Energy Capital Partners is marking a four times return, reports Bloomberg, on its 2018 take-private of power generator Calpine Corp. after last week’s $26.6 billion sale to Constellation Energy.
On an initial $5.6 billion equity check, ECP and co-investors CPP Investments and Access Industries are realizing cash proceeds of $4.5 billion (plus dividends taken over the hold) and walking away with Constellation shares worth $11.9 billion.
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Post-close, ECP will become the largest non-index shareholder in Constellation with a 6.7 percent stake.
The chunky stock consideration reflects some of the practical constraints of such a sizeable exit, but ECP isn’t worried about the partial liquidity. President and managing partner Tyler Reeder says the firm is “in this case very excited to take a lot of stock here.”
“We don’t in any way think this is the top of the market, so for us to own the stock over the next few years is a very comfortable place to be.”
The deal includes a phased 18-month lock-up, meant to match Constellation’s anticipated timeline for synergy realization: the business expects 20%-plus adjusted EPS accretion by 2026.
The outcome is a welcome vindication of ECP’s contrarian bet on natural gas generation.
“When we took Calpine private, the view was that renewables were going to overtake natural gas and that the value of natural gas-fired plants was going to decline,” said Reeder.
Instead, Calpine’s EBITDA doubled over the hold.
That earnings growth was enough to secure the positive outcome despite mild valuation headwinds. ECP entered at a forward multiple of around 8.5 times, versus Constellation’s purchase at just 7.9 times 2026 EBITDA.
Even with Washington’s newly-lenient regulatory environment, the deal’s approval process is still likely to be complex. Required clearances include the DOJ, FERC, Canadian authorities, and utility authorities in New York and Texas.
Otherwise, it’s ‘so far, so good’ for the sponsors: Constellation shares are already up more than 35 percent since the deal’s announcement.
The eventual roll-out of yesterday’s $500 billion Stargate AI infrastructure announcement might add to the momentum. Constellation (and its shareholders) will be hoping for more deals like September’s 20-year power purchase agreement with Microsoft, which separately sent Constellation shares up more than 26 on the day it was announced.