growth.
Image Source: Zacks Investment Research
CEG Stock’s Earnings Estimates on the Rise
The Zacks Consensus Estimate for Constellation Energy’s 2025 and 2026 earnings per share indicates an increase of 9% and 22.09%, respectively.
Image Source: Zacks Investment Research
CEG Stock Trading at a Premium
CEG is trading at a premium relative to the industry, with a forward 12-month price-to-earnings ratio of 29.43X compared with the industry average of 20.8X.
Image Source: Zacks Investment Research
CEG currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.