Constellation Energy Corporation

Thank you for standing by, and welcome to Constellation Energy Corporation's third quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. Instructions will follow at that time. As a reminder, this call may be recorded. I would now like to hand the call over to Emily Duncan, Senior Vice President, Investor Relations and Strategic Growth. Please, you may begin.

Thank you, Lateef. Good morning, everyone, and thank you for joining Constellation Energy Corporation's third quarter earnings conference call. Leading the call today are Joe Dominguez, Constellation's president and chief executive officer, and Dan Eggers, 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 in the investor relations section of Constellation's website. The earnings release and other matters which we discussed during today's call contain forward-looking statements and estimates regarding Constellation and 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 during this call. Please refer to today's 8K and constellations other SEC filings for discussions of risk factors and other circumstances and considerations 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 the non-GAAP measures and the nearest equivalent GAAP measures. I'll now turn the call Over to Joe Dominguez.

Thanks, Emily. Good morning, everyone. Thank you for joining us today, and a big thank you to our amazingly talented team at Constellation. Today, Dan and I once again have the privilege to share their results, results that outperform our plan, your expectations, and require us to raise guidance. But before I do that, I want to touch upon Friday's FERC ruling that I know is top of mind for many folks. In Constellation's view, the two-to-one ruling rejecting Talens ISA by a fraction of the commission is not the final word from FERC on co-location. The ruling, as many of you know, is very narrow, and we believe that all of the commissioners, including the two who recuse themselves from Friday's decision, understand the critical importance of providing additional guidance. Now, how that's going to come could occur in a number of different ways. We could see the commission take action. We could see PJM take action or parties like ourselves could take action. It's premature at this point to say which of those pathways we are going to pursue. But we know this, co-location in competitive markets remains one of the best ways for the U.S. to quickly build large data centers that are necessary to lead on AI. As Chairman Phillips explained, our nation's entire economy and national security is at stake if we do not lead in AI. That sentiment is shared by both presidential candidates. As National Security Advisor Jake Sullivan warned just two weeks ago, quote, even if we have the best AI models, but our competitors are faster to deploy, we could see them seize the advantage in using AI capabilities against our people, our forces, and our partners and allies. We all know that power has emerged as the key to America's ability to meet the challenge, and Constellation uniquely is positioned to help. There are multiple regulatory and commercial pathways to resolve the co-location issues, and we will work quickly with customers and other stakeholders to put these in place. In PJM, we have abundant base load power almost all times of the year. We can power AI. I think sometimes we get sloppy and say we have energy issues with AI growth. We don't. We have a capacity issue that manifests itself just a few hours of the year. This problem is fairly simple to address with demand response, peakers, and batteries all provided that we have the right market price signals. But to be fair, we have been a bit challenged on the issue of getting the capacity market moving. Now we agree with PJM's decision to delay the latest auction, and we encourage PJM to do that because we support changing the reference unit and addressing the RMR units. Those narrow reforms should provide clarity, fair pricing, and price stability for customers and generators alike. PJM should also proceed with streamlining the process for adding generation like our crane restart. We're happy to see PJM progressing on this front, and we're working hard to bring crane on in 2027. We trust that FERC will prioritize these RPM matters and urge FERC to act on them quickly. The load is going up, and the market needs the price signal to react. We note that the recent utility filings with PJM already indicate another five to six gigawatts of load in the next auction that we expect PJM to implement in its planning parameters. The PJM capacity market has a long track record of being able to deliver new capacity and to drive customer demand response, but we need to let it work. Co-location will add, not detract, from reliability in PJM. Here Constellation's principles have been quite simple. First, in times of emergency, our power should support the grid. To be absolutely clear about what I am saying, that means that nuclear energy supporting a co-located load will be switched to the grid when needed to prevent the reliability crisis. and it should be fairly compensated when so called. Second, if the co-located load has backup power, it should be allowed to offer that power to the grid, subject, of course, to state and environmental permitting rules. Third, co-located load should pay its fair share of grid costs for what it uses. These issues should be brought together and advanced at FERC. Frankly, I think part of the issue with the ISA proceeding is that it did not bring these issues together and understandably some of the commissioners want to see the complete package. We will pursue this regulatory clarity while simultaneously pursuing commercial strategies for co-location that are permitted under existing rules. Now turning to our results and guidance updates, in the third quarter, Our 14,000-person team here at Constellation delivered gap earnings of $3.82 per share and adjusted operating earnings of $2.74 per share. Due to this strong performance, we are raising and narrowing our adjusted operating earnings guidance for the full year to $8 to $8.40 per share. This brings our midpoint to $8.20 per share, a whopping $0.60 cents per share above our original guidance midpoint, and we remain bullish on the balance of the year. Our core value proposition is strong, and our strategy remains on track. We will grow our base EPS by at least 13% through 2030, growth that is backstopped by nuclear production tax credits. We have the best operated and largest fleet of carbon-free, reliable nuclear plants that run 24-7, and we will be needed by the energy system for decades to come. These assets will benefit from both increasing demand for carbon-free electricity and reliable power. Through our industry-leading CNI business, we provide the innovative products and services our customers want. our strong investment grade balance sheet, along with strong free cash flows that can continue to be used for growth, meet our threshold, and provide valuable opportunities for you, our owners. And finally, as you've seen this year, we have the ability to do better than our base level of earnings through multiple paths, including optimizing our portfolio and getting better than average margins. It's been an incredible three years for Constellation, a remarkable journey that perhaps is best epitomized by the restart of the Crane Clean Energy Center that we announced in September. Crane validates three points that we have discussed many times before. First, it's a powerful symbol of the rebirth of nuclear energy, and it happens at a location that once came to represent nuclear energy's demise. Second, it confirms our thesis that the most valuable energy commodity in the world today is clean and reliable electricity. And third, it underscores the growing demand for 24-7 clean energy driven by the data economy, onshoring, and electrification. All of these macro points benefit our owners. We have talked about them before, and I don't think we need to talk about them much more because by now these points have become self-evident. In addition to Crane, we have at least 1,000 megawatts of additional nuclear generation that we could bring onto the grid through upgrades. And I'm pleased to report to you that we are seeing a wave of interest from customers all who are interested in these opportunities and in our relicensing, and we are making significant progress on contracting. The intensity of our negotiations with hyperscalers and others keeps going up and up. Our entire team is focused on executing transactions and supporting data center development anywhere in PJM. Now, I want to emphasize the word anywhere. Recall that when Microsoft announced the crane offtake agreement, they explained that their agreement with Constellation enables them to use the energy in four different states, not just Pennsylvania. That should tell you that Constellation easily can structure transactions to sell energy, capacity, and sustainability products to data economy customers anywhere in PJM, and in some cases, outside of PJM. And we can make those fixed price deals for as long as our counterparties desire. That's pretty unique to us. The governors in the states where we operate clean energy centers certainly understand the national security imperative and the value of economic development in their states. They want us to use the clean energy in their states, and we want that too. But we will follow the customers to all utilities and regions that are working with us to advance economic development and meet the vital national security needs of the nation. So as we look forward to the inevitable regulatory certainty and flexibility on co-location that Chairman Phillips emphasized in his dissent, Constellation is continuing to hit on all cylinders on co-location opportunities, grid sales, and in delivering new MiG-1s to the grid at attractive prices. We are proud that no one, No one is doing more to sustain and increase clean and reliable energy for America than Constellation. And we continue to lead research on new nuclear energy designs, such as SMRs, and for natural gas with sequestration. Our partnership with Rolls-Royce Nuclear is advancing a very promising SMR design, and we are working with other SMR developers as well. Our pioneering investment in net power is poised to undergo advanced engineering tests at our facility in LaPorte, Texas. And we're partnering with GE on engineering tests and a pre-feed study for CCUS at Colorado Bend. As I've said to you many times before, natural gas is a big part of our bridging strategy. And we continue to be a player in natural gas, provided we have a real pathway to sustainability. Because while powering the data economy is vital to our nation, defeating the climate crisis is vital to the world. In conclusion, our people are leading on all fronts. The 13% compounded growth that we've committed to you through the end of the decade is secure. And we're very confident that we will outperform this target as we layer in new opportunities just as you have seen us continuously outperform quarter to quarter and year to year. Turning slide sets. Nuclear performance was once again strong. We produced more than 41 million megawatt hours of a reliable, available, and carbon-free generation from our nuclear plants with a capacity factor of 95%. Our refueling outage performance was exceptional during the quarter. We completed two refueling outages during the quarter with each lasting less than 18 days on average. Great job to Brian Hanson, David Rhodes, and that team. For the year, our average is under 20 days. Tracking two days are almost 10% below our historical averages and well below the industry average of 40 days. Our renewables and natural gas fleet similarly performed very well with 96% renewable energy capture and 98.2% power dispatch matching. Turning to slide seven, we talk a lot about the advantage of creating value between our best-in-class generation fleet and our exceptional commercial business. Our results this year are further proof of the strategic advantages of the combination of these businesses. This is an area where the numbers, not the words, do most of the talking, and you can see from the numbers just how spectacularly the commercial team has performed. We perform so well because our customer business is meeting demand in many ways, including through our Core Plus and CFE products, where we enable new renewable generation to be built and carbon-free electricity to be shared with our customers. Since 2020, our Core Plus business has grown by leaps and bounds as customers look for products to help them meet their energy and sustainability goals. As I mentioned before, through this product, 2,800 megawatts of wind and solar have been added to the system, helping to meet not only our customers' needs, but the system's needs. We think Core Plus is a great way for customers to move forward on their sustainability efforts, and it's a complementary pathway to our elite CFE product that provides 24-7 time and geographically matched clean energy. I'm now going to turn the call over to Dan for the financial update. Dan?

Thank you, Joe, and good morning, everyone. Beginning on slide 8, we earned $3.82 per share in GAAP earnings and $2.74 per share in adjusted operating earnings, which was 61 cents higher than last year. Starting with generation, when we look at the quarter and the year, we've seen actual power prices materialize well below the outlook at the start of the year, largely given weather-driven declines in natural gas prices as well as generally good renewables performance. Fortunately, with the nuclear PTC now in place, the means-based tax credit worked like it was supposed to, providing the revenue support as anticipated and helping us to meet our expectations. We also benefited from the earnings contribution from our interest in the South Texas project, which we acquired late last year. Turning to commercial business, as Joe mentioned, we continue to perform exceptionally well. The team has done an excellent job managing the variability in loads and market prices, reinforcing how it thrives in volatile markets. We're also continuing to see margins above the long-term averages we use in our forecast and above the enhanced margins we disclosed in February. Finally, as we discussed last quarter, Our financial results and our stock have continued to perform very well year to date, which results in higher employee compensation expense year over year. Altogether, we had a strong third quarter that is contributing to our improved outlook for the year. Before I turn to guidance, given the timing of our announced crane restart and where negotiations were during the quarter following our second quarter earnings call, we were unable to be in the market and unfortunately did not repurchase any shares during the quarter. We still have approximately $1 billion of share buybacks currently authorized by the board, as well as $1.8 billion of unallocated capital for the 2024-2025 period, which I should remind is not updated for the increase in 2024 earnings guidance or outlook for 2025. Moving to slide nine, We are raising the midpoint and narrowing full-year adjusted operating earnings guidance. The updated midpoint goes from $8 per share to $8.20 with a range of $8 to $8.40. The new range is effectively above the top end of our original guidance range of $7.23 to $8.03 per share. The commercial business continues to outperform plan, allowing us to increase our earnings outlook for the year once again. As you can see in the appendix on slide 21, we increased our enhanced gross margin by $275 million as a result of the commercial team's continued strong performance, created additional value compared to plan through the optimization of our portfolio. As previously discussed, we are seeing higher O&M due to the strong earnings results in stock comp. On the fourth quarter call, we will roll forward our earnings guidance and other disclosures to include 2026. As you think through your modeling and as reflected in the disclosures in this deck, I want to remind you that we'll have more refueling outages in 2026 than in 2025, and these outages will be longer than our average outages because we'll be installing the first of our planned uprates at Byron and Braidwood. As a result, we will produce less electricity and have higher O&M. In addition, we expect the PTC floor to be flat in 2025. We still forecast at least 13% compound-based EPS growth through 2030, and we'll look for ways to further enhance our opportunity from here. Thank you, and I'll turn the call back to Joe.

Thanks, Dan. Good job, as always. Folks, Constellation is like no other company. We have a unique set of existing assets that creates opportunities that no one else has. As Dan and I both hit, we expect to see 13% compounded growth through the end of the decade. Uniquely, it's backstopped by the federal government. We're the best operator of nuclear plants in the world, and our plants' performance is only getting better. We have 20% of market share with competitive CNI customers, and that's allowed us to have the products and services that now we are uniquely using with the data economy customers. Our strategy from the beginning is to provide America solutions to its energy problems, and we're doing that. We're not done as a company, not far from done. Our demand is growing, and at the same time, reliability is becoming a premium product. We don't need to look further than the recent capacity auctions and the load growth projections to see that. We see increased demand from the data economy, but also from electrification. and from onshore, and it's going to mean that our resources are more important than ever. We have opportunities in the data economy for front-of-the-meter deals. We've shown that through Crane. We've shown that through our CFE product, and we continue to see opportunities behind the meter in co-location. We've got 2,000 megawatts of new nuclear that we could bring to the grid beginning in 2027. So think about that. That's 2,000 megawatts, roughly the equivalent of Vogel, and we think we could get that done all within the next handful of years. We're going to benefit from government procurements from clean energy, and we're going to be able to capture energy and capacity prices above the PTC floor. Finally, I'd just like to say something about tomorrow's election and how it could impact us at Constellation. We're proud that nuclear energy has strong and bipartisan support from federal and state policymakers and from the American people. In fact, the majority of Americans support nuclear. Congress has passed several pieces of pro-nuclear legislation in recent years, including the ADVANCE Act, which passed Congress with strong bipartisan support. You'll recall, and we've told you this before, that the origins of the production tax credit came from Republicans in the House and the Senate. And both Vice President Harris and former President Trump have been strong supporters of existing and new nuclear during their time in office. Politically, and unfortunately, there are deep divisions in the country, but all Americans want clean and reliable energy, and we're proud to provide what they want. We're proud to provide what our customers and our communities want. No matter who wins tomorrow, We're going to continue to do that. With that, Lateef, we'll end our prepared remarks and open it up for questions.

Thank you. Ladies and gentlemen, if you have a question, you will need to press star 11 on your telephone. To remove yourself from the queue, you may press star 11 again. Please stand by while we compile the Q&A roster.

Our first question.

comes from the line of Jeremy Tenet of JPMorgan Securities. Please go ahead, Jeremy.

Hi, good morning. Morning, Jeremy. Thanks for all the details on the call. Just wanted to come back to post-Burke here and thoughts. Just wondering, if Constellation were to pursue more front-of-the-meter deals, how do you think that, I guess, impacts value creation and, uh, you know, speed to market relative to, I guess, uh, behind the meter solution here. It seems like there's still an opportunity to get to the same place, but just wondering any other thoughts that you can share.

Yeah, Jeremy, our, our foot is, uh, on the accelerator pressed all the way down on deals, whether they're front or behind the meter. And so we are, we're pursuing both. Um, I think, um, We've, as I said, demonstrated through Crane our ability to use our power stations to support data center development anywhere. And so I think that's going to create some real opportunities for partnering with utilities that want to ensure that customers in their region or their utility get first access to clean and reliable power so that they could meet their growth objectives. And we look forward to partnering with them and customers who want to be in those areas. the market is very clearly the most important thing for customers and so that's going to depend on the transmission configuration in different places and certain places are going to be frankly more attractive to others for the data economy customers and we're going to follow them where they need to go got it that makes sense thank you for that and then

I guess also looking at the state level, you see certain states out there really looking to promote the data economy development in their states. And I think there's some actions coming out of the governors to really promote, I guess, quicker speech market interconnect queue timelines. And just wondering any other thoughts that you could share there as far as what could be done on the state level?

Yeah, that's the irony of it. I have not, look, I've talked to every governor in states from which we operate clean energy centers. And I could assure you, that they all want to get this economy going. They understand that it's important for national security, but it's also critically important for economic development in their states. And moreover, they understand this kind of fundamental point, that they are part of an interstate grid, so that if they don't build, the power from power plants that might be in their state is going to flow to different places where those data centers are going to be built. And those states are going to get the economic benefits, the jobs, the taxes, all the other things that come with it. So I see it as a circumstance where they're all leaning into this. And I think we will see more of them lean more aggressively into trying to advance rules at FERC and trying to do things that attract data center development to their jurisdictions. And that's Republicans and Democrats alike. So we're following that closely. We, as I said, will continue to meet with utilities that we have common interests with and want to really advance data economy development work in those states, and we could go anywhere. We have been selling hundreds of terawatt hours every year to customers across PJM and other RTOs. We know how to do that. We know how to manage the risks. We know what our costs are going to be 10, 20 years from now. We know how to get capacity to all places. And as more transmission is built, we'll be able to move even more capacity to different places. So we'll follow the customers where they go. That's the entire focus of Jim's team and the work that Kathleen and others are doing right now. And that's what I have said before, that the discussion with hyperscalers is

is only ramping up it's about this sort of thing how do they buy the energy capacity that they could deploy wherever they want got it that's very helpful thank you thank you our next question comes from the line of shar pereza of guggenheim partners please go ahead morning joe good morning dan um

I appreciate sort of the color you're giving around sort of the markets and stuff, but maybe just if you could speak a little more to the transmission capacity within the comment and Pico zones around your plants as you see it. I mean, one of your peers has pitched capacity in its primary zone. It's kind of advantageous in a shift towards more front of the meter deals. And obviously some of the stock reactions we're seeing this morning is, is prompting that. So I just want to get a little bit more color there. Thanks.

Yeah, look, sure, I think from a temporal standpoint, a long-term standpoint, we happen to operate in markets that have fairly robust transmission capabilities, right? When you think about the ComEd zone as an example, it has probably the most robust export capabilities of any zone within PJM. I think numerically that's accurate. And we're seeing new transmission being built all over the place that's really expanding that. So the ability to move energy and capacity to different places is growing really as these plans come into fruition and transmission is built. But there's a lot of lanes right now for us to move our power. So that's what we're exploring.

Got it. Okay, perfect. And then just the pathways to getting some clarity on BTM tariffs. I guess, what do you see as kind of a realistic timeline? You know, had a conference on Friday, could be a new chair next year with the election tomorrow. I guess, what is the fastest this could get resolved at this point? Do you wait for a NOPR? Can you or PJM do something to expedite? I mean, there's a lot of options that are being thrown around, but nothing seems to be a quick fix besides shifting to sort of in front of the meter. Thanks.

Yeah, look, I probably would agree with you that there's not a quick fix. But by that, I mean, you know, it's not going to happen tomorrow. But there are a lot of parties interested in moving this forward. People are reacting to the tech conference. I think a bigger development wasn't the ISA, which was a narrow thing. But how do we deal with the comments that came out of the tech conference and craft something globally that addresses those comments? I touched a little bit on that. in terms of the principles that we think would be the framework for a bigger deal. How that happens, I don't think we're, you know, we're literally, what, 72 hours away from the tech conference and still putting that together. We're meeting with counterparties, and we'll figure out how to move forward. I don't know if FERC at this point is going to take the lead, PJM will, or other parties will. I think it's just too early in the game for us to say that. But look, I think there's a strong appetite. I don't care who's in the White House. AI is going to be of growing importance. I fundamentally believe this, Shar. This is the issue of our time. It transcends the energy business. This is the issue that will define America's success in this century. Whether we lead or fall behind is going to be of critical importance. That may not be universally known to others. Clearly, Chairman Phillips understood that with great clarity the other day in his comments. But not everybody does right now in November of 2024. A handful of months into next year, I think that whole picture will change and the energy around this issue is going to intensify and FERC and others will have to clear up these rules quickly.

Got it. Yeah, it's a national security issue. Appreciate it. Thanks so much, Joe. See you soon.

Thank you. Our next question comes from the line of Steve Fleischman of Wolf Research.

Hey, Steve. Yeah, hey, good morning. So I guess I'd like to, Joe, you talked about some kind of collocation broad thematics, including the first one being that nuclear would be switched to the grid for emergencies and be fairly compensated. Could you just talk more to that? Because that seems like a little different than at least the things that we've seen so far structurally. So I'd like to get more color on how that would work. And then tied in with that, the DR aspect with the data center, since that's been kind of a challenge since they run all the time. If you could talk to those two issues, it would be helpful.

Yeah, sure, Steve. Let me do it kind of backwards. I think we've seen historically lots of megawatts show up of demand response when the price signals within PJM are consistent and sufficiently robust for commercial industrial customers like ours to pull back energy consumption during peak hours. And the challenge, frankly, for that DR market isn't that the thesis doesn't work, it's that prices dropped so precipitously in capacity markets that it no longer made sense for businesses to participate, to be willing to disrupt their business. But at the price levels we saw in the last auction, to the extent that prices in that vicinity are sustained, I see a reemergence of DR as an immediate resource that's going to address some of these hours of peak demand. That's what I was talking about. I think we're in a good spot because we have, as customers, those clients that could respond. And so I happen to know from our commercial team that we believe that those folks will respond if the price signal is right. So that's kind of the answer to that. But we've got to get this capacity market up and running. We can't be doing hand-wringing about capacity and then at the same time keep tweaking and delaying auctions that send the price signals to the market so that the market will respond. We know historically the market always responds, so that's point one. Point two, what I'm talking about in terms of the nuclear units returning is, and I think we're seeing some of this in ERCOT, at some level, right, of advance warning when the grid reaches some level in its kind of multi-step hierarchy of a grid crisis, the nuclear unit will shut down the co-located load and come back to the grid. And so we could get some legs under that exactly when it will happen, but that's something we're absolutely willing to do, and our customers understand we will do. So this kind of notion that we're taking the energy off the grid and it never comes back or something, kind of unrealistic fantasy that the grid is down, data center is up surrounding the nuclear plant is just, you know, it's a poor narrative. It doesn't accurately reflect what will happen. We will always go back to the grid as primacy. In terms of being compensated, we have offered solutions that allow us to continue to participate in the capacity market and return to the grid in all configurations when needed. Now, unfortunately, in the past, as an isolated issue, that didn't make its way through the PJM committee process. But my point in my opening comments is we've got to bring all of this back together in response to what we heard at the PEC conference and provide a credible and viable pathway for the nukes to come back when needed, but also to serve the co-located load that is vital for this AI development.

Thanks.

One other, I guess, follow-up question. Just in the event that you wanted to shift to co-located structures that are more, I guess, front of the meter, could you give us a sense of just the timeline that delay that that would cause in your kind of key regions relative to being able to do it behind the meter? Sure.

Yeah, look, I don't know, Steve. It'll probably require some more study process, but I think we've got, it's going to depend on what the transmission is around the site and how long that study process will be. I think it is a bit of a longer solution, but I think it could be staged cooperatively in a manner that really doesn't cost that much time. We have some ideas about how we will do that in accordance with the existing guidelines tariffs that allow us to get to the end state fairly quickly. We're probably going to be a little careful here on an earnings call spelling out exactly how that will work.

Got it. Thank you for the call. Appreciate it.

Thank you. Our next question comes from the line of Paul Zimbardo of Jefferies.

Hey, good morning, team. It's Julian. Thanks for the time. I appreciate it. Just wanted to follow up a little bit on sort of the cadence of the last few questions and asking, how do you think about confidence is probably pretty key here right now. How do you think about being able to come to market with whatever it is, whether it's a behind-the-meter type arrangement or some sort of portfolio front-of-the-meter type deal? How do you think about Friday representing any kind of setback in timeline on your front, or do you think that you're still – front foot here in terms of being able to bring something to market sooner than later?

Look, I think Friday is just what I said. I think it's a narrow ruling by three commissioners. I'm not even sure that's the ruling we would have seen if the two commissioners didn't recuse themselves. So it's going to be dependent on how fast. We always anticipated that after the tech conference there would be a process to deal with issues that came up. So that has been in our thinking from a strategic standpoint and in the thinking of our customers. I just don't over-rotate on what happened on Friday in the ISA because I don't think that really brought the issues together in the most favorable way. My point is, from our internal planning, it's kind of the same thing. In terms of front-of-the-meter deals, we're doing that already. We've done it with dozens and dozens of customers already in PJM and you'll see those numbers in our disclosures, and as well as the upgrades and other opportunities. Those things are moving along at pace, and if anything, have intensity. After the Microsoft deal with Crane, the appetite and desire to talk to us about the upgrades has gone up pretty considerably. So we're moving at pace on all of those things, and I think they're all going to be additive to the 13%. get the deals done, and incorporate them into our numbers, and you'll see it.

Yeah, thanks, Joe. And I appreciate all this takes some time, right? I mean, obviously, TMI took a lot of planning. How do you think about the upgrade structures here? I mean, obviously, you know, there's incremental megawatt potential here, but as you think about contracting here, would you think of that as being kind of an opportunity to recontract entire plants, or would you think about this being more discreet to the additionality provided by the specific megawatt upgrades? What do you think about the structure of that and timing?

All of the above. But, guys, I think we're seeing such interest in the upgrades that we want to package it with other opportunities. I think I have fewer upgrades than I have customers to sell them to. So there's a scarcity of that product. And so that tells us we should pair it with other things that we care about. Relicensings are another thing. that hyperscalers want to be a part of and support, right? So that makes a good pairing. So I think about the upgrades as a scarce opportunity that we have at Constellation and an opportunity we want to share with customers that are interested in a broader or strategic relationship than perhaps just the upgrades.

Got it. Hey, thanks, team. Good luck.

Thanks.

Thank you. Our next question. comes from the line of David Acaro of Morgan Stanley.

Hey, David. Hey, thanks so much. Good morning. Hey, wondering what's the perspective that you're hearing from the hyperscalers? You know, what's the urgency level? Are they worried about regulatory issues in PJM? Are they sticking with PJM and still, you know, looking for a behind-the-meter approach? Any changes in their thinking?

David, where are they going to go? Right? It's not like it's a lot better anywhere else than PJM. I think the reality everyone is facing is simply this. This power issue has become the key to unlocking the whole deal. They're investing billions, and as you can see from their disclosures, they're not slowing the pace of their investment. But what they're seeing is that there's no Nirvana out there. There's no place where you could easily hook up the amount of energy that they're looking to hook up. So no, I don't I don't see them as saying, oh no, PJM is not the place to go. I think competitive markets and PJM very much remain on their list of priority sites. But the truth of all of this, and I think Philip said it exactly right, is this is going to require a degree of regulatory flexibility and creativeness that's going to stretch everybody. And that's no less true, by the way, in vertically integrated markets than it is here. And you see that time and again. I'll tell you what won't be the solution, and I know this with absolute certainty. They're not going to wait around for 10 years until somebody builds a power plant and transmission lines to power the data economy. If that's the U.S.

plan, then we've got bigger problems than picking the right RTO.

Yeah, gotcha. No, I appreciate that. That makes a lot of sense. And then maybe thinking about the PGM market broadly too, appreciate your comments before, and we're still waiting for this kind of supply response, but there's some stakeholders that may not be as patient here. You mentioned demand response, but what do you think in there about potential major market changes or like subsidized new generation or re-regulation, just some of these broader approaches that have started to pick up in PGM discussions?

Yeah, I'd give you the same answer I gave you last quarter. I don't think that's realistic. I don't think it's lost on governors or stakeholders that we've had one option and we've now delayed the second option. We don't have final rules. We have a reference unit that was creating really this Enormous variability in pricing against very few megawatts. That was the wrong decision. PJM is going to revisit that decision. They're going to do what they're going to do with the RMR units. And what I think the combination of those things is going to create is a more realistic pattern of pricing that's going to incentivize demand response and incentivize competitive supply option. So look, I know people talk about these things. They've been talking about these things for 20 years, and they haven't made any significant progress on these fronts. But it's not the first time we've seen high prices result in utilities saying, oh, we want to build. We welcome them into the water any time they want to create a merchant part of their business and invest in power plant generation.

We got to kind of let this market work, and I think folks will let the market work.

Yeah, understood. Okay, great. Thank you.

Thank you. Our next question comes from the line of Nick Campanella of Barclays.

Hey, thanks for the time, and good morning. Hey, so a lot of questions have been answered, but I think a couple quarters ago, or I think it was even in the second quarter, You talked about grid charges. This is more in the face of the protest that was filed. And, you know, you argue these were in kind of like the low single digits on a dollar per megawatt hour basis. But just if we are shifting towards front of the meter, I'm also kind of acknowledging that, you know, every T&D operator has increased their visibility to the gigawatts that they're seeing on the grid. Their queues are becoming more valuable. And just, you know, do you see that impacting the overall front of the meter charge? And how do we kind of think about how that impacts the economics and the return hurdles you're targeting? If you could just update us on what you think those front-of-the-meter charges actually are now. Thanks.

Nick, I haven't changed my view on what they should be. I think if they're charged for when they use the grid, I think the ranges I gave you before are still the same ranges. So that's, you know, there's nothing really that has changed that. Look, I think what's kind of misunderstood here is the, as long as the interconnection is done efficiently, the more people you have using the transmission system, the more that, you know, cost will be broadly shared and that'll be a mitigate. And that means that you have to, that means you have to get the connection right to begin with. You can't spend a boatload of dough locating some of these projects in places that are completely unreasonable, and then trying to socialize all of those costs. That may be good for the utility, but it's not good for customers. But if you locate these things very near the data centers or very near the power sources on a co-located basis, you shouldn't see huge interconnection costs. And as a result, you're not going to see much higher prices than what I shared with you previously. But I think I laid this out in what you're referencing, that this is not a dollars issue. This is a speed issue. And if you listen very carefully to the tech conference the other day, that's what the data economy customers are saying. They're not saying they're not willing to pay their fair share. What they don't want to get stuck in is being mired in years of study processes. And I think some utilities are going to be able to distinguish themselves and get these things done faster than others.

Hey, I appreciate those thoughts. And then just one follow-up on the capital allocation. Do you see yourself leaning on the buyback more this year now that we've moved past this crane announcement and then just set the table on what you're expecting to bring in the fourth quarter? Are you going to wrap in the earnings guidance to that $1.8 billion figure? And, you know, should we have kind of a wider update in the fourth quarter? Thank you.

Yeah, Nick, so just kind of our cadence now, right, is we provide a pretty comprehensive update on our financials on the fourth quarter earnings call. We'll roll forward, right, give formal 25 guidance. We'll give you the same significant inputs for 26 as we have for 25 today to give you some visibility into that multi-year view. We'll, you know, refresh the kind of the extended version of those numbers in the appendix, right, so we kind of go out to 28 now. So, We'll probably add another year there, so you'll see, you know, even further horizon and keep supporting, you know, getting back to the growth rate we talked about out to 2030. On the two-year cash available slide, Yeah, we'll update that for, you know, where we are, you know, closing out the year on cash and then our outlook for 25 and 26 will all go into that map. So you'll see a full new update on all those numbers and, you know, reflective of, you know, all of our CapEx plans and opportunities that we haven't talked about with you guys at this point in time. On the buyback, you know, we, like you, as long as we are not burdened by any material non-public information. We'll look to be in the market. We were bummed we weren't able to do it last quarter when the stock was lower, and certainly we see opportunities. So as we're allowed to, we'll be there.

Thank you. Thank you.

Our next question comes from the line of Durgish Chopra of Evercore ISI.

Morning. Hey. Hey, good morning, Joe. Thanks for giving me time. Hey, I just had one question. Joe, appreciate all the color on the FERC decision you shared. You mentioned the decision being narrow. When we read through the order, there's clearly a willingness from one of the commissioners to get it right. They talk about not setting a precedent. Just do you expect FERC to start a process or some sort of a docket following the technical session on Friday, or does something have to be, has to be initiated by you or your peer IPPs?

Yeah, look, I think that's one of the things we still don't know, right? Because there's not clarity on where FERC goes, but we could drive the agenda here if we're unsatisfied with progress, and we know that. And so... But we're not going to do that by ourselves. We'll do that with others that are of similar mind, and we'll get that proceeding going. But we want to see where PJM is going to be. We want to see where FERC is going to be. It's one where without hearing really from these other two commissioners who recuse themselves on it, it's kind of hard to gauge based on the opinion because we obviously didn't see their words. So we got a little bit of work to do to understand it. And we're going to be doing that this week and formulating a plan over the next couple weeks.

Okay. That's helpful. That's all I had.

Thank you.

Thank you. I would now like to turn the conference back to Joe Dominguez for closing remarks. Sir?

Well, listen, I appreciate all of the good questions today and the discussion. We're charging forward on all fronts, as I said. We think we have a pretty unique value proposition here with a 13% compounded growth and many, many opportunities not yet realized. And we're quite excited for the future. So thanks again for your interest. And with that, I'll conclude the call.

This concludes today's conference call. Thank you for participating. You may now disconnect. Have a great day.