Earnings Release Highlights
- GAAP Net Income of $833 million and Adjusted EBITDA (non-GAAP)
of $1,031 million for the second quarter of 2023
- Raising guidance range for full year 2023 Adjusted EBITDA
(non-GAAP) to $3,300 million to $3,700 million
- Delivering on our commitment to shareholders – announced
acquisition of NRG’s 44% stake in South Texas Project Electric
Generating Station (STP); commenced project to repower our
Criterion wind facility; and repurchased over $250 million of
shares in the second quarter, now having completed half of our $1.0
billion share repurchase program
- Moody’s raised outlook on credit ratings from stable to
positive, reflecting continued strength in the balance sheet
- Reached landmark agreement with Microsoft that will allow
Microsoft to track power usage using Constellation’s hourly
carbon-free energy (CFE) matching platform
- Exhibiting role as a leader in the clean energy transition by
setting an industry record for blending hydrogen with natural gas
at our Hillabee Generating Station
Constellation Energy Corporation (Nasdaq: CEG) today reported
its financial results for the second quarter of 2023.
“Constellation continues to deliver strong operational and
financial performance across the business, while giving customers
the visibility and certainty they need to manage energy costs
during a time of market volatility and creating value for our
shareholders,” said Joe Dominguez, president and CEO,
Constellation. “During a summer of record-setting heat, our nuclear
fleet continues to deliver clean, reliable and affordable
electricity to the communities we serve in every hour of every day
of the year, making it an essential tool in meeting our customers’
carbon reduction goals. In a first for our industry, we recently
signed a landmark agreement with Microsoft to provide one of its
data centers with environmental attributes from nuclear energy as
part of a strategy to power its operations with clean energy around
the clock, demonstrating the unique value of nuclear as a
sustainable climate solution.”
“We earned in excess of $1 billion in adjusted EBITDA in the
second quarter, marking a significant increase year-over-year,”
said Dan Eggers, executive vice president and chief financial
officer. “Our commercial team continues to capture significant
value in the market through higher customer margins, successful
load auction wins and by optimizing across our load-serving and
generation positions. Our strong investment-grade balance sheet
remains a critical competitive advantage, allowing us to create
additional value where others cannot. As a result of this strong
performance, we are raising our adjusted EBITDA guidance range to
$3.3 billion to $3.7 billion from $2.9 billion to $3.3 billion,
which raises the midpoint by $400 million.”
Second Quarter 2023
Our GAAP Net Income for the second quarter of 2023 increased to
$833 million from ($111) million GAAP Net Loss in the second
quarter of 2022. Adjusted EBITDA (non-GAAP) for the second quarter
of 2023 increased to $1,031 million from $603 million in the second
quarter of 2022. For the reconciliations of GAAP Net Income (Loss)
to Adjusted EBITDA (non-GAAP), refer to the tables beginning on
page 3.
Adjusted EBITDA (non-GAAP) in the second quarter of 2023
primarily reflects:
- Favorable market and portfolio conditions and ZEC revenue;
partially offset by unfavorable labor, contracting, and materials,
unfavorable nuclear outage impacts and decreased capacity
revenues.
Recent Developments and Second Quarter Highlights
- Delivering on Our Capital Allocation Promises: In
alignment with our capital and strategic plan we have agreed to
acquire NRG Energy Inc.’s 44% ownership stake in the South Texas
Project Nuclear Generating Station, a 2,645-megawatt, dual-unit
nuclear plant located about 90 miles southwest of Houston, for
$1.75 billion. We expect to issue approximately $500 million of
incremental debt to finance the transaction, with the remainder of
the purchase price being funded by existing cash and previously
planned debt issuances. This acquisition is complementary to and
aligned strategically with our existing clean energy business
operations. Absent any delays, we expect to close within 2023.
We have commenced a project to repower our
Criterion wind facility in Oakland, Md. The repower will increase
the efficiency and output of the facility, resulting in the
delivery of more carbon-free electricity to the region for many
years to come. The project is part of our previously announced $350
million effort to increase the output and lifespan of our renewable
energy portfolio.
We’ve also continued our share repurchase
program, repurchasing nearly 3 million shares for a total of $252
million in the second quarter 2023. To date, we have successfully
repurchased approximately 6.2 million shares for a combined $503
million.
- Moody’s credit ratings raised to positive outlook: On
May 10, 2023, Moody’s Investor Service reaffirmed our senior
unsecured issuer ratings (Baa2) and short-term rating (Prime-2)
while raising the outlook from stable to positive. Moody’s cites
the expected improvement of our credit metrics, revenue stability
provided by the nuclear production tax credit, and our commitment
to managing debt levels as rationale for putting the ratings on
positive outlook.
- Hourly Carbon-Free Energy Matching Agreement: We’ve
entered into an agreement with Microsoft to significantly reduce
the carbon footprint of one of its data centers in Boydton,
Virginia. Under the agreement, the facility will receive up to 35
percent in environmental attributes from nuclear power,
complementing the company’s new wind and solar purchases. This
agreement puts Microsoft very close to its goal of operating the
data center on 100 percent carbon-free electricity around the
clock, further proof that hourly, regional matching of clean energy
to demand is both practical and feasible today with suitable
infrastructure and energy innovation.
- Industry Record for Hydrogen Blending: We have set an
industry record for blending high concentrations of hydrogen with
natural gas, further proof that hydrogen can be an effective tool
to lower greenhouse gas emissions. Working with Siemens Energy and
the Electric Power Research Institute, the hydrogen blending test
was conducted in May 2023 at our Hillabee Generating Station, a
753-megawatt combined-cycle natural gas plant in central Alabama
that began operating in 2010. The test showed that with only minor
modifications, an existing natural gas plant of that age can safely
operate on a blend of 38.8 percent hydrogen, nearly doubling the
previous blending record for similar generators. The testing
results at Hillabee demonstrate that hydrogen produced with clean
energy can be an effective tool to help achieve the nation’s
climate goals.
- Nuclear Operations: Our nuclear fleet, including our
owned output from the Salem Generating Station, produced 41,895
gigawatt-hours (GWhs) in the second quarter of 2023, compared with
42,522 GWhs in the second quarter of 2022. Excluding Salem, our
nuclear plants at ownership achieved a 92.4% capacity factor for
the second quarter of 2023, compared with 94.2% for the second
quarter of 2022. There were 94 planned refueling outage days in the
second quarter of 2023 and 66 in the second quarter of 2022. There
were 25 non-refueling outage days in the second quarter of 2023 and
15 in the second quarter of 2022.
- Natural Gas, Oil, and Renewables Operations: The
dispatch match rate for our fleet was 99.1% in the second quarter
of 2023, compared with 99.6% in the second quarter of 2022.
Renewable energy capture for our fleet was 96.1% in the second
quarter of 2023, compared with 96.3%1 in the second quarter of
2022.
GAAP/Adjusted EBITDA (non-GAAP) Reconciliation
Adjusted EBITDA (non-GAAP) for the second quarter of 2023 and
2022, respectively, does not include the following items that were
included in our reported GAAP Net Income (Loss):
(in millions)
Three Months Ended June 30,
2023
Three Months Ended June 30,
2022
GAAP Net Income (Loss) Attributable to
Common Shareholders
$
833
$
(111
)
Income Taxes
342
(270
)
Depreciation and Amortization
274
277
Interest Expense, Net
103
56
Unrealized Gain on Fair Value
Adjustments
(426
)
(24
)
Plant Retirements and Divestitures
—
(8
)
Decommissioning-Related Activities
(116
)
684
Pension & OPEB Non-Service Costs
(14
)
(33
)
Separation Costs
36
31
ERP System Implementation Costs
10
5
Change in Environmental Liabilities
1
8
Noncontrolling Interests
(12
)
(12
)
Adjusted EBITDA (non-GAAP)
$
1,031
$
603
________
1Prior year energy capture was previously
reported as 95.3%. The update reflects a change to include the
Conowingo run-of-river hydroelectric operational performance within
renewable energy capture, and remove the performance from dispatch
match. This update did not result in an impact to the dispatch
match
Webcast Information
We will discuss second quarter 2023 earnings in a conference
call scheduled for today at 10 a.m. Eastern Time. The webcast and
associated materials can be accessed at
https://investors.constellationenergy.
About Constellation
A Fortune 200 company headquartered in Baltimore, Constellation
Energy Corporation (Nasdaq: CEG) is the nation’s largest producer
of clean, carbon-free energy and a leading supplier of energy
products and services to businesses, homes, community aggregations
and public sector customers across the continental United States,
including three fourths of Fortune 100 companies. With annual
output that is nearly 90% carbon-free, our hydro, wind and solar
facilities paired with the nation’s largest nuclear fleet have the
generating capacity to power the equivalent of 15 million homes,
providing approximately 11% of the nation’s clean energy. We are
further accelerating the nation’s transition to a carbon-free
future by helping our customers reach their sustainability goals,
setting our own ambitious goal of achieving 100% carbon-free
generation by 2040, and by investing in promising emerging
technologies to eliminate carbon emissions across all sectors of
the economy. Follow Constellation on LinkedIn and Twitter.
Non-GAAP Financial Measures
In analyzing and planning for our business, we supplement our
use of net income as determined under generally accepted accounting
principles in the United States (GAAP), with Adjusted EBITDA
(non-GAAP) as a performance measure. Adjusted EBITDA (non-GAAP)
reflects an additional way of viewing our business that, when
viewed with our GAAP results and the accompanying reconciliation to
GAAP net income included above, may provide a more complete
understanding of factors and trends affecting our business.
Adjusted EBITDA (non-GAAP) should not be relied upon to the
exclusion of GAAP financial measures and is, by definition, an
incomplete understanding of our business, and must be considered in
conjunction with GAAP measures. In addition, Adjusted EBITDA
(non-GAAP) is neither a standardized financial measure, nor a
presentation defined under GAAP and may not be comparable to other
companies’ presentations or deemed more useful than the GAAP
information provided elsewhere in this press release and earnings
release attachments. We have provided the non-GAAP financial
measure as supplemental information and in addition to the
financial measures that are calculated and presented in accordance
with GAAP. Adjusted EBITDA (non-GAAP) should not be deemed more
useful than, a substitute for, or an alternative to the most
comparable GAAP Net Income measure provided in this earnings
release and attachments. A reconciliation of projected Adjusted
EBITDA, which is a forward-looking non-GAAP financial measure, to
the most directly comparable GAAP financial measure, is not
provided because we are unable to provide such reconciliation
without unreasonable effort. The inability to provide each
reconciliation is due to the unpredictability of the amounts and
timing of events affecting the items we exclude from the non-GAAP
measure. This press release and earnings release attachments
provide reconciliations of Adjusted EBITDA (non-GAAP) to the most
directly comparable financial measures calculated and presented in
accordance with GAAP, are posted on our website:
www.ConstellationEnergy.com, and have been furnished to the
Securities and Exchange Commission on Form 8-K on August 3,
2023.
Cautionary Statements Regarding Forward-Looking
Information
This press release contains certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995 that are subject to risks and uncertainties. Words such as
“could,” “may,” “expects,” “anticipates,” “will,” “targets,”
“goals,” “projects,” “intends,” “plans,” “believes,” “seeks,”
“estimates,” “predicts,” and variations on such words, and similar
expressions that reflect our current views with respect to future
events and operational, economic, and financial performance, are
intended to identify such forward-looking statements.
The factors that could cause actual results to differ materially
from the forward-looking statements made by Constellation Energy
Corporation and Constellation Energy Generation, LLC, (Registrants)
include those factors discussed herein, as well as the items
discussed in (1) the Registrants' 2022 Annual Report on Form 10-K
in (a) Part I, ITEM 1A. Risk Factors, (b) Part II, ITEM 7.
Management’s Discussion and Analysis of Financial Condition and
Results of Operations, and (c) Part II, ITEM 8. Financial
Statements and Supplementary Data: Note 19, Commitments and
Contingencies; (2) the Registrants' Second Quarter 2023 Quarterly
Report on Form 10-Q (to be filed on August 3, 2023) in (a) Part II,
ITEM 1A. Risk Factors, (b) Part I, ITEM 2. Management’s Discussion
and Analysis of Financial Condition and Results of Operations, and
(c) Part I, ITEM 1. Financial Statements: Note 13, Commitments and
Contingencies; and (3) other factors discussed in filings with the
SEC by the Registrants.
Investors are cautioned not to place undue reliance on these
forward-looking statements, whether written or oral, which apply
only as of the date of this press release. Neither Registrant
undertakes any obligation to publicly release any revision to its
forward-looking statements to reflect events or circumstances after
the date of this press release.
Constellation Energy
Corporation
GAAP Consolidated Statements
of Operations and
Adjusted EBITDA (non-GAAP)
Reconciling Adjustments
(unaudited)
(in millions, except per share
data)
Three Months Ended June 30,
2023
Three Months Ended June 30,
2022
GAAP(a)
Non-GAAP Adjustments
GAAP(a)
Non-GAAP Adjustments
Operating revenues
$
5,446
$
(212
)
(b),(c)
$
5,465
$
298
(b),(c)
Operating expenses
Purchased power and fuel
2,887
(202
)
(b)
3,508
328
(b)
Operating and maintenance
1,477
(89
)
(c),(d),(f),(l)
1,273
(80
)
(c),(d),(f),(g)
Depreciation and amortization
274
(274
)
(h)
277
(277
)
(h)
Taxes other than income taxes
139
—
133
—
Total operating expenses
4,777
5,191
Loss on sales of assets and
businesses
—
—
(2
)
2
(g)
Operating income
669
272
Other income and (deductions)
Interest expense, net
(103
)
103
(i)
(56
)
56
(i)
Other, net
605
(588
)
(b),(c),(e)
(654
)
669
(b),(c),(d),(e), (g),(j),(m)
Total other income and
(deductions)
502
(710
)
Income (loss) before income
taxes
1,171
(438
)
Income taxes
342
(342
)
(j)
(328
)
328
(j)
Equity in losses of unconsolidated
affiliates
(5
)
—
(3
)
—
Net income (loss)
824
(113
)
Net loss attributable to noncontrolling
interests
(9
)
12
(k)
(2
)
12
(k)
Net income (loss) attributable to
common shareholders
$
833
$
(111
)
Effective tax rate
29.2
%
74.9
%
Earnings per average common
share
Basic
$
2.57
$
(0.34
)
Diluted
$
2.56
$
(0.34
)
Average common shares
outstanding
Basic
324
327
Diluted
325
328
__________
(a)
Results reported in accordance with
GAAP.
(b)
Adjustment for mark-to-market on economic
hedges and fair value adjustments related to gas imbalances and
equity investments.
(c)
Adjustment for all gains and losses
associated with NDTs, ARO accretion, ARO remeasurement, and any
earnings neutral impacts of contractual offset for Regulatory
Agreement Units.
(d)
Adjustment for certain incremental costs
related to the separation (system-related costs, third-party costs
paid to advisors, consultants, lawyers, and other experts assisting
in the separation), including a portion of the amounts billed to us
pursuant to the TSA.
(e)
Adjustment for Pension and Other
Postretirement Employee Benefits (OPEB) Non-Service costs.
(f)
Adjustment for costs related to a
multi-year ERP system implementation
(g)
Adjustments related to plant retirements
and divestitures.
(h)
Adjustment for depreciation and
amortization expense.
(i)
Adjustment for interest expense.
(j)
Adjustment for income taxes.
(k)
Adjustment for elimination of the
noncontrolling interest related to certain adjustments.
(l)
Adjustment for changes in environmental
liabilities.
(m)
In 2022, includes amounts contractually
owed to Exelon under the tax matters agreement.
Constellation Energy
Corporation
GAAP Consolidated Statements
of Operations and
Adjusted EBITDA (non-GAAP)
Reconciling Adjustments
(unaudited)
(in millions, except per share
data)
Six Months Ended June 30,
2023
Six Months Ended June 30,
2022
GAAP(a)
Non-GAAP Adjustments
GAAP(a)
Non-GAAP Adjustments
Operating revenues
$
13,011
$
(1,142
)
(b),(c)
$
11,056
$
1,217
(b),(c)
Operating expenses
Purchased power and fuel
8,616
(1,428
)
(b)
7,059
1,131
(b)
Operating and maintenance
2,908
(181
)
(c),(d),(f),(l)
2,477
(131
)
(c),(d),(e),(f),(g),(l)
Depreciation and amortization
542
(542
)
(h)
557
(557
)
(h)
Taxes other than income taxes
271
—
268
(2
)
(d)
Total operating expenses
12,337
10,361
Gain on sales of assets and
businesses
26
(26
)
(g)
13
—
Operating income
700
708
Other income and (deductions)
Interest expense, net
(210
)
210
(i)
(112
)
112
(i)
Other, net
919
(882
)
(c),(e)
(973
)
992
(b),(c),(d), (e),(g),(j),(m)
Total other income and
(deductions)
709
(1,085
)
Income (loss) before income
taxes
1,409
(377
)
Income taxes
472
(472
)
(j)
(381
)
381
(j)
Equity in losses of unconsolidated
affiliates
(11
)
—
(6
)
—
Net income (loss)
926
(2
)
Net (loss) income attributable to
noncontrolling interests
(3
)
24
(k)
3
25
(k)
Net income (loss) attributable to
common shareholders
$
929
$
(5
)
Effective tax rate
33.5
%
101.1
%
Earnings per average common
share
Basic
$
2.85
$
(0.02
)
Diluted
$
2.84
$
(0.02
)
Average common shares
outstanding
Basic
326
327
Diluted
327
328
__________
(a)
Results reported in accordance with
GAAP.
(b)
Adjustment for mark-to-market on economic
hedges and fair value adjustments related to gas imbalances and
equity investments.
(c)
Adjustment for all gains and losses
associated with NDTs, ARO accretion, ARO remeasurement, and any
earnings neutral impacts of contractual offset for Regulatory
Agreement Units.
(d)
Adjustment for certain incremental costs
related to the separation (system-related costs, third-party costs
paid to advisors, consultants, lawyers, and other experts assisting
in the separation), including a portion of the amounts billed to us
pursuant to the TSA.
(e)
Adjustment for Pension and Other
Postretirement Employee Benefits (OPEB) Non-Service costs.
(f)
Adjustment for costs related to a
multi-year ERP system implementation
(g)
Adjustments related to plant retirements
and divestitures.
(h)
Adjustment for depreciation and
amortization expense.
(i)
Adjustment for interest expense.
(j)
Adjustment for income taxes.
(k)
Adjustment for elimination of the
noncontrolling interest related to certain adjustments.
(l)
Adjustment for changes in environmental
liabilities.
(m)
In 2022, includes amounts contractually
owed to Exelon under the tax matters agreement.
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version on businesswire.com: https://www.businesswire.com/news/home/20230802012082/en/
Paul Adams Corporate Communications 410-470-9700
Emily Duncan Investor Relations 833-447-2783
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