Constellation Reports Second Quarter 2023 Results
Earnings Release Highlights
-
GAAP Net Income of
and Adjusted EBITDA (non-GAAP) of$833 million for the second quarter of 2023$1,031 million -
Raising guidance range for full year 2023 Adjusted EBITDA (non-GAAP) to
to$3,300 million $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 of shares in the second quarter, now having completed half of our$250 million share repurchase program$1.0 billion - 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 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
Second Quarter 2023
Our GAAP Net Income for the second quarter of 2023 increased to
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 ofHouston , for . We expect to issue approximately$1.75 billion 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.$500 million
We have commenced a project to repower our Criterion wind facility in
We’ve also continued our share repurchase program, repurchasing nearly 3 million shares for a total of
- 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 a92.4% capacity factor for the second quarter of 2023, compared with94.2% 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 with99.6% in the second quarter of 2022. Renewable energy capture for our fleet was96.1% in the second quarter of 2023, compared with96.3% 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
|
Three Months Ended
|
||||
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 |
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
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
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
|
|
|
|
GAAP(a) |
|
Non-GAAP
|
|
|
||||||||
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
|
|
|
|
GAAP(a) |
|
Non-GAAP
|
|
|
||||||||
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. |
View source 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
Source: Constellation Energy Corporation