Reports related to this article:
Project(s): View 6 related projects in PECWeb
Plant(s): View 3 related plants in PECWeb
Released December 20, 2022 | SUGAR LAND
en
Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Timing is everything, goes the old saying. That's certainly true for Constellation Energy Corporation (NASDAQ:CEG) (Baltimore, Maryland), which was created in early 2022 when Exelon Corporation (NASDAQ:EXC) (Chicago, Illinois) decided to exit electric generation and focus on its transmission and distribution (T&D) business. Overnight, Constellation became a clean energy merchant generation giant, with a portfolio of more than 32,000 megawatts (MW) of generation, anchored by nuclear power plants but also including wind, solar, hydroelectric and gas-fired generation.
Seven months later, in August, President Joe Biden signed the Inflation Reduction Act (IRA), which contained billions of dollars in federal production tax credits (PTCs) for non-emitting generation, including nuclear power.
Investors, clean energy advocates, utilities and political operatives were well aware of the president's goal of decarbonizing the U.S. electricity market. Constellation is a pure-play electric decarbonization stock, with no "poles and wires," similar to renewable energy developers but on a much larger scale.
Investors have flocked to Constellation: The stock is up about 116% since its launch this past January. Former parent Exelon, by contrast, is up about 6% and the broader Dow Jones Utilities Index is up about 5% since then.
Constellation proudly touts its credentials in environment, social and governance (ESG): It said it is the number one producer of carbon-free electricity in the U.S. The Baltimore-based generator produces about 10% of the nation's carbon-free electricity, according to its website, which says the company "is helping to accelerate the nation's transition to clean energy." On an annual basis, it said 90% of its electricity is carbon-free. Its goal is to become carbon-free by 2040.
With no T&D network, the company will focus most of its capital spending on carbon-free generation, including nuclear refuelings, for 2023 and 2024. Industrial Info also is tracking a $1 billion project to decommission and demolish Constellation's Dresden Nuclear Power Station, but the company recently announced it wants to relicense that facility rather than demolish it
Click on the image at right to see historical and projected capital outlays for Constellation Energy Corporation.
In its third-quarter earnings presentation on November 8, company leaders said the federal IRA, signed into law August 16, "transforms" Constellation by limiting the downside risk of operating nuclear generators while providing upside opportunity. That law also enables nuclear fleet life extensions while providing growth opportunities, including in hydrogen, company officials said.
The zero-emission nuclear power production tax credit provides up to $15 per megawatt-hour (MWh) for the electricity produced by nuclear projects between 2024 and 2032, according to the U.S. Department of Energy (DOE) (Washington, D.C.). As part of the spin-off from Exelon, Constellation also is eligible for zero-emission generation credits from several of the states where it operates nuclear power plants, including Illinois, New York and Pennsylvania.
Constellation also is upbeat about the IRA's potential to stimulate the production of emission-free hydrogen from nuclear power plants, claiming the economics of hydrogen from nuclear power are "superior" to hydrogen produced by renewable electricity generators.
At the end of October, Constellation notified the U.S. Nuclear Regulatory Commission (NRC) (Rockville, Maryland) of its intent to seek 20-year license extensions for its Clinton and Dresden nuclear units.
In its November 8 earnings release, Constellation President and Chief Executive Officer Joe Dominguez said, "Our long-term outlook has strengthened significantly with passage of the landmark Inflation Reduction Act, which will allow us to create value and drive America's clean energy transition."
"Support for carbon-free energy in the legislation creates opportunities for us to extend the life of our nuclear fleet past mid-century and pursue hydrogen production to slash emissions from difficult-to-decarbonize sectors of the economy. Now there are both state and federal policies that recognize the essential role our zero-carbon nuclear assets must play in achieving our nation's climate goals, preserving jobs and ensuring a secure energy supply."
However, the company's financial performance has not yet caught up to Constellation's enthusiasm about the future of the business. The company lost $188 million on revenue of $6 billion for the third quarter, a $795 million swing from the year-earlier quarter, when Constellation earned $607 million on revenue of $4.4 billion.
Like many companies reporting losses, in its quarterly earnings release Constellation emphasized its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), a financial measure that is not a generally accepted accounting principle (GAAP). On an EBITDA basis, Constellation earned $592 million in the just-concluded quarter.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 trillion (USD).
Seven months later, in August, President Joe Biden signed the Inflation Reduction Act (IRA), which contained billions of dollars in federal production tax credits (PTCs) for non-emitting generation, including nuclear power.
Investors, clean energy advocates, utilities and political operatives were well aware of the president's goal of decarbonizing the U.S. electricity market. Constellation is a pure-play electric decarbonization stock, with no "poles and wires," similar to renewable energy developers but on a much larger scale.
Investors have flocked to Constellation: The stock is up about 116% since its launch this past January. Former parent Exelon, by contrast, is up about 6% and the broader Dow Jones Utilities Index is up about 5% since then.
Constellation proudly touts its credentials in environment, social and governance (ESG): It said it is the number one producer of carbon-free electricity in the U.S. The Baltimore-based generator produces about 10% of the nation's carbon-free electricity, according to its website, which says the company "is helping to accelerate the nation's transition to clean energy." On an annual basis, it said 90% of its electricity is carbon-free. Its goal is to become carbon-free by 2040.
With no T&D network, the company will focus most of its capital spending on carbon-free generation, including nuclear refuelings, for 2023 and 2024. Industrial Info also is tracking a $1 billion project to decommission and demolish Constellation's Dresden Nuclear Power Station, but the company recently announced it wants to relicense that facility rather than demolish it
In its third-quarter earnings presentation on November 8, company leaders said the federal IRA, signed into law August 16, "transforms" Constellation by limiting the downside risk of operating nuclear generators while providing upside opportunity. That law also enables nuclear fleet life extensions while providing growth opportunities, including in hydrogen, company officials said.
The zero-emission nuclear power production tax credit provides up to $15 per megawatt-hour (MWh) for the electricity produced by nuclear projects between 2024 and 2032, according to the U.S. Department of Energy (DOE) (Washington, D.C.). As part of the spin-off from Exelon, Constellation also is eligible for zero-emission generation credits from several of the states where it operates nuclear power plants, including Illinois, New York and Pennsylvania.
Constellation also is upbeat about the IRA's potential to stimulate the production of emission-free hydrogen from nuclear power plants, claiming the economics of hydrogen from nuclear power are "superior" to hydrogen produced by renewable electricity generators.
At the end of October, Constellation notified the U.S. Nuclear Regulatory Commission (NRC) (Rockville, Maryland) of its intent to seek 20-year license extensions for its Clinton and Dresden nuclear units.
In its November 8 earnings release, Constellation President and Chief Executive Officer Joe Dominguez said, "Our long-term outlook has strengthened significantly with passage of the landmark Inflation Reduction Act, which will allow us to create value and drive America's clean energy transition."
"Support for carbon-free energy in the legislation creates opportunities for us to extend the life of our nuclear fleet past mid-century and pursue hydrogen production to slash emissions from difficult-to-decarbonize sectors of the economy. Now there are both state and federal policies that recognize the essential role our zero-carbon nuclear assets must play in achieving our nation's climate goals, preserving jobs and ensuring a secure energy supply."
However, the company's financial performance has not yet caught up to Constellation's enthusiasm about the future of the business. The company lost $188 million on revenue of $6 billion for the third quarter, a $795 million swing from the year-earlier quarter, when Constellation earned $607 million on revenue of $4.4 billion.
Like many companies reporting losses, in its quarterly earnings release Constellation emphasized its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), a financial measure that is not a generally accepted accounting principle (GAAP). On an EBITDA basis, Constellation earned $592 million in the just-concluded quarter.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 trillion (USD).
