Constellation Energy Corp

GAAP Results of Operations. The following table sets forth our GAAP consolidated Net Income (Loss) Attributable to Common Shareholders for the year ended December 31, 2023 compared to the same period in 2022. For additional information regarding the financial results for the years ended December 31, 2023 and 2022 see the discussions of Results of Operations below.

Adjusted EBITDA (non-GAAP). In analyzing and planning for our business, we supplement our use of GAAP Net Income (Loss) Attributable to Common Shareholders with Adjusted EBITDA (non-GAAP) as a performance measure. Adjusted EBITDA (non-GAAP) reflects an additional way of viewing our business that, when viewed with our GAAP results and the accompanying reconciliation to GAAP Net Income (Loss) Attributable to Common Shareholders included in the table below, may provide a more complete understanding of factors and trends affecting our business. Adjusted EBITDA (non-GAAP) should not be relied upon to the exclusion of GAAP financial measures and is, by definition, an incomplete understanding of our business, and must be considered in conjunction with GAAP measures. In addition, Adjusted EBITDA (non-GAAP) is neither a standardized financial measure, nor a presentation defined under GAAP and may not be comparable to other companies’ presentations or deemed more useful than the GAAP information provided elsewhere in this report.

The following table provides a reconciliation between Net income (loss) attributable to common shareholders as determined in accordance with GAAP and Adjusted EBITDA (non-GAAP) for the year ended December 31, 2023 compared to the same period in 2022.

(a)Includes amounts contractually owed to Exelon under the TMA reflected in Other, net.

(b)Includes mark-to-market on economic hedges and fair value adjustments related to gas imbalances and equity investments.

(c)Reflects all gains and losses associated with NDTs, ARO accretion, ARO remeasurement, and impacts of contractual offset for Regulatory Agreement Units.

(d)Represents certain incremental costs related to the separation (system-related costs, third-party costs paid to advisors, consultants, lawyers, and other experts assisting in the separation), including a portion of the amounts billed to us pursuant to the TSA.

(e)Reflects costs related to a multi-year ERP system implementation.

(f)Reversal of a charge related to a 2012 merger commitment.

(g)Represents elimination from results for the noncontrolling interests related to certain adjustments.

Results of Operations

Year Ended December 31, 2023 Compared to Year Ended December 31, 2022. Net income (loss) attributable to common shareholders was favorable by $1,783 million primarily due to:

•Favorable market and portfolio conditions primarily driven by higher realized margins on load contracts and generation-to-load optimization;

•Favorable net realized and unrealized NDT activity; and

•Unrealized gains resulting from an investment that became a publicly traded company in the second quarter of 2023.

The favorable items were partially offset by:

•Higher labor, contracting and materials;

•Lower capacity revenues;

•Impact of our annual update to the nuclear ARO for Non-Regulatory Agreement Units;

•Unfavorable impacts of nuclear outages; and

•Higher interest expense.

Operating revenues. The basis for our reportable segments is the integrated management of our electricity business that is located in different geographic regions, and largely representative of the footprints of RTO/ISO and/or NERC regions, which utilize multiple supply sources to provide electricity through various distribution channels (wholesale and retail). Our hedging strategies and risk metrics are also aligned with these same geographic regions. Our five reportable segments are Mid-Atlantic, Midwest, New York, ERCOT, and Other Power Regions. See Note 5 —Segment Information of the Combined Notes to Consolidated Financial Statements for additional information on these reportable segments.

Wholesale and retail sales of natural gas, as well as sales of other energy-related products and sustainable solutions and other miscellaneous business activities that are not significant to overall results of operations are reported under Other and not allocated to a region.

For the year ended December 31, 2023 compared to 2022, Operating revenues were as follows:

Sales and Supply Sources. Our sales and supply sources by region are summarized below:

(a)Includes the proportionate share of output where we have an undivided ownership interest in jointly-owned generating plants.

Nuclear Fleet Capacity Factor. The following table presents nuclear fleet operating data for our plants, which reflects ownership percentage of stations operated by us, excluding Salem and STP, which are operated by PSEG and STPNOC, respectively. The nuclear fleet capacity factor presented in the table is defined as the ratio of the actual output of a plant over a period of time to its output if the plant had operated at its net monthly mean capacity for that time period. We consider capacity factor to be a useful measure to analyze the nuclear fleet performance between periods. We have included the analysis below as a complement to the financial information provided in accordance with GAAP. However, these measures are not a presentation defined under GAAP and may not be comparable to other companies’ presentations or be more useful than the GAAP information provided elsewhere in this report.

ZEC Prices. We are compensated through state programs for the carbon-free attributes of our nuclear generation. ZEC programs are a significant contributor to our total operating revenues. The following table includes the average ZEC reference prices ($/MWh) for each of our major regions in which state programs have been enacted. Prices reflect the weighted average price for the various delivery periods within the years ended December 31, 2023 and 2022.

(a)See ITEM 1. BUSINESS, Environmental Matters for additional information on the plants receiving payments through state programs.

(b)The ZEC price is expected to be $10.00/MWh for each delivery period and is subject to an annual update once full year generation is known. Following the latest annual update, on August 16, 2023 the ZEC price for the delivery period beginning June 1, 2022 through May 31, 2023 was calculated to be $9.88.

(c)See Note 4 — Revenue from Contracts with Customers of the Combined Notes to Consolidated Financial Statements for additional information on the Illinois ZEC program.

Illinois CMC Price. The price received (paid) for each CMC is determined by the IPA monthly and is based on the accepted CMC bid, less the sum of (a) monthly weighted average PJM busbar price, (b) ComEd zone capacity price and (c) any federal tax credit or subsidy received, and is subject to a customer protection cap ($30.30 per MWh for initial delivery period June 1, 2022 through May 31, 2023 and $32.50 per MWh for the period June 1, 2023 through May 31, 2024). If the monthly CMC price per MWh calculation results in a net positive value, ComEd will multiply that value by the delivered quantity and pay the total to us. If the CMC price per MWh calculation results in a net negative value, we will multiply this value by the delivered quantity and pay the net value to ComEd. The average CMC prices per MWh were $4.13 and ($42.20) for the years ended December 31, 2023 and 2022, respectively.

Capacity Prices. We participate in capacity auctions in each of our major regions, except ERCOT which does not have a capacity market. We also incur capacity costs associated with load served, which are factored into customer sales prices. Capacity prices have a significant impact on ouroperating revenues and purchased power and fuel expense. We report capacity on a net monthly basis within each region in either Operating revenues or Purchased power and fuel expense, depending on our net monthly position. The following table presents the average capacity prices ($/MW Day) for each of our major regions. Prices reflect the weighted average price for the various auction periods within the years ended December 31, 2023 and 2022.

Electricity Prices. As a producer and supplier of electricity, the price of electricity has a significant impact on our operating revenues and purchased power cost. We report the sale and purchase of electricity in the spot market on a net hourly basis in either Operating revenues or Purchased power and fuel expense within each region, depending on our net hourly position. The price of electricity is impacted by several variables, including but not limited to, the price of fuels, generation resources in the region, weather, on-going competition, emerging technologies, as well as macroeconomic and regulatory factors. The following table presents an average day-ahead around-the-clock reference price ($/MWh) for the periods presented for each of our major regions and does not necessarily reflect prices we ultimately realized.

(a)Reflects New England, which comprises the majority of the activity in the Other region.

For the year ended December 31, 2023 compared to 2022, changes in Operating revenues by region were approximately as follows:

(b)See Note 3 — Regulatory Matters of the Combined Notes to Consolidated Financial Statements for additional information on PJM performance bonuses

(c)See Note 16 — Derivative Financial Instruments of the Combined Notes to Consolidated Financial Statements for additional information on mark-to-market gains and losses.

Purchased power and fuel. See Operating revenues above for discussion of our reportable segments and hedging strategies and for supplemental statistical data, including supply sources by region, nuclear fleet capacity factor, capacity prices, and electricity prices.

The following business activities are not allocated to a region and are reported under Other: wholesale and retail sales of natural gas, as well as other miscellaneous business activities that are not significant to overall results of operations.

For the year ended December 31, 2023 compared to 2022, Purchased power and fuel expense were as follows:

For the year ended December 31, 2023 compared to 2022, changes in Purchased power and fuel expense by region were approximately as follows:

(b)See Note 16 — Derivative Financial Instruments of the Combined Notes to Consolidated Financial Statements for additional information on mark-to-market gains and losses.

The changes in Operating and maintenance expense consisted of the following:

(a)Primarily reflects increased employee-related costs, including labor and other incentives, and certain non-essential maintenance work.

(b)Primarily reflects a decreased benefit related to the annual nuclear ARO update for non-regulatory agreement units.

Interest expense, netincreased for the year ended December 31, 2023 compared to the same period in 2022, primarily due to the issuance of senior notes and tax exempt bonds, increased fees and interest on short term borrowings, and changes in the 13-week Treasury rate for our SNF obligation. See Note 17 — Debt and Credit Agreements of the Combined Notes to Consolidated Financial Statements for additional information on our senior notes, tax-exempt bonds, and short-term borrowings. See Note 19 — Commitments and Contingencies of the Combined Notes to Consolidated Financial Statements for additional information on our SNF obligation.

Other, net was favorable for the year ended December 31, 2023 compared to the same period in 2022, due to activity described in the table below:

(a)Includes net realized and net unrealized gains (losses) on NDT fund investments, the elimination of decommissioning-related activities, and the elimination of income taxes related to all NDT fund activity for the Regulatory Agreement Units except for decommissioning-related impacts that were not offset for the Byron units starting in the second quarter of 2021. With our September 15, 2021 reversal of the previous decision to retire Byron, we resumed contractual offset for Byron as of that date. See Note 10 — Asset Retirement Obligations of the Combined Notes to Consolidated Financial Statements for additional information regarding the accounting for nuclear decommissioning and the contractual offset suspension for the Byron units. See Note 23 — Supplemental Financial Information of the Combined Notes to Consolidated Financial Statements for additional information.

(b)Prior to separation, we were allocated our portion of pension and OPEB non-service credits (costs) from Exelon, which was included in Operating and maintenance expense. Effective February 1, 2022, the non-service credit (cost) components are included in Other, net, in accordance with single employer plan accounting. See Note 15 — Retirement Benefits of the Combined Notes to Consolidated Financial Statements for additional information.

(c)For 2023, includes unrealized gain resulting from equity investment that became publicly traded in the second quarter of 2023 and now has a readily determinable fair value (and no longer is accounted for as an equity method investment due to lack of significant influence). We record the fair value of this investment in Investments on the Consolidated Balance Sheets based on quoted market price of the stock. See Note 18 — Fair Value of Financial Assets and Liabilities of the Combined Notes to Consolidated Financial Statements for additional information. For 2022, represents Net realized and unrealized (losses) gains from equity investments.

(d)This reflects amounts contractually owed to Exelon under the TMA, which is offset in Income taxes. See Note 14 — Income Taxes of the Combined Notes to Consolidated Financial Statements for additional information.

(e)Includes amounts we billed Exelon for services pursuant to the TSA. See Note 1 — Basis of Presentation of the Combined Notes to Consolidated Financial Statements for additional information.

Effective income tax rates were 35.1% and 71.6% for the years ended December 31, 2023 and 2022, respectively. We do not expect the effective tax rate to deviate from the statutory tax rate with the exception of realized and unrealized gains and losses of the nuclear decommissioning trust funds. In 2022, the rate was also impacted by one-time adjustments. See Note 14 — Income Taxes of the Combined Notes to Consolidated Financial Statements for additional information.

Net income attributable to noncontrolling interests primarily relates to CRP for the years ended December 31, 2023 and 2022.