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By Tim McLaughlin
BOSTON (Reuters) - CEOs of the 10 largest U.S. utilities earned more than $115 million combined in a recent three-year period as demand for electricity from their power plants jumped substantially due to the burgeoning cryptocurrency and artificial intelligence sectors.
At seven of the companies, CEO payouts were much larger than what the utilities estimated at the time of their stock grants in early 2022, according to a Reuters analysis of pay disclosures with the U.S. Securities and Exchange Commission.
Constellation Energy Group CEO Joseph Dominguez received stock now worth $40.3 million, or twice the target amount estimated, the company disclosed. This was the biggest payout among CEOs at the 10 largest companies by market capitalization in the S&P 500 Utilities Index
A typical feature of CEO pay is granting restricted stock tied to performance targets such as total shareholder return and cash flow over a three-year period.
Dominguez received nearly 200,000 company shares for producing $7.3 billion in free cash flow during the 2022-2024 measurement period. That easily beat the pre-set target of $5 billion.
In the Texas market, where data center and crypto miners have huge appetites for electricity, Constellation's operating revenue surged 15% in 2024. The upswing in electricity demand throughout the U.S. now has some investors viewing once-sleepy utility stocks as growth investments.
Constellation's total shareholder return was 448% at the end of the three-year period, easily beating the 16% return on the S&P 500 Utilities Index.
Constellation said its pay-for-performance approach received 96% shareholder approval at its 2024 annual meeting.
Total return at Vistra Corp < VST.N> was even better than Constellation's, surging 548% during 2022-2024. Vistra CEO James Burke received nearly $29 million in stock-based pay as the company rewarded him for driving adjusted free cash flow per share far above target levels, according to company disclosures for 2022-2024.
Vistra's retail electricity sales volumes in the Northeast and Midwest more than doubled in 2024 while its nuclear plants operated at 93% capacity. Vistra did not return a message seeking comment for this story.
By contrast, Dominion Energy CEO Robert Blue missed out on taking home more than $4 million in cash after shareholder return and operating profit during 2022-2024 failed to meet performance targets.
Blue received $438,240, just 9% of the potential target payout of nearly $5 million, the company disclosed last month. Dominion's total shareholder return during 2022-2024 was minus 21%.
But Dominion's key Virginia territory is one of the hottest U.S. electricity markets, home to the world's largest concentration of data centers. Dominion connected 15 new data centers to the grid in 2024 and expects to connect another 15 this year.
"In 2024, the sentiment around utilities, which are historically viewed as defensive investments, shifted dramatically," portfolio managers at the $2 billion Fidelity Select Utilities Portfolio said in quarterly update.
"Investors gradually recognized that the rising demand for power, fueled by the AI boom...could be potent drivers of earnings growth across the sector, in what may be a durable multi-year trend."
(Reporting By Tim McLaughlin; Editing by David Gregorio)
