The paragraph is an introduction to Constellation Energy Corporation's First Quarter Earnings Call. The call is in a listen-only mode with a future Q&A session. The host, Emily Duncan, introduces the key speakers, Joe Dominguez (CEO) and Dan Eggers (CFO), and mentions other senior management will be available for questions. The earnings release and related materials are available on the company's website. The call will include forward-looking statements subject to risks and uncertainties, and listeners are directed to refer to the company's SEC filings for more details. The presentation will also include non-GAAP financial measures.

In the paragraph, Joseph Dominguez, from Constellation, expresses gratitude to his team for a strong start to the year, highlighting that their operational and financial goals are on track. Constellation reported GAAP earnings of $0.38 per share and adjusted operating earnings of $2.14 per share. Dominguez notes a favorable market environment, driven by major tech companies investing in growth, which aligns with Constellation's strategy focused on America's nuclear energy and the acquisition of Calpine. Despite some overstated demand predictions, Constellation is confident in meeting market demands and supporting significant data center development.

The paragraph highlights the strategic advantage of Constellation's clean and reliable energy assets, particularly nuclear energy, as a sustainable option for the future. It notes the growing adoption of AI technology in American businesses and households, which in turn increases the demand for energy to support data centers. Constellation is focused on meeting this demand and has made progress in customer agreements. Additionally, the rising costs and longer timelines for new energy project entries make Constellation's offerings more attractive in a competitive market.

The paragraph discusses the strategic decision to locate AI facilities near large, clean, and reliable power plants and the flexibility to achieve fair pricing regardless of the facility's proximity to the plant or whether it's in front of or behind the meter. The shift to on-grid sales is highlighted as increasingly attractive due to challenges with local utilities in the behind-the-meter approach and regulatory challenges. The controversy has led utilities to expedite the interconnection process. The paragraph concludes by acknowledging the benefits of on-grid sales, allowing collaboration with utilities across the regional transmission organization (RTO).

The paragraph discusses a strategic partnership approach to rapidly bring grid resources online while minimizing regulatory complications. It acknowledges the continued relevance of behind-the-meter configurations for certain customers and expresses a need for clear federal guidelines to enable innovation. The paragraph also highlights a positive assessment of the Constellation-Calpine deal, suggesting that Calpine's value may exceed its acquisition cost given the high expenses of new cycle machines. It acknowledges that although Calpine's assets aren't brand new, their strategic value and the combined capabilities of Constellation and Calpine benefit customers across America.

The paragraph discusses the challenges and opportunities the company faces, emphasizing the benefits of having a well-functioning fleet of plants despite uncertainties with new assets. While expressing dissatisfaction with recent stock price volatility due to macroeconomic factors, the company feels its stock is undervalued and is keen to resume its share buyback program when possible. The narrative shifts to highlighting the growing demand from data centers and the U.S. government's commitment to leading in the AI race under the Trump administration, recognizing the data economy's role in national security and economic success.

The paragraph discusses the widespread recognition of the importance of AI leadership both in Washington and among major tech companies, which are increasing investments in data centers due to AI's positive impact on business results. It highlights the transformative potential of AI for businesses and families, including at Constellation, where AI is effectively enhancing operations and customer relationships. However, there is caution against exaggerated claims about AI-driven demand growth, often driven by stakeholders with vested interests. While electric demand is expected to grow significantly, skepticism from policymakers about these claims is considered justified.

The paragraph discusses the tendency of overestimating demand within the data center and renewable energy sectors in the United States, drawing parallels to how fishermen use multiple lines to catch fish. It illustrates that many projects appear in development queues concurrently, yet only a fraction materialize. Specifically, it highlights the growth in ERCOT's load interconnection queue from 20 gigawatts in 2025 to over 100 gigawatts by 2030. It compares the demand forecasts of MISO, PJM, and ERCOT with national forecasts, suggesting that these projections are often inflated. Historical overestimations are noted, citing examples with electric vehicles and the Internet. A study by the Rocky Mountain Institute shows utilities overstated demand forecasts by an average of 23% over the past decade, acknowledging the challenge utilities face in ensuring system reliability.

The paragraph discusses concerns about the increasing costs of new energy generation resources, particularly focusing on the potential impact on data center strategies. It highlights that despite fears of losing out due to not being considered incremental, the relicensing of nuclear plants is seen as incremental. The costs of new Combined Cycle Gas Turbines (CCGTs) and solar plus storage have significantly risen, with estimates for CCGTs exceeding $2,000 per KW and solar plus storage exceeding $2,500 per KW, marking substantial increases compared to previous years. Additionally, potential tariffs could further raise these costs, indicating a major shift in the economic landscape for energy generation.

The paragraph discusses Constellation's strategic positioning in the energy market, highlighting the competitive advantage of its nuclear fleet over renewables and natural gas. It argues that nuclear energy offers superior cost-effectiveness, reliability, sustainability, and long-term price stability compared to other energy sources. The author emphasizes the growing demand for nuclear contracts due to these advantages, supported by policy and market responses such as those from FERC and PJM, which facilitate new dispatchable generation to meet rising energy needs.

The paragraph discusses a decrease in demand response from 15 gigawatts in past auctions to 2-6 gigawatts in recent ones, attributing it to broken capacity markets with low prices, which have now been fixed by FERC. It highlights that much of the grid is underutilized during most hours, with a third not being used 80% of the time, allowing for the accommodation of new generation. A study by the Nicholas Institute at Duke University found that reducing peak demand by 25% could enable the addition of 76 gigawatts of new load. Demand response is seen as a potent tool to address data center demand by utilizing existing system slack and covering peak hour gaps. Customers are adopting new curtailment methods to contribute to this effort.

The paragraph discusses the recent decision by the EPA to relax rules on backup generation at data centers to help alleviate grid pressure, highlighting the availability of various tools for energy optimization. The company, Constellation, is positioned as a leading player due to its existing clean energy resources, ability to offer price certainty, and operational flexibility. It can quickly deliver additional megawatts and is expanding capabilities nationwide, especially after acquiring Calpine. The company's investment-grade credit rating provides long-term confidence for customers, adding value in the data economy. The focus is on building a significant fleet of clean energy resources across the nation.

The paragraph discusses the company's ongoing efforts to integrate with Calpine, emphasizing their progress and enthusiasm about the merger. They have established integration teams and made necessary regulatory filings, including a response to a FERC deficiency notice, with plans to complete the transaction by the end of the year. Additionally, Daniel Eggers presents the financial overview, noting strong performance with increased earnings compared to the previous year and successful market positioning. The company secured higher-than-average margins, which supports their future backlog and performance.

In the first quarter of 2025, higher prices for the Illinois ZEC and CMC programs were offset by lower nuclear PTCs, reflecting the annual PTC determination based on actual revenues and forecasts. Despite not booking PTC revenues this quarter, unlike the previous year, the company anticipates exceeding the PTC floor for the full year. This situation affects quarterly results but supports the full-year EPS guidance of $8.90 to $9.60 per share. Nuclear plants achieved strong operational performance, with a 94.1% capacity factor and efficient refueling outages. Renewables and natural gas also performed well. Additionally, PJM selected over 1,150 new nuclear megawatts, including Constellation projects, for accelerated interconnection, supporting the company's clean energy goals.

The paragraph discusses the progress and positive developments at a power plant, including quicker than expected restaffing and successful staff training, with an emphasis on meeting or beating cost and time targets for bringing the plant back online. The commercial team is performing well, optimizing the portfolio and benefiting from market volatility. There is also a focus on strong renewable rates and customer relationships. The paragraph acknowledges concerns about a potential recession and its impact on power demand, noting that past recessions have temporarily reduced demand by 1% to 4%, but a strong rebound typically follows.

The paragraph discusses the current economic environment, highlighting a temporary economic slowdown and reduced power demand, which are being balanced by growth in electrification, on-shoring of manufacturing, and the data economy. The main risk to the business amid a recession is power prices, but the nuclear Production Tax Credit (PTC) provides protection by supporting continued nuclear operations when prices fall. The company has assessed other risks like lower regional volumes and bad debt and remains confident in managing these without significant financial strain. Constellation is financially strong, with a solid balance sheet and support from nuclear PTCs and forward sales. The paragraph also briefly mentions the tariff environment, noting an estimated negligible impact on operations and maintenance (O&M) and a slight 1% to 2% impact on capital expenditures, including fuel, for 2025 and 2026. The company will continue to monitor and mitigate these effects.

The paragraph discusses the impact of the Production Tax Credit (PTC) after a year of implementation, highlighting its inflationary protections. It's noted that the PTC assumes a 2% inflation adjustment, but the 2025 adjustment is estimated between 2.3% and 2.6%, potentially boosting revenues by $500 million for 2028. This underscores the benefits of the PTC for economic stability in the nuclear industry and the company's inflation hedge advantage. Joseph Dominguez then corrects a previous statement about the Duke study, emphasizing flexibility and capacity to handle new demand. He concludes with positive remarks about the company's progress and the Calpine integration.

The company highlights its unique and strong business model, characterized by robust cash flow and base earnings supported by a nuclear Production Tax Credit (PTC) that enjoys bipartisan support. With an earnings growth rate of 13% through the decade, any new long-term deals will enhance this growth. The company references past successful ventures like Crane, Calpine, and the GSA, noting that Calpine will significantly boost earnings per share and free cash flow. The PTC provides protection and advantages in high inflation. The company plans to capitalize on opportunities in the data economy and overall economic growth, while continuing to invest in and enhance their existing fleet, which is crucial for America. The CEO expresses pride in the team and opens the floor for questions. Jeremy Tonet from J.P. Morgan Securities asks the first question.

In the paragraph, Joseph Dominguez addresses the progress of long-term customer agreements despite policy uncertainties. He notes that while policy clarity would be beneficial, both utilities and customers are finding ways to move forward. There is a willingness among customers to share fair costs, and both utilities and customers are working to expedite the interconnection process. Dominguez emphasizes the continued interest in both behind-the-meter and in front-of-the-meter power solutions, particularly highlighting data centers as examples of utilizing a combination of both. Despite the uncertainties, customers are adapting by exploring alternative solutions.

The paragraph discusses the deliberations around a FERC (Federal Energy Regulatory Commission) 206 proceeding, focusing on the need for clear and expedited resolutions. Joseph Dominguez highlights the robust information available in the FERC docket to make a final decision and the urgency underscored by national leaders for a more efficient grid. David Dardis notes that most parties involved agree that the current PJM tariff is inadequate and requires amendments for clarity and speed. While they have supported a fast settlement process, they also encourage FERC to make prompt decisions based on the case's merits.

The paragraph discusses the importance of speed and clarity in addressing regulatory issues related to PJM's tariff and rule gaps. The speaker believes that either through a settlement or a directive from the commission, these issues could be resolved in a matter of months to allow critical loads and customers to access the system swiftly. Jeremy Tonet appreciates this expedited approach. The conversation then shifts to Steve Fleishman from Wolfe asking about potential new power agreements, pricing, and the logistics of selling power beyond local utilities. Joseph Dominguez explains that his company has been selling power to various customers across PJM for 20 years and cites an example of providing power to Microsoft across multiple states from the Crane Clean Energy Center.

The paragraph discusses the strengths of the commercial team in managing power distribution, particularly in regions like PJM. The team has over 20 years of experience and uses its geographic reach to optimize power distribution for clients with advanced projects. Pricing and location details are kept confidential to maintain competitive advantage and negotiation power. The paragraph also addresses that the company does not bear wires charges in customer relationships. Additionally, there is a mention of the IRA and nuclear issues, specifically the reconciliation process and concerns about transferability.

The paragraph discusses the impact of potential changes to nuclear tax credits on monetizing credits. Joseph Dominguez mentions that any impact would be minimal for their company because they have sufficient tax capacity. He highlights strong congressional support for continuing and expanding nuclear tax credits, specifically mentioning the support of 38 Republican members of Congress. Dominguez is actively monitoring legislative developments and expresses confidence in their position. Daniel Eggers adds that the company currently does not need to transfer any credits and might consider purchasing credits from others if offered at a discount due to their tax situation.

The paragraph is a discussion regarding the opportunities and challenges related to behind-the-meter (BTM) energy solutions. David Arcaro from Morgan Stanley asks about the potential shift from BTM to front-of-the-meter solutions. Joseph Dominguez explains that there is currently uncertainty around BTM projects, leading to more focus on front-of-the-meter solutions involving utilities and customers. However, Dominguez believes that large data centers, like those in Texas, will still need BTM support because it is unrealistic to rely solely on the grid for substantial power needs. He suggests that facilities may end up supplementing grid connections with additional on-site power generation. Dominguez emphasizes the importance of not restricting innovation in co-generation and co-location by regulatory bodies like FERC.

The paragraph discusses the importance of managing peak electricity demand to ensure affordability and reliability, particularly during peak events. Joseph Dominguez highlights the value of utilizing backup generators at data centers as a resource during these times. The conversation touches on the challenges of supply for data centers and the role of demand response. Dominguez supports the EPA's direction and mentions the progress made by the Flex program, led by EPRI and data economy customers, in enabling hyperscale data centers to better handle peak demand events.

The paragraph discusses the importance of demand response in managing energy capacity, costs, and emissions by incentivizing industrial and commercial customers to reduce usage during critical times. The author believes that we often have an energy surplus and emphasizes avoiding unnecessary investments in generation. While optimistic about the immediate future, the author expresses concern about long-term climate considerations and advocates for research and development investments in technologies like sequestration to prevent future stranded assets. Overall, the focus is on managing costs without overreacting to current hyperbole in the system.

In this paragraph, during a Q&A session, Paul Zimbardo from Jefferies asks Joseph Dominguez about the timeline and progress of a potential deal and interconnection studies with local PJM utilities. Dominguez refrains from specifying when the deal might be announced but suggests it is at an advanced stage. He notes that interconnection studies are progressing, often taking six to seven months, and emphasizes that these studies are not currently a constraint. Dominguez credits utilities for their proactive approach in getting these studies completed and ensuring load connection, highlighting a general commitment across utilities to facilitate this process.

The paragraph outlines a discussion between Angie Storozynski and Joseph Dominguez about the demand for power from data centers, particularly in the context of hyperscalers shifting focus from training facilities to inference. Dominguez notes that a significant portion of expected load has always been from inference data centers, which are increasing in size, now requiring 100 to 150 megawatts compared to smaller past sizes. He also mentions a shift in focus from fiber connections to available power due to these larger sizes. Additionally, there has been a decrease in discussion around extremely large data centers (7 to 10 gigawatts) as initially anticipated during the early stages of AI development.

The paragraph discusses the shifting trends in the location choices for data centers. Angie Storozynski inquires about the noticeable retreat in forward power curves in Northern Illinois and whether regulatory or political pressures are influencing data centers to move out of the state. Joseph Dominguez responds that the decisions are not driven by opposition in Illinois but are instead based on ease of connectivity and power availability, which are now more critical factors than proximity to large population centers. This shift allows data center customers to explore a broader range of locations, including Iowa, Indiana, Michigan, and even Pennsylvania, as the industry's geographical preferences expand.

In the paragraph, the participants of a conference call, including Angie Storozynski and Joseph Dominguez, discussed the unique capabilities and extensive experience of their company, Constellation, in managing power systems and accommodating various clients. Joseph Dominguez thanked the team and participants for their contributions to the discussion and expressed eagerness to provide more updates on the company's business strategy in the future. The call was then concluded by the operator.

This summary was generated with AI and may contain some inaccuracies.