Good day, everyone, and welcome to the Constellation Energy Corporation Business and Earnings Outlook Call. All participants are currently in a listen-only mode. We will have a question-and-answer session later, and instructions will be provided at that time. This call may be recorded. I would now like to introduce your host for today’s call, Emily Duncan, Senior Vice President of Investor Relations and Strategic Growth. You may begin.

Thank you, Tanya. Good morning, everyone, and thank you for joining Constellation Energy Corporation's business and earnings outlook call. Leading the call today are Joe Dominguez, Constellation's President and Chief Executive Officer; and Dan Eggers, Constellation's Chief Financial Officer. They're joined by other members of Constellation's senior management team who will be available to answer your questions following our prepared remarks. We issued an 8-K this morning, which includes our earnings release detailing 2023 results along with a separate press release and business outlook presentation to be covered on today's call, all of which can be found in the Investor Relations section of Constellation's website. The materials in the 8-K and other matters which we'll discuss 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 materials and comments made during this call. Please refer to today's 8-K and Constellation's 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 it over to Joe Dominguez, CEO of Constellation.

Thank you, Emily. Tanya, thank you for kicking off our discussion today, and Emily for setting the agenda. It’s great to have everyone with us. While our focus today is on guidance for 2024 and the future of Constellation, I want to begin by acknowledging the remarkable accomplishments we achieved in 2023, where we significantly raised our guidance in both the second and third quarter calls and still exceeded the upper limits of our full-year results. This marks our second full year in operation, and I believe it's noteworthy that we exceeded the midpoint of our guidance range in both years, and last year was particularly impressive. We hope these outcomes highlight the dedication of our entire management team to fulfilling our commitments to you, which we will maintain going forward. The unique strength of Constellation lies in our combination of top-tier generation assets and a best-in-class commercial business, all supported by a remarkable team. I want to extend my gratitude to them for the outstanding results, as they are truly the driving force behind our success. As we turn our attention to 2024 and beyond, I’ll begin by discussing our distinctive business model and the advantages we see emerging in this changing marketplace. I’ll first outline who we are: the best operator of carbon-free nuclear plants globally, backed by a federal government nuclear PTC, and with a commercial business that caters to the most essential customers. In the evolving power markets, we stand out by providing carbon-free energy and reliability together, which we believe will be foundational for the future of our country. Additionally, we are well-positioned to capitalize on volatility in markets and the energy transition by selling the clean and dependable attributes of our 180 million megawatt-hour nuclear fleet. Now Dan will elaborate on our projected EPS guidance range for 2024, which is $7.23 to $8.03 per share, our visibility of over 10% growth on the majority of our earnings through the end of the decade, referred to as base EPS, along with our updated two-year free cash flow outlook. Dan will also highlight some of our new disclosures that we believe can be very beneficial. We appreciate that we've already heard positive feedback today from several investors regarding these updates. Let’s dive into the details. Constellation is a unique company that contributes to the economic growth and sustainability goals of our country and our customers. From the outset of our Company, we have stated that the most critical energy commodity today is carbon-free electricity that offers consistency and reliability. We produce more of it than anyone else, with our fleet enjoying an unparalleled track record of cost-effectiveness and reliability for over a decade. Our scale is unmatched, as we own more competitive nuclear generation than all other U.S. nuclear generators combined. Our assets also feature outstanding longevity, with the potential to operate for up to 30 to 40 more years. In a politically divided environment, nuclear energy has emerged as a preferred option for both Republicans and Democrats due to its unique benefits. Our customer business reaches nearly one-fourth of all commercial industrial demand in the U.S. and three-fourths of the Fortune 100 companies, positioning us favorably to leverage our unique assets and capabilities to meet customer demands. Furthermore, the synergy between our assets and commercial business allows us to achieve higher earnings beyond the company’s base earnings, just as we have in our first two years. Our robust investment-grade balance sheet and strategic capital allocation approach will continue to generate value for you, including through share buybacks, as we are confident in the future value of our Company. Our nuclear fleet and customer business are set to meet the increasing demand for clean, reliable energy to power the U.S. economy, with multiple opportunities for growth beyond the 10% we are forecasting today. The global shift is undoubtedly in our favor; the demand for dependable, clean energy will only increase. We are best positioned to fulfill this growing need and to lead the energy transition, capitalizing on the unique, clean, and reliable characteristics of our 180 million megawatt-hours of nuclear power. We are committed to helping America advance the technologies of the future, whether they involve electric vehicles, electric heating, industrial electrification, or the burgeoning data economy that is crucial for both economic and national security reasons. The production tax credit provides us with the flexibility to navigate the evolving market strategically through hedging and portfolio optimization. Essentially, the PTC allows us to determine the timing and manner in which we hedge our fleet. This flexibility is immensely valuable, driving enhanced earnings for us. We can use the cash flow generated from these earnings to reinvest in the industry through buybacks and achieve double-digit returns on growth investments. No other company combines predictable growth, exposure to power markets, strong cash flows, and downside protection from the federal government like we do. As I mentioned earlier, our team is committed to honoring the promises we make, as we understand that keeping our word is key to creating long-term sustainable value for our shareholders. On our second anniversary as an independent company, I would like to summarize the commitments we made and have since delivered on. We have surpassed our financial expectations, our balance sheet has improved to a competitive BBB rating, our dividend has grown by 150%, beating our annual target of 10%, and we have successfully executed our first billion-dollar buyback while initiating a second in January. For many calls now, I have reiterated our intent to purchase our shares continuously, and we remain steadfast in that belief. I'm proud to report that our commitment to building the Company’s future value has already brought substantial benefits, generating $400 million in value from our share buybacks. We successfully advocated for the inclusion of the nuclear PTC in the IRA, which is transformative for our business. We have maintained a disciplined approach to mergers and acquisitions, integrating we acquired ownership of STP into our fleet, focusing on dual-unit nuclear plants due to their competitive advantages. We made prudent decisions to acquire fuel aggressively and secure costs for this decade and beyond. We have also developed a carbon-free energy product aligned with hourly demand, which we are now offering to sustainability leaders like Microsoft, positioning us favorably in the data economy. We've started the process to extend the operational lives of our nuclear fleet, potentially extending them to 80 years, and we remain the leading operator of nuclear power plants worldwide. We are proud of what we have accomplished in just two years and even more excited about the future. Now, let’s discuss how the nuclear PTC fundamentally changes our business since its implementation. Previously, the outlook for our nuclear fleet relied heavily on power prices, resulting in fluctuating revenues year over year. The PTC has altered this scenario significantly. Essentially, the PTC guarantees our fleet a revenue floor starting at $43.75 per megawatt-hour in 2024, providing considerable downside protection while preserving unlimited upside potential. Additionally, the PTC floor revenue will grow with inflation, supporting ourEPS growth targets. We're projecting that the PTC will increase by 2% in our financial disclosures, including our 10% growth target. However, higher inflation could positively impact our revenue growth significantly. For instance, by 2028, the financial disparity between a 2% and 3% inflation scenario could exceed $750 million, with a 3% inflation case potentially pushing our EPS growth rate into the mid to high teens, rather than merely 10%. This is a significant opportunity. Moving on, I want to address the escalating public and bipartisan political support for nuclear energy, which is recognized for its essential role in our energy system from both a transitional and national security perspective. Noteworthy endorsements from both President Biden and former President Trump highlight the urgency of retaining baseload clean power. Before the PTC, various states implemented programs to prevent premature retirement of these crucial resources, with initiatives enacted by both Republican and Democratic governors. At the federal level, former President Trump emphasized the necessity of maintaining baseload energy and proposed using the Department of Energy's emergency authority to support existing nuclear plants. Both parties have introduced tax credit bills for nuclear energy, demonstrating a shared understanding of its critical importance. In a politically divided landscape, both sides recognize nuclear energy’s unique and essential contribution to the nation, leading us to believe that this policy framework is robust and sustainable. There are many reasons why nuclear energy has gained policy and public appreciation in recent years. Nuclear energy generates more output for a given installed capacity than any other technology, operating more than 90% of the time, with our operations at around 95%. This is significantly higher than wind and solar, which operate at only 25-30%. Nuclear power provides consistent support 24/7, regardless of external conditions, ensuring grid reliability in extreme weather events. Furthermore, nuclear plants have the longest operational lifespan, with the potential to run for over 39 years, and in many cases, extending to a century. In terms of lifecycle emissions, nuclear energy holds the lowest emissions profile, making it an environmentally responsible choice considering all aspects of construction and fuel mining. Safety is also paramount, with nuclear being one of the safest energy sources, and its operational transparency ensures we can carefully manage every aspect of fuel usage and site restoration. Compared to other technologies, nuclear is land-efficient and creates more jobs than any other energy generation type. Our workforce has grown from 13,000 to 15,500 in just two years. As we look at the evolving energy landscape, it’s clear that the clean-energy transition is underway, and Constellation is at the forefront of this movement. However, as this transition takes place, we expect to see impacts on electric reliability and market conditions. The Energy Information Administration forecasts that as we see intermittent generation replace dispatchable generation, the growth in installed generation capacity will remain crucial. For the first time, regions like Texas are experiencing real load growth, a notable shift after years of stagnation. In fact, PJM's peak demand forecast for 2028 has increased by 2%, while ERCOT's spike is a remarkable 6.6%. The economic development across the country, coupled with political tensions influencing the onshoring of manufacturing and supply chains, is contributing to this demand increase. Moreover, the electrification of various sectors and heightened frequency of extreme weather events are further driving peak demand. The data economy, particularly driven by AI, is yielding additional demand growth, putting a premium on reliable, clean energy resources, and we own more of those resources than anyone else. In summary, we’re seeing signs in the marketplace that indicate a convergence of prices with the costs associated with new construction. For instance, offshore wind costs are rising above $100 per megawatt-hour without the necessary storage solutions to match the reliability of nuclear plants. Turning our attention to the data economy, projections suggest that by 2030, demand from data centers and AI could constitute 7% of total electricity demand in the U.S., which is staggering when considering it's equivalent to the electricity used for lighting homes and businesses. Today's data centers have significantly increased in size, with many demanding around-the-clock power, creating a perfect opportunity for us because we can provide that reliable energy. Our offerings can cater to 24/7 energy needs found in data centers while also aligning with sustainability objectives, positioning us to tap into significant opportunities across multiple jurisdictions. In conclusion, I want to highlight potential challenges in serving fluctuating demand patterns due to high variability. However, we are uniquely equipped to handle this due to the reliability of our generation assets. We believe that while renewables play an essential role in decarbonizing energy, the intermittent nature of renewable energy presents challenges that we can effectively manage. For example, renewables underperform during peak demand periods, necessitating a reliance on dispatchable energy sources. This scenario places us in an advantageous position as we ensure our nuclear plants provide consistent support. The demand for load management in a variable system is likely to result in higher margins for Constellation, benefiting our shareholders. Looking at specific markets like ERCOT indicates the trend we could see in other regions. In 2023, ERCOT experienced a substantial increase in peak demand hours, leading to higher prices associated with reliability. When wind and solar make up less of the demand, average prices can surge dramatically, signaling to investors the importance of reliability. These developments underscore the critical intersection of reliability and sustainability. The energy commodity most valued today excels at both, which is where Constellation’s strengths lie. To summarize, states have recognized the vital role of nuclear energy supporting both economic and environmental stability; customers are increasingly willing to pay for the clean attributes our fleet offers, paving the way for monetization opportunities. As we move forward, it’s clear that we can leverage this unique position, potentially realizing a significant annual revenue from our clean nuclear power. As we continue to evolve and find new markets, we are excited about the potential for growth, particularly in areas like data centers that require consistent clean energy. This opportunity, together with favorable interpretations of statutes regarding hydrogen production, positions us well for future success. I’ll now turn it over to Dan, who will provide insights into our financial outlook and the recent changes we've implemented. Thank you again for your positive remarks. Dan?

Thank you, Joe. Good morning, everyone. We're immensely proud of what we've accomplished since we launched, and we're even more excited about what lies ahead. I'm starting on Slide 21. As Joe outlined, the nuclear PTC has fundamentally changed our business by providing revenue visibility, supporting earnings growth through its built-in inflation adjustment and protecting against power market downside by providing a floor or base level of earnings while maintaining exposure to higher prices. From a mechanical perspective, the PTC will be treated as an after-tax revenue stream that will fill the gap between spot revenues at each plant. What we consider the after-tax earnings support our high investment-grade credit ratings and our strong free cash flow generation to support reinvestment or return of capital to our owners. We are transitioning our primary financial metric to operating EPS. Our guidance range for 2024 is $7.23 to $8.03 per share, up considerably from the $6.28 earned in 2023, which I'll remind you is well ahead of our original expectations for last year. On Page 31 of the appendix, we provide 2023 EPS by quarter to help you calibrate against last year. Since EPS is new, the easy rule of thumb is every $4 million of pre-tax equals $0.01 of EPS and ties back to some of Joe's slides earlier. More than just helping prompt the change to EPS, the nuclear PTC is reshaping how we approach the sale of electricity from our nuclear plants. Historically, we hedged on a three-year ratable basis to provide earnings visibility, support our credit metrics and ensure we have the cash needed to run the business with the downside revenue protection from the Nuclear PTC and current interpretation of gross receipts. We no longer need to hedge our generation output in the same way, allowing us to better take advantage of power price moves. This also means the traditional way of modeling the company is changing. To help, we are also introducing new disclosures to provide simplicity, a longer time horizon, and greater visibility into our business that you've all been asking for. Turning to Slide 22. Our total earnings can be thought of in two parts. First, a significant portion of our business delivers consistent, visible, and easy-to-calculate earnings that will grow over time. This goes beyond the support the PTC provides our nuclear fleet and includes our commercial business and non-nuclear assets. We call these base earnings, which can be easily modeled using simple PxQ. For example, retail margins times volumes sold and the nuclear PTC price times generation output. Base earnings for 2024 are projected as $5.45 to $5.55 per share, which we are confident will grow at least 10% through the decade. I will discuss the tools for calculating base earnings shortly. To get to our total EPS, we have a second bucket called enhanced earnings. Our company consistently generates more money than what is captured in the easy-to-calculate base earnings, but these earnings don't conform to the same PxQ math and can also vary year-to-year depending on market opportunities. Our extraordinary results last year are a good example of outsized value capture created by market volatility that provided an opportunity for greater margins. When we look forward, enhanced earnings may add at least 10% to 20% to total EPS on top of base earnings, but we're doing even better than that in 2024 and 2025 due to big backlog gains and forward power prices in those years. This breakdown of base and enhanced earnings are modeling tools, which will help provide visibility into our disclosures and greater clarity into our business. We plan to refresh the split of base and enhanced once a year during our guidance on the fourth quarter earnings call. Throughout the year, for our quarterly results, we will only report total EPS. Moving on to Slide 23. Through the end of the decade, our base EPS will grow at a compound rate of at least 10%. We see opportunities to do better since this outlook assumes a 2% inflation rate for the PTC adjustment, does not include getting paid for our clean and reliable attributes via data centers and additional clean energy sales that Joe discussed, or margin expansion we've seen from our customer business in recent years, to name a few potential drivers. All these factors would be additive to our growth rate. I do want to clarify; the growth rate will not be a straight line. It will vary from year to year due to various factors, including the irregularities of PTC floor adjustments as well as the number and duration of outages in any given year. You can observe this most clearly when looking at 2026. At a 2% inflation, the PTC does not increase that year. We expect heavy outage years as we will start installing turbines for upgrades of Byron and Braidwood. Over the long term, we are confident that we will grow base EPS by at least 10%, and we've included tools for you to model and validate our outlook. Moving to Slide 25, you'll see the types of tools used to calculate base earnings. The model inputs, including costs can be located on Pages 32 to 34 of the appendix and will guide you into modeling out to 2028. For our generation fleet, we provide expected generation times price. For nuclear, this is broken down by the CMC units in Illinois, New York units inclusive of the ZEC revenues, and the remaining PTC units. On the non-nuclear side, we provide capacity prices and volumes, historical renewable PPA prices, and minimum expected spark spreads. On the commercial side, we provide 13-year average historical and forecasted margins for both our power and gas businesses, which capture the vast majority of the base earnings for our commercial business. We also have other businesses like Constellation Home, energy efficiency, and portfolio management that consistently contribute to our earnings. These tools will help easily model Constellation well into the future, giving you much longer visibility in the base earnings. Moving to the next slide. We know that we will earn more each year than our base earnings, as demonstrated by our outperformance in the last two years. As I mentioned earlier, these earnings are not as easy to model from the PxQ approach and can vary from year to year as we seize market opportunities. We are, nonetheless, confident we will continue to drive additional value from our competitively advantaged businesses. For 2024 and 2025, commercial margins will be above the 13-year average used in base EPS, which we have already included in our backlog through forward sales made in '22 and '23. For example, in 2024, we are forecasting electric margins $1.75 per megawatt hour above the 13-year average because we've monetized recent commodity price volatility as customers have preferred the certainty that a fixed price product offers them. Enhanced earnings will also benefit from plants where forward power prices exceed the PTC floor as well as optimizing positions between our retail and generation businesses. When we look forward and the assumptions underpinning base EPS, we anticipate enhanced earnings to add at least 10% to 20% to total EPS in typical years but see that contribution rising for the next couple of years due to extraordinary commercial margins we've locked in. On Page 35 in the appendix, we provide additional inputs about enhanced gross margin, which should help clarify this earnings stream. I'll turn to our capital allocation plan on Page 26, which should look familiar to all of you. Our goal is to deliver value for our owners through our capital allocation plan. Our philosophy on how to achieve that is unchanged. Our high investment-grade credit ratings are our foundation. Our strength has been recognized by both S&P due to our recent upgrade to BBB+ and by being placed on a positive outlook at Moody's. Our high investment-grade credit ratings and strong metrics reflect the high quality of our business. We remain committed to the dividend, with a projected 25% growth this year, starting with the March 2024 dividend. This brings our total dividend increase since we started in 2022 to 150%. We'll continue to target 10% annual growth in future years. We'll also keep investing in our assets that will supply long-term clean energy from our nuclear fleet and help decarbonize the American economy. Our 2024 and 2025 capital plans can be found on Page 36 of the appendix. We will remain disciplined on both organic and inorganic opportunities, making investments where we exceed our double-digit unlevered return threshold. Last year, we secured a large portion of the South Texas Project nuclear plant, and we'll continue to pursue acquisitions that meet our business priorities and return thresholds. Over the next two years, we plan to invest in organic projects that will grow and maintain operations of our invaluable carbon-free assets. We are making investments at some plants to prepare for future behind-the-meter demand, and hydrogen remains a potential opportunity as long as we see suitable outcomes from the final treasury rules. Additionally, we’re excited to invest alongside our owners last year, completing our first $1 billion share repurchase program. Our Board has authorized the next $1 billion program in December, and we have already begun buying this quarter. We are eager to pursue opportunities to invest in our business with favorable returns, and we're also happy to keep buying our stock wherever possible. Turning to Slide 27. Let's discuss our free cash flow outlook for the next two years covering 2024 and 2025. Starting on the left, we forecast approximately $6 billion in free cash flow before growth after accounting for base CapEx and nuclear fuel, which is still a lot of money to deploy. As I mentioned on the last slide, we have nearly $900 million in organic investments over the next two years with returns exceeding our double-digit threshold. $900 million will be returned to our owners as common dividends, reflecting this year's 25% increase. We then plan to return another $1 billion to owners through the share repurchase authorized in December and have already completed $150 million of that authorization. This leaves us with approximately $3.1 billion to $3.5 billion of unallocated capital over the next two years. This unallocated capital provides us the flexibility to pursue our strategic priorities, including M&A and additional organic growth, provided those projects meet our return thresholds. As seen in prior years, if such opportunities do not materialize, we will return that capital to our owners. Thank you all for your time today. We're incredibly excited about the opportunities ahead of Constellation and our great growth story. We look forward to another strong year in 2024 and delivering on our financial commitments. I'll now turn the call back to Joe.

Thanks, Dan. Folks, I'm going to close here basically where I started. We've had a fantastic run for the first couple of years of this business. But as we look at the fundamentals of power markets, as we look at growing demand, and the need for sustainability solutions, we think there is plenty of room to run yet. We believe we have a very durable policy in the PTC because of the unique position we're in, where both political parties have strongly supported nuclear energy for all of the reasons that we covered earlier in the presentation. At our core, we have visible base earnings growth of 10% through the decade, backed by the PTC. Again, our assets are the best in the world, run by the best individuals operating those sorts of plants. This company cannot be replaced. There's simply not enough nuclear energy out there to match it. Having seen Vogtle illustrates what the cost of new nuclear is. Notably, having 25 of these assets and only needing to replace two of them at Vogtle at a cost of $35 billion gives insight into the replacement value of clean energy that can remain dependable through any weather event. Our commercial and generation businesses create a strong synergy. The 24% share of the C&I business allows us to connect our unique capabilities with some of the most sustainable companies in the country, and that trend is growing. Observing the dynamics of energy markets, it's clear that reliability will become as important as sustainability, and we are equipped to fulfill both of these needs. We see ourselves as a crucial part of the solution for America, and our clean, reliable nuclear plants, coupled with our ability to connect with customers and aid them in meeting sustainability goals, fortifies our vision to be the leading company in this space. On top of the opportunities we discussed, we will have 180 million megawatt hours of carbon-free electricity that we could receive additional compensation for through sales for 24/7 solutions, behind-the-meter opportunities, hydrogen possibilities subject to final rules or outcomes from litigation, government procurements of clean energy, and simply capturing prices beyond the PTC floor as market volatility continues and accelerates. All these opportunities exist on top of what is a solid profile for the Company of growing a predictable part of our business, which comprises a substantial portion of our earnings by 10% per year. Dan and I have discussed that this number could be considerably better. That’s the reason we prioritize capital allocation and remain enthusiastic about buying the shares of this company all day long. The road we’ve traveled for the first two years is nothing compared to the future we're anticipating here at Constellation. With that, I look forward to answering your questions with the rest of the management team here.

Our first question will come from Steve Fleishman of Wolfe. Your line is open, Steve.

Yes. Hey, good morning. Can you hear me okay?

Steve, we can hear you. Great. Good morning to you.

Okay, great. Thanks. So I guess, first for Joe, just as you're thinking about the attribute values for the fleet and the different options, whether it's the 24/7 or the on-site hydrogen, on-site data center, etc., just how are those weighing against each other right now in terms of most likely? Could you also clarify the timing of when you're likely to be in a position to start making more of those decisions? And just to confirm, those are all kind of upside to base and enhanced, would be the way to think about it? Thank you.

I believe it will show improvement in both base and enhanced values. The PTC pricing structure indicates that if your overall price is below a certain level, there’s additional value above that level, which reflects the potential for higher prices at the time of delivery. When contracts fall within that range, adding elements like PJM capacity payments could increase value, especially as we approach that pricing threshold. This leads to enhanced earnings and increases margins as we manage contracts. We expect contracts to exceed PTC levels, reflecting their inherent value. In terms of opportunities, our focus on the hydrogen hub in Illinois continues as the DOE supports us while we await final rules. If those rules don’t align with our expectations, we may seek legal recourse and pause capital investments in hydrogen until the matter is resolved. Regarding our 24/7 strategy, we see ongoing interest from our customers, notably Microsoft, who leads on 24/7 initiatives while also engaging in the data economy. Some customers will pursue sustainability solutions that may not directly link to data centers. We believe the most promising prospects lie in selling 24/7 solutions to companies in the data sector across various regions. We aim to establish a standard agreement to quickly pursue additional opportunities with clients in multiple locations. Given our asset distribution, we’re likely uniquely positioned to meet this demand with the necessary megawatts and geographic flexibility the clients require. We're actively addressing these matters with a large team involved in ongoing discussions. These significant deals require time to develop, and while there is a desire for a speedy market entry, we are focused on that goal.

Hey, Steve, just to tie that into the earnings expectations, right? As we sign long-term contracts for attribute sales for data centers, what have you, those long-term earnings would flow into base earnings given the long-term visibility that goes with them.

Okay, thanks. One other question regarding the base growth rate, what are your assumptions for the use of free cash in that plan?

Yeah, Steve. We use a range of expectations, right? We have the billion-dollar buyback scheduled. We've got the $3.1 billion to $3.5 billion of unallocated capital. We assume that we will use some of that for growth opportunities and some of that for buyback. However, I would say that outcome covers a range of different strategies. So it's not an all-buyback assumption, which would probably provide the highest added contribution to EPS because it gives immediate contributions, while growth investments probably have a higher return but take longer to yield results. Our growth rate encompasses a wide range of capital deployments to ensure we commit to our targets.

Okay, great. Thank you. Congrats.

And one moment for our next question. The next question will be coming from David Arcaro of Morgan Stanley. Your line is open.

Hey, good morning. Morning. Thanks for the comprehensive update here. I was wondering about the free cash flow outlook, it seems solid for 2024-2025. As earnings grow, will free cash flow before growth to be growing at a similar level over time? Or are there other important factors to consider in the guidance period for cash flow?

Yeah, I think that's a fair expectation. If you set aside the nuclear PTC and its associated tax attributes, we will work through our tax credits we've accumulated in the past. Depending on capital investment and bonus depreciation, our effective cash tax rate will likely be higher in the future than it has been in the past. That could present a small impediment. Year-to-year, you might see different timing on nuclear fuel spend or base CapEx spend, particularly considering the work we're doing to extend the useful lives of our assets. However, I think it's fair to expect some solid follow-through on free cash flow.

To supplement Dan's point, I think that the opportunities we're discussing do not normally come with more O&M. Some behind-the-meter opportunities might, but those will be accounted for in the contract pricing. Selling attributes does not add O&M costs to our Company, so cash conversion remains excellent.

Got it. Thanks. That makes sense. Regarding the range of $10 to $20 per megawatt-hour for attribute payments, is that the right range for each of the different clean attributes, whether it's hydrogen, or data centers? Also, what's your confidence level in achieving that uplift in terms of pricing for those customer sources?

Yeah, David, we positioned those as benchmarks for you to quickly analyze the math. We're not selling attributes for $10 here. That's not something we’d pursue over the long term. We’re not revealing our pricing curve for attributes, as that’s competitively sensitive info. We put the $10 in as an illustration, it could have just as well been set at $20.

Okay, great. Got it. I'll leave it there. Thanks so much.

And one moment for our next question. The next question will be coming from Durgesh Chopra of Evercore ISI. Durgesh, your line is open.

Hey, good morning, team. Thanks for taking my questions. I just wanted to follow up with a quick clarification. Dan, regarding the unallocated capital at $3 billion, is that factored into the base EPS growth rate, or is that in the other bucket on top?

Yeah. The unallocated capital would primarily finance growth investments and potentially be used for buybacks. However, some of it may not factor solely into base; it would also help guide enhanced growth, as we assume effective management of our balance sheet. We didn't fixate on one path of future capital deployment.

Got it. That's helpful. And could you share any insights on your M&A strategy going forward? There's a substantial amount of free cash flow at your disposal, and you outlined your return parameters. What kinds of assets do you consider? Is it predominantly nuclear, or could you be aiming at other renewable assets? If you could provide more insights there. Thank you.

I think we discussed the two core aspects of our business: commercial and nuclear assets. Our M&A activity would principally focus on both aspects. Specifically, we have consistently indicated that young dual unit sites are our target. Any assets that fit that description would definitely interest us.

To clarify, if you think about last year, we succeeded with STP, which fits that template. Other assets weren't pursued because they didn't align with our return profile or asset mix.

It's all about the right price. What we see in the management presentation is that we believe in the future of this company. We value the potential of future contracting opportunities. We recognize the expansive reliability benefits we anticipate. In other words, we see substantial value that is still unrealized. As we consider different M&A opportunities, we will measure them against buybacks regarding what offers the greatest impact or return for our investors; we aren't confident on where that will lead. We have types of plants we're keen on acquiring but commercial businesses that would interest us as well. All must come at the appropriate price. We've proven to be disciplined in our decision-making process over the initial couple of years.

Thank you so much for giving me time, and I appreciate all the disclosures in the appendix. That’s really helpful. Thanks again.

And one moment for our next question. Our next question will be coming from Angie Storozynski of Seaport. Angie, your line is open.

Thank you. Good morning. Just two quick things. Can you clarify how you did against the free cash flow projections from the analyst day from '22? Again, whenever I think about power, it should be a cash business, right? So I'm wondering how you tracked against that guidance range, and what was the main reason you decided to shift from EV to EBITDA – or from EBITDA to EPS? I understand the nuclear PTCs, but conceptually, what was the reasoning?

Angie, it’s Dan. On the free cash flow performance, we exceeded our commitments in both years, I would describe it. We can get you the specific numbers as a follow-up, but we did exceed the targets for both years. Regarding moving from EBITDA to EPS, a main factor was the nuclear PTC because it is calculated based on gross receipts. The PTC can have variance over the year. It impacts our net income consistently as those two balance each other. From an EBITDA perspective, it added a lot of volatility, and there's no way to gross up the PTC to a pre-tax EBITDA equivalent; our external counsel and auditors confirmed that. More significantly, we see ourselves as a strong investment-grade company with a balanced leverage profile. We believe we have an attractive growth story with the PTC growth and our ability to redeploy capital. As we see it, the cash flow, whether returned to our owners or reinvested in the business, drives a unitized growth story that fits better as EPS rather than a more variable EBITDA.

Understood. One other thing. Looking at your progression, for example, of O&M expenses and CapEx, those numbers seem to be increasing at a faster rate compared to EBITDA projections. That would imply, at least regarding CapEx, potentially lower free cash flow than that EBITDA you're adding. There's no doubt you've been ahead of the curve on addressing nuclear fuel cost risk, and I appreciate all of the additional purchases related to nuclear fuel expense and CapEx. Is there a shift in how cash-heavy your earnings are? Or is it just that, I don’t know if you can comment at all?

On the O&M front, remember we purchased STP last year. So there’s a significant uptick in the projected O&M for '24 accounting for STP, which is the largest factor for the increase from last year's update. Additionally, as in '23, we expect overall higher O&M for performance-based compensation for employees due to the extraordinary results from our commercial activities. Remember, we locked in a lot of backlog in '22 and '23 that will impact '24, hence the robust enhanced earnings. We pay at delivery, not at inception, affecting O&M alongside significantly improved profits. I believe we are well-aligned on the O&M profile relative to earnings expectations. The trajectory of our numbers has notably shifted for '24 versus prior years, which solidifies that.

To address your query regarding nuclear fuel, we planned for procurement ahead of trends in the market. We've secured arrangements well through '28 and those contracts extend into the 2030s across the fuel chain. I think we've effectively controlled our fuel exposure, particularly in an inflationary environment. As previously noted, our projected nuclear fuel expense for '28 is around $6 per megawatt hour but might be slightly over that, not significantly. We’ve managed where our fuel prices are, especially considering visible fluctuations.

Does none of your fuel contracts reflect indexation to the current price?

Some of them will have collars around them, and I'll inform you that all figures we're presenting reflect those contracts at their maximum caller value.

Sounds good. Thank you.

And one moment for our next question. Our next question will be coming from Neil Kalton of Wells Fargo. Neil, your line is open.

Hi, everyone. Thanks for taking my question. Just a question on the retail power margins. You're showing in 2024, approximately $1.75 above the 13-year average, trending down to $0.50 in 2025. I’m curious if that reflects the market in '25 or just where the hedges sit. Any insights in how we should be thinking about '25 and beyond?

Neil, when looking at our commercial business, we sell forward in contract terms approximately 24 months or so. We would have sold many of our '24 volumes in '22 and '23 but less of '25 volumes then. What's reflected in our numbers showcases positive backlog gains. We locked in very high margins. Hence, the sustained margins above these long-term averages will continue enhancing the value as we use more contracts. Anything that remains unsold at this point is assumed to revert back to those historical averages as volatility continues. Our commercial segment has performed considerably well taking advantage of current markets, assisting our customers who find volatility disruptive. Our ability to sign and provide them long-term certainty is beneficial.

It’s worth noting that we may be slightly conservative in reverting back to historical margins instead of resetting them. We anticipated you or another participant might raise this inquiry. We relied on historicals for the moment until we see how market conditions develop.

That makes sense. Regarding growth, how should we think about it? I think it's around 200 terawatt-hours as your base. In terms of internal growth perspectives, do you see it as meaningful or steady in that range for the foreseeable future?

That's closely tied to operational aspects. We've announced some, and we're evaluating further meaningful opportunities to increase our megawatts produced from M&A activities. We're not going to build more nuclear. So it's primarily about optimizing our existing fleet that is already functioning at high capacity factors. We’ll explore upgrades, M&A opportunities, and unique methods to introduce more megawatts. This is a range we'll remain in for some time.

On the retail side, we’ve been opportunistic and consolidated within that segment for a long while. If we come across assets that align with our portfolio, we'll look to increase volumes. The focus is on making sure the increases are not just volume-driven but also profit-driven.

This concludes our Q&A session today. I would now like to turn the call back to Joe.

Once again, it's been a longer-than-usual call. We had a lot to cover regarding the evolving marketplace, Constellation strategy, and the guidance changes provided. I appreciate the positive feedback thus far. We look forward to continuing to deliver on our commitments to you. I am eager to engage during the first-quarter call. With that, I'll conclude and thank everyone for your time and attention.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone have a great day.