Constellation Energy (CEG) 16 Feb 232022 Q4 Earnings call transcript

Good day, ladies and gentlemen, and welcome to the Constellation Energy Corporation Fourth Quarter 2022 Earnings Call. [Operator Instructions].

As a reminder, this call may be recorded. I would now like to introduce your host for today's call, Emily Duncan, Vice President, Investor Relations.

You may begin.

Justin. you, Thank and Corporation's everyone, for the joining Good quarter thank earnings Energy fourth conference Constellation morning, you call. Officer. Eggers, Leading the Chief Chief Dan and Constellation's Dominguez, Financial Constellation's call today Executive are Officer; Joe President and team, They are joined following be other members questions to your prepared who senior answer of available our will Constellation's by management remarks.

and could other our statements discussions call. all Relations our be and can differ forward-looking the this that Investor which circumstances of from management's differ X-K section and Please risks cause earnings based refer various earnings results forecasts that Constellation's to matters, assumptions found statements expectations. factors to Constellation's this risk from The and for made and regarding to Constellation today's along morning during filings contain comments release issued considerations other and discuss SEC which may We and with today's its presentation, during website. of factors Actual today's other material subsidiaries and the and we forward-looking of subject uncertainties. estimates on discussed on are projections, release in call and results

to EBITDA the our Today's equivalent measures. to also references measures the Please contained non-GAAP for and reconciliations other release appendix nearest earnings GAAP information adjusted includes measures. non-GAAP refer of presentation our and the in and presentation between the

Joe now to I'll Constellation, CEO Dominguez. over turn the call of the

future. the Thanks owners for it's and stand-alone shown year everyone. confidence our what morning, a now, appreciate company and the call. company have We Good Emily. year been really our been. its in quarter a Thanks, joining fourth earnings for We've a

look tackle climate company that enduring language transformational to X deck leads we'd ESG the made our commitments. ability to with namely to pretty and way the A the operate we'd that commitments companies business a ago, our for deliver you crisis, out and that our we on support the of I'm year creating the and and customers, women with our protect create the going on value, with that shareholders. start and laid unique balance plants along Page we to value that and familiar to power focused to working hard our others that premier we're strategy for men you. the ought bar and the way sets them, run serve these well to a corporate sheet teams delivering on Thanks high exceptional on an

electricity XX% produced hydro, from we to which carbon-free and U.S. be year, in energy estimate the This XXX in nuclear, hours carbon-free clean XXXX. wind, of we solar about terawatt of all produced

Constellation customers the front, On energy supplier. as retail customer #X retail ranked the

solutions continue where are XX/X, innovative where road. are and to customers offer and anticipating we years the CORe today We meeting and like down what that be strong call going matching, they're to energy carbon-free few pricing they a

year ever. a has Following challenges in we renewables had and Texas fleet its during gas the worked. The bounced hydro, by includes in power investments of back arguably our finest natural and our Uri, which Texas business, super storm bumpy plants all has XXXX made marked

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diverse $XXX Our million. businesses increased by spending with

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clean no Let nuclear there be doubt saved this Christmas energy that year.

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Thank Joe, everyone. morning, and good you,

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Turning Slide XX. to on O&M

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for on Joe. today. now commitments, another call I'll in look our Thank turn and We the your delivering you forward year all back strong time financial to to

to work megawatts to of now states accelerating working purpose of capital focused year extending and ensuring operational In Okay. pretty other on of on hydrogen as our on commitments And the We're our the can a see, assets. issues, our additional to Thanks, delivering implementation time future. continue carbon-free towards success benefit a folks, lives and going to another transition we focus of We'll deploy IRA spectacular 'XX, excellence, have energy we center a on it's the as Treasury and Dan. effectively the we're had company. will doing, Well, we're shareholders. to critical clean and one. to delivering continue work you with first financial

to will matters continue update the We calls. these our on year throughout you during

I Now, time it's Justin, for think questions.

from Capital And Thalacker Instructions]. Markets. BMO question James our comes first from [Operator

growth Maybe specifically, guess generically more a growth-related the that to that you these CapEx just the questions organic you've discussed get higher projects double-digit I will hoping outlined exceed was I in And on your slides. color Dan. for little thresholds. updated

see leverage? by return discrete is is driven for So IRR just put this projects? could or hoping you that a I margins are these I different different was look it hydrogen, -- of we whether X could overall Or profiles it And threshold on want can channels return? you or disproportionate the maybe be these if discuss to function a this there these to unlevered economic nuclear But you a that confirm the double-digit one is that foremost. driven leverage of at then repowering, prior the first by think you more little and uprates also bit each

different lot But factor James, And have of and calls. walk in kind learning. we're hard and say that think capacity other a that these O&M combination that do I on could it's that still But asset not the why the kind It's I'll threshold. we been clear value Dan always value. start upgrades. kind off. the to of have see different these in It's of unlevered We've we'll an return hopefully the would of hydrogen, of any through is. have. the on we could fact upgrades

I I a I parameters numbers some set better have to And bit and execution, within think the will we're we And projects want rolling repeatable those can these how a of see to think investments. comfortably I the that. that is are. get you chance sense tell do announce through we know what you'll as investments, we've to of are -- as little actually a start the what you they we about you'll Dan, talk and get uprate work? for

you uprates you It's lot the of put a in energy right? megawatts megawatts. clean that Yes. the about I per same tax you interesting going value, equivalent with PTC on We're almost how think attractive. it megawatt credit, gearing as XXX of the when of about wind. kind energy equivalent million get it's XXX of to mean quite same at when think $XX.XX megawatts right? capital is to It's hour that output So get megawatts $XXX the amount many

As Joe no said, those work, no to make that additional all There's additional of fuel right? There's O&M. back-end work.

-- it's on, the our we -- It's timing those will and what manufactured awfully the refilling said, that's advance a run can on see just great get list down the good, to then of It the getting But to managing business. to continuing great for else and for So as equipment company. economics there's take the time forward. on environment. projects some we're I based those and look of

real excited we're about those. So

how return. the question of think you I kind that's affecting other the and leverage asked was about

time. unlevered said, investments as So at all are point these this in

managing been assumption and That's XX% to the sheet will balance continue for kind that to we're to year us the last be. CFO for Our of is debt. our

future we finding time differently. We'll further in the make to that. at those to So opportunities service think look to the think have But decisions. I about

Can pre-spinout, versus common when us things on you special about as little about stock dividends a of I get bit how back look preferred special question. other actually was also at common return route capital thinking a between trade-off is give and of obviously quick you're I to a organic talked you terms the of just And Great. Okay. of you would a in discussion guess, growth. I terms real shareholders? dividend. dividend actually that But buybacks to versus stock -- guess in money one view, doing the there the guess a one of in sort buybacks

Yes, deploy good about Jim. are, the learned business as dramatically the where And been awful our investment a and it's as for IRA The capital. we it's question, year, we've to began about far lot are. to quite an I a landscape where change opportunities think opportunities

billion that hydrogen opened from lot really that wasn't a there's you think kind got and that progress up, of of have this lot work. $X.X organization growth to operators, I putting capital we year, of an things made the capital a of

lot going some through. to then about more see size, how We're long learn our Our inform flow their right I that of cash a free very term, payout lot today learn time. it inorganic we're the reasonable for growth. a to more the XXXX, We will growth or And is of to increase the continue opportunities expectation that for capital we're made balance allocation for I decisions opportunities dividend is is our at think think that's the our now continue And the duration right? setup. to of It's the We investments. the right going dividend sense. of investment, about investment. But less will think think still going and XX% this way But a to the evolve. play scope

to we're of thing value are end That feel the over making Yes. things of will investment value and the the a how the is determination cause a now it the is company, of buyback. of the At us own relative James, obviously, our make Board right I'd The stock. we and to to in only that, day, us the the add other years, move compared decisions about certainly our to the our the drove But course market. and value at of stock around value halfway. assets that the relative that may looking in different

from comes Wolfe And question Research. Steve our from Fleishman next

inventory of So sense higher this actual does after of of higher build related Does some you couple rolling just fuel Or start period versus to in could is how that? a that inventory The to that on CapEx down you just long you're talk also then showing? fuel, how CapEx things. could kind cost? just level last? And the much this build get increase of

with you numbers. give to the the deliveries that we're to But continue that majority time. what are remarks in I period over the doing is going provide, not Russian this increase what continuing will contracted said of to Remember occur. to I'm associated Steve, exact the now right in is inventory that prepared Yes, is expect we're

who providers calls. -- the make We'll store if -- other capital from fuel building if is cover any that Russian to change. to were out no will the assuming sure inventory XXXX, net fuel available us delivery be towards buying longer be Russians will Russian would We we would potential numbers

about seeing on previously admittedly had are past some And on fuel our in numbers. then both We higher purchased. pieces you When we hedge in talked there the prices not the we've to of is the you pressure XX% fuel bill. year to putting conflict, go up to due saw the uranium move, conversion really enrichment and services that of over course XXX% that upward the

So it is than more reserve. inventory

a continue your unfold. at sense I right this to question, is where going a we're to -- is simple. have table ourselves the for be But pretty now, it's owners. is just this our position We're and how off going risk can't I our for philosophy long going number to the machines. years. to think to of in price a be here We're is we for Steve, We take to fuel get how that plain And and don't issue going for where never long.

saying driving and while, saying I'm with this now. maybe going it's what Russian all given to right plans what And And a be like so I that's for the our permanent. we're situation, think

Okay.

to plant that? will sells think should have the the you'll -- going nuclear When too? capture we that project. is as an how of should it what think come the about to how you how between Like kind we and we you're interaction of, its projects? contracts there, Or obviously and about hydrogen hydrogen about on return power investment the said, think side, some from some at the hydrogen. returns the But Secondly, for

Yes.

hydrogen the or when at of that think in on have stand We we're to talking hydrogen returns. that's leverage own, sales their double-digit about, look the the you I returns, look at sale, facility, the got of economics returns what production input the power right, the right?

production also. the The sale economic hydrogen will there, to own. a sense investment going is be of sense the and for generation price us its the sold at makes So make on that

returns bill. we're by co-mingling hydrogen So not a our adjusted

Yes. value Steve, certain on investment what's to energy prices it's a sense, really because happening. incremental were cool if decline, kind hydrogen of there's in because a the of side

Let's here. pretend of some just kind numbers

back From of from hydrogen standpoint, tax sale. energy go us a prices company $XX. to $XX just credit the we're up that true will to $XX.XX suppose Let's at going get Plus became production for the cheaper.

the So that's it's negatively businesses of that's is it's to of PTC do many is Constellation power -- it interaction the happened in story interesting immediately a we've But prices support down, Grail find even mentioned. lower natural for to talked one that are business. The this co-variant these interesting between degree, actually, other making the you How prices, significant piece viable It's go a quite story that in does gas prices. Dan economically as at to line the this and top power what's it Holy when here. things a prices. hydrogen floor more better So that natural been bit gas? about

it get a us. the tax makes ability it's So for both good way of credits strategic that these to very production

question seeing are M&A from such? the impact could as what perspective now us on market M&A processes for that how in looking kind the you've And on it you the nuclear of does thoughts at of your that future? been that kind maybe much. And you at just were last fall, -- very some give obviously, not last And on the and focused just Great. you time on

of our that I'm the would We're always any impact to the group into the going we fleet looking more assets single of of What bound has have they any are sites quality well dual we kind how value sites. our and criteria in those the at is of for is have bit of say by expressed get so unit that the assets for take M&A. a big opposed look or company get been little But of where unit maintained specifics. a I same view as and companies at to to this happened around to confidentiality not that's when acquisition values to disciplined available, us

site. the right, dual are effectively X invested a we're operate fleet, unit XX Clinton, that or The are only units. plants our XX as as outliers dual in them site For unit of a the and continued plants. had part the require that our of reason those because fleet existence clean energy is of operation and circumstances, . states these have they're And policies in both

in it. assets way there. single of we've the been what diligence run out We these that's So at looked one disciplined. every know for and exactly to we've look We've

that people aren't the in we Exelon pre-IRA to same trying overpaying that I'm something its frankly from by that And talk separation already think If component signal any of not for parts. passion We that and about, not. exist tremendous view space. of That's after probably my and go available are the seeing clap hands you we're business have intent it are in here. this we at criteria by anything. we it. that what other that about think not a it any when I'm opportunity. and us group meet But there these into on was think we consolidation separating assets the assets, I less other we throughout traditionally But and had heard we're reasonable sold X not X unparalleled assets to of dilute to is talked to the going regulated a believe come they to is price takes here, going us the reality a that, utilities to they I discipline, for

seeing. So what we're that's

will I the be think and tire opportunities, still we'll kick there on everything.

on So want reality companies and opportunity, fact of discipline valuable to the said, indicate the IRA reality, them. a the to of I but and more lack it's are our don't units the strategically, in of I that as are holding setting, these

Stanley. David question Morgan from next Arcaro from our comes And

$X allocated. that serve an through in to allocate capital what a identifying the additional potentially envision and or timing would is hasn't that of chunk Wondering start potential base of roll kind you got you've just milestones terms up wondering XXXX just yet over I'm Or capital. other that XXXX? billion just opportunities a investment of been Could more for ongoing as could allocation? into that pop to opportunities

I'd good XXXX said, a a lot forward. question. learned opportunities going it's we've -- I say that in David, as about

sense in looking lot a we're at queue that for things the we're reiterated X that's right or we to opportunities still when of the have have We interested a think that now. have they shot some Joe the make by if returning very this in a and right inorganic fact going us that and whatever, I should lot year we're certainly how but they and look investment clock an don't as excess. think saying into we maintaining a next date this $X makes at year then of this making that to money billion opportunities saw investments sense. to And to decision look progress And have release as we I you us as we'll amount prudent afforded of there's year be forward. moving at don't far high-return us flexibility. a

an terms wondering, of taking the hydrogen. transportation. Got I end with was don't it. technology Wanted Okay. just into opportunities, might I point. directly hydrogen the deal curious to a the be was if volume have or curious to was envisioning I this also little they're so clarify, And for the who the electrolyzer which you more just off-takers at in then digging And you're markets producer just site there's from identified bit

David. Yes,

who's the have and we going latter, -- the the On to electrolyzers. that developer make

first of pretty a haven't day have went sense we and we that. We announced And a into competitive process. good it

on hold to going I'm So that.

hub of the at to the guess this on terms of that hub pipelines taking without the looking site, and facilities. is point need of through cautionary part or In the for transform otherwise other compress all offtake, we're hydrogen opportunities whatnot right. or the evolving. where that site still is the is We're I you're at that hydrogen customer exactly counterparty to the the

include through And do to to still but deals and possibilities are so And hubs anticipate I customers want got this, terms out. these hydrogen we'll it that that how we've front-run share got we've our see there get premises, we'll kind pipeline that the I commercial will be all, work of I not off plays that some are don't hate to announcements executed. and to making on and

market or like indication it. fertilizer to if industrial Got point just jet no that? or it's areas terms end Okay. this or in uses the as And of other fuel at

Not the is answer proportionately, but yes.

the the it's at above think I be the best end are day, of of leave going at kind markets site. hydrogen it of let will me there. at to for produced all that our be But

Zimbardo And our from next of comes America. question Paul from Bank

state are whether the was that's to to What conclusion? about regulatory, little support, what on bit states would get a working nuclear with? slide assume, I the or that the timing, I working elaborate comment the hoping, you you the could reduce on ZECs? with legislative policymakers And

these having about heck calls we're worst the would have to these them. kind have I've a long because learned a us policymakers of ago where conversations Paul, on of is lot them expect earnings to that you discussions way talk to with

flip caution unfold. Let Kathleen they it and that we'll me how the to are confidential these see with discussions over

think we're Joe. I mean where you locations Yes, sure, talking know about. I the

X places X we states. programs state across and have those We have in programs

that the where of that's national nuclear fleet. for are. to that And course, benefit So goal the out plants the acted keep sure get first online the make to states coming support these we is some of

work to both to make everything and that to importantly, up are So timing properly. work, precisely sure need through federal provisions going we and state, the is what just how those lines

them play we anymore according out point. to like to sort as the said, discuss conversations states will So the them this not started how at let to of we've we would that and and have

commented authorized repurchases? Okay. what's opportunistic? I the programmatic special Duly level, and it at And a value. relative or you around bit the just commentary But little high the share noted. philosophy Is on dividend more then know a something

Yes. And our today. Joe as we think It in here said, is I real value see software.

the authorization. have $X billion We

too will I into be strategy we a particularly ways want more think layout. stock get to in to get to sure. like much for is that here, market isn't the the But like I and of we where probably the than prudent find

now further for back closing remarks. showing I am Thank you. turn I questions. no And would Joe the like . to to over Dominguez call

company. for been in now I happen a business, we in call this, But earlier, to this as folks interest our It's single great a on again this first every commercial made start. We're strong thank just and to demonstrate ride the and we're attention who And for we joining to at best functions. thanks, everybody, want and the excited in Well, beyond. future the is I for Constellation your again, off year. focused noted our 'XX but have what at feel day may the stats business the the plants, the just back The ought hold the office really team by us.

the next and talk we'll to So everybody, again thanks quarter. after again

you call. conference Thank concludes today's This for participating.

may disconnect. now You