Q2 2024 Constellation Energy Corp Earnings Call

Speaker Change: Good day, ladies and gentlemen, and welcome to the Constellation Energy Corporation second quarter earnings call. At this time, all participants are in a listen-only mode.

Operator: At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. As a reminder, this call may be recorded. I would now like to introduce your host for today's call, Emily Duncan, Senior Vice President, Investor Relations and Strategic Growth. You may begin.

Later we will conduct a question and answer session and instructions will follow at that time.

Emily Duncan: As a reminder, this call may be recorded. I would now like to introduce your host for today's call, Emily Duncan, Senior Vice President, Investor Relations and Strategic Growth. You may begin.

Emily Duncan: Thank you, Michelle. Good morning, everyone, and thank you for joining Constellation Energy Corporation's second quarter earnings conference call. Leading the call today are Joe Dominguez, Constellation's President and Chief Executive Officer, and Dan Eggers, Constellation's Chief Financial Officer. They are joined by other members of Constellation's Senior Management Team, who will be available to answer your questions following our prepared remarks.

Emily Duncan: Thank you, Michelle. Good morning, everyone, and thank you for joining Constellation Energy Corporation's second quarter earnings conference call.

Speaker Change: Leading the call today are Joe Dominguez, Constellation's President and Chief Executive Officer, and Dan Eggers, Constellation's Chief Financial Officer. They are joined by other members of Constellation's Senior Management Team, who will be available to answer your questions following our prepared remarks.

Emily Duncan: We issued our earnings release this morning, along with the presentation, all of which can be found in the Investor Relations section of Constellation's website. The earnings release and other matters which we will 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 material and comments made during this call. Please refer to today's 8K 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.

Speaker Change: We issued our earnings release this morning, along with the presentation, all of which can be found in the investor relations section of Constellation's website. The earnings release and other matters which we will discuss during today's call contain forward-looking statements and estimates,

Speaker Change: and its subsidiaries that are subject to various risks and uncertainties.

Speaker Change: Actual results could differ from our forward-looking statements based on factors and assumptions discussed in today's material and comments made during this call.

Speaker Change: Please refer to today's 8K 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.

Emily Duncan: 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 the call over to our CEO, Joe Dominguez.

Speaker Change: 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.

Joseph Dominguez: Thanks, Emily. Good morning, everyone.

Joseph Dominguez: Thanks for joining us this morning and thanks for your interest in Constellation. During this incredibly hot summer we've had, our best-in-class nuclear fleet has once again met the challenge and is delivering clean, reliable, 24-7 power. Combined with our renewable and natural gas fleet, we're providing the power to keep families cool and businesses running, while supporting our country's economic growth.

Speaker Change: I'll now turn the call over to our CEO , Joe Dominguez. Thanks, Emily. Good morning, everyone. Thanks for joining us this morning, and thanks for your interest in Constellation.

Joe Dominguez: During this incredibly hot summer we've had, our best-in-class nuclear fleet has once again met the challenge and is delivering clean, reliable, 24-7 power.

Joe Dominguez: Combined with our renewable natural gas fleet, we're providing the power to keep families cool and businesses running, supporting our country's economic growth.

Joseph Dominguez: Our commercial business continues to do an awesome job providing needed products to our customers and managing our one-of-a-kind portfolio. I want to thank the women and men at Constellation for their tireless efforts and for helping our customers meet their energy and sustainability goals. You know, at Constellation, we put our people first because they're the ones that are responsible for our success and because we think a good culture creates good results. In fact, I think it's the single most important driver of any company's success. Look, we're far from perfect, but we work hard to make this place someplace where people want to come and spend a career doing important things for America and thrive.

Joe Dominguez: Our commercial business continues to do an awesome job providing needed products to our customers and managing our one-of-a-kind portfolio.

Speaker Change: I want to thank the women and men at Constellation for their tireless efforts and for helping our customers meet their energy and sustainability goals. You know, at Constellation, we put our people first.

Speaker Change: because they're the ones that are responsible for our success and because we think a good culture creates good results. In fact, I think it's the single most important driver of any company's success.

Speaker Change: Look, we're far from perfect, but we work hard to make this place.

Speaker Change: someplace where people want to come and spend a career doing important things for America and thriving.

Joseph Dominguez: That is why we're so proud to report to you that Constellation was certified as a great place to work once again. We've been out as a separate company for about two full years, a little bit over that, and for two years, we've received this honor. And it's particularly impactful to us because you only get this certification through surveys and high marks by your people, independent surveys.

Speaker Change: That is why we're so proud to report to you that Constellation was certified as a great place to work once again. We've been out as a separate company for about two full years, a little bit over that, and for two years we've received this honor.

Speaker Change: And it's particularly impactful to us because you only get this certification through surveys and high marks by your people, independent surveys.

Joseph Dominguez: So it's great to see that our folks are seeing the work we're doing. They believe in our mission, they're passionate, and they're 100% committed. And it shows up again here in results for you, our owners. In this quarter, we were able to provide excellent results but also raise guidance for just the second quarter. We delivered second quarter GAAP earnings of $2.58 per share and adjusted operating earnings of $1.68 per share.

Speaker Change: We delivered second quarter gap earnings of $2.58 per share and adjusted operating earnings of $1.68 per share.

Joseph Dominguez: We are raising our adjusted operating earnings guidance from the initial range of $7.23 to $8.03 per share to a revised range of $7.60 to $8.40 per share. In effect, we're resetting the midpoint of our guidance to what used to be the top end of our guidance range. The fact that we do that here in Q2 as opposed to waiting until Q3, when these updates are typically provided, tells you how strongly we feel the business is performing.

Speaker Change: The fact that we do that here in Q2 as opposed to waiting until Q3 when these updates typically are provided should tell you how strongly we feel the business is performing.

Joseph Dominguez: It's even more remarkable when one considers the compensation headwinds associated with stock comp, where the stock has obviously performed very well over the first half. Dan will cover all of the financial details in his slot. In terms of buybacks, we bought $500 million worth of our shares during the quarter, bringing the total cash deployed on buybacks so far this year to over a billion dollars. Excuse me, two rebellions.

Joseph Dominguez: Although we've seen some slippage of late, we remain bullish on buybacks because our thesis is incredibly unique and compelling. We will grow base earnings by at least 10% through the decade, backstopped by the federal PTC. And that growth does not reflect the opportunities we have in front of us, from adding new, clean, reliable MIGWATs to the grid to meet reliability needs or from selling to data center customers. And, as we have been throughout the year, we remain quite confident in our ability to do better each year than our first base earnings, delivering even more value to our owners. And finally, we released our third sustainability report highlighting our efforts to help customers achieve their goals. I encourage you to read it.

Joseph Dominguez: It outlines the good work we're doing on so many fronts as we lead the nation in the production of clean and reliable energy and provide unique and powerful sustainability products. Now, before I turn to the operational updates, I do want to spend a few minutes on two topics that are garnering a lot of attention. BJM Capacity Market Auction Results and the data center opportunities and the FERC proceeding concerning those options. First, let me talk about the PJN capacity audit. We think, and PJM said this in its press release, we think the same thing. It's telling us what we already know.

Speaker Change: Now, before I turn to the operational updates, I do want to spend a few minutes on two topics that are garnering a lot of attention.

Speaker Change: First, let me talk about the PJN capacity option.

Speaker Change: We think, and PJM said this in its press release, we think the same thing, it's telling us what we already know.

Joseph Dominguez: The demand for electricity is growing, and supply and demand fundamentals are tightening. We foreshadowed all of this in our lengthy 2023 Q4 call when we walked through the market fundamentals in considerable detail. Fortunately, the reforms FERC recently approved for the PG&E capacity market are designed to incentivize the supply that we need, name-incentivizing supply that can be counted on to operate when our customers need power. TJM proposed and FERC approved a design that provides greater compensation.

Speaker Change: The demand for electricity is growing, and supply and demand fundamentals are tightening. We foreshadowed all of this in our lengthy 2023 Q4 call when we walked through the market fundamentals in considerable detail.

Speaker Change: Fortunately, the reforms FERC recently approved for the PJM capacity market are designed to incentivize the supply that we need.

Speaker Change: Namely, incentivizing supply that can be counted on to operate when our customers need power.

Joseph Dominguez: Power plants like ours that historically deliver when the system needs power. We previously have shown you data on how nuclear energy performs extraordinarily well in a grid of emergencies, while other resources, frankly, do not, whether they are intermittent or dispatchable fossil fuels. That means that nuclear power is best positioned in this new market design and appropriately receives a fair level of compensation. In light of the forecasted load growth in PJM, we expect to see higher sustained pricing for capacity to address reliability needs and send more accurate price signals to retain, operate, and relicense our plants, as well as incentivizing the development of new resources and customer demand response.

Speaker Change: The power plants, like ours, that historically deliver when the system needs power.

Speaker Change: We previously have shown you data on how nuclear energy performs extraordinarily well through grid of emergencies, while other resources, frankly, do not, whether they are intermittent or dispatchable fossil assets.

Speaker Change: and send more accurate price signals to retain, operate, and relicense our plants, as well as incentivizing the development of new resources and customer demand response.

Joseph Dominguez: Over the years, the PJM market has a proven track record of attracting investment through price signals and has developed over 60 gigawatts of generation to meet all of the needs of the grid. And we're confident that the market will respond to higher prices and add more resources as needed. But with that said, we know that higher prices impact families and businesses.

Speaker Change: Over the years the PJM market has a proven track record of attracting investment through price signals and has developed over 60 gigawatts of generation to meet all of the needs of the grid.

Joseph Dominguez: And so our commercial team is working with these customers to provide solutions that manage the risk and smooth out bumps. But I think it's important to remember that, adjusted for inflation, PJM energy and capacity prices are less today than they were 15 years ago. Markets work. What has changed for the customer is that the distribution and transmission elements of the bill have gone up. They've gone up to address reliability needs on those grid systems, but thankfully, that has been largely accomplished.

Speaker Change: And so our commercial team is working with these customers to provide solutions that manage the risk and smooth out bumps.

Speaker Change: But I think it's important to remember that adjusted for inflation, PJM energy and capacity prices are less today than they were 15 years ago. Markets work, folks.

Speaker Change: What has changed for the customer is that the distribution and transmission elements of the bill have gone up. They've gone up to address reliability needs on those grid systems.

Joseph Dominguez: And now we need to focus on investments on the reliability of the supply side. And that's what the capacity market is designed to do. Over the last two investor calls, we've emphasized that reliability is as critical as sustainability. They have to go hand in hand.

Speaker Change: And now we need to focus on investments on the reliability of the supply side. And that's what the capacity market is designed to do.

Joseph Dominguez: Constellation's business is based on the thesis that the most valuable energy commodity in the world today is a reliable and zero-emission megawatt of electricity. To us, the PJM results are just another data point showing that our thesis is right and that we're focused on doing the right thing. First, by providing sustainability products to customers that Expressly link reliability to sustainability by time-matching clean energy production to when our customers use energy, and second, by investing in relicensing and upgrading the clean energy centers that will reliably and sustainably power American families and businesses for decades to come.

Speaker Change: First, by providing sustainability products to customers that

Speaker Change: expressly link reliability to sustainability by time-matching clean energy production to when our customers use energy.

Joseph Dominguez: On this second point, in its recent comments concerning the auction, PJM alluded to potential efforts to Speed Up the Interconnection of Needed Resources. We look forward to seeing PJM's ideas, and we certainly will support those efforts in any way that we can. The case for prompt and decisive action by PJM is manifestly clear.

Speaker Change: On this second point, in its recent comments concerning the auction, PJM alluded to potential efforts to speed up the interconnection of needed resources.

Speaker Change: We look forward to seeing PJM's ideas, and we certainly will support those efforts in any way that we can.

Joseph Dominguez: In sum, we need to invest to grow America's economy, and we need to invest in and enable the technologies that support our economies and protect our nation. We think Constellation will play a big part in these efforts. That's our mission, and it is what inspires our people to make Constellation a great place to work. Now, turning to slide six, we're continuing to do well in our discussions and negotiations with data center companies.

Speaker Change: In sum, we need to invest to grow America's economy, and we need to invest and enable the technologies that support our economies and protect our nation.

Speaker Change: We think Constellation will play a big part in these efforts.

Speaker Change: That's our mission, and it is what inspires our people to make Constellation a great place to work.

Speaker Change: Now turning to slide six, we're continuing to do well in our discussions and negotiations with data center companies.

Joseph Dominguez: The fact is that data centers are coming, and they're essential to America's national security and economic competitiveness. We've heard this from a variety of sources. A number of nations, including China, are vying for AI supremacy, and it's absolutely critical that the U.S. not fall behind. Time is of the essence.

Speaker Change: The simple fact is that data centers are coming, and they're essential to America's national security and economic competitiveness.

Speaker Change: We've heard this from a variety of policy makers.

Speaker Change: A number of nations, including China, are vying for AI supremacy.

Joseph Dominguez: We simply cannot wait years for the data centers that are going to bring transformation. They're going to bring transformations in medicine, bringing new cures for diseases and treatments that research alone cannot do. They'll better predict weather, they'll provide material enhancements, and they'll do things for us on the energy supply system to more smartly manage the grid. Economically, data center investment means considerable construction, as well as permanent jobs, tax revenue, community development, and other benefits to our state. We appreciate what the utilities in our states are doing to attract this crucial economic engine. And we're doing our part, too.

Speaker Change: Time is of the essence.

Speaker Change: bringing new cures to diseases and treatments that research alone cannot do. They'll better predict weather, they'll provide material enhancements, and they'll do things for us on the energy supply system to more smartly manage the grid.

Speaker Change: Economically, data center investment means considerable construction as well as permanent jobs, tax revenue, community development, and other benefits to our states.

Speaker Change: We appreciate what the utilities in our states are doing to attract this crucial economic engine. We're doing our part, too.

Joseph Dominguez: All of our political leaders understand this, and that's why states are competing with each other. Republicans and Democrats alike are bringing the development of data centers to their jurisdictions. All of the policymakers we talked to want data center development wherever it occurs, on the grid or co-located.

Speaker Change: All of our political leaders understand this and that's why states are competing with each other, Republicans and Democrats alike, to bring the development of data centers to their jurisdictions.

Speaker Change: All of the policy makers we talked to want data center development wherever it occurs, on the grid, or co-located.

Joseph Dominguez: But as you're all closely following, there's an active conversation underway by policymakers and stakeholders trying to understand the implications of the different ways of powering data. We welcome that conversation, and we're confident that any thorough examination of co-location with nuclear energy will show that it is both the fastest and the most cost-effective way to develop critical digital infrastructure without burdening other customers with expensive upgrades. As we see it, utility connections will continue to make sense for some applications and in some parts of the grid.

Speaker Change: But as you're all closely following, there's an active conversation underway by policymakers and stakeholders trying to understand the implications of the different ways of powering data centers.

Speaker Change: We welcome that conversation, and we're confident that any thorough examination of co-location with nuclear plants.

Speaker Change: will show that it is both the fastest and most cost-effective way to develop critical digital infrastructure without burdening other customers with expensive upgrades.

Speaker Change: As we see it, utility connection will continue to make sense for some applications and in some parts of the grid.

Joseph Dominguez: But where it's an option, we will continue to seek customer interest in co-location, strong interest, because there are just too many advantages to connecting large loads directly to large forms of generation, especially clean generation. And I don't think that point is really being debated.

Speaker Change: But where it's an option, we will continue to seek customer interest in co-location, strong interest.

Speaker Change: Because there are just too many advantages of connecting large load directly to large forms of generation, especially clean generation.

Joseph Dominguez: On slide six, you can see some of the many quotes from key stakeholders, including the utilities that oppose Talents ISA, talking about the significant benefits of co-location. I'll outline four. First, in a behind-the-meter configuration, the data center customer, not other customers, pays for the infrastructure needed to connect to the power. Unlike in front-of-the-meter projects, where sometimes costs are almost 90% or more of the costs are shared with other customers, in these behind-the-meter configurations, the data center companies pay for the infrastructure.

Speaker Change: And I don't think that point is really debated. On slide six, you can see some of the many quotes from key stakeholders.

Speaker Change: including the utilities that oppose Talents ISA talking about the significant benefits of co-location. I'll outline four of them.

Speaker Change: First, in a behind-the-meter configuration, the data center customer, not other customers, pay for the infrastructure needed to connect to the power plant.

Speaker Change: Unlike in front-of-the-meter projects where sometimes cost almost 90% or more of the costs are shared with other customers, in these behind-the-meter configurations, the data center companies pay for the infrastructure.

Joseph Dominguez: Second, co-locating a data center with a power plant is just more efficient, and it is fast. Which again, I think the complaining utilities have acknowledged, telling the FERC that, quote, a significant new load can be served without having to expend resources on expensive system upgrades. Close quote.

Speaker Change: Second, co-locating a data center with a power plant is just more efficient and it is faster.

Speaker Change: Which, again, I think the complaining utilities have acknowledged, telling the FERC, quote, significant new load can be served without having to expend resources on expensive system upgrades. Close quote. That's from their filing.

Joseph Dominguez: At a time when RTOs are struggling to integrate new resources faster and time is of the essence, this benefit is a big deal. Third, these behind-the-meter configurations are long-dated, so they'll allow us to have the economic certainty to relicense nuclear plants and operate them, with all the attendant benefits that they create for the grid in our nation. Fourth, in terms of new clean generation, the common thesis for these forms of generation, whether they're SMRs or carbon sequestration technologies, is to co-locate them with industrial and data center load. We've seen that countless number of times.

Speaker Change: At a time when RTOs are struggling to integrate new resources faster and time is of the essence, this benefit is a big deal.

Speaker Change: Third, these behind-the-meter configurations are long-dated, so they'll allow us to have the economic certainty to relicense nuclear plants and to operate them.

Speaker Change: with all the attendant benefits that creates for the grid in our nation.

Speaker Change: Fourth, in terms of new clean generation, the common thesis for these forms of generation, whether they're SMRs or carbon sequestration technologies, is to co-locate them with industrial and data center load. We've seen that countless number of times.

Joseph Dominguez: For all these reasons, co-location will be an essential tool for maintaining our national security, developing new generation, and our overall economic competitiveness. Friday's actions at the FERC may have slowed things down, but they will ultimately be constructive. Notably, FERC did not grant requests by a small number of utilities to set the Talent Energy ISA for hearing or any alternative to reject it outright. Instead, FERC ordered a technical conference that will provide all parties with opportunities to talk about the benefits of co-location as well as other issues. Likewise, we thought the language of the deficiency letter was narrow.

Speaker Change: For all these reasons, co-location will be an essential tool for maintaining our national security, developing new generation, and our overall economic competitiveness.

Speaker Change: Friday's actions at the FERC may have slowed things but ultimately will be constructive in our view.

Speaker Change: Notably, FERC did not grant requests by a small number of utilities to set the Talon Energy ISA for hearing or any alternative to reject it outright.

Speaker Change: Instead, the FERC ordered a technical conference that will provide all parties with the opportunities to talk about the benefits of co-location as well as other issues.

Joseph Dominguez: In fact, it mirrored standard deficiency letter language about a higher burden of proof for ISA modifications that we've seen in a number of other applications. Just as an example of this, in the last 12 months, Exelon subsidiary ComEd received two deficiency letters using the exact same language about a higher burden of proof that we saw in the talent letter. In both instances, the project was, Of course, look, we don't know what FERC ultimately will do with the Talon ISA.

Speaker Change: Likewise, we thought the language of the deficiency letter was narrow.

Speaker Change: In fact, it mirrored standard deficiency letter language about a higher burden of proof for ISA modifications that we've seen in a number of other applications. Just as an example of this, in the last 12 months,

Speaker Change: X1 subsidiary ComEd received two deficiency letters using the exact same language about a higher burden of proof that we saw in the talent letter. In both instances the project was approved.

Speaker Change: Of course, look, we don't know what FERC ultimately will do with the Talon ISA.

Joseph Dominguez: But we think the benefits are compelling, and we look forward to the conference, and we're confident that any fair examination of costs will support co-location. So at this point, we and our customers are continuing to make progress, and we hope to execute consciously. At the same time, on a parallel path, we'll participate in the FERC proceedings or in any proceeding where these matters are discussed.

Speaker Change: But we think the benefits are compelling, and we look forward to the conference, and we're confident that any fair examination of costs will support co-location. So at this point, we and our customers are continuing to make progress, and we hope to execute contracts.

Speaker Change: At the same time, on a parallel path, we'll participate in the FERC proceedings or in any proceeding where these matters are discussed.

Joseph Dominguez: But that doesn't mean we won't have conversations with utilities outside these procedures. In my view, transparency is part of who we are as a company. And the more we can share with policymakers, utilities, and all stakeholders about how these facilities will operate, how they'll interact with the grid, and their benefits, the better for everyone. And I just want you to remember that, in the grand scheme of things, co-location is not a new idea. It's actually quite an old idea.

Speaker Change: But that doesn't mean we won't have conversations with utilities outside these proceedings.

Speaker Change: In my view, transparency is part of who we are as a company.

Speaker Change: And the more we could share with policy makers, utilities, and all stakeholders about how these facilities will operate, how they'll interact with the grid, and their benefits, the better for everyone.

Speaker Change: I just want you to remember that in a grand scheme of things, co-location is not a new idea. It's actually quite an old idea.

Joseph Dominguez: PFCG and others have noted Cogen, or Combined Heat and Power Projects, were the first co-locators. In a sense, I think they were the first microgrids. And when I came into this business, those projects were a common feature of our system, and not surprisingly, utilities were not always friendly to CoGen, at least not at first. But policymakers insisted on non-monopoly alternatives to power, and things got better. Now we're dealing with a whole new generation of policymakers and regulators, including many that weren't around when the CoGen policies were created.

Speaker Change: As PFCG and others have noted, co-gen, or combined heat and power projects, were the first co-locators. In a sense, I think they were the first microgrids.

Speaker Change: And when I came into this business, those projects were a common feature of our system. And not surprisingly...

Speaker Change: Utilities were not always friendly to Cogen, at least not at first, but policy makers insisted on non-monopoly alternatives to power, and things got better.

Joseph Dominguez: So we need to do a bit of work here to educate and inform. Importantly, we simply don't see this as a zero-sum game. There's a great opportunity for Constellation and for the utilities to work together to bring great connected and co-located data economy growth projects to our state. Here's what I think.

Joseph Dominguez: In the fullness of time, those jurisdictions that have clean energy centers like ours and offer both co-location and grid connection will be the most successful in generating business development, economic growth, and jobs for their state. Now, I want to close this part out by talking about something that I think kind of got missed in the overwhelming amount of conversation about the FERC process. I understand why there is a lot of attention on that, but we don't want to leave this topic without saying that we are making great progress on power sales for on-grid data centers through our 27th, 24-7 product.

Speaker Change: Now look, I want to close this part out by talking about something that I think kind of got missed in the overwhelming amount of conversation about the FERC process.

Speaker Change: I understand why there is a lot of attention on that but we don't want to leave this topic without saying that we are making great progress on power sales for on-grid data centers through our 27

Joseph Dominguez: Utilities across PG&E, and I think you've seen this in a bunch of the earnings calls, have been highlighting the growth of data centers in their service tests. In total, as you can see on slide six, they've now identified 50 gigawatts or more that would come in over time. Now look, in fairness, I think there's a lot of duplication in those numbers, and it's going to occur over a long-ish period.

Speaker Change: 24-7 product.

Speaker Change: Now look, in fairness, I think there's a bunch of duplication in those numbers, and it's going to occur over a longish timeline.

Joseph Dominguez: The point is, I think it's powerful that everyone is seeing the same thing, growth in this area. And those growth opportunities are good for Constellation because each of these grid data center projects, whether they're located in Illinois, Ohio, anywhere else in P.J.M. or in other regions.

Speaker Change: And those growth opportunities are good for Constellation because each of these grid data center projects.

Joseph Dominguez: They present an opportunity for our commercial team to sell clean and reliable power through our 24-7 product and other offerings to these clients. So in conclusion, we continue to have multiple ways to serve our data center customers, both behind the meter as well as grid-connected, and create value for all of our own. Nothing over the last quarter has changed our outlook on how Constellation can meaningfully participate. Turning to slide seven.

Joseph Dominguez: The fleet performance is laid out in this slide, and as you can see here, nuclear performance was again strong and ahead of plan for the quarter. We produced more than 41 million megawatt hours of reliable, available, and carbon-free generation from our nuclear plants with a capacity factor of 95.4 percent. That's including refueling outages, which we completed in an average of 21 days. Again, industry leading as always. Our renewables and natural gas fleet also performed well and exceeded our plan with 96.6% of renewable energy capture and a 98% power dispatch match. Congratulations to those teams. Excellent work. Turning to slide 8.

Speaker Change: Turning to slide 7.

Speaker Change: That's including refueling outages, which we completed in an average of 21 days, and industry-leading as always.

Speaker Change: Our renewables and natural gas fleet also performed well and exceeded our plan, with 96.6% of renewable energy capture and a 98% power dispatch match. Congratulations to those teams, excellent work.

Joseph Dominguez: We talk a lot about the advantage of creating value because our best-in-class carbon-free generation fleet is combined with an industry-leading commercial business. And the results here, again, demonstrate the validity of that. Our commercial business arrives in volatile and changing markets. The markets we're seeing. With spot.

Speaker Change: Turning to slide 8.

Speaker Change: We talk a lot about the advantage of creating value because our best-in-class, carbon-free generation fleet

Speaker Change: is combined with an industry-leading commercial business. And the results here, again, demonstrate the validity of that point.

Speaker Change: Our commercial business thrives in volatile and changing markets, the markets we're seeing, with spot and ford prices going up and down a bit throughout the course of the year.

Joseph Dominguez: The price is going up and down a bit throughout the course of the quarter. This quarter, our team priced in higher margins to customers to manage their exposure to volatile prices through firm products that offer price search. They optimized not only our individual generation and load positions, but they created the best positions using both, and they sold customized sustainability solutions. On that point, we're seeing more evidence of our customers, not just data center customers, but customers as a whole, evolving in their sustainability journeys from buying annual clean energy products to starting to match their hourly consumption with clean energy.

Speaker Change: This quarter, our team priced in higher margins to customers to manage their exposure to volatile prices through firm products that offer price certainty.

Speaker Change: They optimized not only our individual generation and load positions, but they created the best positions using both.

Speaker Change: and they sold customized sustainability solutions.

Speaker Change: On that point, we're seeing more evidence of our customers, not just data center customers, but customers as a whole, evolving in their sustainability journeys from buying annual clean energy products to starting to match their hourly consumption with clean energy.

Joseph Dominguez: And again, I think the reliability dimension here plays a huge role in the understanding of customers that we need to match clean energy production with the time of use for their particular application. And they also understand that that's the best way to ultimately make a difference in the environment and manage energy volatility. A good example of that came to us this quarter when John Hopkins University applied physics joined the growing list of high-profile customers that have turned to Constellation to power their operations with 24-7 carbon-free energy, as we did with the Comcast contract and the McCormick contract that we highlighted on our last call.

Speaker Change: The reliability dimension here plays hugely in the understanding of customers that we need to match clean energy production with the time of use for their particular application.

Speaker Change: And they also understand that that's the best way to ultimately make a difference in the environment and to manage the energy volatility.

Speaker Change: A good example of that came to us this quarter when John Hopkins University Applied Physics Lab joined the growing list of high-profile customers that have turned to Constellation to power their operations with 24-7 carbon-free energy.

Joseph Dominguez: We spotlight this agreement with Johns Hopkins because it shows that it's not just the hyperscalers but rather a wide range of customers that are looking at 24-7 carbon-free energy matching as the best. With that, I'll turn it over to Dan to cover the financials.

Daniel Eggers: Thank you, Joe, and good morning, everyone. Beginning on slide 9, we earned $2.58 per share in gap earnings and $1.68 in adjusted operating earnings, which is $0.04 per share higher than last year. Our commercial business continues to perform exceptionally well, creating value by optimizing our generation and load positions, demonstrating how it thrives in volatile markets. We're also seeing margins above the long-term averages we used in our forecast and above the enhanced margins we disclosed in February.

Speaker Change: Thank you, Joe, and good morning, everyone.

Daniel Eggers: This performance flowed through our quarterly results and contributed to our improved outlook for the year, which I'll discuss in a few minutes. Compared to last year, we benefited from the nuclear PTC, more nuclear output combined with lower costs from refueling outages, and a contribution from our ownership share in the South Texas project that closed last fall. And, as discussed last quarter, our stock has performed very well year-to-date, which creates higher employee stock compensation expense year-over-year.

Speaker Change: Compared to last year, we benefited from the nuclear PTC, more nuclear output combined with lower costs and refueling outages.

Daniel Eggers: Finally, on the quarter, we recognized $33 million in the Illinois ZECC program in June for banked credits, which is down a bit from the $218 million recognized last year. As you may recall, the Illinois ZECC program is subject to an overall cost cap as one of its consumer protection features.

Speaker Change: Following on the quarter, we recognized $33 million in the Illinois ZECC program in June for banked credits, which is down a bit from the $218 million recognized last year.

Daniel Eggers: In earlier years of the program, we generated more credits than we could use under this mechanism, so we were able to bank those credits for future years. For the 2023-2024 planning year, so last second quarter, power prices had risen to a level where the ZEC price was nearly zero, and we were instead able to use our bank ZECs to get back to the cost cap. For accounting reasons, we had to book these revenues at the start of the planning year, hence the $218 million we recognized in the second quarter of 2023.

Speaker Change: in earlier years of the program.

Speaker Change: We're able to bank those credits for future years.

Speaker Change: For the 2023-2024 planning year, so last second quarter,

Speaker Change: Power prices had risen to a level where the ZEC price was nearly zero, and we were instead able to use our bank ZECs to get back to the cost cap.

Daniel Eggers: This year, the forward prices have moderated, and the ZEC credits for the 2024-25 planning year will largely get us to the cap, using only $33 million of bank ZECs, which we then recognize this quarter. So, taking all these impacts together, when you think about our second-quarter results, our year-over-year quarterly earnings were $0.04 higher, but would have been $0.44 per share higher if not for the timing of when we recognized the Illinois ZEC credit. Instead, we'll see these credits flow as a positive driver for the remainder of the 24-25 planning year and have always been part of our full year expectations.

Speaker Change: This year, the forward prices have moderated, and the ZEC credits for the 2024-25 planning year will largely get us to the cap, using only $33 million of bank ZECs, which we then recognized this quarter.

Speaker Change: So, taking all these impacts together, when you think about our second quarter results, our year-over-year quarterly earnings were $0.04 higher, but would have been $0.44 per share higher if not for the timing of when we recognized the Illinois ZEC credits.

Speaker Change: Instead, we'll see these credits flow as a positive driver for the remainder of the 2024-25 planning year and have always been part of our full year expectations.

Daniel Eggers: Moving to slide 10, we are raising our full-year adjusted operating earnings guidance outlook, with the midpoint of guidance going from $7.63 to $8.00 per share, with a new range of $7.60 to $8.40. Joe and I spoke about our strong commercial performance to date, and that performance enables us to increase our earnings outlook for the year. As you can see in the appendix on slide 25, we increased our enhanced gross margin line by $450 million due to better optimization of our portfolio and higher commercial margins than planned.

Speaker Change: Moving to slide 10, we are raising our full year adjusted operating earnings guidance outlook with the midpoint of guidance going from $7.63 to $8.00 per share with a new range of $7.60 to $8.40.

Speaker Change: Joe and I spoke about our strong commercial performance to date, and that performance enables us to increase our earnings outlook for the year.

Joe Dominguez: As you can see in the appendix on slide 25, we increased our enhanced gross margin line by $450 million due to better optimization of our portfolio and higher commercial margins than planned.

Daniel Eggers: Our expectations for enhanced commercial margins improved by 15 cents to $1.90 per megawatt hour, which is on top of our base commercial margin of $3.50 to $3.60 per megawatt hour. In addition to an increase in stock compensation due to our share price, we have some O&M drag due to performance-based compensation as a result of the commercial team's exceptional execution and value creation for our owners. Our ability to optimize our generation and load positions is not limited to 2024 but is extended into our 2025 outlook as well. We've increased our 2025 enhanced gross margin expectation by $250 million, some of which is from strong commercial backlog creation. All the rest is due to the higher prices from the PJM capacity offer.

Joe Dominguez: Our expectations for enhanced commercial margins improved by 15 cents to $1.90 per megawatt hour, which is on top of our base commercial margin of $3.50 to $3.60 a megawatt hour.

Joe Dominguez: In addition to an increase in stock compensation due to our share price, we have some O&M drag due to performance-based compensation as a result of the commercial team's exceptional execution and value creation for our owners.

Joe Dominguez: Our ability to optimize our generation and load positions is not limited to 2024, but is extended into our 2025 outlook as well.

Joe Dominguez: We have increased our 2025 Enhanced Gross Margin expectation by $250 million, some of which is from strong commercial backlog creation, while the rest is due to the higher prices from the PJAM capacity auction.

Daniel Eggers: So turning to slide 11, let's get into the financial impact of last week's capacity auction results. To level the playing field for everyone from the start, the nuclear PTC is now in place, so calculating the benefit from higher capacity prices is a little more involved than just a P times Q exercise. The Nuclear PTC is a means-based credit, and it's calculated by filling the gap between gross receipts, so all the market-based revenues coming to a plant, and the PTC threshold value, which we assume is $44.75 in 2025. What this means is that if gross receipts for a unit were below the PTC threshold of $44.75, we'd expect to receive PTC revenues to get us to that level.

Joe Dominguez: So turning to slide 11, let's get into the financial impact of last week's capacity auction results.

Joe Dominguez: To level set everyone from the start, the nuclear PTC is now in place, so calculating the benefit from higher capacity prices is a little more involved than just a P x Q exercise.

Joe Dominguez: The nuclear PTC is a means-based credit and is calculated by filling the gap between gross receipts, so all the market-based revenues coming to a plant, and the PTC threshold value that we assume is $44.75 in 2025.

Joe Dominguez: What this means is if gross receipts for a unit were below the PTC threshold of $44.75, we'd expect to receive PTC revenues to get us to that level.

Daniel Eggers: For those units, the uplift from higher than anticipated capacity revenues following this auction must first replace the expected PTC that was bringing us to the PTC floor level before we are able to realize upside earnings. For units that were already above the PTC floor, the full upside of the capacity price increase will be realized. Additionally, any revenues above the CMC price will be refunded to cost... So we do not realize any upside benefit for the three CMC plants in Illinois, even though they cleared the auction.

Joe Dominguez: For those units, the uplift from higher than anticipated capacity revenues following this auction must first replace the expected PTC that was bringing us to the PTC floor level before we are able to realize upside earnings.

Joe Dominguez: For units that were already above the PTC floor, the full upside of the capacity price increase will be realized.

Joe Dominguez: Additionally, any revenues above the CMC price will be refunded to customers.

Joe Dominguez: So we do not realize any upside benefit for the three CMC plants in Illinois, even though they cleared the auction.

Daniel Eggers: With all that clarification, capacity prices were higher than our expectations, and compared to where power prices were for both 2025 and 2026, we are now seeing many of our PJM plants at or above the PTC floor in providing earnings upside for us. Forwards for 2025 are lower than 2026, so more of the capacity revenue upside in 2025 goes first to offset the expected PTC contribution. The net earnings impact of 2025 is approximately 25 cents per share, which we reflected as part of the enhanced gross margin increase on slide 25 of the appendix for 2026.

Joe Dominguez: With all that clarification, capacity prices were higher than our expectations, and, compared to where power prices were for both 2025 and 2026, we are now seeing many of our PJM plants at or above the PTC floor in providing earnings upside for us.

Joe Dominguez: Four is for 2025 or lower than 2026, so more of the capacity revenue upside in 2025 goes first to offset the expected PTC contribution.

Joe Dominguez: The net earnings impact of 2025 is approximately 25 cents per share, which we reflected as part of the enhanced gross margin increase on slide 25 of the appendix.

Daniel Eggers: Assuming that we carry through the same capacity prices to the 2026-2027 capacity auction in December and use the end-of-quarter forward power prices, we would expect a $1.25 per share increase in earnings against the previous assumption using the $100 a megawatt day for the capacity auction. As a reminder, every penny of EPS is about $4 million pre-tax if you are trying to calibrate your forecast.

Joe Dominguez: for 2026.

Joe Dominguez: Assuming that we carry through these same capacity prices in the 2026-2027 capacity auction in December and use the end of quarter forward power prices.

Joe Dominguez: We would expect a $1.25 per share increase in earnings against the previous assumption using the $100 a megawatt day for the capacity auction.

Joe Dominguez: As a reminder, every penny of EPS is about $4 million pre-tax if trying to calibrate your forecast.

Daniel Eggers: Turning to the financing and liquidity update on slide 12, our investment grade balance sheet remains strong, and we continue to have constructive conversations with the ratings agency. During the second quarter, we entered into an accelerated share repurchase program, completing $500 million of repurchases, on top of the $500 million of repurchases we discussed on the first quarter call. You've now completed $1 billion in repurchases a year to date. $2 billion since the program began last year, for a total of more than 16 million shares.

Joe Dominguez: Turning to the financing and liquidity update on slide 12, our investment grade balance sheet remains strong and we continue to have constructive conversations with the ratings agencies.

Joe Dominguez: During the second quarter, we entered into an accelerated share repurchase program, completing $500 million of repurchases, on top of the $500 million of repurchases we discussed on the first quarter call.

Joe Dominguez: We've now completed $1 billion year-to-date and $2 billion since the program began last year for a total of more than 16 million shares.

Daniel Eggers: We have roughly $1 billion remaining in our board-authorized repurchase program, and we have more than $2.3 billion of capital still to be allocated for 2024 and 2025 before taking into account the improving earnings outlook for both of these years. We have considerable strategic flexibility to create further benefits for our shareholders through organic growth that meets our return thresholds or through investing directly in our companies. We believe firm, clean megawatts are the most valuable commodity in the market today, and we have more nuclear generation in competitive markets than all of our peers combined.

Joe Dominguez: We have roughly $1 billion remaining in our board-authorized repurchase program.

Joe Dominguez: And we have more than $2.3 billion of capital still to be allocated for 2024 and 2025 before taking into account the improving earnings outlook for both of these years.

Joe Dominguez: We have considerable strategic flexibility to create further benefits for our shareholders through organic growth that meets our return thresholds or through investing directly in our company.

Joe Dominguez: We believe firm, clean megawatts are the most valuable commodity in the market today, and we have more nuclear generation in competitive markets than all of our peers combined.

Daniel Eggers: When we look at our ability to execute and create value, as well as the opportunities ahead of us, we continue to view our stock as compelling, and, unfortunately, even more so since the last time we met. We will continue to invest directly in it through buying back our stock. I will now turn the call back to Joe for his closing. Thanks, Dan.

Joe Dominguez: When we look at our ability to execute and create value, as well as the opportunities ahead of us, we continue to view our stock as compelling, and unfortunately even more so since the last time we met. We will continue to invest directly in it through buying back our stock.

Joseph Dominguez: Thanks, Dan. Great job.

Joseph Dominguez: Constellation's like no other company. We have a unique set of existing assets that really can't be replicated, that create opportunities for us that no one else has. At our core, we have a visible base earnings growth of 10% through the decade that is backstopped by the federal government through the nuclear PTC and has a built-in inflation adjuster. That backstop is a huge differentiator, especially as some investors start to become concerned about clouds in the economy.

Joe Dominguez: I now turn the call back to Joe for his closing remarks.

Joe Dominguez: Thanks, Dan. Great job. Constellation's like no other company. We have a unique set of existing assets that really can't be replicated, that create opportunities for us that no one else has.

Joe Dominguez: At our core, we have a visible base earnings growth of 10% through the decade that is backstopped by the federal government through the nuclear PTC and has a built-in inflation adjuster.

Joseph Dominguez: Our country needs what we have, clean and dependable power generation to drive economic growth. And the argument for that just got stronger as the year progressed. We could support both national security and meet environmental goals. Power demand is growing, and at the same time, reliability is becoming a premium product. And we have the most reliable generation in America. Increased demand combined with the change to more intermittent, non-dispatchable resources means that volatile power markets will continue.

Joseph Dominguez: We have a commercial team that is very capable of addressing and earning margins from that volatility. We think Constellation is going to be a huge part of the solution for decades to come. Our clean and reliable nuclear plans, coupled with our ability to offer customer sustainability products, will drive the U.S. energy transition and the growth in the data center account. Politically, both Republicans and Democrats have consistently recognized that nuclear energy is both the backbone of our system, from a reliability standpoint, and is key to our sustainability goals.

Joe Dominguez: Politically, both Republicans and Democrats have consistently recognized that nuclear is both the backbone of our system from a reliability standpoint

Joseph Dominguez: And that support just continues to grow, on top of the opportunities we have from volatile power markets. We have more than 180 million megawatt hours of carbon-free generation that we produce annually that can achieve additional compensation through front-of-the-meter deals, behind-the-meter deals, upgrades, and other opportunities to invest in reliable clean energy and government procurement. Not many companies are growing at least 10% through the decade as their starting point with a federal tax.

Joe Dominguez: On top of the opportunities we have from volatile power markets.

Joe Dominguez: We have more than 180 million megawatt-hours of carbon-free generation that we produce annually.

Joe Dominguez: through in front-of-the-meter deals, behind-the-meter deals, upgrades, and other opportunities to invest in reliable, clean energy and government procurements.

Joe Dominguez: Not many companies are growing at least 10% through the decade as their starting point with a federal backstop.

Joseph Dominguez: We're not satisfied with that. We think we can grow base earnings faster with both behind and in front of the meter customer deals and increase our nuclear megawatt. And on top of this, our commercial team is working to consistently create products and services that will capture additional value from the markets above our baseline. That's our focus. That's what we do every day. So with that, I'll turn it over back to you, Michelle, to handle any questions.

Joe Dominguez: But we're not satisfied with that.

Joe Dominguez: We think we will grow base earnings faster with both behind and in front of meter customer deals and increasing our nuclear megawatts.

Joe Dominguez: On top of this, our commercial team is working to consistently create products and services that will capture additional value from the markets above our baselines.

Operator: Thank you. Ladies and gentlemen, if you have a question at this time, please press Star 1-1. If your question has been answered and you'd like to remove yourself from the queue, please press Star 11 again. Our first question comes from Shahriar Pourreza with Guggenheim Partners. Your line is open.

Joe Dominguez: So with that, let me turn it over back to you, Michelle, to handle questions.

Michelle: Thank you. Ladies and gentlemen, if you have a question at this time, please press star 11. If your question has been answered and you'd like to remove yourself from the queue, please press star 11 again.

Shahriar Pourreza: Hey Joe and Dan, morning. Joe, just starting with the co-location backdrop, does the FERC technical conference, I think you kind of alluded to this, prolong the timeline for a deal announcement at this point? And can you give us just any color on timing of a potential deal or how your potential counterpart is your view in the ISA process right now?

Speaker Change: Our first question comes from Shahriar Pourreza with Guggenheim Partners. Your line is open.

Char Pereza: Hey Joe and Dan, good morning.

Char Pereza: Morning.

Char Pereza: Joe, just starting with the co-location backdrop, does the FERC technical conference, I think you kind of alluded to this, does it kind of prolong the timeline?

Speaker Change: for a deal announcement at this point. And can you give us just any color on timing of a potential deal or how your potential counterpart is your view in the ISA process right now?

Joseph Dominguez: Yeah, sure. I think...

Joseph Dominguez: It could slow things down in terms of folks looking for certainty, but as we kind of think about it, or you think about the ancillary services that people are debating here, I think the totality of those ancillary services is relatively small. We actually think it's zero, just as PPL and TALENT do, in terms of the physical application we have.

Joe Dominguez: Yeah, sure. I think...

Speaker Change: It could slow things down in terms of folks looking for certainty, but as as we kind of think about it, you think about the ancillary services that people are debating here.

Joseph Dominguez: But even an allocation of these ancillary services is relatively a small amount, and if they're metered as PJM proposes, we're talking about really low dollars per megawatt hour, $1 to $2 to $3 a megawatt hour. Those kinds of charges aren't going to change the economic viability of these projects, even if they're imposed. And again, we think the better argument is that no charges will be imposed in terms of the configuration we're talking about. So,

Speaker Change: But even an allocation of these ancillary services is relatively a small amount, and if they're metered as PJM proposes, we're talking about really low dollars per megawatt hour, $1 to $2 to $3 a megawatt hour at most.

Speaker Change: Those kinds of charges aren't going to change the economic viability of these projects, even if they're imposed. And again, we think the better argument is no charge will be imposed in terms of the configuration we're talking about.

Joseph Dominguez: From our customers' perspectives, it's about crafting provisions in the contract that allocate those contingencies to the extent they are, and we've had to deal with that in the negotiations of the deal. But these things continue to march forward. I think, in the long run... Having clarity is going to be the most important thing. And getting through this in town, getting through its ISA, and having clarity is only going to kind of speed up the process and speed up deal execution, because people will then know exactly what they're contemplating.

Speaker Change: Having clarity is going to be the most important thing and getting through this in town, getting through its ISA and having clarity is only going to kind of speed up the process and speed up deal execution because people will then know exactly what their contract is.

Joseph Dominguez: So that's kind of the way we see it, and we'll continue to work for it. I don't think we need to wait until the end of the FERC process to announce a deal. Like I said, the contracting provisions will handle all contingencies that might occur with regard to that FERC proceeding, and we really don't see an outcome here where the FERC is going to say you can't do this. I mean, we've outlined the four reasons in the script. I won't go through them again, but this is kind of it.

Speaker Change: [inaudible]

Speaker Change: We need to wait until the end of the FERC process.

Speaker Change: to announce a deal. Like I said, contracting provisions will handle all contingencies.

Speaker Change: that might occur with regard to that FERC proceeding. And we really don't see an outcome here.

Speaker Change: where the FERC is going to say, you can't do this. I mean, we've outlined the four reasons in the script. I won't go through them again, but this is kind of a, this is important on so many levels to get done.

Joseph Dominguez: This is important on so many levels to get done; the policymakers in the states wanted it done, and I think that message will come through loud and clear in the process. I actually think it's a good opportunity to educate and inform people and kind of get this all out there. You know, this is, again, not a really new idea, but it's new to many. And so we've got to walk through the process. Kathleen, I don't know if you have anything to add in terms of the timing of the conference or what you expect.

Speaker Change: The policy makers in the states wanted to get done and I think that message will come through loud and clear in the process

Speaker Change: I actually think it's a good opportunity to educate and inform people and kind of get this all out there. You know, this is, again, not a really new idea, but it's new to many.

Speaker Change: And so we've got to walk through the process. Kathleen, I don't know if you have anything to add in terms of the timing of the conference, what you expect to see.

Kathleen Barrn: No, I mean, I think you covered it, Joe. You know, this kind of meeting is the kind of meeting that FERC holds from time to time when they want to learn something about a topic. You know, last year they had a technical conference on the EPA proposed 111D rule, and I participated in it on both sides, both at the commission and as a stakeholder.

Speaker Change: No, I mean, I think you covered it, Joe. You know, this kind of meeting is the kind of meeting that FERC holds from time to time when they want to learn something about a topic. You know, last year they had a technical conference.

Speaker Change: on the EPA proposed 111D rule. And I've participated in these on both sides, both at the commission and as a stakeholder, and it really is a great opportunity for there to be interaction between stakeholders and the commissioners.

Kathleen Barrn: And it really is a great opportunity for there to be interaction between stakeholders and the commissioners in an informal setting like a conference as opposed to doing so in litigation so that we can answer questions, we can talk about the benefits as we see them and get the issues out there in the open in a setting where it's less adversarial than a litigated docket. And in terms of the Talon case, when we look at the narrowness of the deficiency letter, as Joe pointed out, you know, it's very similar in language to other deficiency letters that have been issued on ISAs that have nonconforming language, asking, you know, one really narrow question about why those provisions are necessary. You contrast that to what typically happens where there are a long list of questions. Efficiency Letters reflecting, you know, concerns from the commission or questions from the commission. That does not occur here.

Speaker Change: in an informal setting like a conference.

Speaker Change: As opposed to doing so in litigation, so that we can answer questions, we can talk about the benefits as we see them, and get the issues out there in the open in a setting where it's less adversarial than a litigated docket.

Speaker Change: And in terms of the Talon case, when we look at the narrowness of the deficiency letter, as Joe pointed out, you know, it's very similar in language to other deficiency letters that have been issued on ISAs that have non-conforming language.

Speaker Change: asking one really narrow question about why those provisions are necessary. You contrast that to what typically happens where there are a long list of questions.

Speaker Change: in deficiency letters reflecting, you know, concerns from the commission or questions from the commission. That does not occur here. So they're really, you know, if you zoom out, signaling that they intend to keep the talent proceeding focused on the talent facts.

Kathleen Barrn: So they're really, you know, if you zoom out, signaling that they intend to keep the talent proceeding focused on the talent facts. And then they're going to use the standard tool that they have, this tech conference, to learn some more about the topic. So we see this as, you know, a very constructive way to move forward, and frankly, you know, a responsible one on the FERC's behalf.

Speaker Change: And then they're going to use the standard tool that they have, this tech conference, to learn some more about the topic. So we see this as, you know, a very constructive way to move forward and frankly, you know, a responsible one on the FERC's behalf.

Joe Dominguez: Got it. Okay, that's helpful. And then just lastly, BRA, I mean, I guess it's open to interpretation on whether we actually do incent new entry into the market. I guess, you know, obviously, Joe, you're in discussions. What's your view on some of the commentary out of some of the T&D utilities?

Speaker Change: and it's been topical on these calls is regarding just PPAing or rate basing peakers in PJM if the market doesn't move fast enough. Thanks guys.

Joe Dominguez: Yes, sir, I don't think that's really any different. I've now been in this business seemingly for so long that I remember these cycles over and over again. We've had these discussions before, but, you know, in states like Pennsylvania, states like Ohio,

Joe Dominguez: They've been pretty clear, let alone places like Illinois where I just think that conversation would be impossible.

Joe Dominguez: They've been very clear that they want the markets to work, and there's great evidence here that the PJM market has worked. We've seen high prices before in the PJM market.

Shahriar Pourreza: Got it. Okay, that's helpful.

Joe Dominguez: And in fact, even with these higher prices, the point I made in my opening remarks here is that we're still at a lower point.

Joe Dominguez: than we were 15 years ago, and it's just, it's a testament to the value of competition. I think stakeholders in those states get it.

Speaker Change: You know, I think there is a genuine concern.

Speaker Change: about the growth rates in terms of spending on the D&D system. And I don't see policymakers naturally going to the view that monopolization...

Speaker Change: of the Generation Sector, or further monopolization of the Generation Sector, is going to be the

Speaker Change: Now, frankly, any more than I ever did.

Speaker Change: You know, we'll respond to those points, but right now, we just have a new FERC.

Speaker Change: process in the capacity option. We need to give it the time to work. There's no evidence whatsoever through history or anything that's going on now that competition isn't going to address this problem, right? So that's our view.

Speaker Change: Great. Thank you guys so much. Appreciate it. Talk to you soon.

Joseph Dominguez: And then just lastly, BRA, I mean, I guess it's open to interpretation on whether we actually do incentivize new entry into the market. I guess, you know, obviously, Joe, you're in discussions. What's your view on some of the commentary out of some of the T&D utilities, and it's been topical on these calls regarding just PPAing or rate-basing peakers in PJM if the market doesn't move fast enough? Thanks, guys.

Speaker Change: Thank you. Our next question comes from David Arcaro with Morgan Stanley . Your line is open.

Joseph Dominguez: Yeah, sure, I don't think that's really any different. I've now been in this business for seemingly so long that I remember these cycles over and over again. We've had these discussions before, but you know in states like Pennsylvania, states like Ohio, they've been pretty clear, let alone places like Illinois, where I just think that conversation would take place. They've been very clear that they want the markets to work, and there's great evidence here that the PJM market has worked.

Joseph Dominguez: We've seen high prices before in the PJM market. And, in fact, even with these higher prices, the point I made in my opening remarks here is that we're still at a lower point than we were 15 years ago. And it's just, it's a testament to the value of competition.

Joseph Dominguez: I think stakeholders in those states get it. I think there is genuine concern about the growth rates in terms of spending on the D&D system. And I don't see policymakers naturally going to the view that monopolization of the generation sector, further monopolization of the generation sector, is going to be the answer now, frankly, any more than I ever did. So, you know, we'll respond to those points. But right now, we just have a new FERC process in the capacity auction.

Joseph Dominguez: We need to give it the time to work. There's no evidence whatsoever through history or anything that's going on now that competition isn't going to address this problem, right? So that's our view. Great. Thank you, guys.

David Arcaro: Thank you. Our next question comes from David Arcaro of Morgan Stanley. Your line is open.

David Arcaro: Hey, good morning. Thanks so much for taking my questions.

Shahriar Pourreza: Great. Thank you guys so much. I appreciate it. Talk to you soon.

David Arcaro: I was wondering, does the outcome of the PJM auction, just in terms of how high prices got, does that increase the urgency that you're hearing from potential data center counterparties to get some of these co-location deals done?

David Arcaro: Hey, good morning. Thanks so much for taking my question. Do you think the outcome of the PJM auction, just in terms of how high prices got, increases the urgency that you're hearing from potential data center counterparties to get some of these co-location deals done?

Joseph Dominguez: Yeah, I think it increases urgency both in terms of that and also urgency in terms of locking down front-of-the-meter deals because it is a tightening market, and people are seeing that, and in particular for clean and reliable megawatts, it creates a huge opportunity, I think, for Jim's business to go and meet the demand of these customers, and we're certainly seeing that we've reshaped the team, and we' I think it also signals that even with the forecasted growth, right because the data center growth was in the forecast that PJM used when it ran the auction.

Speaker Change: Yeah, I think it increases urgency both in terms of that and also urgency in terms of

Speaker Change: Locking down in front of the meter deals because it is a tightening market and people are saying that

Speaker Change: and in particular for clean and reliable megawatts. It creates a huge opportunity, I think, for Jim's business.

Speaker Change: to go and meet the demand of these customers. And we're certainly seeing that. We've reshaped the team. We've refocused the team through a lot of effort on Jim's part to go out and meet and address the needs of these customers. And we're seeing a pretty significant appetite there.

Speaker Change: I think it also signals that even with the forecasted growth, right, because the data center growth was in the forecast that PJM used when it ran.

Joseph Dominguez: It's evidence that we have the supply needed in PJM to address this data center growth. So I think it was positive on two fronts. I think now we have the forecast in, and the market still responded with enough generation to meet the reliability needs of the system. But, at the same time, we do see a tightening in the market, and people need to get moving to lock up their supply. So I think it's added value.

Speaker Change: the auction.

Speaker Change: It's evidence that we have the supply needed in PJM to address this data center growth. So I think it was a positive on two fronts. I think now we have the forecast in and the market still responded with enough generation to meet the reliability needs of the system.

Speaker Change: And, but at the same time, we do see a tightening in the market and people need to get moving to lock up their supplies. So I think it's additive.

David Arcaro: Yeah, got it. That makes sense. And then, you know, another question that we've had is, as you're working on data center deals, should we be assuming that dual unit plants make the most sense with one unit acting as backup? Or is there demand for or certain structures where you could fully contract a dual unit plant? What would that structure potentially look like?

Speaker Change: Yeah, got it. That makes sense.

Speaker Change: And then, you know, another question that we've had is, as you're working on data-centered deals, should we be assuming that...

Speaker Change: Do dual unit plants make the most sense with one unit acting as backup, or is there demand or certain structures where you could fully contract a dual unit plant? What would that structure potentially look like?

Joseph Dominguez: Yeah, great question, Dave. For us, we started with the dual units because that made the most sense, right? As you noted, one unit becomes the natural backup for the other unit during outages. But, you know, as we've gotten smarter at this, it really depends on the type of data center, whether it's an inference data center or a learning data center, and it really depends on what the hyperscaler intends to evolve the facility.

Dave: Yeah, great question, Dave. For us, we started with the dual units because that made the most sense, right? One, as you noted, one unit becomes the natural backup for the other unit during outages.

Dave: But, you know, as we've gotten smarter in this, it really depends on the type of data center, whether it's an inference data center or a learning data center. And it really depends on what...

Joseph Dominguez: I don't think we've seen all the configurations, and I could easily see circumstances where behind-the-meter data centers are located in the same region as on-grid data centers and effectively provide reliability through fiber, as opposed to through wires and backup generation where on-grid picks up behind-the-meter data needs when the data center is in outage mode.

Speaker Change: How the hyperscaler intends to evolve the facility.

Speaker Change: I don't think we've seen all the configurations, and I could easily see...

Speaker Change: Circumstances where

Speaker Change: behind-the-meter data centers.

Speaker Change: are located in the same region as on-grid data centers and effectively provide reliability through fiber as opposed to through wires and backup generation where on-grid picks up.

David Arcaro: So we could see those configurations. I could, frankly, see those configurations evolving even at the dual-unit stations. We're learning a lot, you know. Despite the enthusiasm, we certainly feel it, and we know our owners feel it. We're still in the fairly early innings in terms of understanding all of the different use cases and how our resources will interact with the grid and will interact with these customers. Honestly, I think in talking to them, the customers are still figuring it out.

Speaker Change: behind the meter data needs when the data center is in outage mode. So we could see those configurations. I could frankly see those configurations evolving even at the dual unit stations. We're learning a lot, you know.

Speaker Change: Despite the enthusiasm, we certainly feel it. We know our owners feel it.

Speaker Change: We're still fairly early innings in terms of understanding all of the different use cases.

Speaker Change: and how our resources will interact with the grid and will interact with these customers. Honestly, I think in talking to them, the customers are still figuring it out. So, I at this point wouldn't rule out anything.

David Arcaro: So I, at this point, wouldn't rule out anything. We do think the most natural place is the dual-unit site, both in terms of the volume of electricity and the natural backup. We think those are going to be the first sites to be selected, and so far, it appears to be the

Speaker Change: We do think the most natural place is the dual-unit site, both in terms of the volume of electricity and the natural backup. We think those are going to be the first sites to be selected, and so far it appears to be the case.

David Arcaro: Okay, great. That's a helpful color. Thanks so much.

Steven Fleishman: Thank you. Our next question comes from... Steve Fleishman with Wolf Research. Your line is open.

Speaker Change: Okay, great. That's helpful color. Thanks so much.

Speaker Change: Thank you. Our next question comes from...

Steven Fleishman: Morning, Steve. Yeah, hi, good morning.

Speaker Change: Steve Fleishman with Wolf Research. Your line is open.

Steven Fleishman: Sorry, I wanted to kind of better clarify a little bit more on the co-location kind of timeline. So I think we'll have a technical conference in the fall, but I don't think we're going to get, you know, kind of any next step from that probably till sometime in 2025, probably a policy statement 206 or whatever, and I guess we will have a talent outcome by the fall.

Speaker Change: Good morning, Steve. Yeah, good morning.

Steve Fleischman: Sorry, I wanted to just try to kind of better clarify a little bit more on the, uh...

Steve Fleischman: co-location kind of timeline. So I think

Speaker Change: You know, we'll have a technical conference in the fall, but I don't think we're going to get...

Speaker Change: You know kind of any next step from that probably till sometime in 2025 most likely policy statement or

Speaker Change: 206 or whatever, and I guess we will have a talent outcome by the fall. So just in terms of thinking about

Steven Fleishman: So just in terms of thinking about just a realistic time frame to kind of get the ball rolling, as you said, it would be helpful to get clarity. I mean, is this something that we should kind of not expect to hear more until sometime next year, or is this something that we could still see something happen even this year, even as these things are still kind of in process?

Speaker Change: Just a realistic time frame to kind of be helpful to get clarity, as you said. I mean, is this something that...

Speaker Change: We should kind of not expect to hear more until sometime next year, or is this something that we could still see something happen even this year, even as these things are still kind of in process?

Joseph Dominguez: I think that the deal you're referring to is a deal done, right? Yes.

Speaker Change: Love you, too. Love you.

Speaker Change: I think that something you're referring to is a deal done, right?

Joseph Dominguez: Yeah, so Steve, I don't think we're bound by time bound by, ultimately, clarity in the FERC process. I do think that TAL and ISA are going to be instructive, and folks are watching that to make sure that some kind of it goes through or what conditions might get attached to that, but We are independently working on contractual provisions that will allow us to manage whatever outcome comes out of those proceedings. And so, at least for the moment. We're working with our customers towards finalizing deals, and I could certainly see a circumstance where those things get announced, and there's still some process going on at FERC or some discussion among stakeholders.

Speaker Change: Yes.

Speaker Change: Yeah, so Steve, I don't think we're bound, time-bounded by...

Speaker Change: ultimately clarity in the FERC process. I do think that TAL and ISA is going to be instructive and folks are watching that to make sure kind of it goes through or what conditions might get attached to that.

Speaker Change: We, independently, are working on contractual provisions that will allow us to manage whatever outcome comes out of those proceedings. And so, at least for the moment...

Speaker Change: We're working with our customers towards finalizing deals and I could certainly see a circumstance where those things get announced and there's still some process going on at FERC or some discussion among stakeholders.

Joseph Dominguez: That's helpful. Thanks. And then just on, you know, one, this has been a very public kind of gotten very noisy process, and I would assume that some of these customers don't really care.

Speaker Change: That's helpful, thanks. And then, just on, you know, this has been a very public, kind of gotten very noisy process.

Speaker Change: and I would assume...

Speaker Change: You know, some of these customers don't really love kind of seeing that and such, so just is that in a way impacting at all the ability to kind of

Speaker Change: you know, get things done with the customers at a concern.

Joseph Dominguez: You know, not yet, Steve. But the customers aren't paying attention. And, by the way, so are the policymakers. Look, if...

Speaker Change: You know, not yet, Steve, but the customers are paying attention to this.

Joseph Dominguez: This stuff is happening, and I'll just challenge not our deal, but I'll use it as an illustration. Allen, and that arrangement is bringing 10 plus billion dollars, maybe more than 20 billion, of Economic Development to a region that, if we're going to be honest, hasn't seen a lot of sunshine from an economic development standpoint of this dimension in a long, long time. And I think it's fair to say that policymakers around Pennsylvania like to see that for communities like this that need jobs and economic opportunity.

Speaker Change: And by the way, so are the policy makers. Look, if...

Speaker Change: This stuff is happening. I'll just challenge not our deal, but I'll use it as an illustration.

Speaker Change: Talon and that arrangement is bringing 10 plus billion dollars, maybe more than 20 billion dollars.

Speaker Change: of Economic Development to a region that, if we're going to be honest, hasn't seen a lot of sunshine from an economic development standpoint of this dimension in a long, long time.

Speaker Change: I think it's fair to say that policy makers around Pennsylvania like to see that for communities like this that need jobs and economic opportunities.

Joseph Dominguez: And I think it's fair to extrapolate from that that they won't like it very much if people interfere with those things and cause them to come off the rails. And so I think the policymaker reaction, the labor reaction, which, of course, drives policymakers in many of our jurisdictions, they're all pretty important factors. So I think we'll see that play out.

Speaker Change: And I think it's fair to extrapolate from that.

Speaker Change: that they won't like it very much.

Speaker Change: if people interfere with those things and cause it to come off the rails.

Speaker Change: And so...

Speaker Change: I think the policymaker reaction, the labor reaction, which of course drives policymakers

Joseph Dominguez: I think that pushes parties to try to work these things out. The other thing is from a customer standpoint, right? You want to be in a jurisdiction that is pro and friendly to data centers and gives these companies every option. And I think in the early innings... That probably isn't the case, and I noticed that you pointed that out in some of your research.

Speaker Change: They're all pretty important factors, so I think we'll see that play out. I think that pushes parties to try to work these things out. The other thing is, from a customer standpoint, right?

Speaker Change: You want to be in a jurisdiction that is pro and friendly to data centers and gives these companies every option. And I think in the early innings...

Speaker Change: That probably isn't the case, and I noticed that you pointed that out in some of your research. So look, we're not at a place right now where people are saying, you know, have a circle around a particular jurisdiction with a red stripe through it like a Ghostbusters thing.

Joseph Dominguez: So look, we're not at a place right now where people are saying, you know, have a circle around a particular jurisdiction with a red stripe through it like Ghostbusters. But I think people are paying attention to it. Policymakers want this to happen. They want the parties to work it out. So at the end of it, we will go anywhere we need to go to have the discussion. If we could only have the discussion in proceedings, state or federal, we'll have the discussions in state or federal proceedings.

Speaker Change: But I think people are paying attention to it.

Speaker Change: Policymakers want this to happen. They want the parties to work it out.

Speaker Change: At the end of it, we will go anywhere we need to go to have the discussion. If we could only have the discussion in proceedings, state or federal, we'll have the discussions in state or federal proceedings.

Joseph Dominguez: But we think the clear signal from what happened at FERC and from the rejection of ban legislation in Maryland is to tell parties, "Work these issues out. This economic development is important." I don't think we're the only ones hearing this.

Speaker Change: But we think the clear signal from what happened at FERC from the rejection of ban legislation in Maryland is to tell parties Work these issues out. This economic development is important. I don't think we're the only ones hearing that message

Joseph Dominguez: And we'll strive, and we do this every day, to have conversations. You don't have to have every policy conversation in a proceeding, and frankly, if we did, regulators and lawmakers would never sleep. So we need to continue to have those discussions. In my view, Steve, it's... If you have clean energy centers in your jurisdiction, and you can offer that opportunity, that's a huge advantage for the incumbent utility to make the state a place that's friendly to the data economy.

Speaker Change: And we'll strive, and we do this every day, to have conversations.

Speaker Change: You don't have to have every policy conversation in a proceeding, and frankly, if we did, regulators and lawmakers would never sleep. So we need to continue to have those discussions. In my view, Steve, it's this.

Steve Fleischman: If you have clean energy centers in your jurisdiction and you can offer that opportunity.

Steve Fleischman: That's a huge advantage for the incumbent utility to make the state a place that's friendly to the data economy and what we've seen before.

Joseph Dominguez: And what we've seen before, one data center attracts more because they kind of work together. So I just think the approach here of thinking about this as a zero-sum game is really just kind of the wrong mindset.

Steve Fleischman: is one data center attracts more because they kind of work together.

Speaker Change: So, I just think the approach here of thinking about this as a zero-sum game is really just kind of the wrong mindset. And I think we just got to kind of get through that phase here. And we are working very hard to do it.

Joseph Dominguez: And I think we just have to get through that phase here, and we're working very hard to do it. Our owners. Expect us, every day, to work on the things that bring the Lakonda vision that our team is announcing today. We don't want to be tied up in procedures all over the place. We will if we have to, but we prefer to resolve these issues in a way that's friendly to what policymakers want and what customers want. That's what we aim to achieve.

Steven Fleishman: Great. Thanks for the clarification. Thank you.

Speaker Change: Our Owners.

Speaker Change: Expect us every day to work on the things that bring the spectacular results that our team is announcing today. That's what we want to be working on.

Speaker Change: We don't want to be tied up in proceedings all over the place. We will if we have to, but we prefer to resolve these issues in a way that's friendly to what policymakers want and what customers want. That's what we aim to achieve.

Operator: Thank you. We have time for one last question, and that question comes from Paul Zimbardo with Jeffrey's. Your line is open.

Speaker Change: All right, thanks for the clarifications. Thank you.

Speaker Change: Thank you. We have time for one last question and that question comes from Paul Zimbardo with Jeffreys. Your line is open.

Paul Zimbardo: Hi, good morning team. Thanks for squeezing me in. Daniel, thank you. Lots of good content today. I wanted to shift and kind of run with that last one you mentioned a little bit.

Paul Zimbardo: Hi, good morning team. Thanks for squeezing me in.

Paul Zimbardo: Daniel, thank you. Lots of good content today. I want to shift it and kind of run with that last one you mentioned a little bit. I know we're all focused on FERC, but you mentioned Maryland. Just holistically, what are some of your state legislative priorities to support the co-location strategy? I know Maryland has Senate Bill 1. If you could just comment more broadly what kind of the focuses are at the state level, that'd be helpful.

Paul Zimbardo: I know we're all focused on FERC, but you mentioned Maryland. Just holistically, what are some of your state legislative priorities to support the co-location strategy? I know Maryland has Senate Bill 1. If you could just comment more broadly on what kind of focus there is at the state level, that'd be helpful.

Joseph Dominguez: Well, I think we're going to be largely reactive to what we're seeing, but, you know, we will work with customers, with labor unions, and others to make sure that all opportunities remain on the table for economic growth. But, you know, we're not, you know, we're not sitting here thinking about launching legislation. We think this is like the cogen stuff that I alluded to or the microgrid stuff that we've talked about, largely handled in the regulatory arena.

Joseph Dominguez: Well I think

Speaker Change: Well, I think we're going to be largely reactive to what we're seeing, but, you know, we will work with customers, with labor unions and others to make sure that all opportunities remain on the table for economic growth.

Speaker Change: But, you know, we're not, you know, we're not sitting here thinking about launching legislation. We think this is like the cogen stuff that I alluded to or the microgrid stuff that we've talked about largely handled in the regulatory arena.

Paul Zimbardo: Okay, understood that. And I know in your prepared remarks, you talked about some of the customer bill impacts from the PGM auction, some of the benefits for all parties from the co-location strategy. But just curious, if you have any initial estimates of like what the benefits would be in terms of rate reductions for ratepayers, if there was like a hypothetical one gigawatt data center or co-location. Some of your peers have kind of put out some numbers, but curious if you've done the analysis there you're willing to share.

Speaker Change: Okay.

Speaker Change: Understood there. And I know in your prepared remarks you talked about some of the customer bill impacts from the PGM auction, some of the benefits for all parties from the co-location strategy.

Speaker Change: but just curious if you have any initial estimates of like what the the benefits would be in terms of rate reductions for rate payers if there was like a hypothetical one gigawatt data center or co-location some of your peers are going to put out some numbers but curious if you've done the analysis there you're willing to share.

Joseph Dominguez: Well, I will point to either Kathleen or David Dardis, our general counsel. We could talk certainly about some of what we've presented in our case, but we have, you know, generally seen, a billion dollars of costs associated with a gigawatt of load, right? And in jurisdictions where a lot of that is socialized, you know, 90% or more, and frankly, I think that's an underestimate because that just includes the kind of direct substation work. It doesn't include the work behind the substation that may be necessary. But we see some jurisdictions where a lot of that is spread out to many other customers.

Speaker Change: Well, I will point to either Kathleen or David Dardis, our general counsel, we could talk certainly about some of what we've presented in our case, but we have, you know, generally seen

Speaker Change: You know, a billion dollars of costs associated with a gigawatt of load, right?

Speaker Change: and in jurisdictions where a lot of that is socialized, you know, 90% or more. And frankly, I think that's an underestimate, because that just includes the kind of direct substation work. It doesn't include the work behind

Speaker Change: at the substation that may be necessary.

Speaker Change: but we see some jurisdictions where a lot of that

Joseph Dominguez: In our applications, those hyperscalers are paying for the connection. Now, it's not a billion dollars because the connection is occurring right at the plant, which is the point, right? So, you know, what we're doing is creating switch yards and other things that are one-tenth of those costs.

Speaker Change: is spread out to many other customers in our applications.

Speaker Change: those hyperscalers are paying for the connection. Now, it's not a billion dollars because the connection is occurring right at the plant, which is the point, right? So, you know, what we're doing is creating switch yards and other things that are one-tenth of those costs.

Joseph Dominguez: I'm going to talk a little bit about how to connect the same amount of load, but you can easily see a factor of 10x. I actually think it's more when you talk about putting a data center out on the grid side. And a lot of those costs get socialized to customers that aren't the hyperscalers, and so that's the real benefit.

Speaker Change: to connect the same amount of load. But you can see easily a factor of 10x, I actually think it's more when you talk about putting a data center out on the grid somewhere.

Speaker Change: And a lot of those costs get socialized to customers that aren't the hyperscalers. And so that's the real benefit. But the other thing that – look, Paul, when we're talking about this –

Joseph Dominguez: But the other thing that—look, Paul, when we're talking about this—we are pretending as if the grid could easily host a gigawatt of load. When I was at ComEd, the largest load we ever had in the system was steel mills at 150 megawatts, right? When I was general counsel at PECO, the largest load, or one of the largest loads we had were the refineries in Philadelphia, 60, 70 megawatts. The notion that you could accumulate enough power somewhere on the grid to power a gigawatt data center.

Paul Zimbardo: We are pretending as if the grid could easily host a gigawatt of load.

Paul Zimbardo: When I was at ComEd, the largest load we ever had in the system was steel mills at 150 megawatts, right? When I was general counsel at PECO, the largest load, or one of the largest loads we had, were the refineries in Philadelphia. 60, 70 megawatts.

Paul Zimbardo: The notion that you could accumulate enough power somewhere on the grid to power a gigawatt data center.

Joseph Dominguez: It's frankly laughable to me that you could do that anywhere that doesn't start with decades of time, right? This is an enormous amount of power to go out and try to concentrate. Think about it.

Paul Zimbardo: It's frankly laughable to me that you could do that in anywhere that doesn't start with decades of time, right?

Joseph Dominguez: You're building three 345 kV lines with all the attendant substations to create all of the redundancy, each one of those substations having to draw power from an independent source. It just, it is always me, not new.

Paul Zimbardo: This is an enormous amount of power to go out and try to concentrate it. Think about it. You're building three 345 kV lines with all the attendant substations to create all of the redundancy, each one of those substations having to draw power from an independent source.

Joseph Dominguez: It always makes sense that when you're talking about a large load, you're going to bring it closer to large generation resources. And when you're talking about a large load that also wants to use zero emission energy, you're going to bring it very close to nuclear power. We need to make sure that policies don't inadvertently drive us to spending billions of dollars where cheaper solutions are available, quicker solutions are available, and, from an electrical engineering standpoint, more prudent.

Paul Zimbardo: It just, it has always made sense.

Paul Zimbardo: This is not new. It's always made sense that when you're talking about large load, you're going to bring it closer to large generation resources. And when you're talking about large load that also wants to use zero emission energy, you're going to bring it very close to nuclear power plants.

Paul Zimbardo: We need to make sure that policies don't inadvertently drive us to spending billions of dollars.

Paul Zimbardo: where cheaper solutions are available, quicker solutions are available, and from an electrical engineering standpoint, more prudent.

Joseph Dominguez: And frankly, feasible solutions are available. So we're going to have those policy discussions, but I think that's what's going to be revealing in the FERC discussion. Powerful if you want to, if you want to take a look at one document that I think lays this out pretty clearly Mike Kormos, who for many years was the leader of transmission, all things transmission at PJM, published a report. He is also senior vice president of transmission for Exelon for a period of time in his career about exactly the issues I just described.

Paul Zimbardo: frankly feasible solutions are available. So we're going to have those policy discussions but I think that's what's going to be revealing in the FERC discussion.

Mike Kormos: Powerful, if you want to take a look at one document that I think lays this out pretty clearly. Mike Kormos, who for many, many years...

Mike Kormos: was the leader of transmission, all things transmission at PJM, published a report. He is also senior vice president of transmission for Exelon for a period of time in his career about exactly the issues I just described.

Joseph Dominguez: The feasibility of connecting and the cost of connecting super-large loads somewhere on the grid as opposed to co-location. And he lays it out pretty succinctly in his expert report. Those are the things we'll be talking about with regulators and policymakers. There will be opportunities for data centers in both places, but dimensionally, the bigger we get, the closer we're going to be to the generation source if we are going to have any chance of doing this in a manner that addresses the nation's need for timely action.

Mike Kormos: the feasibility of connecting and the cost of connecting super large loads somewhere on the grid as opposed to co-location. And I think it lays it out pretty succinctly in his expert report. Those are the things we'll be talking about to regulators and policy makers.

Mike Kormos: There's going to be opportunities for data centers in both places, but dimensionally the bigger we get, the closer we're going to be to the generation source, if we are going to have any chance of doing this in a manner that addresses the nation's need for timely action.

Paul Zimbardo: Right now, thank you again. I really appreciate all of the contacts.

Mike Kormos: Right now, thank you again. Really appreciate all of the contacts.

Operator: Thank you. I'd like to turn the call back over to Joe Dominguez for any further remarks.

Mike Kormos: Thank you. I'd like to turn the call back over to Joe Dominguez for any further remarks.

Joseph Dominguez: So, thank you. We've had a great beginning to the year. I want to give a shout out to all of our folks that made it happen. We really feel strongly about our performance to date. We really feel strongly about what we think we're going to be able to accomplish in the balance of the year and the work we're doing. I appreciate the robust discussions we've had today around co-location. One always gets concerned that one particular issue distracts from the overall benefits of the company that are really laid out on the last slide we have in the deck about the unique opportunities we have here. We're super excited about them. We appreciate your attention, your focus on Constellation, your ownership, and I guarantee you we'll continue to focus on the things that create value. Papaschall and McCall.

Joe Dominguez: Well, thank you. We've had a great beginning to the year.

Joe Dominguez: And again, just...

Joe Dominguez: I want to give a shout out to all of our folks that made it happen. We really feel strongly about our performance to date. We really feel strongly about what we think we're going to be able to accomplish in the balance of the year and the work we're doing.

Joe Dominguez: Appreciate the robust discussions we've had today around co-location.

Joe Dominguez: One always gets concerned that one particular issue

Joe Dominguez: distracts from the overall benefits of the company that are really laid out in the last slide we have in the deck about the unique opportunities we have here. We're super excited about them. We appreciate your attention, your focus on Constellation, your ownership, and I guarantee you we'll continue to focus on the things that create value for you.

Operator: 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.

Joe Dominguez: Thank you. This is Matt Pichelle on the call.

Speaker Change: 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.