Constellation Reports Fourth Quarter and Full Year 2022 Results and Initiates 2023 Financial Outlook

Earnings Release Highlights

• GAAP Net Income of $34 million and Adjusted EBITDA (non-GAAP) of $605 million for the fourth quarter of 2022. GAAP Net Loss of ($160) million and Adjusted EBITDA (non-GAAP) of $2,667 million for the full year 2022.
• Introducing 2023 Adjusted EBITDA (non-GAAP) guidance range of $2,900 million to $3,300 million
• Announcing initial capital allocation strategy focused on supporting and growing our business and returning capital to shareholders.  It includes $1.5 billion in organic growth capital that will exceed our double-digit return threshold, doubling the per share dividend from the 2022 level and targeting growth at 10% thereafter, and authorizing $1 billion in share repurchases
• During Winter Storm Elliott, from December 23 through December 25, our always-on nuclear fleet provided reliable power to homes and businesses as record-setting low temperatures blanketed the PJM region and a significant portion of fossil-fueled generators failed to perform 
• Our best-in-class nuclear fleet operated at a capacity factor of 95.4% for the fourth quarter of 2022 and 94.8% for the full year 2022, marking more than a decade as the industry leader among major nuclear operators
• Celebrated our first anniversary by launching a $1 million workforce development program aimed at fostering change in underserved communities

Baltimore (Feb. 16, 2023) — Constellation Energy Corporation (Nasdaq: CEG) today reported its financial results for the fourth quarter and full year 2022.

“We had an incredible first year that exceeded expectations as we adapted to rapidly evolving market conditions, successfully advocated for clean energy policies and positioned the company for sustainable, long-term growth,” said Joe Dominguez, president and CEO of Constellation. “I want to emphasize that there is no commodity more valuable to our economy, national security and way of life than energy that is carbon-free, affordable and always there when you need it, and no U.S. company produces more of it than we do. The unique reliability and resiliency of our nuclear fleet was driven home yet again during Winter Storm Elliott, when our operated fleet performed at 100 percent, helping to prevent rolling blackouts on Christmas Eve as fossil generation in our nation’s largest electric grid failed. Nuclear’s value to the grid was also proven in the 2014 polar vortex and again in 2021 during Winter Storm Uri, and it’s only going to increase in the years ahead as we invest to extend the lives of our nuclear plants, increase their output and utilize their carbon-free energy to power the dirtiest parts of our economy with clean hydrogen. We set out one year ago to be the nation’s answer to the climate crisis, and today we have the assets and financial foundation to deliver on that promise.”

“Our strong financial position allows us to return exceptional value to shareholders by doubling our dividend and authorizing a $1 billion share repurchase program, while still leaving us the flexibility to build a new, clean hydrogen business and reserve $2 billion in unallocated capital to invest in other organic and inorganic growth as opportunities arise, or return additional capital to shareholders,” said Dan Eggers, chief financial officer of Constellation. “Operationally, our nuclear fleet remains the most reliable and efficient in the industry and our commercial business delivered high value in a market buffeted by global events. For the year, we delivered $2.667 billion in adjusted EBITDA, which exceeded the top of our range, and we are introducing 2023 adjusted EBITDA guidance of $2.9 billion to $3.3 billion.”

Fourth Quarter 2022

Our GAAP Net Income for the fourth quarter of 2022 was $34 million, down from $42 million GAAP Net Income in the fourth quarter of 2021. Adjusted EBITDA (non-GAAP) for the fourth quarter of 2022 decreased to $605 million from $1,027 million in the fourth quarter of 2021. For the reconciliations of GAAP Net Income to Adjusted EBITDA (non-GAAP), refer to the tables beginning on page 4.

Adjusted EBITDA (non-GAAP) in the fourth quarter of 2022 primarily reflects:

• Increased labor, contracting, and materials, unfavorable market and portfolio conditions, and  decreased capacity revenues, partially offset by favorable nuclear outages.

Full Year 2022

Our GAAP Net Loss for 2022 was ($160) million, compared to ($205) million GAAP Net Loss in 2021. Adjusted EBITDA (non-GAAP) for 2022 increased to $2,667 million from $2,185 million in 2021.

Adjusted EBITDA (non-GAAP) for the full year 2022 primarily reflects:

• The absence of impacts from the February 2021 extreme cold weather event, partially offset by decreased capacity revenues, increased labor, contracting, and materials, and lower CTV gains in 2022 compared to 2021.

Initiates Annual Guidance for 2023

We introduced a guidance range for 2023 Adjusted EBITDA (non-GAAP) of $2,900 million to $3,300 million. The outlook for Adjusted EBITDA (non-GAAP) excludes the following items:

• Income taxes
  
• Depreciation and amortization
• Interest expense, net
• Unrealized impacts of fair value adjustments
• Decommissioning-related activities
• Pension and Other Postretirement Employment Benefit (OPEB) non-service credits
• Separation costs
• Enterprise Resource Program (ERP) system implementation
• Other items not directly related to the ongoing operations of the business
• Noncontrolling interest related to exclusion items

Recent Developments and Fourth Quarter Highlights

• Initial Capital Allocation Strategy: We are announcing our capital allocation strategy for 2023 and 2024 supporting our core principles previously laid out at Analyst Day. Our balance sheet strength is the foundation of this strategy.  Through our strong free cash flows, we will grow the business and return capital to shareholders. We are allocating capital towards our best-in-class generation fleet by committing $1.5 billion of growth capital over the next three years, including nuclear uprates, wind repowering and hydrogen. These organic growth opportunities are projected to exceed our double-digit return threshold. We will double the annual dividend in 2023 from $0.5640 per share to $1.1280 per share while targeting growth at 10% annually. In our commitment to return value to shareholders, we are also authorizing $1 billion in share buybacks.
• Dividend Declaration:  In keeping with the newly announced capital allocation strategy, our Board of Directors has declared a quarterly dividend of $0.2820 per share on our common stock. The dividend is payable on Friday, March 10, 2023, to shareholders of record as of 5 p.m. Eastern time on Monday, February 27, 2023.
• December 2022 PJM Performance Bonuses: On Dec. 23, 2022, and continuing through the morning of Dec. 25, 2022, Winter Storm Elliott blanketed the entirety of PJM’s footprint with record low temperatures and extreme weather conditions. A significant portion of PJM's fossil generation fleet failed to perform as reserves were called, while our operated nuclear fleet performed at 100 percent and helped avoid a grid failure. PJM’s initial estimate of non-performance charges ranges from $1 billion to $2 billion and, in accordance with its tariff, funds collected from those charges are redistributed to generating resources that performed above expectations during the event, including nuclear. Leveraging preliminary data from PJM and applying significant judgments and assumptions, we recognized an estimated benefit of $109 million (pre-tax) for performance bonuses (net of non-performance charges), primarily driven by the over performance of our nuclear fleet that prevented rolling blackouts across PJM.
• Nuclear Operations: Our nuclear fleet, including our owned output from the Salem Generating Station, produced 44,436 gigawatt-hours (GWhs) in the fourth quarter of 2022, compared with 42,604 GWhs in the fourth quarter of 2021. Excluding Salem, our nuclear plants at ownership achieved a 95.4% capacity factor for the fourth quarter of 2022, compared with 92.4% for the fourth quarter of 2021. There were 65 planned refueling outage days in the fourth quarter of 2022 and 90 in the fourth quarter of 2021. There were three non-refueling outage days in the fourth quarter of 2022 and 24 in the fourth quarter of 2021.
• Natural Gas, Oil, and Renewables Operations: The dispatch match rate for our gas and hydro fleet was 96.6% in the fourth quarter of 2022, compared with 98.8% in the fourth quarter of 2021. Energy capture for the wind and solar fleet was 95.9% in the fourth quarter of 2022, compared with 94.3% in the fourth quarter of 2021.
• “Powering Change” Workforce Development Initiative: In celebration of our first anniversary as a stand-alone company on Feb. 2, we announced the launch of a $1 million workforce development program as part of our commitment to foster equitable change in underserved communities. The new program, called Powering Change, will provide grants to five nonprofit organizations focused on improving job awareness and training, providing advancement and upskilling opportunities and breaking down employment barriers for individuals from underrepresented communities.

GAAP/Adjusted EBITDA (non-GAAP) Reconciliation

Adjusted EBITDA (non-GAAP) for the third quarter of 2022 and 2021, respectively, does not include the following items that were included in our reported GAAP Net (Loss) Income:

Webcast Information

We will discuss fourth quarter 2022 earnings in a conference call scheduled for today at 10 a.m. Eastern Time. The webcast and associated materials can be accessed at https://investors.constellationenergy.com.