stellation Energy (CEG) - 2024 Q2 - Quarterly Report

GLOSSARY OF TERMS AND ABBREVIATIONS This section provides definitions for key terms and abbreviations used throughout the report, including company names, former related entities, and industry-specific acronyms, to ensure clarity and consistent understanding of the financial and operational disclosures - Defines 'CEG Parent' as Constellation Energy Corporation and 'Constellation' as Constellation Energy Generation, LLC[6] - Lists various industry acronyms such as AOCI, ARO, CAISO, ERCOT, FERC, GAAP, GHG, IRA, ISO, MISO, NRC, NYISO, PJM, PTC, SEC, SOFR, VIE, ZEC[7][8] FILING FORMAT This section clarifies that the combined Form 10-Q is filed separately by Constellation Energy Corporation and Constellation Energy Generation, LLC, with each registrant solely responsible for its own information - The combined Form 10-Q is filed separately by Constellation Energy Corporation and Constellation Energy Generation, LLC[9] - Neither registrant makes any representation as to information relating to the other registrant[9] CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION This section warns readers about forward-looking statements in the report, emphasizing that actual results may differ materially due to various risks and uncertainties detailed in other sections of this report and previous filings, and that no obligation is undertaken to update these statements - Report contains certain forward-looking statements subject to risks and uncertainties[10] - Factors that could cause actual results to differ are discussed in the Registrants' combined 2023 Annual Report on Form 10-K and this Quarterly Report on Form 10-Q[11] - Readers are cautioned not to place undue reliance on these forward-looking statements, and neither Registrant undertakes any obligation to publicly release any revision[12] WHERE TO FIND MORE INFORMATION This section directs readers to the SEC's website (www.sec.gov) and the company's website (www.ConstellationEnergy.com) for additional reports and information, clarifying that content on the company's website is not incorporated into this report - The SEC maintains an Internet site at www.sec.gov that contains reports, proxy and information statements, and other information filed electronically[13] - Documents are also available on the company's website at www.ConstellationEnergy.com, but information contained on the website is not deemed incorporated into this Report[13] PART I. FINANCIAL INFORMATION This section presents the unaudited financial statements, management's discussion and analysis of financial condition and results of operations, quantitative and qualitative disclosures about market risk, and controls and procedures for Constellation Energy Corporation and Constellation Energy Generation, LLC for the quarter ended June 30, 2024 ITEM 1. FINANCIAL STATEMENTS This section provides the consolidated financial statements for Constellation Energy Corporation and Constellation Energy Generation, LLC, including statements of operations, cash flows, balance sheets, and changes in equity, along with combined notes detailing accounting policies, segment information, government assistance, and other financial disclosures Constellation Energy Corporation Consolidated Statements of Operations and Comprehensive Income For the three and six months ended June 30, 2024, Constellation Energy Corporation reported a decrease in net income attributable to common shareholders for the three-month period but a significant increase for the six-month period, driven by changes in operating revenues and expenses Constellation Energy Corporation Consolidated Statements of Operations and Comprehensive Income (Millions USD) | Metric (Millions USD) | 3 Months Ended Jun 30, 2024 | 3 Months Ended Jun 30, 2023 | 6 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2023 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Operating revenues | $5,475 | $5,446 | $11,637 | $13,011 | | Operating income | $1,100 | $669 | $1,913 | $700 | | Net income (loss) attributable to common shareholders | $814 | $833 | $1,697 | $929 | | Basic EPS | $2.58 | $2.57 | $5.37 | $2.85 | | Diluted EPS | $2.58 | $2.56 | $5.35 | $2.84 | Constellation Energy Corporation Consolidated Statements of Cash Flows For the six months ended June 30, 2024, Constellation Energy Corporation experienced a net cash outflow from operating activities, a significant net cash inflow from investing activities, and a net cash outflow from financing activities, resulting in a decrease in cash and cash equivalents Constellation Energy Corporation Consolidated Statements of Cash Flows (Millions USD) | Metric (Millions USD) | 6 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2023 | | :-------------------- | :-------------------------- | :-------------------------- | | Net cash flows provided by (used in) operating activities | $(1,336) | $(1,126) | | Net cash flows provided by (used in) investing activities | $2,650 | $171 | | Net cash flows provided by (used in) financing activities | $(1,385) | $752 | | Cash, restricted cash, and cash equivalents at end of period | $383 | $325 | Constellation Energy Corporation Consolidated Balance Sheets As of June 30, 2024, Constellation Energy Corporation reported an increase in total assets and total equity compared to December 31, 2023, while total liabilities also saw a slight increase Constellation Energy Corporation Consolidated Balance Sheets (Millions USD) | Metric (Millions USD) | June 30, 2024 | December 31, 2023 | | :-------------------- | :------------ | :---------------- | | Total assets | $51,340 | $50,758 | | Total liabilities | $39,559 | $39,472 | | Total equity | $11,781 | $11,286 | Constellation Energy Corporation Consolidated Statements of Changes in Equity For the six months ended June 30, 2024, Constellation Energy Corporation's total equity increased, primarily due to net income, partially offset by common stock repurchases and dividends paid Constellation Energy Corporation Consolidated Statements of Changes in Equity (Millions USD) | Metric (Millions USD) | Balance, Dec 31, 2023 | Balance, Jun 30, 2024 | | :-------------------- | :-------------------- | :-------------------- | | Total Equity | $11,286 | $11,781 | | Net Income (loss) | N/A | $883 (Q1), $814 (Q2) | | Common stock repurchased | N/A | $(504) (Q1), $(505) (Q2) | | Common stock dividends | N/A | $(112) (Q1), $(110) (Q2) | Constellation Energy Generation, LLC Consolidated Statements of Operations and Comprehensive Income For the three and six months ended June 30, 2024, Constellation Energy Generation, LLC reported a slight decrease in net income for the three-month period but a substantial increase for the six-month period, reflecting similar trends to the parent company Constellation Energy Generation, LLC Consolidated Statements of Operations and Comprehensive Income (Millions USD) | Metric (Millions USD) | 3 Months Ended Jun 30, 2024 | 3 Months Ended Jun 30, 2023 | 6 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2023 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Operating revenues | $5,475 | $5,446 | $11,637 | $13,011 | | Operating income | $1,100 | $669 | $1,913 | $700 | | Net income (loss) attributable to membership interest | $814 | $833 | $1,697 | $929 | Constellation Energy Generation, LLC Consolidated Statements of Cash Flows For the six months ended June 30, 2024, Constellation Energy Generation, LLC experienced net cash outflows from operating and financing activities, offset by a significant net cash inflow from investing activities, resulting in a decrease in cash and cash equivalents Constellation Energy Generation, LLC Consolidated Statements of Cash Flows (Millions USD) | Metric (Millions USD) | 6 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2023 | | :-------------------- | :-------------------------- | :-------------------------- | | Net cash flows provided by (used in) operating activities | $(1,350) | $(1,207) | | Net cash flows provided by (used in) investing activities | $2,650 | $171 | | Net cash flows provided by (used in) financing activities | $(1,368) | $852 | | Cash, restricted cash, and cash equivalents at end of period | $372 | $317 | Constellation Energy Generation, LLC Consolidated Balance Sheets As of June 30, 2024, Constellation Energy Generation, LLC reported an increase in total assets and total equity compared to December 31, 2023, with a slight increase in total liabilities Constellation Energy Generation, LLC Consolidated Balance Sheets (Millions USD) | Metric (Millions USD) | June 30, 2024 | December 31, 2023 | | :-------------------- | :------------ | :---------------- | | Total assets | $51,321 | $50,738 | | Total liabilities | $39,445 | $39,364 | | Total equity | $11,876 | $11,374 | Constellation Energy Generation, LLC Consolidated Statements of Changes in Equity For the six months ended June 30, 2024, Constellation Energy Generation, LLC's total equity increased, primarily due to net income, partially offset by distributions to members Constellation Energy Generation, LLC Consolidated Statements of Changes in Equity (Millions USD) | Metric (Millions USD) | Balance, Dec 31, 2023 | Balance, Jun 30, 2024 | | :-------------------- | :-------------------- | :-------------------- | | Total Equity | $11,374 | $11,876 | | Net Income (loss) | N/A | $883 (Q1), $814 (Q2) | | Distributions to member | N/A | $(610) (Q1), $(610) (Q2) | Combined Notes to Consolidated Financial Statements These notes provide detailed disclosures supporting the consolidated financial statements, covering significant accounting policies, recent transactions, revenue recognition, segment performance, government assistance, accounts receivable, nuclear decommissioning, income taxes, retirement benefits, derivative instruments, debt, fair value measurements, commitments, contingencies, shareholders' equity, variable interest entities, and supplemental financial information 1. Basis of Presentation Describes the company as a carbon-free energy producer and supplier, with primary generation from nuclear, wind, solar, natural gas, and hydroelectric assets across five reportable segments. The unaudited interim financial statements are prepared in accordance with GAAP, with certain information condensed or omitted per SEC rules - Company is a producer of carbon-free energy and supplier of energy products and services, with generating capacity primarily from nuclear, wind, solar, natural gas, and hydroelectric assets[38] - Has five reportable segments: Mid-Atlantic, Midwest, New York, ERCOT, and Other Power Regions[38] - The accompanying Consolidated Financial Statements are unaudited and prepared in accordance with GAAP, with certain information condensed or omitted pursuant to SEC rules[39] 2. Mergers, Acquisitions, and Dispositions Details the acquisition of a 44% ownership interest in the South Texas Project (STP) nuclear plant in November 2023 for $1.65 billion. A subsequent settlement in May 2024 involves selling a 2% interest in STP to CPS, which is not expected to materially impact financial statements - Completed the acquisition of a 44% undivided ownership interest in the jointly owned STP nuclear plant in November 2023 for $1.65 billion[40] - Executed a settlement agreement in May 2024 to sell a 2% ownership interest in STP to CPS, resolving litigation[41] - The terms of settlement are not expected to have a material impact on consolidated financial statements[41] 3. Revenue from Contracts with Customers Explains the company's revenue recognition from competitive sales of power, natural gas, and sustainable solutions. It details contract assets and liabilities, including those related to energy efficiency, the Mystic COS, and the Illinois ZEC program, and provides a rollforward of these balances - Recognizes revenue from contracts with customers for competitive sales of power, natural gas, and other energy-related products and sustainable solutions[43] 3. Contract Assets Rollforward (Millions USD) | Metric | 2024 | 2023 | | :-------------------------- | :--- | :--- | | Beginning balance as of January 1 | $82 | $130 | | Ending balance as of June 30 | $93 | $89 | 3. Contract Liabilities Rollforward (Millions USD) | Metric | 2024 | 2023 | | :-------------------------- | :--- | :--- | | Beginning balance as of January 1 | $40 | $47 | | Ending balance as of June 30 | $35 | $52 | - For the June 2023 through May 2024 planning year, $218 million of revenue was recognized as a receivable for ZECs delivered in prior planning years, with payment expected in the third quarter of 2024[51] 4. Segment Information Details the company's five reportable segments (Mid-Atlantic, Midwest, New York, ERCOT, and Other Power Regions) based on geographic electricity business management. Performance is evaluated using Operating revenues net of Purchased power and fuel expense (RNF). Tables disaggregate revenue by product and region and reconcile segment revenues to total consolidated operating revenues - The company has five reportable segments: Mid-Atlantic, Midwest, New York, ERCOT, and Other Power Regions[53][54] - Performance of electric business activities is evaluated and resources are allocated based on Operating revenues net of Purchased power and fuel expense (RNF)[55] 4. Total Consolidated Operating Revenues (Millions USD) | Period | 2024 | 2023 | | :-------------------------- | :----- | :----- | | Three Months Ended June 30 | $5,475 | $5,446 | | Six Months Ended June 30 | $11,637 | $13,011 | 4. Total RNF (Operating Revenues Net of Purchased Power and Fuel Expense) (Millions USD) | Period | 2024 | 2023 | | :-------------------------- | :----- | :----- | | Three Months Ended June 30 | $3,183 | $2,559 | | Six Months Ended June 30 | $5,928 | $4,395 | 5. Government Assistance Discusses federal government incentives under the Inflation Reduction Act (IRA), specifically the nuclear Production Tax Credit (PTC). The company's nuclear units are eligible for a transferable credit of up to $15 per MWh, subject to phase-out. For the three and six months ended June 30, 2024, estimated nuclear PTCs of $408 million and $712 million, respectively, were recognized in Operating revenues. Many state programs require refunds or pass-through of this PTC - Nuclear units are eligible for a transferable Production Tax Credit (PTC) up to $15 per MWh under the Inflation Reduction Act (IRA), beginning in 2024[64] 5. Estimated Nuclear PTCs Recognized in Operating Revenues (Millions USD) | Period | Amount | | :-------------------------- | :----- | | Three Months Ended June 30, 2024 | $408 | | Six Months Ended June 30, 2024 | $712 | - Many state-sponsored programs require refunding or passing through the nuclear PTC, leading to $404 million of estimated payables as of June 30, 2024[65] 6. Accounts Receivable Details unbilled customer revenue and the revolving accounts receivable financing arrangement (Facility) with NER, a wholly-owned special purpose entity. The Facility allows for the sale of eligible short-term customer accounts receivable, with the Deferred Purchase Price (DPP) representing the subordinated interest 6. Unbilled Customer Revenues (Millions USD) | Date | Amount | | :-------------------------- | :----- | | June 30, 2024 | $171 | | December 31, 2023 | $372 | - The company has a revolving accounts receivable financing arrangement (Facility) with a maximum funding limit of $1.1 billion through August 2025[68] 6. Deferred Purchase Price (DPP) (Millions USD) | Date | Amount | | :-------------------------- | :----- | | June 30, 2024 | $1,553 | | December 31, 2023 | $1,216 | 6. Loss on Sale of Receivables (Millions USD) | Period | 2024 | 2023 | | :-------------------------- | :--- | :--- | | Three Months Ended June 30 | $17 | $26 | | Six Months Ended June 30 | $32 | $46 | 7. Nuclear Decommissioning Addresses the legal obligation to decommission nuclear power plants, including the Asset Retirement Obligations (AROs) and Nuclear Decommissioning Trust (NDT) funds. The ARO balance decreased due to updated retirement timing assumptions for Braidwood and Byron plants. The company demonstrated adequate funding assurance for most shutdown units to the NRC 7. Nuclear Decommissioning AROs (Millions USD) | Metric | Amount | | :-------------------------- | :----- | | Balance as of December 31, 2023 | $13,891 | | Net decrease due to changes in, and timing of, estimated future cash flows | $(909) | | Balance as of June 30, 2024 | $13,275 | - The net decrease in AROs was primarily driven by the change in assumed retirement dates for the Braidwood and Byron plants, commensurate with an update to estimated useful lives[75] 7. NDT Funds (Millions USD) | Date | Amount | | :-------------------------- | :----- | | June 30, 2024 | $17,015 | | December 31, 2023 | $16,398 | 7. Payables related to Regulatory Agreement Units (Millions USD) | Entity | June 30, 2024 | December 31, 2023 | | :-------------------------- | :------------ | :---------------- | | ComEd | $3,566 | $2,955 | | PECO | $274 | $278 | | CenterPoint | $349 | $338 | | AEP Texas | $121 | $117 | | Total | $4,310 | $3,688 | - The annual decommissioning funding status report filed with the NRC in March 2024 demonstrated adequate funding assurance for all shutdown units except for Peach Bottom Unit 1[78] 8. Income Taxes Reconciles the effective income tax rate to the U.S. federal statutory rate, highlighting the impact of state income taxes, NDT fund income/losses, and Production Tax Credits (PTCs). The effective tax rate decreased significantly in 2024 due to the non-taxable nuclear PTC and a state tax benefit 8. Effective Income Tax Rate | Period | 2024 | 2023 | | :-------------------------- | :----- | :----- | | Three Months Ended June 30 | 16.0% | 29.2% | | Six Months Ended June 30 | 15.8% | 33.5% | - The change in effective tax rate in 2024 is primarily due to the increase in pre-tax book income inclusive of the nuclear PTC, which is not taxable, and a state tax benefit due to a change in forecasted apportionment[200] - Receivables from Exelon under the Tax Matters Agreement were $137 million in Other accounts receivable and $193 million in Other deferred debits and other assets as of June 30, 2024[84] 9. Retirement Benefits Presents the components of net periodic benefit (credits) costs for pension and other postretirement employee benefits (OPEB) plans. Service costs remained relatively stable, while non-service components showed a credit for pension benefits and a cost for OPEB 9. Net Periodic Benefit (Credit) Cost (Millions USD) | Period | 2024 | 2023 | | :-------------------------- | :----- | :----- | | Three Months Ended June 30 | $32 | $11 | | Six Months Ended June 30 | $60 | $23 | - The pension benefit and OPEB service costs reflected in the Consolidated Statements of Operations and Comprehensive Income for the three and six months ended June 30, 2024, totaled $27 million and $51 million, respectively[86] 10. Derivative Financial Instruments Details the use of derivative instruments to manage commodity price, interest rate, and foreign exchange risks. All derivatives are recognized at fair value, with specific accounting treatments for NPNS, cash flow hedges, and fair value hedges. The company manages credit risk through netting agreements, credit limits, and collateral requirements - The company uses derivative instruments (swaps, futures, forwards, options) to manage commodity price risk, interest rate risk, and foreign exchange risk[87][90][99] 10. Mark-to-Market Derivative Balances (Millions USD) | Metric | June 30, 2024 | December 31, 2023 | | :-------------------------- | :------------ | :---------------- | | Total mark-to-market derivative assets | $10,984 | $11,272 | | Total mark-to-market derivative liabilities | $(11,711) | $(12,564) | 10. Net Pre-Tax Commodity Mark-to-Market Gains (Losses) for Economic Hedges (Millions USD) | Period | 2024 | 2023 | | :-------------------------- | :----- | :----- | | Three Months Ended June 30 | $589 | $(4) | | Six Months Ended June 30 | $778 | $(267) | - Credit exposure for all derivative instruments, net of collateral and instruments subject to master netting agreements, was $1,219 million as of June 30, 2024[103] - If the company were downgraded below investment grade, an estimated $1,950 million in additional collateral would be required as of June 30, 2024[108] 11. Debt and Credit Agreements Outlines the company's short-term and long-term debt, including commercial paper and revolving credit facilities. The revolving credit facility was amended in June 2024, increasing commitment to $4.5 billion and extending maturity. Details debt issuances and redemptions, and confirms compliance with all debt covenants - The existing $3.5 billion revolving credit facility (RCF) was amended in June 2024, increasing the available aggregate commitment to $4.5 billion and extending the maturity date from January 2027 to June 2029[110] 11. Aggregate Bank Commitments and Available Capacity (Millions USD) | Metric | June 30, 2024 | December 31, 2023 | | :-------------------------- | :------------ | :---------------- | | Aggregate Bank Commitment | $7,458 | $6,108 | | Available Capacity | $4,740 | $3,166 | - Issued $900 million in Green Senior Notes (5.75% due March 2054) during the six months ended June 30, 2024[113] - As of June 30, 2024, the company is in compliance with all debt covenants[114] 12. Fair Value of Financial Assets and Liabilities Presents the fair value measurements of financial assets and liabilities, categorized into Level 1, 2, and 3 of the GAAP hierarchy. Details the fair values of long-term debt, SNF obligation, NDT fund investments, and mark-to-market derivatives, along with a reconciliation of Level 3 assets and liabilities 12. Long-Term Debt and SNF Obligation Fair Values (Millions USD) | Metric | June 30, 2024 (Carrying Amount) | June 30, 2024 (Fair Value) | December 31, 2023 (Carrying Amount) | December 31, 2023 (Fair Value) | | :-------------------------- | :------------------------------ | :------------------------- | :---------------------------------- | :----------------------------- | | Long-Term Debt | $8,444 | $8,507 | $7,617 | $7,914 | | SNF Obligation | $1,331 | $1,281 | $1,296 | $1,222 | 12. Total Assets Measured at Fair Value (Millions USD) | Date | Amount | | :-------------------------- | :----- | | June 30, 2024 | $20,981 | | December 31, 2023 | $20,284 | 12. Total Liabilities Measured at Fair Value (Millions USD) | Date | Amount | | :-------------------------- | :----- | | June 30, 2024 | $(1,202) | | December 31, 2023 | $(1,120) | - As of June 30, 2024, NDTs have outstanding commitments to invest in private credit ($420 million), private equity ($190 million), and real estate investments ($395 million)[122] 13. Commitments and Contingencies Discloses commercial commitments, environmental remediation liabilities, and litigation matters. Commercial commitments include letters of credit and surety bonds. Environmental liabilities are accrued for, and the company is involved in various litigation, including asbestos-related claims, for which reserves are maintained 13. Total Commercial Commitments (Millions USD) | Metric | Total | | :-------------------------- | :----- | | Letters of credit | $2,175 | | Surety bonds | $736 | | Total commercial commitments | $2,911 | 13. Accrued Environmental Liabilities (Millions USD) | Date | Current | Non-current | Total | | :-------------------------- | :------ | :---------- | :---- | | June 30, 2024 | $56 | $161 | $217 | | December 31, 2023 | $61 | $88 | $149 | 13. Estimated Liabilities for Asbestos-Related Bodily Injury Claims (Millions USD) | Date | Amount | | :-------------------------- | :----- | | June 30, 2024 | $129 | | December 31, 2023 | $131 | 14. Shareholders' Equity Details the share repurchase program, which was increased by $1 billion in April 2024 to a total of $3 billion. The company repurchased 1.2 million shares for $150 million during the six months ended June 30, 2024, including through Accelerated Share Repurchase (ASR) agreements. Also presents changes in Accumulated Other Comprehensive Loss (AOCI) - The Board of Directors approved a $1 billion increase to the share repurchase program in April 2024, authorizing up to $3 billion in total repurchases[135] - During the six months ended June 30, 2024, the company repurchased 1.2 million shares of common stock for a total cost of $150 million[136] 14. Accelerated Share Repurchase (ASR) Agreements (Millions USD, except per share data) | ASR Agreement Initiation | Total Cost | Initial Shares Received | ASR Agreement Settlement | Additional Shares Received | Total Number of Shares Purchased | Average Price Paid per Share | | :----------------------- | :--------- | :---------------------- | :----------------------- | :------------------------- | :------------------------------- | :--------------------------- | | March 2024 | $354 | 1.7 | May 2024 | 0.2 | 1.9 | $182.65 | | May 2024 | $505 | 1.8 | July 2024 | 0.6 | 2.4 | $211.40 | 14. Accumulated Other Comprehensive Loss (AOCI), Net (Millions USD) | Date | Amount | | :-------------------------- | :----- | | December 31, 2023 | $(2,191) | | June 30, 2024 | $(2,161) | 15. Variable Interest Entities Discusses consolidated and unconsolidated Variable Interest Entities (VIEs). Consolidated VIEs include CRP, Bluestem Wind Energy Holdings, Antelope Valley, and NER, whose assets and liabilities are included in the consolidated financial statements. Unconsolidated VIEs primarily involve energy purchase and sale agreements where the company is not the primary beneficiary 15. Consolidated VIEs' Assets and Liabilities (Millions USD) | Metric | June 30, 2024 | December 31, 2023 | | :-------------------------- | :------------ | :---------------- | | Total assets | $3,882 | $3,532 | | Total liabilities | $992 | $990 | - Consolidated VIEs include CRP (wind and solar project entities), Bluestem Wind Energy Holdings (Tax Equity structure), Antelope Valley (solar generating facility), and NER (accounts receivable financing entity)[145] - Unconsolidated VIEs primarily consist of energy purchase and sale agreements where the company is not the primary beneficiary because it does not conduct the operational activities[149] 16. Supplemental Financial Information Provides additional details on operating lease income, taxes other than income taxes, and components of 'Other, net' in the statements of operations. Also reconciles cash, restricted cash, and cash equivalents, and provides supplemental balance sheet information on accounts payable and accrued expenses 16. Operating Lease Income (Millions USD) | Period | 2024 | 2023 | | :-------------------------- | :----- | :----- | | Three Months Ended June 30 | $13 | $13 | | Six Months Ended June 30 | $17 | $17 | 16. Total Decommissioning-Related Activities (within Other, net) (Millions USD) | Period | 2024 | 2023 | | :-------------------------- | :----- | :----- | | Three Months Ended June 30 | $51 | $155 | | Six Months Ended June 30 | $347 | $435 | 16. Total Cash, Restricted Cash, and Cash Equivalents (Millions USD) | Date | CEG Parent | Constellation | | :-------------------------- | :--------- | :------------ | | June 30, 2024 | $383 | $372 | | December 31, 2023 | $454 | $440 | | June 30, 2023 | $325 | $317 | - Accounts payable and accrued expenses included $536 million (CEG Parent) and $402 million (Constellation) for compensation-related accruals, and $201 million (CEG Parent) and $183 million (Constellation) for taxes accrued as of June 30, 2024[160] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on the company's financial performance, condition, and results of operations for the quarter ended June 30, 2024. It covers an executive overview, significant transactions, key business drivers, critical accounting policies, detailed financial results, and liquidity and capital resources Executive Overview Constellation is a clean energy supplier with diverse generation capacity (nuclear, wind, solar, natural gas, hydroelectric) and integrated business operations selling electricity, natural gas, and sustainable solutions across five reportable segments - Constellation is a supplier of clean energy, with generating capacity primarily from nuclear, wind, solar, natural gas, and hydroelectric assets[162] - Through integrated business operations, the company sells electricity, natural gas, and other energy-related products and sustainable solutions to various customers[162] - The company has five reportable segments: Mid-Atlantic, Midwest, New York, ERCOT, and Other Power Regions[162] Significant Transactions and Developments Highlights the impact of the nuclear Production Tax Credit (PTC) from the IRA, which began in 2024 and is expected to provide significant revenue. Also notes the $1 billion increase to the share repurchase program, bringing the total authorized repurchases to $3 billion - Nuclear units are eligible for a Production Tax Credit (PTC) under the IRA beginning in 2024, providing a transferable credit up to $15 per MWh[163] - Estimated nuclear PTCs of $408 million (three months) and $712 million (six months) were included in Operating revenues for the period ended June 30, 2024[163] - The Board of Directors approved a $1 billion increase to the share repurchase program in April 2024, authorizing total repurchases of up to $3 billion[164] Other Key Business Drivers Discusses the ongoing monitoring of the Russia and Ukraine conflict's impact on nuclear fuel supply, noting the 'Prohibiting Russian Uranium Imports Act' and the company's proactive measures to increase nuclear fuel inventory from diverse suppliers. Also addresses environmental regulations, including EPA's final rule on greenhouse gases and the 'Good Neighbor Rule,' both subject to ongoing evaluation and litigation - Closely monitoring developments of the Russia and Ukraine conflict, including the 'Prohibiting Russian Uranium Imports Act' that bans Russian uranium imports[165] - The company has entered into contracts to increase nuclear fuel inventory from diverse suppliers to ensure long-term operation and bridge potential Russian supply disruption into 2029[165][166] - Evaluating market impacts of EPA's final rule regulating greenhouse gases from power plants under the Clean Air Act and the 'Good Neighbor Rule,' both subject to ongoing state implementation and litigation[167][168] Critical Accounting Policies and Estimates States that critical accounting policies and estimates have not significantly changed from December 31, 2023, with the exception of accounting for government grants and disclosure of government assistance - Critical accounting policies and estimates had not changed significantly from December 31, 2023[169] - Exception to unchanged policies is accounting for government grants and disclosure of government assistance[169] Financial Results of Operations Presents GAAP Net Income (Loss) Attributable to Common Shareholders and Adjusted (non-GAAP) Operating Earnings, along with a reconciliation. It details the variance in net income, operating revenues by segment, sales and supply sources (GWhs), nuclear fleet capacity factor, ZEC prices, CMC prices, capacity prices, and electricity prices, explaining the drivers behind these changes Financial Results of Operations GAAP Net Income (Loss) Attributable to Common Shareholders and Adjusted (non-GAAP) Operating Earnings (Millions USD) | Metric | 3 Months Ended Jun 30, 2024 | 3 Months Ended Jun 30, 2023 | 6 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2023 | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | GAAP Net Income (Loss) Attributable to Common Shareholders | $814 | $833 | $1,697 | $929 | | Adjusted (non-GAAP) Operating Earnings | $531 | $535 | $1,110 | $791 | - The unfavorable variance in Net income attributable to common shareholders for the three months ended June 30, 2024, was primarily due to lower unrealized gains, unfavorable ZEC and CMC program revenues, higher labor/contracting/materials, increased environmental liabilities, and unfavorable NDT activity, partially offset by favorable mark-to-market activity, market conditions, nuclear PTCs, and nuclear outages[178][179] - The favorable variance in Net income attributable to common shareholders for the six months ended June 30, 2024, was primarily due to favorable mark-to-market activity, market conditions, nuclear PTCs, and nuclear outages, partially offset by unfavorable ZEC and CMC program revenues, lower unrealized gains, higher labor/contracting/materials, increased environmental liabilities, higher interest expense, and unfavorable NDT activity[180] Financial Results of Operations Operating Revenues by Segment (Millions USD) | Segment | 3 Months Ended Jun 30, 2024 | 3 Months Ended Jun 30, 2023 | % Change | 6 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2023 | % Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :------- | :-------------------------- | :-------------------------- | :------- | | Mid-Atlantic | $1,304 | $1,198 | 8.8% | $2,546 | $2,444 | 4.2% | | Midwest | $1,168 | $1,330 | (12.2)% | $2,262 | $2,361 | (4.2)% | | New York | $514 | $471 | 9.1% | $1,027 | $1,005 | 2.2% | | ERCOT | $357 | $328 | 8.8% | $678 | $497 | 36.4% | | Other Power Regions | $1,184 | $1,111 | 6.6% | $2,808 | $2,903 | (3.3)% | | Total reportable segment electric revenues | $4,527 | $4,438 | 2.0% | $9,321 | $9,210 | 1.2% | | Other | $756 | $797 | (5.1)% | $2,062 | $2,661 | (22.5)% | | Mark-to-market gains (losses) | $192 | $211 | N/A | $254 | $1,140 | N/A | | Total Operating revenues | $5,475 | $5,446 | 0.5% | $11,637 | $13,011 | (10.6)% | Financial Results of Operations Nuclear Fleet Capacity Factor | Period | 2024 | 2023 | | :-------------------------- | :----- | :----- | | Three Months Ended June 30 | 95.4% | 92.4% | | Six Months Ended June 30 | 94.4% | 92.6% | Financial Results of Operations Average ZEC Reference Prices ($/MWh) | State (Region) | 3 Months Ended Jun 30, 2024 | 3 Months Ended Jun 30, 2023 | % Change | 6 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2023 | % Change | | :-------------------------- | :-------------------------- | :-------------------------- | :------- | :-------------------------- | :-------------------------- | :------- | | New Jersey (Mid-Atlantic) | $10.00 | $9.92 | 0.8% | $10.00 | $9.90 | 1.0% | | Illinois (Midwest) | $3.33 | $8.11 | (58.9)% | $1.81 | $10.06 | (82.0)% | | New York (New York) | $18.27 | $18.27 | —% | $18.27 | $19.83 | (7.9)% | Financial Results of Operations Purchased Power and Fuel Expense (Millions USD) | Metric | 3 Months Ended Jun 30, 2024 | 3 Months Ended Jun 30, 2023 | % Change | 6 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2023 | % Change | | :------------------------------------------ | :-------------------------- | :-------------------------- | :------- | :-------------------------- | :-------------------------- | :------- | | Total electric purchased power and fuel | $2,122 | $2,036 | (4.2)% | $4,617 | $4,868 | 5.2% | | Other | $567 | $632 | 10.3% | $1,613 | $2,334 | 30.9% | | Mark-to-market losses (gains) | $(397) | $219 | N/A | $(521) | $1,414 | N/A | | Total Purchased power and fuel | $2,292 | $2,887 | 20.6%| $5,709 | $8,616 | 33.7%| - Operating and maintenance expense increased by $168 million (three months) and $223 million (six months) in 2024, primarily due to higher labor, contracting, and materials, and an unfavorable increase in environmental liabilities, partially offset by lower nuclear refueling outage costs and separation costs[198] - Other, net was unfavorable for both the three and six months ended June 30, 2024, compared to the same periods in 2023, primarily due to decommissioning-related activities and net realized and unrealized gains (losses) from equity investments[199] - Effective income tax rates decreased to 16.0% (three months) and 15.8% (six months) for 2024, primarily due to the non-taxable nuclear PTC and a state tax benefit from changes in forecasted apportionment[200] Liquidity and Capital Resources Discusses the company's liquidity strategy, relying on internally generated cash flows, receivables sales, and external financing. It details NRC minimum funding requirements for nuclear decommissioning, summarizes cash flows from operating, investing, and financing activities, and addresses credit matters, pension funding, and other financial commitments - Liquidity and capital expenditure requirements are met by internally generated cash flows from operations, the sale of certain receivables, and funds from external sources in the capital markets and through bank borrowings[201] - NRC regulations require licensees of nuclear generating facilities to demonstrate reasonable assurance that sufficient funds will be available for radiological decommissioning[203] Liquidity and Capital Resources Summary of Change in Cash Flows from Operating Activities (Millions USD) | Metric | 6 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2023 | Change | | :------------------------------------------ | :-------------------------- | :-------------------------- | :----- | | Net cash flows provided by (used in) operating activities | $(1,336) | $(1,126) | $(210) | Liquidity and Capital Resources Summary of Change in Cash Flows from Investing Activities (Millions USD) | Metric | 6 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2023 | Change | | :------------------------------------------ | :-------------------------- | :-------------------------- | :----- | | Net cash flows provided by (used in) investing activities | $2,650 | $171 | $2,479 | Liquidity and Capital Resources Summary of Change in Cash Flows from Financing Activities (Millions USD) | Metric | 6 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2023 | Change | | :------------------------------------------ | :-------------------------- | :-------------------------- | :----- | | Net cash flows provided by (used in) financing activities | $(1,385) | $752 | $(2,137) | - As of June 30, 2024, the company had access to facilities with aggregate bank commitments of $7.5 billion and $4.7 billion of available capacity under its credit facilities[212][214] - A loss of investment grade credit rating would require approximately $2.0 billion in incremental collateral[214] - Credit ratings from S&P and Moody's are BBB+ and Baa1, respectively, as of June 30, 2024, with Moody's having raised the issuer credit rating in March 2024[222] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This section discusses the company's exposure to market risks, including commodity price risk, credit risk, interest rate risk, and equity price risk, and the strategies employed to manage them. Highlights the nuclear PTC as a tool for managing commodity price risk and details collateral requirements for derivative instruments - The company is exposed to market risks associated with adverse changes in commodity prices, counterparty credit, interest rates, and equity prices, which are managed through risk management policies[223] - The nuclear PTC provided by the IRA is an important tool in managing commodity price risk for nuclear units not already receiving state support[226] - The forecasted market price risk exposure for the entire economic hedge portfolio associated with a $5/MWh reduction in energy price results in an immaterial impact to net income (loss) for 2024 and 2025, largely due to the nuclear PTC[228] ITEM 3. Commodity Mark-to-Market Net Asset/Liability Balance (Millions USD) | Date | Amount | | :-------------------------- | :----- | | December 31, 2023 | $1,108 | | June 30, 2024 | $797 | - Credit risk is managed through enabling agreements allowing payment netting, credit limits, margining thresholds, and collateral requirements for counterparties[101][235] - A hypothetical 25 basis points increase in interest rates and 10% decrease in equity prices would have resulted in a $946 million reduction in the fair value of NDT trust assets as of June 30, 2024[242] ITEM 4. CONTROLS AND PROCEDURES This section states that the principal executive and financial officers evaluated the effectiveness of disclosure controls and procedures as of June 30, 2024, and concluded they were effective. No material changes in internal control over financial reporting occurred during the second quarter of 2024 - The principal executive officer and principal financial officer evaluated the effectiveness of disclosure controls and procedures as of June 30, 2024, and concluded they were effective[243][244] - No material changes in internal control over financial reporting occurred during the second quarter of 2024[245] PART II. OTHER INFORMATION This section provides additional information not covered in Part I, including legal proceedings, risk factors, unregistered sales of equity securities, mine safety disclosures, other information, and a list of exhibits ITEM 1. LEGAL PROCEEDINGS This section refers to Note 13 — Commitments and Contingencies in Part I for information regarding material lawsuits and regulatory proceedings, stating that the company is involved in various litigation matters in the ordinary course of business - The company is a party to various lawsuits and regulatory proceedings in the ordinary course of business[247] - Information regarding material lawsuits and proceedings is incorporated by reference from Note 13 — Commitments and Contingencies[247] ITEM 1A. RISK FACTORS This section states that the company's risk factors as of June 30, 2024, are consistent with those described in its 2023 Form 10-K - As of June 30, 2024, the company's risk factors were consistent with the risk factors described in its 2023 Form 10-K[248] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS This section provides details on the company's share repurchase program, which was increased to $3 billion in April 2024. During the three months ended June 30, 2024, 2.09 million shares were repurchased, including through ASR agreements, with $991 million remaining authority - The Board of Directors authorized a $1 billion increase to the share repurchase program in April 2024, bringing the total authorized repurchases to $3 billion[248] - During the three months ended June 30, 2024, 2.09 million shares were repurchased under the program, including shares delivered from Accelerated Share Repurchase (ASR) agreements[249] - As of June 30, 2024, there was approximately $991 million of remaining authority to repurchase shares[249] ITEM 4. MINE SAFETY DISCLOSURES This section states that the item regarding mine safety disclosures is not applicable to the company - This item is not applicable[250] ITEM 5. OTHER INFORMATION This section reports that no directors or executive officers adopted or terminated any Rule 10b5-1 trading plans during the three months ended June 30, 2024 - During the three months ended June 30, 2024, none of the company's directors or executive officers adopted or terminated any Rule 10b5-1 trading plans[251] ITEM 6. EXHIBITS This section lists the exhibits filed with the Form 10-Q, including an amended and restated credit agreement, XBRL documents, and certifications from executive officers - Includes an Amended and Restated Credit Agreement dated as of June 14, 2024, among Constellation, JPMorgan Chase Bank, N.A., and various financial institutions[253] - Contains Inline XBRL Instance Document and Taxonomy Extension Documents (Schema, Calculation Linkbase, Definition Linkbase, Label Linkbase, Presentation Linkbase)[253] - Certifications pursuant to Rule 13a-14(a) and 15d-14(a) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 United States Code (Sarbanes — Oxley Act of 2002) are filed by Joseph Dominguez and Daniel L. Eggers for both Constellation Energy Corporation and Constellation Energy Generation, LLC[253][254] SIGNATURES This section contains the signatures of the principal executive officer, principal financial officer, and principal accounting officer for both Constellation Energy Corporation and Constellation Energy Generation, LLC, certifying the report as of August 6, 2024 - The report is signed by Joseph Dominguez (President and Chief Executive Officer), Daniel L. Eggers (Executive Vice President and Chief Financial Officer), and Matthew N. Bauer (Senior Vice President and Controller) for Constellation Energy Corporation[256][257] - The report is also signed by Joseph Dominguez (President and Chief Executive Officer), Daniel L. Eggers (Executive Vice President and Chief Financial Officer), and Matthew N. Bauer (Senior Vice President and Controller) for Constellation Energy Generation, LLC[259] - The signing date for the report is August 6, 2024[256][259]