10-QPeriod: Q3 FY2022

Constellation Energy Corp Quarterly Report for Q3 Ended Sep 30, 2022

Filed November 8, 2022For Securities:CEG

Summary

Constellation Energy Corporation (CEG) reported its financial results for the nine months ended September 30, 2022. The company experienced a net loss of $195 million for this period, a shift from a net loss of $122 million in the prior year. This deterioration was largely attributed to unfavorable mark-to-market activity, increased labor and material costs, and lower capacity revenues, partially offset by the absence of certain prior-year charges and favorable impacts from updated nuclear asset retirement obligations. Despite the net loss, the company's operating revenues saw a significant increase of 21.2% year-over-year, reaching $17.1 billion for the nine months ended September 30, 2022. This growth was driven by higher energy prices across most of its operating regions, particularly in the Mid-Atlantic, ERCOT, and Other Power Regions. The company also highlighted positive developments such as the passage of the Inflation Reduction Act of 2022, which provides significant tax credits for clean energy, and the ongoing efforts to secure long-term nuclear fuel supply, aiming to support the continued operation of its nuclear fleet. The company's liquidity remains robust, supported by strong cash flow from operations and access to credit facilities.

Financial Highlights

47 data points
Beta

Revenue

$6.05B

Net Income

-$188.00M

-3.1% Net Margin

EPS (Diluted)

$-0.57

Total Assets

$46.62B

Cash & Equivalents

$1.19B

Free Cash Flow

-$1.48B

Financial Statements
Beta
Revenue$6.05B
Operating Expenses$6.09B
Operating Income-$41.00M
Interest Expense$75.00M
Net Income-$188.00M
EPS (Basic)$-0.57
EPS (Diluted)$-0.57
Shares Outstanding (Basic)327.00M
Shares Outstanding (Diluted)328.00M

Key Highlights

  • 1Net loss attributable to common shareholders was $(194) million for the nine months ended September 30, 2022, compared to $(247) million in the prior year's period.
  • 2Total operating revenues increased by 21.2% to $17.1 billion for the nine months ended September 30, 2022, driven by higher energy prices and volumes across key regions.
  • 3Purchased power and fuel expenses rose by 18.5% to $8.1 billion for the nine months ended September 30, 2022, largely due to higher energy prices and increased gas prices.
  • 4The company received a $1.75 billion cash contribution from Exelon on January 31, 2022, related to its separation.
  • 5Cash flows from operating activities for the nine months ended September 30, 2022, were $69 million, a significant decrease from $974 million in the prior year, mainly due to changes in working capital and collateral received.
  • 6Capital expenditures remained stable at $1.09 billion for both the nine months ended September 30, 2022 and 2021.
  • 7The Inflation Reduction Act of 2022 is expected to provide significant support for the company's nuclear assets through tax credits starting in 2024.

Frequently Asked Questions

For the nine months ended September 30, 2022, Constellation Energy Corporation reported a net loss of $195 million, an improvement from a net loss of $122 million in the comparable period of 2021. This was driven by increased operating revenues, which grew 21.2% to $17.1 billion, largely due to higher energy prices across its segments. However, this was partially offset by higher purchased power and fuel costs, and unfavorable mark-to-market activity.

The separation from Exelon was completed on February 1, 2022. As a result, financial statements prior to this date reflect transactions with affiliates of Exelon as related party transactions. Post-separation, these are no longer considered related party transactions. The company also received a $1.75 billion cash contribution from Exelon as part of the separation agreement.

Constellation Energy views the Inflation Reduction Act of 2022 favorably, particularly the federal tax credits for clean energy technologies, including existing nuclear plants. The Nuclear PTC, providing up to $15/MWh, is expected to incentivize the continued operation of many of its nuclear assets through the end of the credit period in 2032. The company also sees opportunities for its nuclear fleet to support clean hydrogen production through the Hydrogen PTC.

Constellation Energy is exposed to commodity price risk through unhedged portions of its electricity portfolio. It mitigates this risk by entering into non-derivative and derivative contracts, such as swaps, futures, forwards, and options, with approved counterparties. For merchant revenues not covered by state programs, the company employs a three-year ratable sales plan, hedging approximately 90%/60%/30% of prompt three-year merchant revenues. As of September 30, 2022, significant hedging levels were in place for 2022 and 2023 across its key reportable segments.