Constellation Energy Has the Power That AI Needs. The CEO Is Making the Most of It.

Joseph Dominguez, CEO of Constellation Energy. (Photograph by Caroline Gutman)

The company is about to become the world’s largest producer of electricity. Joe Dominguez tells us what to expect.

As the kingpins of AI scramble to secure electricity for their data centers, CEO Joe Dominguez has the goods. His Baltimore-based Constellation Energy is on the brink of producing more electricity than any company on earth.

Constellation produces most of its power with 21 nuclear reactors spread across several states, accounting for about a quarter of America’s nuclear generation. It also owns wind farms and hydroelectric plants. And it’s now acquiring one of the country’s biggest operators of natural-gas plants, Houston-based Calpine. When that deal closes, likely before year end, tens of millions of households across the country will depend on Constellation to keep the lights on.

Yet the company is far from a household name; in most places, its logo isn’t even on customer bills. When CEO Dominguez visited the White House in May, President Donald Trump was surprised to learn of Constellation’s sheer size. “That’s very impressive. I didn’t know that,” said Trump, before telling Dominguez, “You’re so modest.”

“That’s normally not said about me, Mr. President,” Dominguez replied.

Dominguez has reason to be immodest. Constellation was barely on anyone’s radar three years ago, when it spun out of utility Exelon. The utility held on to its regulated businesses, including transmission wires and customer service, while Constellation took over the power-generation business. Unlike regulated utilities, which control about half the country’s electricity generation, independent power producers like Constellation sell electricity directly to corporations, or to consumers at prices determined in competitive auctions. Power producers’ fortunes tend to rise and fall with supply and demand.

Constellation stock has followed electricity demand in one direction: up, up, up. Since its debut in 2022, the stock has rocketed more than 750%, giving the company a market value of $125 billion. That has come as Dominguez has signed eye-catching deals with both Meta Platforms and Microsoft to buy power from Constellation’s reactors for their artificial- intelligence data centers. Tech companies need the clean, reliable power Constellation produces, and they are willing to pay a premium for it. Any investor looking for ways to cash in on AI’s insatiable demand for power has invariably come across its name.

Created with Highcharts 9.0.1Constellation Energy(CEG / Nasdaq)Source: FactSetAs of Oct. 17

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There’s good reason to keep believing in the company. AI’s demands for electricity look to be dwarfing anything from past eras. By some estimates, power demand from AI data centers could rise tenfold by 2030, an increase equivalent to adding 45 nuclear reactors. Dominguez is taking clear steps to make the most of that market and, equally important, to minimize the risks. As he knows well, a half-dozen major power companies have gone bankrupt over the past two decades chasing what they thought would be the next unstoppable wave of electricity demand. What if the AI wave crashes? Dominguez doesn’t intend to repeat that history.

In a series of interviews with Barron’s over the past month, Dominguez laid out how Constellation can turn the company’s short-term sugar rush of revenue into a long-term growth story. First, he needs to be mindful of who has the real power in the industry. “The companies that I’m trying to call my clients are worth $3.5 trillion or $4 trillion. They could spend in a year the entire market capitalization of my company,” he says. “How do we chase that tiger down, now that we’ve got it by the tail?”

One answer is to bulk up. In January, Constellation agreed to buy privately held Calpine for $26.6 billion in stock and cash. Constellation stock has climbed over 30% since the announcement, a boon to Calpine’s owners. The deal is on track to close within the next few weeks, assuming the Department of Justice has no last-minute objections.

The acquisition will boost Constellation’s potential electricity output by some 80%. Calpine owns 61 natural-gas plants from coast to coast, big battery-storage installations, and the country’s largest geothermal resource, a steam-filled reservoir called the Geysers in northern California. It pumps out steam at such a steady rate that it could power all of San Francisco, Calpine says.

In all, the deal will leave Constellation as the face of modern power generation, providing enough electricity to serve over 40 million homes. It will sell much of that electricity to commercial and industrial companies, including data centers.

Dominguez, 63, is a new kind of energy CEO. Rather than coming up through exploration, refining, or plant management, he earned his spurs in the legal affairs side of the business, and then in governmental relations. That has left him well equipped to address the industry’s current challenges.

A son of Cuban immigrants raised in Union City, N.J., he studied engineering in college and went to law school with the intention of becoming a patent attorney. But he soon found something more exciting: He took a job as an assistant U.S. attorney in Philadelphia, prosecuting murder-for-hire and money-laundering cases.

Calpine’s Geysers geothermal field in Lake County, Calif. (Inga Spence / Alamy)

It was his legal skills that got him in the door at Exelon in 2002. He became a problem-solver for a company with plenty of legal headaches, from badly delayed power-plant projects to superfund site cleanups. Some cases were literally radioactive. The state of Illinois sued Exelon after finding tritium in the water near one of its nuclear reactors.

Then as now, Dominguez had the sharp speaking style of a successful prosecutor, and he could break complicated concepts down into understandable terms, colleagues say. Soon the company put him in charge of governmental relations, where the controversies were no less heated. Exelon beat back proposals looking to freeze electricity rates in Illinois, and Dominguez helped get controversial nuclear-energy subsidies passed in Illinois and New York.

The same arguments that worked in New York and Illinois led to game-changing federal legislation. In 2022, the Inflation Reduction Act introduced tax subsidies for nuclear plants that effectively created a price floor for their power.

Those tax credits saved the nuclear industry from disappearing, one rusty reactor at a time. A dozen U.S. reactors shut down from 2012 to 2021, largely because they couldn’t compete in short-term power auctions against cheaper natural gas and renewables, despite their value as baseload electricity generators. But since the tax credits were approved in 2022, no more have closed—and two companies have even announced plans to reopen reactors that were already shut down. The tax credits are a major reason Constellation had the confidence starting in 2023 to say it can grow its base earnings by at least 10% a year through the end of the decade.

The nuclear subsidies survived Trump’s One Big Beautiful Bill, even as wind and solar credits were eliminated. Nuclear power is one of the few areas in energy that has maintained support through both Republican and Democratic administrations. The public, too, now likes nuclear power: The industry’s favorability rating climbed to 61% this year, up from 44% in 2016, according to Gallup.

Dominguez has emerged from all this as a leading ambassador for the industry. “He’s very smart, can explain complex subjects easily, and understands the whole energy system,” says Jamie Dimon, CEO of JPMorgan Chase, which advised Constellation on the Calpine deal. “He’s got gas and nuclear and renewables. To understand the give and take of all of those things” is particularly valuable, he adds.

“There’s a lot of regulatory morass surrounding the utility industry, especially surrounding nuclear plants. But Joe’s a very clear thinker, he cuts through the nonsense,” says Doug Kimmelman, founder of private-equity firm Energy Capital Partners, which is selling Calpine to Constellation.

Joseph Dominguez has a knack for conveying complicated concepts in understandable terms, colleagues say. (Photograph by Caroline Gutman)

Kimmelman also credits Dominguez with convincing Trump and his top energy staff of other policies, including speeding up permitting for nuclear reactors. “I think he single-handedly has educated [the president] on the benefits of nuclear,” adds Kimmelman, a large Republican donor who said he has spoken to Trump about Dominguez. The White House didn’t respond to a request for comment.

Dominguez’s own politics are harder to pigeonhole. He has donated money to politicians in both parties.

He praised Trump effusively at an Oval Office signing ceremony for nuclear executive orders in May, saying that the president’s Energy Dominance council has made permitting energy projects easier. “You’re the best at building big things,” he told Trump. And Dominguez has opposed some environmental rules, criticizing states whose net-zero carbon policies depend heavily on expanding solar and wind power. He considers that strategy unrealistic.

But he views climate change as an urgent issue that energy companies need to address head on, putting him at odds with the Trump administration. Dominguez publicly criticized power-plant owners who opposed emissions rules introduced in 2023 under the Biden administration. Now Trump is working on repealing all carbon emission standards for the power industry.

Trump may be reversing climate rules today, but Dominguez expects them to come back. Power companies that ignore their climate impacts will eventually face financial repercussions, he argues. “The fact that someone doesn’t want to talk about climate today doesn’t mean that climate isn’t being talked about every day with customers and in the boardroom,” he says.

Dominguez has an economic incentive to advocate for climate-friendly policies. The fact that Constellation’s nuclear reactors don’t emit CO2 is one reason their power is valued at a premium to coal and natural-gas plants. But by purchasing Calpine, Constellation will soon own one of the largest natural-gas fleets in the country, vastly expanding its emissions. Dominguez says the acquisition is consistent with his climate views. Calpine appealed to him partly because of its work on carbon capture, a process allowing it to capture the carbon dioxide emissions coming out of plants, liquefy them, and store them underground. If Constellation builds more natural-gas plants, he’d want them designed so they could be retrofitted with carbon-capture technology, he says.

“If climate has seen its day and it’s not coming back as part of American public policy, then we’re going to have made mistakes,” he says.

In that spirit, Constellation’s next acquisition target is likely to have a much lighter carbon footprint. Dominguez said last month that he’s keeping an eye out for renewable energy assets, which he expects to eventually be offered for sale at attractive prices because Trump and Congress cut subsidies for the industry. “You can’t only invest in things that are politically popular at the moment,” he says.

Dominguez has seen how political ties can lead to disastrous outcomes. His last job before the Exelon spinoff was as CEO of Commonwealth Edison, the Exelon-owned utility that serves Chicago. His predecessor in that role was convicted in a high-profile bribery case involving the Illinois Speaker of the House. Dominguez was questioned by prosecutors in the case but never charged. In fact, conspirators were overheard on a wiretap saying they “wouldn’t trust Joe” to agree to their scheme.

“In retrospect, I’m proud that that’s the way they thought of me,” Dominguez says. From that experience, he learned to be wary of political attachments. In the time it takes to build a nuclear plant, the president could change two or three times. “You’d better be prepared for that.”

It isn’t just politics that has Dominguez on his toes. Constellation’s ties to the AI boom are the biggest selling point for its stock—and its biggest potential risk. The stock plunged in January after Chinese AI company DeepSeek emerged, causing investors to question whether AI really needs so much power. The AI boom is by no means guaranteed, and all those data centers could outlive their usefulness before the bills to finance the power plants are paid off.

“Some people believe that hyperscaler AIs are going to be here forever,” says Jeff Rosenbaum, a partner at investment manager King Street who focuses on power. “Other people think that a hyperscaler box is going to be good for a couple of years while these large language models learn, and then you’re going to have huge pickleball facilities.”

Even if AI’s demand for electricity continues apace, Dominguez could face a special risk of his own. For Constellation to keep up with the Microsofts of the world, it may eventually need to build new reactors or gas plants—but Dominguez has limited experience in the construction phase of the business.

“I’m worried constantly about, am I ready for this next chapter?” Dominguez said in an interview in his office at the company’s Baltimore headquarters. His experience at Exelon was instructive in how construction delays and cost overruns can push power companies into debt spirals. “What I know about building power plants is 20 years dated, around a disastrous build in New England that started my career. I’m acutely aware of how bad it could go, and how consuming to the entire organization it can be.”

That “disastrous build” was a set of power plant projects in Massachusetts in the early 2000s that had been badly delayed, leading to legal action that Dominguez worked on. Exelon wasn’t the only company struggling at that time. It was a rough era for power producers. Demand for electricity was stagnant, and regulations were changing. In the 1990s and early 2000s, about half of U.S. states chose to deregulate their electricity markets, taking electricity generation out of the hands of monopoly utilities. A new crop of independent power producers raced to take market share, buying or building dozens of new plants. Several expanded too fast and ran into financial trouble. Calpine and NRG Energy both filed for bankruptcy protection in the early-to-mid 2000s. Others were outright frauds: One of Enron’s many business lines was power generation.

The electricity market today is much different than it was back then, but the risk of overbuilding persists. Some new companies, such as Texas-based Fermi, are essentially building power plants on spec, betting that tech companies will eventually pay up for their electricity.

One way Dominguez is managing the risk associated with adding power capacity is by expanding or updating the company’s existing assets rather than building new ones. The poster child for that strategy is Three Mile Island, the nuclear plant that was the site of a notorious 1979 meltdown. Constellation owns the reactor on that site that wasn’t involved in the accident. It was shut down in 2019 for economic reasons, but Constellation is working to turn it back on by 2027, and has contracted to sell the power to Microsoft for 20 years at a rate that analysts say is at least twice the going price for electricity in the area.

Dominguez’s office is sparsely decorated, but one of the few pictures on the wall is of Three Mile Island. The company is renaming it the Crane Clean Energy Center after former Exelon CEO Chris Crane, who elevated Dominguez to his current job. “Three Mile Island, although a horrible event, was the foundation for everything that’s good that has come subsequently,” he says.

Similarly, Meta agreed to buy power from a Constellation nuclear plant in Illinois for 20 years. Constellation intends to add additional power-generating capacity to the plant by upgrading the equipment, a strategy known as “uprating.” Dominguez thinks uprates could eventually add the equivalent of five or six large new nuclear reactors to Constellation’s fleet.

Constellation shareholders like these deals because they lock in above-average power prices for 20 years. Dominguez said on the company’s latest earnings call that he’s “past the seventh-inning stretch” on a similar agreement. In an interview last month, he said those talks are still on track, and new potential buyers are sniffing around for deals.

Another method Constellation is using to provide power to data centers is called curtailment. It works like this: For most of the year, power plants are underutilized, because there isn’t enough demand for their electricity. But on a few days each year—particularly during heat waves, when people are using air conditioners—the grid gets overtaxed. Some businesses are willing to curtail their electricity use during those hours for a price. Data centers that want 24/7 power are often willing to pay that price, Dominguez says. Constellation acts as a broker between those two parties and takes a small cut. Constellation thinks it can broker about one nuclear reactor worth of curtailment deals by December.

The upshot: The company’s earnings are on track to increase 22% next year, well ahead of the S&P 500 ’s 13.8%. But a lot of that growth is already reflected in the stock price. The stock trades at 32.9 times Constellation’s expected 2026 earnings, versus 20.8 for the S&P 500.

There’s another, perhaps stronger case for the shares: the replacement value of the company’s assets compared with the current market value. Its existing plants would be impossible to build at anywhere near the prices that Constellation and Calpine originally paid. The cost of building a new natural-gas plant has risen sharply and now stands around $2,500 per kilowatt. Building a new nuclear reactor is much pricier; the latest ones cost over $10,000 a kilowatt. Today, the combined enterprise value of Calpine and Constellation is around $150 billion—for a company that will control about 60 gigawatts worth of power capacity. That’s roughly $2,500 a kilowatt, which gives Constellation minimal credit for its higher-value nuclear reactors or the fact that its plants are already hooked up to the grid, a process that can take upstart developers five years to achieve.

Valuing the combined company based on a conservative estimate of how much it would cost to replace its assets suggests it’s worth quite a bit more—say, $2,500 for the natural-gas plants and $8,500 for the nuclear ones (one government estimate of eventual costs). Taking into account the full mix of Constellation and Calpine’s energy types, it would probably cost more than $4,000 a kilowatt to replace the assets. That’s 60% more than the two companies are valued at today.

“You’ve got a huge incumbency advantage having the megawatts today,” says Energy Capital Partners’ Kimmelman. Energy Capital agreed to be paid mostly in Constellation stock in the Calpine deal, and will be Constellation’s largest shareholder once the deal closes. “We have a big vote of confidence for Joe and what he’s doing,” he says. “Otherwise we wouldn’t be taking the shares.”

Investors are searching for the next hot energy stock, hoping to make quick money on the AI frenzy. Dominguez’s vision might not play out that fast, but he’s putting Constellation at the center of whatever comes next.

Write to Avi Salzman at avi.salzman@barrons.com