Constellation Energy Corporation
CEO : Mr. Joseph Dominguez
Quarterly earnings growth(YoY,%)
| Period | Revenue | Operating Income | EPS | Release Date |
|---|---|---|---|---|
| 2023 Q2 | -0.3% YoY | 331.6% | -855.9% | 2023-08-06 |
Joe Dominguez says,
Financial Performance and Guidance
- Second-quarter adjusted EBITDA of $1.031 billion
- 2023 adjusted EBITDA guidance range raised by $400 million to $3.3 billion to $3.7 billion
- 2024 gross margin update increased by $150 million
Operational Updates and Achievements
- Acquisition of 44% of the South Texas Project Nuclear Station from NRG
- Deal with Microsoft to provide an hourly time match clean energy product
- Agreement with NYSERDA to share the value of the PTC with New York customers
- Industry record for blending hydrogen with natural gas at Hillabee generating station
- Investment in net power and CCUS technology for carbon capture
Commercial Business Performance
- Commercial business driving outperformance
- Landmark agreement with Microsoft for time-match clean energy solution
- Combining nuclear power with renewable energy for near 100% clean power operation
James McHugh says,
Contract Duration and Customer Retention
- The company tends to hold customers for at least five years once they are signed up, indicating strong customer retention and durability.
Volatility and Supply Side Changes
- Volatility in multiple markets, such as PJM, Texas, New England, and New York, is expected to continue in the next few years.
- Supply side changes, including intermittent energy sources and generation side developments, will contribute to volatility in these markets.
Gross Margin Optimization
- The company expects margin optimization activities to continue in 2023, 2024, and even into 2025 due to customer sign-ups and market activity.
Macro Trend of Sustainability Products
- The company’s core product volumes and margins have been growing, and they are now exploring the possibility of sustainability products, such as hourly carbon-free energy matching, to further scale their business.
- They are confident about the sustainability environment and believe it will contribute to longer-term customer sign-ups and decent margins.
Competitiveness and Balance Sheet
- The company’s competitiveness is strong, particularly in the current interest rate environment, where their balance sheet allows them to manage collateral and borrowing costs effectively.
Q & A sessions,
Constellation’s Unique Business and Value Creation Opportunities
- Constellation is the best operator of nuclear plants and the largest producer of carbon-free electricity in the United States.
- The Inflation Reduction Act (IRA) provides unique opportunities for Constellation and its investors, including the ability to use nuclear energy to produce hydrogen and the possibility of relicensing the nuclear fleet for at least 80 years.
- Constellation’s businesses are essential in addressing the climate crisis and have durable assets.
Expected Benefits and Growth Opportunities
- Constellation expects to benefit from floor price inflation against the baseline earnings level supported by the PTC floor over the length the PTC.
- The company generates strong free cash flow that can be used for organic growth, disciplined M&A, dividend growth, and stock buybacks.
- Constellation has announced a $1.5 billion growth in uprates, hydrogen, and wind repowering, doubled the per share dividend, and bought back $500 million of its own stock.
- There is $1.2 billion of unallocated capital in ’23 and ’24 that can be used to further enhance earnings growth.
Margin Expansion and Volatility in the Market
- The margin expansion is a reflection of the volatility in the market, which is influenced by the changing composition of the generation fleet.
- Volatility is expected to increase as fossil generation is replaced with renewable generation, creating opportunities for companies with a special balance sheet to cover financial impacts.
Time Match Product and Hydrogen Production
- Constellation’s time match product, sold to customers like Microsoft, can also be used to enable hydrogen production at customer locations.
- The company is having productive conversations with the administration to address regulatory requirements for using existing nuclear plants to produce hydrogen.
- If discussions do not go as expected, Constellation is prepared to use the Board’s line to achieve its goals.
Wholesale Load Customers and Optimization Activity
- Constellation has had strong performance in wholesale load contracts, including load auctions with utility companies and origination contracts with large entities and municipals/co-ops.
- The company’s optimization activity, driven by volatility assessment and decision-making, has also contributed to its success.
- Constellation expects to continue its success in volatile markets due to changing stack dynamics.
No bad stock 