Constellation Energy Inks a Nuclear Power Deal with Walmart. Here's What Investors Need to Know.
In a big win for nuclear energy, the retailer will purchase around 176 megawatts of electricity.
By Eric Volkman
Monster retailer Walmart (Nasdaq:WMT) and powerful power utility Constellation Energy (Nasdaq:CEG) rarely end up in the headlines together. That sure wasn’t the case on Tuesday, as the two companies announced a power supply agreement that’s historic in several ways.
Since the deal will affect the futures of the two companies considerably, here’s a quick rundown of its key points for investors in one or both.
The power of nuclear
That morning, Walmart and Constellation published a press release heralding the arrangement.
They have signed a power purchase agreement (PPA) for Constellation to supply roughly 176 megawatts of electricity produced by the Dresden Clean Energy Center, one of six nuclear power plants operated by Constellation in Illinois.
Constellation’s electricity will power Walmart’s perishable distribution center in the municipality of Belvidere. That facility is currently under development.
Nuclear PPAs consist of three “products” a user is buying — the energy produced, “environmental attributes,” the emission-free energy certificates or zero-emission credits for buying clean energy, and “capacity”, a kind of reservation fee exclusively locking down a block of a power plant’s output.
The deal is arranged in two staggered, 15-year terms. The first begins in 2029, and the second in the following year.
While both companies have long had a presence in Illinois, the new agreement is their first partnership centered around nuclear energy. In fact, they wrote in the press release, it’s Walmart’s inaugural nuclear PPA.
Clean and cheap
While Walmart and Constellation were eager to provide granular details of the new PPA, they did not disclose its financial particulars. While that’s actually typical for PPAs, we can’t get much of a fix on how it’ll affect either company. Besides, it won’t kick off until the first of the two terms begins in 2029.
That said, we have a hint of the financial advantages in the words of some of the officials involved in the deal.
In the press release, Walmart’s senior vice president of energy Shayne Wahlmeier was quoted as saying that “Working with Constellation allows us to support new operations in Illinois while advancing our strategy in a way that prioritizes affordable, reliable, and clean energy for our business and the communities we serve.”
He added that the retailer is “constantly evaluating new capabilities and energy solutions that help ensure the electricity we rely on is dependable, responsibly produced, and built to support long-term growth.”
A win for both
Given this, we can deduce that the arrangement was financially advantageous enough for Walmart to accept it. The company’s always-competitive prices are fundamental to its success, so any PPA it agrees to must be cost-effective, at least to some degree.
What Walmart received, then, is a reliable, long-term source of clean energy at a price that should help keep it in the black. Such arrangements are always victories for the company.
As for Constellation, it’s securing a client known to nearly every American, and doing it in the nuclear segment. This is particularly important for the company, as it operates the largest nuclear fleet in this country. Also, the ultra-reliable revenue stream it’ll earn from Walmart will help it with the planned expansion of Dresden’s capacity.
This has to be considered a win-win for the two companies, then. Walmart’s management is clearly demonstrating flexibility and a continued willingness to adopt modern, practical business solutions. Meanwhile, Constellation is proving that big next-generation energy wins don’t necessarily have to come from tech companies feverishly building out artificial intelligence (AI) data center capacity, as some continue to believe.