Constellation Energy Corporation Common Stock 2026 Q2 Earnings Call

You may begin. Thank you, Kevin.

Good morning, everyone, thank you for joining Constellation Energy Corporation's second quarter earnings conference call. Leading the call today are Joe Dominguez, Constellation's Chairman, President, and Chief Executive Officer, and Shane Smith, Constellation's Chief Financial Officer. They are joined by other members of Constellation's senior management team who will be available to answer your questions following our prepared remarks. We issued our earnings release this morning, along with the presentation, all of which can be found on the investor relations section of Constellation's website. The earnings release and other matters which were discussed during today's call contain forward-looking statements and estimates regarding Constellation, its subsidiaries that are subject to various risks and uncertainties. Actual results could differ from our forward-looking statements based on factors and assumptions discussed in today's material and comments made on the call.

Please refer to today's 8-K and Constellation's other SEC filings for discussions of risk factors and other circumstances and conditions that may cause results to differ from management's projections, forecasts, and expectations. Today's presentation also includes references to adjusted operating earnings and other non-GAAP measures. Please refer to the information contained in the appendix of our presentation and our earnings release for reconciliations between non-GAAP measures and the nearest equivalent GAAP measures. I'll now turn the call over to Joe.

Thanks, Tim. Morning, everyone. Thanks for joining our call for your continued interest in Constellation. We've got a terrific update for you today. Strong results, an increase in guidance, positive regulatory developments, good progress on strategic transactions. As always, we want to start off with the most important part of our business, our people. First, let me begin by recognizing Bob Lawless, who this week retired from Constellation's board after more than 25 years of spectacular service to Constellation and its predecessors as a board member. From Constellation's early years as a standalone company, through our time as part of Exelon, in the years since our separation, Bob has played a critical role in helping to position the company for the long-term success we enjoy today. He is one of a kind.

On behalf of all of us at Constellation, I want to thank Bob for his leadership, his guidance, his friendship, and his dedicated service. We wish him all the best in retirement. Godspeed, Bob. Next, I want to thank the women and men of Constellation for delivering another strong quarter operationally and financially. During the Mid-Atlantic heat wave ahead of the Fourth of July holiday, our employees delivered, achieving a nuclear capacity factor above 99% while safely managing our dispatchable generation fleet through challenging operating conditions as the new organization came together effectively. Their dedication and execution helped sustain grid reliability when our customers and communities needed it most. Constellation is a special company, and we pride ourselves in making our company a place where people want to spend a career doing important work for America.

We're especially gratified that Constellation has been named a Great Place to Work for the fourth year in a row. As you know, this certification is meaningful because the recognition can only be earned through the direct input of our people. I'm also pleased to report to you that for the first time, Constellation has been recognized as the world's top business for people with disabilities. Finally, we were extraordinarily pleased to receive the Points of Light honor as one of the nation's 50 most community-minded companies based upon the positive impact we make every day through volunteerism and investment in our communities. I know that some may think that these awards and recognitions are nice, but maybe not quite as important as the financial and operational results that we'll talk about in just a moment. We don't see it that way.

We think our values are the most important things. When I talk in a few minutes about what it takes to restart Crane and get the overwhelming public support, which we have, and do in a place known for the worst moment in U.S. nuclear history, then I think you will come to understand why we believe our durable community values matter so much to our business. Turning to the quarter and our financial results, we delivered second quarter GAAP earnings of $1.42 per share and adjusted operating earnings of $2.55 per share. Given our team's strong commercial and operational performance year to date, we are increasing our operational earnings guidance range by $0.50 to $11.50-$12.50 per share. Our midpoint is now what used to be the top end of the guide, and we still have many opportunities to deliver more value this year.

Shane will talk through the details in his remarks. Since our business and earnings outlook in March, we have made meaningful progress across several key focus areas, reinforcing our confidence in delivering long-term value for our owners. In March, I candidly shared that we were behind our targeted timeline for completing long-term agreements due to new uncertainty in the regulatory environment. I told you that we were hopeful that PJM, under FERC's oversight, would move quickly to provide needed clarity so that work critical to our nation's future might proceed forward. I know that many were skeptical that reforms could be accomplished quickly and feared that the PJM process would drag on for years, something we have unfortunately seen in the past. Those concerns have not materialized. Instead, we are seeing PJM, prompted by FERC, move at the necessary speed.

While additional work remains for PJM to get the details right, I am pleased to report that the progress is giving customers greater confidence to evaluate long-term solutions and move forward with planning and contracting activities. Since the last call, we have signed approximately 920 MW of long-term nuclear deals that are consistent with our view of long-term value. These contracts have an average duration of 18 and a half years and are with investment-grade customers. As we talked about, and as I explained to you last quarter, we will continue to follow our customers' lead on how and when their agreements are disclosed so that they may protect their procurement strategies. Turning to Crane, important progress has also been made on the restart.

During the quarter, the NRC approved the Crane new fuel licensing amendment request, clearing the path for the receipt of new fuel and representing another significant milestone towards returning the facility to service in the second half of 2027. In addition, FERC granted the waiver request to transfer the capacity injection rights from our Eddystone facility, which is slated to close to Crane. We expect that this transfer will help clear many of the transmission contingencies identified in PJM's initial deliverability review and will pave the way for Crane to deliver full value to the grid. Further strengthening the value and unique long-term durability of our nuclear fleet, we continue to extend the lives of our clean energy centers. During the quarter, we filed subsequent license renewal applications for both the Ginna and Nine Mile 1.1 clean energy centers.

These extensions were made possible by Governor Hochul and the New York Service Commission, recognizing the value of clean, reliable nuclear energy and extending the ZEC program, advancing our strategy to preserve these critical assets for New York and for America. As a reminder, these programs and license extensions mean that Constellation is truly in a unique space with the vast majority of our power generation secured through 2050 and beyond. Integration with Calpine is progressing well, and we are seeing strong collaboration across the combined organization as teams identify opportunities to create additional value for you. In addition, we are pleased to have reached an agreement with LS Power to sell the Brazos Valley Energy Center. Following regulatory approvals and closing, the sale will satisfy the final DOJ requirement tied to the Calpine acquisition.

The fact that smart private equity buyers with long track records in competitive power markets are willing to pay over $1,400 a kW for Texas assets in a soft ERCOT market should tell you everything you need to know about the value of the efficient gas fleet that we now own. Finally, we continue to execute on our capital allocation strategy. Year to date, we have deployed approximately $2.2 billion toward opportunistic and accretive share repurchases. Shane will talk about it, but we already are seeing upside to our earnings from these buybacks. Turning to slide six. As I mentioned at the outset, we executed this quarter on 920 MW of long-term contracts for nuclear power. While I cannot disclose pricing, what I can say is that the deals recognize the value of existing clean and reliable nuclear energy as a premium product.

After a successful quarter in signing deals, we have now contracted roughly 30% of our clean base load output under long-term agreements, and our transactional pipeline for future deals is both robust and active. Taking an additional moment on the deal that was announced this quarter with our partner, Walmart, I wanted to mention that Walmart has a long history of supporting clean energy development, but this agreement represents their first nuclear power purchase agreement and the first transaction of its kind for a major retailer. Walmart is helping to define how corporate customers think about nuclear energy, reflecting a growing recognition that achieving ambitious decarbonization goals requires access to around-the-clock carbon-free generation. This transaction is only the beginning of a wonderful partnership with this iconic American company.