BGRIM jumps 3.14% as broker sees margin recovery driving power sector on 3 factors

Constellation Energy unveiled a 20-year power purchase agreement with Google supporting the addition of 890 MW of new nuclear generation through uprates of 11 existing reactors, sending its shares up 12.2% on Tuesday as one of the top two gainers on the S&P 500. The deal is the largest-ever uprate project between a nuclear power provider and a tech company, and will provide additional power to the grid roughly equivalent to building a large new reactor. Along with the nuclear deal, which will be backed by $4.3B in new investment by Constellation, the two companies also entered into a 15-year supply agreement for another 2,700 MW across the PJM power market. KeyBanc analyst Sophie Karp said the news validates a key pillar of her bullish case for the stock, calling it high-quality, low-risk growth that enhances earnings visibility and derisks the company's capital deployment strategy. Constellation's news lifted other power producers, with Talen Energy up 12.4%, Vistra up 10.7%, and NRG Energy up 7%, while the State Street Utilities Select Sector SPDR ETF jumped 3%.

Google and major U.S. power producer Constellation Energy announced on the 6th that they have agreed to partner in the nuclear power business. Under the deal, Google will purchase for 20 years the additional generating capacity created by investment in nuclear plant equipment, aiming to secure electricity for data centers being built amid the expansion of artificial intelligence use. According to the announcement, Constellation will increase the generating capacity of 11 reactors it owns in the Midwestern state of Illinois and the Eastern states of Pennsylvania and New Jersey. Constellation will make more than 4.3 billion dollars in new investment, which is expected to create about 7,200 jobs during the construction period.

Black Hills Corporation announced definitive agreements to serve a planned Google data center in Cheyenne, Wyoming, sending its shares up 5% in after-hours trading Tuesday. The utility will invest $1.8 billion in new natural gas generation between 2027 and 2029, providing up to 590 megawatts of grid-connected energy service and managing 2.1 gigawatts of third-party contracted resources through a private microgrid under agreements running through 2048. Black Hills plans to construct 564 megawatts of company-owned natural gas generation at its existing Cheyenne Prairie Generating Station, with the remaining 26 megawatts supplied through market energy purchases and retail utility service. The project is expected to contribute approximately $150 million of net income in 2030 and generate approximately $2.4 billion of unlevered free cash flow through 2048, net of the $1.8 billion capital expenditure. Google will bear all costs associated with serving the data center and has provided Black Hills with $399 million in refundable advances for procurement of long-lead-time equipment, which the company expects to reimburse by June 30, 2027. Energy service is planned to begin in late 2027 and ramp to peak load in 2030.

Constellation Energy surged more than 12% after Alphabet's Google agreed to buy nuclear power from the company under a 20-year power purchase agreement that will drive more than 4.3 billion dollars of investment to upgrade systems at 11 Constellation reactors. The deal made Constellation the second-biggest gainer in the S&P 500 and the top gainer in the Nasdaq 100, lifting utilities and uranium-linked names on hyperscaler demand for clean, reliable baseload power. The S&P 500 closed at a record high of 7,819.04, up 45 points or about six-tenths of a percent, while the Nasdaq 100 also set a record and the Dow Jones Industrial Average added about 253 points, or half a percent. Nvidia rose to another record high and moved toward becoming the first company with a 6 trillion dollar market cap, while Marvell Technology finished just under 6% higher after raising its fiscal 2028 revenue guidance to 20 billion dollars, topping the average analyst estimate. On the downside, Seagate Technology fell 9% and Western Digital dropped almost 7%, while Moderna slid about 7.7%.

US power consumption will reach record levels in 2026 and 2027, the US Energy Information Administration projected Tuesday in its Short-Term Energy Outlook. The EIA expects demand to climb from a record 4,195 billion kilowatt-hours in 2025 to 4,288 billion kWh in 2026 and 4,356 billion kWh in 2027, driven largely by artificial intelligence and cryptocurrency data centers, with homes and businesses also consuming more electricity as they cut fossil fuel use for heating and transportation. Power sales in 2026 are projected at 1,541 billion kWh for residential consumers, 1,549 billion kWh for commercial customers and 1,055 billion kWh for industrial customers, surpassing the prior peaks of 1,515 billion kWh residential and 1,493 billion kWh commercial set in 2025, while the industrial record of 1,064 billion kWh dates to 2000. Coal's share of generation will slip from 17% in 2025 to 16% in 2026 and 15% in 2027, natural gas holds a 40% share in 2026 before easing to 39% in 2027, renewables rise from about 24% in 2025 to 25% in 2026 and 27% in 2027, and nuclear holds steady at 18% through 2026 and 2027. Natural gas sales in 2026 are forecast at 12.5 billion cubic feet per day for residential consumers, 9.5 bcfd for commercial customers and 23.8 bcfd for industrial customers, with power generation consuming 37.0 bcfd.