Quarter 1
Q4 2025 Earnings Call — March 31, 2026
Analyst Name (Firm): David Arcaro (Morgan Stanley) Executive Name (Title): Joe
Good morning, David. Thanks so much. Good morning. You know, Joe, could you maybe comment on, in maybe a little bit more detail if you could, just what's the status of discussions you're having with other hyperscalers? You did mention, you know, one that may be a possible opportunity in Maryland here, but just more broadly, if you could touch on what's the status, how close, how advanced, how broad across your portfolio that you're in discussions here for in terms of data center contracting?
Executive Name (Title): Joe
Well, I want to avoid, David, promising delivery dates here because we all know that there are bumps that unexpected and otherwise that occur in these transactions. But I think it's fair to say that there continues to be strong interest in clean and reliable power. But look, the data economy customers are very conscious of either being flexible at peak using backup generation, some of the AI technologies that move data demand around. And so we're, you know, we're certainly seeing that in our conversations. I think there could be a point in time where the flexibility that data centers have at peak will be substantially greater than what we've seen historically. And then we have ongoing conversations with customers that just want to buy energy and capacity from us. They'll absorb whatever the backstop proposal is. And, you know, here's what I would say. I would say that those conversations grew more complicated after the executive order as we found solutions and delayed some of the transactions. But I see the momentum resuming.
Thanks. That's helpful. And a bit of a follow-up on your comments there, too. You know, is flexibility, you know, and or additionality, is that really the path forward here? I'm curious if, you know, as we maybe think about the backstop procurement, just how does that interact with the potential to bring, you know, new megawatts onto the grid or being flexible?
Executive Name (Title): Joe
Yeah, I think it is, David. I think, you know, there has been since we announced this strategy the overhang of do we have enough peak capacity in the system and so that ambiguity is going to be addressed hopefully here by FERC in a way that gives our customers clear line of sight that if they're going to rely on the backstop capacity auction what the cost of that is going to be and what the terms are going to be for that. Other customers are going to look at the ability to either bring batteries, demand response, new gas fire generation, or some of this AI flexibility I just mentioned into play to manage the peaks. But if you manage the peaks, right, what we're really talking about is the capacity slice of what we have to offer. And I see a potential where we're going to do the same thing we've been doing with CNI customers historically, and that is we sell our capacity into the market and our customers are buying a capacity product from PJM. That could be that backstop capacity or they could bring their own capacity or flexibility, as I mentioned. But what is uninterrupted is the other 99% of the hours, the energy and the attributes they need to meet their goals for firm and reliable and clean power.
Okay, great. Thank you so much.
Analyst Name (Firm): Steven Fleischman (Wolf Research) Executive Name (Title): Joe
Good morning, Steve.
Yeah, hey, good morning, Joe. Just, I'm sure there'll be other questions on that topic, so let me just maybe move to a different one. The capital allocation, so one point of clarity, in the plan to 29 and outlook that you have, what are you assuming or doing with cash in 28 and 29? Just in the plan, the growth rates and all, et cetera.
Executive Name (Title): Shane
Hey, Steve, it's Shane. There's nothing planned with regard to accretion relative to that free cash flow. So that's all upside opportunity for how we deploy it. It's essentially earning interest income at the current assumption. You're just having it sit in cash effectively. So any use of capital better than that is...
Executive Name (Title): Shane
Correct. That's right. Correct. That's what leads to the 50 cent upside you see on the sensitivity table is we think there's a meaningful opportunity to find opportunities, you know, above that low threshold.
That's helpful. And then maybe related to that, and Joe, over the last three, six, nine months, you've mentioned renewables a couple times. You did talk again here a little bit about nuclear. Could you just maybe on those specific topics or others other than new gas that you could talk to kind of what are you seeing there? How are you looking at that?
Executive Name (Title): Joe
Yeah, Steve. Yeah. No, no, I'm sorry. Complete your question.
Executive Name (Title): Joe
No, no, that's it. I'll leave it there. Thanks.
Executive Name (Title): Joe
Okay. Yeah, so look, on new nuclear, we're continuing to look at both large reactors and small modular reactors. I think the last time we talked, I commented that we have to have really clarity on three things. One is, what's it going to cost and what the schedule is going to be? Obviously, a number of the new reactor designs, particularly on SMRs, still have a bit of work to be done in their design and regulatory approval journey. We've got to get to the other side to make sure that we understand that. We need to understand the operating costs of these machines. And while we continue to chip away at that, I am not yet at a confidence level where I could say to you that we are committed on a path to new nuclear. I think we just we need a lot more data before we could get there, and some of that is just going to have to play out over time.
In the case of renewables, what I'm really looking for here, Steve, is to have the capability with battery storage and other renewables, as well as gas-fired gen, to really facilitate these transactions that are the core of our growth strategy, these deals with hyperscalers and CNI customers. So, what we're thinking about there is capability that gives us some peak capability or some incremental new capability that is a deal sweetener. And that's kind of our focus on renewables. What platforms might we add to the business that give us that incremental capability to do the things our customers want? It is... a secondary objective to have another means of deploying some of the vast amounts of free cash flow that Shane alluded to. But, you know, I've said this before and I stick with it. The returns on renewables are often underwhelming when we're looking at some of these deals. So in order for a platform to be something we're going to want, it has to come with it the ability to unlock our essentially contracting of 147 million megawatt hours of nuclear. And that's where we see some potential value. But I don't yet see a platform that is attractive enough and is going to meet our threshold for 10% unlevered IRRs. We'll continue to search for that opportunity, but we're not there.
Okay. I have one last question on the capital allocation and I'll then turn it to others. Just going back to, so obviously you're free cash 28, 29, you're just leaving in cash. How about just like balance sheet targets? Cause you're, your EBITDA is going up a lot, 28, 29. So just what should we be using? Because there could be just balance sheet cash or leverage capability too that grows. Just any view of kind of leverage targets?
Executive Name (Title): Shane
Yeah, I mean, we'll continue in the long run kind of, I think it's fair to assume that two times debt to EBITDA, Steve. So with that rising EBITDA that'll, you know, to follow the base EPS trajectory, if you will, from your modeling, you can assume that if we're levering at two times EBITDA, we'll have significantly more leverage capacity in 28 and 29 than we're reflecting in 27.
Thank you.
Analyst Name (Firm): Shar Puriza (Wells Fargo) Executive Name (Title): Joe
Hi, Shar. It's actually Constantine here for Char. Thanks for taking the questions. You noted 9 gigawatts of additionality, including the nuclear relicensing. Do you see that as enough offering for hyperscalers looking to contract? And maybe is there a rule forming around matching new and existing capacity one-to-one? Or is there a lower mix palatable similar to the Vistra deal earlier this year?
Executive Name (Title): Joe
Yeah, I think on what's going to ultimately come out of the PJM process, I think we're going to still await clarity. I think it's more about just managing the peak and whether the customer is willing to take interruptible service or not. As to whether the 10 gigawatts is enough, I think there's going to be instances where we'll partner with another party. We've shown that with DR, for example, where they bring the incremental capacity and we have another company that's partnering with Constellation. I could see that happening with natural gas development projects or other things where we'll be more aggressively working with other companies that have a Q position in a particular area, and then we're going to fill in our energy and our attributes into that contract. So in answer to your question, I'm not sure that the 10 gigawatts is enough or rightly placed. We may have to supplement that. And I spoke a moment ago in response to Steve's question about continuing to search out platforms, renewable battery storage platforms that may add some incremental capabilities. So I think it's a hell of a good start, but I don't think it's a finished story.
Excellent. Thanks for that. And in regards to the 147 million megawatt hours that you called out, obviously a really big number. Is there kind of a level of interest that you would highlight in the more immediate term versus long term and maybe an order of preference by region, especially, as you mentioned, with the kind of reforms going on at PJM?
Executive Name (Title): Joe
I don't think we, you know, I don't think we could get into that level of detail here yet. There's interest in kind of across the board in different places, and it's different types of interest that we get. But we don't yet have, hey, this is the number of megawatts we're going to be able to do at this point in time in a particular geography.
Maybe just a quick follow-up on PGM. Is there a level of interest in the reserve backstop auction? What's SEG's position going into the potential procurement later part of the year? Thanks.
Executive Name (Title): Joe
Yeah, I would simply say I think there's certainly a level of interest in it, but we have to see the details.
Okay, perfect. Thanks so much.
Analyst Name (Firm): Angie Storosinski (Seaport) Executive Name (Title): Joe
Thank you. So my first question is about the free cash flow generation. I'm just wondering what kind of assumptions you're making about cash taxes in that $8.4 billion free cash flow assumption for 26 and 27?
Executive Name (Title): Shane
We're in the low teens from an overall effective cash tax rate in the front two years, Angie.
Okay. I mean, low teens as in like based on net income?
Executive Name (Title): Shane
Yes.
Yeah, okay. Essentially, if you convert, instead of using your book tax rate, if you use the cash tax rate, it would essentially be in that lower teens.
Okay, because that number looks a little bit low, no? It's just that I was looking at your free cash regeneration for Constellation Standalone. You were already in... around, I think, $3.5 billion range on average per year. So the calcine accretion with some, again, tax benefits should have been, you know, should have boosted the free cash regeneration more. I mean, so what am I missing? Is it the interest expense? Is it that there are no tax efficiencies related to this transaction?
Executive Name (Title): Shane
Yeah, I think, one, the $3.5 is probably a little bit too high. Two, there's still some ongoing CTAs regarding the integration in the front years that we need to be mindful of. Three, there might be probably higher maintenance capex than you may have had in your model. So those are a few of the variables that I think are leading to some of that delta, but it's not off of what we anticipated.
Okay. And then secondly, when I'm looking at site 32, the assumptions, the modeling assumptions for 26 and 27, so just wondering how you flow through the sale of PJM assets. It doesn't seem like it's having any benefit on either O&M or other cost items. Is it just because, again, you're picking an additional time for CalPines ownership and thus higher costs? Because I would have expected that there's some cost benefit by divesting these assets.
Executive Name (Title): Shane
Yeah, there's a little bit of a lumpiness year to year on O&M for some one-time things. It's dependent upon nuclear fuel outages and things like that. So it's not always easy to look at just a two-year view and say, well, if these are coming out, I wouldn't see this material delta year over year. So there's some more intricacies to it that create some lumpiness besides just looking at two years and trying to adjust for inflation.
Okay, and then just one big picture question, Joe. I mean, we've had a lot of announcements, semi-announcements, about new build in PJM. How do you see those potential capacity additions? I mean, as you said, the cost basis is pretty high, and I'm not quite sure if there is offtake agreement behind this potential capex on the gas-fired side, but are you concerned that there could be some, I don't know, non-competitive entrance into the PJM market, which in turn would suppress both energy and capacity prices?
Executive Name (Title): Joe
Yeah, Angie, I think two things have happened in that space. We saw kind of a wave of interest in legislation that would allow the utilities to return to building generation, and I thought that was a risk to the market. I think favorably... we haven't really seen that gain traction anywhere. And people seem to be rejecting that idea. So since the last time we talked, probably improvement in terms of that risk factor. There have been announcements for things that are at least based on what we understand about the projects that are going to exist off the grid. And so there doesn't seem to be to us any meaningful impact that those things will have on energy and capacity markets. But we're still looking at that. Frankly, you know, what we have on some of this stuff is just press releases and not much more. So, you know, more fulsome answer would require us to kind of understand what's going on. And, you know, I don't know what's real or not real. There's a lot of press release activity going on all over the place about different things. I think you correctly point out might add some non-competitive supply, whether energy and capacity, into the market. But who knows how long it's going to take to actually build that stuff or, frankly, whether it's real and it has offtake agreements yet. We're seeing the same thing, but I can't really give you anything meaningful on that because I don't understand the details yet.
Okay. Thank you.
Analyst Name (Firm): James West (Milius Research) Executive Name (Title): Joe
Good morning, James.
Hey, Joe. Thanks for all the great detail this morning. One of the things I wanted to ask about that I think gets under-recognized by the market overall is the increased demand on your capacity is leading to much better durability in your earnings. I wonder if you could comment on that. One, if you agree with that, but two, if you could comment on how that is creating durability and how we should think about that durability.
Executive Name (Title): Joe
Yeah, I mean, so I think about it in a few ways. On the nuclear side, you all understand what we're doing. We're taking the production tax credit and we're modeling that as the base earnings. So there's obviously, you know, what we're saying is power prices in certain regions exceeding that, and so giving us some additional opportunity above the production tax credit floor price. So we're seeing a bit of that. We're also seeing it in terms of the gas fire generation being dispatched more often. So that would translate into what I would think of as a tailwind for enhanced earnings more than for base earnings. Where it kind of converges, though, is that in long-term contracting, in the mind of the customer, ultimately it's about doing better than they're going to do over the long term with the variability in the market. So I think the fundamentals that you're talking about are actually driving people to want to secure long-term contracts at prices that we would then put into base earnings and making the base earnings, you know, more durable in that sense. But I really think the way we've explained it here is probably the best way. And that's to give you this baseline that we think of as durable and then quantify for you some additional opportunities on top of that.
And in terms of the way I kind of simply think about the stock and the value we're trying to deliver to owners is we're taking a look at the S&P and we're saying, what's the average multiple in that S&P? And then underneath that, what are the growth rates for different companies? What are their cash flow capabilities? What's their long-term durability to have assets that are going to be around for decades? And that's where we're trying to distinguish ourselves as always being better than that average. That's the philosophy of the company. So that when we show up and we present to you, look, in a very conservative way, we see a 20% kegger. What we're saying is, go look for other opportunities in the S&P, and we bet that our opportunity is going to be better than other things that you could find. And then you layer on top of that kind of catalyst for even better performance, some of which would land in base earnings, like PTC increases as a result of inflation. Some of it would land in enhanced earnings. But to give you, you know, a page here and page 23 does this to say, look, here are the opportunities we're going after. And if we realize those opportunities, here's what it's going to mean on top of what we just talked about.
Okay.
Analyst Name (Firm): James West (Milius Research) Executive Name (Title): Joe
Okay. Makes sense. And then maybe just a quick, um, Joe, quickly, quickly follow up for me. Um, uh, you've mentioned, um, PJM clarity, when do you expect to have clarity in that market? I mean, I know you're very close and you're working with the federal government and all state regulators and everybody's trying to come to that moment. When do you expect to see that happen?
Executive Name (Title): Joe
Look, I expect to see that this year. I mean, again, I... These things are out of constellations control, but what I'm seeing is a FERC that's highly motivated to get this done. An administration that believes that leading in the data economy and this important part of innovation is essential to America going forward. So they want to have this clarity. And then obviously you have other market participants like us, the utilities. Everybody's pushing this for some clarity here so we know the rules of the road going forward. And so, look, I'm hoping all of that pressure drives us to a place where we get that clarity from FERC this year and it clears up questions in the minds of customers and others.
Got it. Thanks, Jim.
Analyst Name (Firm): Julian Dumoulin-Smith (Jefferies) Executive Name (Title): Shane
Good morning. Excellent.
Hey, good morning. Can you guys hear me okay?
Executive Name (Title): Shane
Absolutely. Loud and clear, Julian.
Good morning. Hey, good morning, guys. Thank you. I appreciate the question here. A couple things real quickly. First, some of the nuances here. I think it says the 27 assumes average shares outstanding are held flat. Are you guys assuming this $5 billion buyback is executed in the core EPS? I just want to clarify that real quickly.
Executive Name (Title): Shane
And then separately – I think Steve got at this a little bit, but how do you think about capital allocation and further buybacks as maybe a policy for beyond this 27 period, like 28, 29? Is there a ratio? Is there a payout? Is there something that you give people as a heuristic on that front? And then I got a quick follow-up.
Executive Name (Title): Shane
Hey, Julian, it's Shane. So let me take the first part. I mean, we did not reflect an assumption on how many shares we would repurchase in 26. in part to not overly signal to the market what our strategy is here. We want to preserve flexibility there. So I trust you all can make some assumptions on how we would probably allocate that over the next 21 months or so, but our 27 share count is not reflected on an assumption of what we take out before year-end 26.
Executive Name (Title): Shane
Secondly, let me make sure, you know, I hate your question there, but I think it's consistent with what we've done to date. I mean, we're, as Joe hit on, we think we have a number of opportunities to bring new megawatts to the grid in a variety of different areas. We obviously are looking for some policy clarity here, as well as customers that want the long-term contracts. And so our priority is on identifying growth at double-digit unlevered returns. To the extent that doesn't present itself as an opportunity, we're very comfortable acquiring our shares at this price. And we think we have a lot of cash flow ultimately to end up doing both. But we won't make an ill-informed investment decision because we feel the money's got to go somewhere. We're very confident in reacquiring our shares.
Awesome. So the EPS guidance per se doesn't include the buyback, but the 20% EPS CAGR in the broader sense does. And then if I can, just to follow up on this, you have this 10% rolling CAGR. Can you describe a little bit about how to think about that? And obviously you talk about a base EPS number there too. Is this 10% rolling supposed to be like off of that 29 that you should be thinking about is implicitly growing 10% from 29 onwards? Or is this more, hey, next year when you roll the plan from 27 to 2030, you should be kind of thinking about it being more than 10% zip code. I just want to clarify how you're thinking about that.
Executive Name (Title): Shane
I think I get the concept, but I want to make sure we're crystal clear about what you're suggesting here. Is growth kind of implied beyond 29?
Executive Name (Title): Shane
Sure. So let me clarify on your first point. There is no benefit in the 20% base EPS CAGR from capital allocation for the share repurchase. So that is all upside. That's all reflected in the 50 cent upside on slide 23. Secondly, when we recalibrated the base EPS CAGR of 20% on a three-year view, we're projecting to roll that forward in a commitment to essentially grow base EPS CAGR at 10% each rolling three-year cycle. And that's kind of our minimum target, Julian. What I'd say is, again, that slide 23 that shows the optionality, we're assuming that we're going to execute on some of those levers and ideally have a higher growth rate than the 10%, but we're saying we have great line of sight that if you start next year looking at following three years and so forth, that we have good line of sight into a rolling three-year view of a 10% base EPS CAGR.
All right, perfect. So, again, stress. No buyback reflected in any of this 26 onwards. More to the point, the rolling piece is truly, genuinely a rolling three-year average, and that's a minimum here. But if you thought about 27 to 2030 here, again, obviously you've got a plus at the end of that 10%. Don't necessarily take it too literally. I think you've got it.
Awesome. All right. Excellent, guys. Thank you very much. I really appreciate it.
Executive Name (Title): Joe
Thanks, Jillian.
Executive Name (Title): Joe
And thank you. This concludes the Q&A session, and I will turn it back to Joe Dominguez for closing comments.
Executive Name (Title): Joe
Great. Well, thank you again, all of you, for joining us. We've got a lot of work still in front of us to integrate Calpine. The future is very bright. Hopefully we've given you something here this morning that allows you to understand what the baseline strategy is for the company and what we intend to return to our owners in terms of value and the many upside opportunities. Thanks again for participating and have a great day.
Executive Name (Title): Joe
And ladies and gentlemen, thank you for participating in today's call. This concludes today's program. You may all disconnect. Everyone have a great day.
Quarter 2
Q3 2025 Earnings Call — November 7, 2025
Analyst: Quite tell from the baseball analogy, but are you still kind of confident with announcing another hyperscaler deal by year-end, or should we assume early next year, and despite FERC, should we still assume that this deal or any deal will be structured in front of the meter? Thanks.
Executive: Yeah, as to the last question, yeah, right now, as I've indicated on prior calls, we're really focused exclusively on front of the meter deals, which is why this interconnection process ends up becoming, to a certain extent, the gating function on these deals, and we often have to wait for other parties. Sure. My expectation is that the deals will be completed soon. I think it'll happen before we talk again. But I don't, you know, there are these approval processes that customers have to go through that sometimes are time-consuming, and I can't guarantee the work of other parties. But we're quite close here, so I'm hopeful that this stuff will get done soon and certainly before our fourth quarter call.
Analyst: Okay, no, that's actually helpful. And then just lastly, just from a contracting pricing perspective, I mean, we obviously we have a proxy right now in Texas for a BTM deal with significant backup, Jen, are you seeing FOM and BTM pricing kind of converge in your conversations, especially since you're focused more on the FOM side? And just what about gas versus nuclear, especially as you're closing the Calpine deal? Thanks.
Executive: Yeah, I think gas has some capabilities in this space. Just to answer that part of your question, I think the real issue with gas for the customers is twofold. One is, does it meet their longer-term sustainability goals? For some customers, it's okay. For other customers, it isn't. And then separately, in the case of gas, it's sometimes more difficult to predict the kind of long-term pricing. When you're asking me to compare pricing for gas, whether that's behind the meter or in front of the meter to a nuclear deal, we end up having to speculate about what future gas prices are going to be, say, over 20 years. We end up having to speculate whether or not there are going to be other compliance costs associated with carbon emissions from gas. So really hard to do that. Oftentimes, the gas deals... leave those issues open to different inputs for either a carbon price, a change in policy, and of course for the underlying cost of gas. So hard to compare the two things. And generally speaking, the deals that you're alluding to that have been done really haven't been done with new clean resources that allow for the comp. So a bit hard to say.
I do think that from an economic perspective, what we're offering And I think it's part of the heat that we're seeing in terms of the inflow of customers through the door is very attractive pricing relative to other options and pricing that's firm and sustainable for a long-term period and something that they know from their own environmental pledges and sustainability goals is going to be compliant for them.
Analyst: Got it. But just, I guess, Joe, just focusing a little bit on just nuclear FOM versus BTM pricing. Is there a material difference? Are you seeing when those conversations just honing in on nuclear?
Executive: Sure. I think it's hard yet to fully understand what the new nuclear pricing is going to be. I mean, that's the bottom line is we do a tremendous amount of work on that. And I think it's far from settled what that's going to look like. Obviously, what we could offer is significantly more economic, and most importantly, it's available right now.
Analyst: Got it. Okay. Super helpful. Thanks, Joe. Appreciate it. See you soon.
Executive: Yeah, you bet. Take care. Thank you.
Analyst (Steve Fleissman, Wolf Research): Our next question, coming from the lineup, Steve Fleissman with Wolf Research. The line is now open.
Analyst: Hey, Steve.
Analyst: Hi. Yeah. Hey, Joe. Good morning. I guess, first, just a question on the Calpine. There were some stories about a potential delay in the asset sale process by you. Just is there anything that we should read into that?
Executive: Probably a couple things, Steve. One is we kicked off the asset sale process because we weren't sure how much time we were going to be given to divest needed assets. And so we're feeling more confident that we're going to have a reasonable amount of time to execute the divestiture post regulatory approvals. Secondly, you know as we complete the regulatory approvals, it is as you know DOJ and FERC utilize different tests. And so we want to make sure we're targeting the exact right assets to divest. Okay, biggest point here is that we just don't feel like we need to be in a hurry to complete an asset sale transaction and we want to take our time. The market is very supportive of sales of these assets right now.
Analyst: Yeah. And I guess there'll be others that have pending ones that will be done later on, maybe. Right. That could be buyers.
Analyst: Okay. So the other question is more just high level. I mean, for the last several months, we just keep hearing different new entrants to the power business, whether it's, you know, oil companies, gas companies, new technologies, et cetera, and then obviously huge focus on time to power. But then at the same time, it seems to take a very long time to work out deals for those same customers with the assets that are there already. And maybe you can just help connect the dots of what's going on and your conviction level that you'll be able to kind of execute on the ability to capture these new customers?
Executive: I think the excitement and interest in new generation is just really a reflection on how durable this growth cycle is going to be. We're seeing the investment in new data centers just grow year over year. And we're now seeing capital deployment projected to be three quarters of a trillion dollars on building data centers. And notably, that's probably twice as large as the three largest publicly traded power companies in the United States. So we're seeing an investment in the data economy that's simply enormous, and it's going to call for all hands on deck. And I'm always pleased to see that they believe in it so much that they're lining up power needs that are really going to come on five or, in certain cases, maybe up to 10 years down the road. I think that's all indicative of the size of the opportunity that we're seeing. Steve, I just simply stand by my earlier comments that the amount of interest we have, the number of deals that are being negotiated is far different now and far bigger and more serious now than it's been before. That's what gives me confidence we're going to be able to continue to execute the strategy. And I think we provide something uniquely, and that's available now power with, you know, a predictable opportunity to scale that.
Analyst: Okay. Thank you for that.
Analyst (Jeremy Tonnet, J.P. Morgan):
Thank you. Our next question coming from Delana, Jeremy Tonnet with J.P. Morgan. Your line is now open.
Analyst: Morning, Jeremy.
Analyst: Hi. Good morning. Hi. We just wondered if you could provide a little bit of color on Three Mile Island and seems like progress is going well there. Just wondering if you could provide any updated thoughts.
Executive: Well, just what you said. I mean, the progress is going well there. We've had a number of critical items that we've completed just recently. The plant looks really well. We talked at the beginning of this whole project that we're going to need a couple of components, the main transformer being one of them. Fuel was another gating item, getting the people ready to operate the site. That was a gating item. Brian, who's here, and his entire team have just done an exceptional job getting the plant ready and really tackling some of these challenges that we identified. Most importantly, we're not seeing new challenges emerge, right? So as we continue to do our work, there's always going to be some discovery that comes along with the inspections of the plant. And what gives me great confidence is that we're not unearthing anything that we didn't anticipate. And in point of fact, the condition of the plant is better.
Analyst: Got it. Very helpful there. And just wondering if you might be able to comment a little bit as well separately on power markets. We've seen energy prices, you know, moving up recently and just wondering, you know, thoughts you have on these moves, where it could go in, do you see this having any, I guess, impact on, you know, conversations when you're discussing contracts?
Executive: Well, I think it has two impacts strategically for us. One, right, is the, you know, is questions I think we've already gotten here. Are we seeing some sort of convergence between that causes us to think we're not going to achieve our pricing expectations. And I would say the opposite is true. And then, you know, secondly, we're going to have to sell some assets here to get through regulatory approvals. And I think the impact there, again, is favorable in that the environment for the sale of assets is more constructive now than probably when we started the, you know, when we announced the Calpine deal. But let me ask Jim McHugh, who's here, to kind of weigh in on what he's seeing in the power markets and their durability.
Executive (Jim McHugh): Yeah, thanks, Joe. I'd break it into a couple components. One is maybe short-term. We've seen a small rebound in the nearby, you know, just kind of the nearby months, maybe gas rebound a little bit. That's had somewhat to do with power upward pressure that we've seen. But actually, the power upside's been longer duration than that, and it's been stronger in the outer years. And it's really outperformed gas. I think we're seeing heat rates expanding and spark spreads expanding, mainly due to the data growth we're talking about, the load growth in general that we're talking about. We'll have some continued retirements down the road. There's less line of sight right now, as we've talked about, to additional megawatts hitting the grid, except for all these wonderful opportunities that we've talked about in Joe talked about in the call earlier, as well as what we're seeing in terms of our corporate PPAs bringing on new generation too. But really, over the last few months, it's been the realization and positive developments on load interconnection and the reality of load growth happening where I think the power markets are pushing stronger. It's still rather tight on the supply-demand fundamentals in general. And it's really about the expectation that we'll see higher energy prices to go with some of the upward pressure we've seen on capacity prices in these markets too.
Analyst: Got it. That's very helpful. Thank you.
Analyst (David Arcara, Morgan Stanley):
Thank you. Our next question coming from the line of David Arcara with Morgan Stanley. Your line is now open.
Analyst: Good morning, David.
Analyst: Okay. David just withdraw his question. Our next question coming from the line of Andrew Weisel with Scotiabank. Your line is now open.
Analyst: Good morning, Andrew.
Analyst: Hi. Good morning, everyone. A few questions for you. First, in Maryland, you talked about the 700 megawatts of natural gas capacity. I believe that's existing assets, and you mentioned relocated turbines. Can you get a little more specific? Where would those be coming from? And maybe on timing, how quickly would those be available to come online?
Executive: They're physically located in buildings in the Midwest and in New England. And I would describe them as incredibly lightly used assets that we could relocate relatively quickly to Maryland. But in terms of their performance capabilities are relatively speaking state-of-the-art in terms of their heat rates. And we have taken measures to refurbish those units and get them ready for rapid redeployment. So that, I think, is the answer to your question.
Analyst: Great. Thank you. Then on new nuclear, I know I'm pretty new to this story, but I know that you sounded pretty cautious about new nuclear construction, given the high costs and risks. But with the announcements from the federal government, has that changed your comfort level or given, has that changed your appetite? And what would it take you to get you to move forward? Would you need government support and the customer contracts? I know you've talked about exploring potentially two gigawatts near Calvert Cliffs in Maryland. And New York is considering adding a gigawatt, as you mentioned. Maybe just high-level thoughts on all of that?
Executive: First and foremost is a PPA, right? We need a durable PPA. And the second thing is we need clear pricing that we're going to be able to achieve with constructability. And that means good partners that bring the technical capability and the ability to construct along with them. We also think, as I alluded to in my prepared remarks, we also think the land value that we offer is the secret sauce to this whole thing. I think you're not going to build nuclear plants in the places we do business, with the exception perhaps of Texas, in communities that have never had nuclear before. And I think there's a huge value to having that talent, having the big water, the rail, all the infrastructure, and most importantly, the community acceptance. So what I'm looking to do is to monetize the value of that land and that set of capabilities that we bring and convert that into a position that gives us some of the output of the new units. The next thing we're trying to do is make sure that whatever gets operated on our land, because we have operating units, gets operated by us, not by others. So an operating services agreement will have to be part of it.
In terms of what enables it, I talked about the importance of a PPA. I think the involvement of the administration and the way that they're talking about with Westinghouse, likewise, is going to be critically important. And I commend President Trump for his incredible leadership on nuclear. We still need to see the details and we still need to see, as I said earlier, some very, very clear cost numbers and some very, very clear commitments to deliver those costs on time and on schedule with an operating unit before we are going to put significant capital at risk for these things. I like the way things are evolving. I have been cautious, and I remain cautious, and I will always be cautious because it's a lot of your money that we are talking about here. But I am gaining confidence daily as more and more qualified players are coming forward and as we're seeing things like the Westinghouse announcement. We still need to get all of the details to really fully understand it, but it is no doubt a positive.
Analyst: Great. That's extremely helpful. Thank you.
Analyst (David O'Carroll, Morgan Stanley):
Thank you. And our next question coming from the line of David O'Carroll with Morgan Stanley. David, your line is now open.
Analyst: Good morning, David.
Analyst: Good morning. I thought you had your question answered. I'll try again. Messed up the first time, but no, thanks so much. Good morning. Let me see. Could you maybe also reflect on your demand response efforts and the initiative that you're pursuing there? And I know you've talked about flexibility of data centers in the past are you seeing progress there in terms of data center willingness to go that route and just the update on that initiative across different markets?
Executive: Yeah, well let me start on what I'm seeing in terms of flexibility from a technical capability and then I'm going to turn it over to Jim McHugh again who runs our commercial team to talk about this exciting work we're doing on demand response. So we have been, since the very beginning, one of the core participants in EPRI and their DC flex or data center flex capability. And we're seeing a lot of great capability use backup generation and flex compute. I don't want to overstate that, however. I don't think we're going to get to a point where we could flex on and off the full output of data centers. It's going to have a meaningful impact, but it's going to have an impact at the margins. That's why we began to explore using AI to see if we can attract some of our other customers to actually providing the relief or the slack on the system during the key hours. And they would then use their own backup generation or curtail their own consumption of energy during peak hours. And we could play this kind of well, middleman role between the hyperscalers and the data center owners and operators and our other customers through this commercial agreement that gives them the ability to call on our other customers to curtail during high demand events. So Jim will talk about the work that we've done to start developing that and the exciting progress we've made.
Executive (Jim McHugh): Yep. Yeah. Thanks, Joe. It kind of started with what we were doing in the market prior to kind of the recent dynamics. We still had a large amount of our customers who were interested in peak response programs and managing their energy usage, but really with the dynamic shifting towards supply needed in the capacity markets, we saw the opportunity that some of these customers may be interested in being demand response providers and supply to the capacity markets. So we're partnering with GridBeyond and who is going to help us do a lot of the execution on the operations side with our demand response customers. But we're seeing interest from our industrial customer base to participate in this demand response product. And what's a little unique about the product we're offering is we've gone to customers to get longer tenors or longer-term commitments, and they're interested in potentially longer-term deals with customers with good pricing associated with it, and we're providing some floor pricing capability in that, too, for them to be incented to sign up for these longer durations. So we've found kind of this unique opportunity.
We're trying to be innovative around the product structure itself, and the pipeline looks really strong right now. We started executing the deals that Joe talked about, you know, working towards 1,000 megawatts or so between now and the next couple capacity auctions. So things are going well. David, what's cool about that is when you think about that thousand megawatts at the electric load carrying capacity or through that computation that PJM does, that looks like a new nuclear plant. It's not like a thousand megawatts of battery, for example, that would look like at the end of the day one-tenth of a new nuclear plant. But this portends to look like a full nuclear unit's worth of output in terms of demand response. I think we're still in the early days of this, but I think the combination of the two things you talked about in your question, the ability to flex at the top of peak by the data centers themselves in combination with new commercial arrangements to get others to pull back consumption during these hours is really going to open up a lot of room on the system and really pave the way for easier interconnection.
Analyst: Yeah, understood. Okay, great. That's helpful, Collar. Then I was wondering if you could just touch on what you're seeing in terms of retail margins in PJM. One of your peers suggested that margins in PJM might be somewhat more competitive. I'm wondering if that's reflective of what you're seeing.
Executive: I think on the retail side, our margins are on the upper end of the range that we've always talked about. We've certainly seen on the wholesale load auction and polar procurements, we've seen some new participants coming in that's gotten a little bit more competitive, but we're still seeing stronger margins than the historical averages there. On the retail side, really on the upper end of the ranges we've always talked about, and I would be remiss if I didn't add, since we're seeing a lot of success with some of these sustainability products and CFE and other types of solutions that are sustainability-related, those margins tend to be stronger than pure, true commodity margins, too.
Analyst: Great. Okay. Thank you so much. Appreciate it.
Analyst (Angie Sorosinski, Seaport):
Thank you. Our next question coming from the lineup, Angie Sorosinski with Seaport. Your line is now open.
Analyst: Thank you. Good morning, Angie.
Analyst: Good morning. So I'm just wondering, and again, somewhat of a playing the devil's advocate here. I mean, you have a huge portfolio of generation assets, especially for Forma Calpine. You know, there's this growing chatter about bring your own generation. And I'm just wondering if you're feeling a bit unease about, you know, how many of these units you will be able to sign. And granted that forward power curves are rising, but it's not just about earnings, right? It's also about the visibility and the quality of earnings. And so, you know, we do need more of your units to have that long-term visibility into their earnings power.
Executive: Yeah, Angie. And, you know, I'll just... My comments during the call were informed by all things, including what we're seeing in terms of policy, regulatory... we still believe that we're going to be able to execute transactions. I think this product offering that Jim just talked about with demand response is a bit of an anticipation, isn't it, of some of what you're talking about, which is to try to make sure we have a BYOG or bring your own generation equivalent as we think about demand response, as we think about the turbines that we have on the sidelines, as we think about our ability to offer upgrades. And we also think that policymakers fully understand that relicensing, while not exactly a new megawatt, is the continuation of megawatts beyond the period that they might otherwise shut down. So we think that there's great awareness of that issue. I think in large measure it was that issue and other compelling arguments that caused PJM to pull back from their bring-your-own-generation kind of requirements that they had in other places. I think we might see some voluntary BYOG, but I'm frankly not concerned with where it is right now in the states. And we're marching forward on these transactions, and that has not been an issue for us right now.
Analyst: Okay. And then, so it's been mentioned by you and in previous questions that we have seen a lot of announcements from other companies vaguely associated with power, for power plants. And I'm wondering, do you think those are comparable deals, like quality-wise, firmness-wise, to the ones that you guys are working on? I mean, some power companies suggest that those deals are more equivalent to LOIs than firm take-or-pay power contracts that public power companies announce?
Executive: Look, I think there's probably room for a bunch of different contracting, but Angie, I feel, and I could only gauge this from the customer interest in what we're offering, I feel that what we have and what we're offering outcompetes just about any other opportunity in this space.
Analyst: Okay, thank you.
Analyst (James West, Mellius Research):
Thank you. Our next question coming from the line of James West with Mellius Research. Your line is now open.
Analyst: Hi, James.
Analyst: Hey, Joe. Thanks for taking my question here. I'm curious, given all this, you know, demand from the data economy and the data centers, how are you thinking about the portfolio of generating assets that you would like to or would be comfortable locking into long-term PPAs versus keeping available for normal generation markets?
Executive: Great question. I think, and you're certainly hearing this from Angie's question and others, I think there's more room to run on the long-term deals that we want to get executed. But there will be a point and there will be a point where one of two things is going to happen. Either we're going to slow it up or we're going to change our pricing to more aggressive levels to reflect, frankly, the scarcity value of what we'll be able to offer. We're not quite there yet. But, look, our incentive is to provide sustainable long-term and growing earnings for our owner base. That's what the company is set up to do. And so in the short term, what we're trying to do is get these deals done. We're happy with the kind of atmospherics in the market being quite positive for us, but we're not at a point where we're even entertaining the discussion of, hey, are we going to stop selling long term? I think it's in our interest. It's in our customers' interest. It's in the nation's interest for us to meet this demand for this incredibly important load that's coming on the system. And so we're going to continue to execute in that space. And I appreciate your question, but I think it's probably more theoretical than practical at this point.
Analyst: Okay. Thanks, Joe.
Analyst (Paul Zimbardo, Jeffrey): Thank you. Our last question coming from the lineup, Paul Zimbardo with Jeffrey. Your line is now open.
Analyst: Paul, you have the last question.
Analyst: Hey, good morning, team.
Analyst: Hey, thank you. Save the best for last. But Joe, the power broker, that was a nice piece recently, I've got to say. Nicely done.
Executive: Thanks, Paul. Let me follow up a little bit. Paul, it's one of those embarrassing things that happens when you're in the middle of something like this, but thank you for noting it.
Analyst: Absolutely. Not too shabby. Let me follow up on a couple things here real quickly. First, with respect to up rates, you've alluded to it both on scale and scope here. I mean, can you speak to the opportunity generically? I'll take note of the Pennsylvania governor's disclosure on cost relative to the 340 megawatts at Limerick. I mean, are there more Limericks out there in terms of effectively providing an up rate that's tantamount to the size of an SMR? And specifically, as it pertains to Limerick, can you elaborate a little bit on where you are on the transmission interconnect process there? I mean, it seems like there's some public disclosure about some potential data center there, if you can.
Executive: Yeah, so, Julian, and I apologize for the poll thing. I now see the two of you guys as the same person, apparently. Sorry about that. Hey, we identified about 900 extra megawatts, and so the big chunky ones there are LaSalle and Limerick, which are effectively kind of the same size but have different costs. LaSalle is a bit easier to execute than Limerick, and I don't think we've published costs on that. And then we've got Calvert-Cliffs, 190 megawatts that I talked about. So all told, we're looking at about 900 to 1,000 megawatts that we've completed engineering work on and feel pretty confident about. So that's the answer to the upright question. In terms of, I think you were talking about crane interconnection. Is that what you asked about?
Analyst: Well, I was thinking about Limerick, right? I mean, it seems like there's some transmission.
Executive: Yeah, go for it.
Executive: Yeah, so, you know, there's a good deal of demand going in that area. So, you know, we're quite hopeful that any new megawatts at Limerick would be welcomed and fairly easy to interconnect. That's a big growing area of Pennsylvania in terms of the data economy, that and, of course, the PPL zone.
Analyst: Got it. In terms of what's being done by customers to interconnect data centers, around Limerick, I think I'm going to just kind of decide not to answer that question. Don't worry. Maybe I'll give you another one to follow up on here. You talked about the cost of new nuclear here, both for yourselves as well as the industry. I mean, cost of these upgrades, though, seems to be materially cheaper than any new nuclear costs we're seeing out there, even if it's more relevant than what we've seen historically. Right. Would it be fair to assume that the next round of efforts on your front, especially with this focus on additionality, would focus on leveraging these upright sites first and foremost? I mean, obviously, we've seen your restarts here take a lot of the limelight at the outset, but the uprights seem to be the next wave here of where you could really win on additionality and in contracting, it would seem, right?
Executive: Yeah although you know Julian I tend not to think about these things as binary i.e. you're not going to not do something because you're doing upgrades but in terms of the economic merits of the operates you're spot on those are those are great investments for us they have the advantage of not just being additional we think the re-licensings are additional as well but they also have the ability to be something that's really well within our wheelhouse to execute. We've done a lot of this work historically, and Brian and the team do really great work in that regard. As I said, we've done the engineering work. It's in communities that already like this stuff. And most importantly, when you're talking about an up rate like this, the reason the economics are so attractive is you're not adding people. You're not adding O&M. The plant is just getting more output. But you don't have either an O&M drag from people, and you don't have an O&M drag on extra fuel. So it's hard to compare kind of the capital numbers for an uprate to a brand new plant, which would, of course, require you to have a whole bunch of additional O&M.
I think, let me just, not to drag this out, but I think sometimes when people are talking about the cost of new nuclear plants, and whether it's going to be competitive as a solution for contracts, so on and so forth. They tend to look at it from a capital cost perspective. And I certainly understand that because that's the way people have become accustomed to looking at things like renewables and storage and even new gas fire generation. But there's a huge O&M piece with nuclear that has to be carefully understood that factors into the ultimate price of that resource.
Analyst: Yeah. I hear you at every level. All right. Well, Godspeed to you. Talk to you soon. Thank you guys very much. Appreciate it.
Executive: Thank you. Have a great day.
Executive: Folks, I think that brings the end. Livia, right? That's the end of the call list here?
Executive: Yes. I don't know for the questions.
Executive: All right. Well, terrific. So we'll bring the conversation for this morning to close. Thank you again for your interest in Constellation, for your time during this busy week, and we look forward to catching up with you at the end of the fourth quarter.
Executive: Libby, close. 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.