Vistras Shares: Soaring Thanks to Industry Peers

The shares of Vistra, an electricity and power generation company, experienced an impressive increase of 38.8% in September, as reported by S&P Global Market Intelligence. Interestingly, this price surge was not due to an event within the company itself but was triggered by developments at an industry peer. The focus here is on Constellation Energy, whose shares rose by 32.2% in September. The reason was a 20-year power purchase agreement with Microsoft to supply its data centers with energy from Constellation's Three Mile Island nuclear power plant. According to a Reuters report, Microsoft might be willing to pay up to 115 US dollars per megawatt-hour (MWh), which is significantly higher than the average price of 51.2 US dollars per MWh achieved by Vistra in the last quarter. Although Vistra currently utilizes various energy sources, including 24,000 megawatts (MW) from natural gas, investor interest is increasingly focused on the 6,400 MW from nuclear power, especially after the company added 4,000 MW of this capacity through the acquisition of Energy Harbor in March. In September, Vistra additionally announced its intention to acquire the remaining 15% of Vistra Vision. Vistra Vision is the subsidiary encompassing its nuclear, renewable energy, and energy storage businesses. This acquisition strengthens Vistra's commitment to nuclear and clean energy generation. The increasing demand from leading cloud service providers such as Amazon Web Services, Microsoft Azure, and Alphabet's Google Cloud for long-term energy contracts to support AI-based applications could provide Vistra with similar opportunities to those Constellation has found. While traditional valuation metrics may suggest that Vistra stock appears expensive, even a single long-term deal could lead to significant analyst potential and raise earnings and cash flow forecasts. Should the AI revolution continue to gain momentum, it could further strengthen Vistra's position.