Constellation Vitality Company (CEG) Q1 2022 Earnings Name Transcript

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Constellation Vitality Company (CEG) Q1 2022 Earnings Name Transcript

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Constellation Vitality Company (CEG 2.13%)
Q1 2022 Earnings Name
Might 12, 2022, 10:00 a.m. ET


  • Ready Remarks
  • Questions and Solutions
  • Name Members

Ready Remarks:


Good day, girls and gents, and welcome to the Constellation Vitality Company first quarter 2022 earnings name. [Operator instructions] As a reminder, this name could also be recorded. I might now prefer to introduce your host for at present’s name, Emily Duncan, vp, investor relations. It’s possible you’ll start.

Emily DuncanVice President, Investor Relations

Thanks, Shannon. Good morning, everybody, and thanks for becoming a member of us for our first Constellation Vitality Company earnings convention name as a stand-alone firm. Main the decision at present are Joe Dominguez, Constellation’s president and chief government officer, and Dan Eggers, constellation’s chief monetary officer. They’re joined by different members of Constellation’s senior administration workforce, who might be obtainable to reply your questions following our ready remarks.

We issued our earnings launch this morning together with the presentation, all of which may be discovered within the investor relations part of Constellation’s web site. The earnings launch and different issues, which we focus on throughout at present’s name include forward-looking statements and estimates concerning Constellation and its subsidiaries following the completion of the separation from Exelon which can be topic to numerous dangers and uncertainties. Precise outcomes might differ from our forward-looking statements based mostly on elements and assumptions mentioned in at present’s materials and feedback made throughout this name. Please consult with at present’s 8-Okay and Constellation’s different SEC filings for discussions of danger elements and different circumstances and issues that will trigger outcomes to vary from administration’s projections, forecasts and expectations.

As we speak’s presentation additionally contains references to adjusted working earnings and different non-GAAP measures. Please consult with the data contained within the appendix of our presentation and our earnings launch for reconciliations between the non-GAAP measures and the closest equal GAAP measures. I am going to now flip it over to the CEO of Constellation, Joe Dominguez.

Joe DominguezPresident and Chief Government Officer

Thanks, Emily. Good morning, everybody. Thanks for becoming a member of the decision and on your curiosity in our firm. As you possibly can think about, there’s fairly a bit of pleasure right here in Baltimore as we collect as senior executives to rejoice the event and milestone of our first earnings name.

We had a powerful quarter with good efficiency and throughout the board right here at Constellation, precisely the way in which you need to begin off. Our nuclear workforce, our energy and renewables enterprise and our business enterprise all carried out exceptionally properly all through the quarter. It is a robust begin, and I simply need to pause for a second and provides a shout out to the gifted men and women for the whole lot they do for our firm. You are the explanation for our success.

Since that is our first quarter, I wished to start out on web page 5 of the deck and take a second to remind you what we’re all about right here at Constellation. As , we produced essentially the most carbon-free power in America and have one of many lowest carbon intensities of any giant energy firm in America by a really broad margin. However we’re not resting on our laurels. We introduced on analyst day our purpose for our technology to be 95% carbon-free by 2030, and 100% clear by 2040.

That is not internet clear, that is clear. Our energy and renewables enterprise has a number of the greatest pure gasoline and renewable power amenities within the nation, and they’re producing some robust outcomes. And eventually, our business and customer-facing enterprise ship sustainable power options to tens of millions of households and companies throughout America, together with most of the nation’s main firms. We assist our communities by offering good paying jobs generously contributing to charitable organizations, volunteering and delivering clear power and options in every single place we sit.

All of this work is supported by a powerful investment-grade stability sheet that we rigorously handle to offer liquidity all through the commodity cycle. In sum, we’re dedicated to being a frontrunner in fixing the local weather disaster. We’ve the monetary instruments in place to offer most flexibility, and we stay a stalwart presence within the communities that we’re privileged to serve. Let me flip to slip six.

Delivering the outcomes that we report at present in a really difficult power world is, after all, difficult. However it’s solely a part of the challenges we confronted right here at Constellation through the first quarter. Along with working the enterprise and delivering robust outcomes, our people have dealt with the company separation with Exelon, standing up new groups and capabilities. We’ve many leaders in new roles, and I am proud to say that the separation has gone easily and with out disruptions.

Our IT platforms have had no points, we’re on observe to separate the platforms and terminate the transition companies settlement between Exelon and Constellation on time and on finances. Thanks once more to the exhausting work and excellence of the groups at Constellation and Exelon, who’re engaged on these points. Our crops proceed to function at world-class ranges, and our prospects proceed to obtain top-notch service and be linked to scrub power merchandise. In truth, a number of the highest buyer satisfaction scores we have ever obtained as an organization we have obtained this quarter.

Since separation, now we have delivered first quartile adjusted EBITDA of $866 million. We paid our first dividend. We decreased our debt by almost $2.5 billion forward of schedule, and strengthening that robust stability sheet that I discussed, on the outset, is a core energy of ours and a aggressive benefit. Dan will get into the main points of all of those achievements and extra.

However I need to say that in step with our previous apply, whereas we’re reaffirming steering at present, we is not going to revisit steering till we get by means of the summer time. From a coverage standpoint, states proceed to steer on addressing local weather change. Maryland enacted the Local weather Options Act, which is able to assist the state attain its greenhouse objectives. Importantly, for the primary time, it acknowledged nuclear power as an important useful resource in reaching these objectives.

In Pennsylvania, the rules for the state to hitch RGGI are finalized. Consequently, Pennsylvania is poised to take part in this system and scale back emissions by 225 million tons by 2030, producing cleaner air for households throughout the Commonwealth. Each of those essential coverage outcomes are the results of the wonderful work by our inside groups led by Kathleen Barron and all of our group companions. We admire that partnership.

On the federal degree, we proceed to work with trade, labor and environmental companions to make sure that nuclear power is a part of the following federal power bundle, incomes the identical tax credit that different applied sciences have loved for a very long time and guaranteeing that this very important know-how is an American useful resource for many years to return. Now everyone knows that we’re not throughout the end line in D.C. with the anticipated tax bundle, however we imagine that progress is being made, and we stay cautiously optimistic {that a} favorable consequence might be achieved this yr. And look, I do know that every one of you, like the parents right here at Constellation, like to take a look at the windshield that what’s in entrance of us and never a lot look within the rearview mirror.

However I do suppose it is essential typically to pause and keep in mind the journey we have traveled. It wasn’t so a few years in the past the place policymakers and even local weather scientists ignored the very important function of nuclear power as a part of an total technique to resolve the local weather disaster whereas offering reasonably priced and dependable energy to prospects. Environmental teams, many who lower their tooth within the antinuclear motion, pressed exhausting to shut crops. And sadly, some total nations took that recommendation.

The very thought that nuclear would obtain state coverage assist was a joke to some. Nicely, clearly, all of that has modified in a number of brief years, as folks throughout the globe have come to know the essential significance of fresh nuclear power. Sadly, the change in mindset got here too late to avoid wasting crops in Europe, the place the painful penalties of very poor power choices are revealed at present in additional air pollution and fewer power and nationwide safety. Nobody is comfortable about that.

And though that we have been a powerful voice and at the forefront of this dialogue about nuclear for years, I am not reminding you of the historical past to let you know that we’re proper all alongside. That is not essential proper now. What’s essential is that this: As you consider our firm, our ESG bonafides and our endurance for many years, we imagine that it’s extra evident than ever that we function the clear power property that America must battle by means of the local weather disaster. In order all of us step again and take a look at the windshield of the way forward for power coverage and ESG issues, we imagine that Constellation is completely positioned to learn from the continuation and enlargement of coverage assist and must be a central a part of the ESG curiosity.

As I stated at analyst day, ESG shouldn’t be a bolt-on right here. It is a technique that we intend to develop. That’s the reason in our first quarter, we established a sustainability council full of leaders throughout the corporate to advise us on ESG points. We launched 9 worker analysis teams, sponsored by members of the chief committee, and these teams exhibit our core worth of respect, belonging and variety by bringing folks collectively, respecting what makes us completely different and particular, whereas selling inclusion at the most effective power workforce in America.

In addition they assist studying and improvement of our folks. Lastly, we proceed to strengthen our workforce. The picture that you simply see right here on this slide is of the Simeon Profession Academy electrical energy class at our Braidwood Clear Vitality Middle. Simeon is a public location highschool on the south aspect of Chicago, which supplies faculty prep and career-focused schooling.

Its scholar physique is numerous, full of many African-Individuals and different teams that traditionally haven’t proportionately benefited from the roles and financial alternative within the power discipline. At Constellation, we’re decided to make this alteration. What I feel is admittedly cool right here about this picture and what I’ve seen time and time once more in my profession, is this idea that you could’t be what you possibly can’t see. And now we have right here African-American leaders, managers right here on the firm, educating African-American college students about careers in nuclear power.

You may’t beat that. As I flip to slip seven, I need to discuss just a little bit concerning the technology working highlights. Total, we produced 40.4 terawatt hours of carbon-free power throughout our nuclear and renewable fleet, which prevented roughly 30.2 million metric tons of CO2 through the quarter. Nuclear had a 93% capability issue, and carried out three outages averaging every 22 days, properly beneath the trade common.

As , one of many ways in which we handle price after the Texas occasions final yr was to push some work into this yr. So our outages this spring have been a bit extra difficult than typical as we needed to do some catch-up work. We did an excellent job getting after that work, and now we have so far accomplished our most troublesome deliberate outages for the yr, and we’re comfortable to have it efficiently behind us as we headed into the summer time. The autumn outages now we have deliberate for later within the yr are the better ones.

Good work by nuclear there. Our Texas fleet ran properly through the winter, even through the excessive climate we noticed in February. And total, we had a 99.4% energy dispatch match charge through the quarter. For my part, we validated final yr’s weatherization work on the Texas fleet, and we’re performed with these bills.

Lastly, our wind and photo voltaic fleet had an power seize of 96.1%, once more exceeding our plan. Turning to slip eight. Our business enterprise carried out very properly through the quarter and delivered power options to prospects, each new and previous. In the course of the quarter, we delivered 53 terawatt hours of wholesale and retail power to our prospects throughout america.

On this slide, we present our trailing 12-month common win charges for energy and gasoline and our renewal charges for energy. As you possibly can see, we have had an excessive amount of success in profitable new prospects and much more success retaining prospects attributable to our product choices and powerful buyer relationships. I am not stunned that we did not miss a beat right here within the enterprise. However look, it is excellent to know that we retained and expanded relationships as we separated from Exelon.

Our prospects proceed to look to us to offer options to assist them meet decarbonization objectives. We executed long-term offers with Comcast and Sheetz to offer them with renewable power. These offers assist 350 megawatts of latest renewable technology being constructed, signify 12% of Comcast energy wants for its operations, and can provide 70% of Sheetz’ total Pennsylvania wants, with nationally — with nationwide recs which can be power matched. Nice work there.

Turning to slip 9. At analyst day, we talked about how nuclear crops might do extra than simply provide carbon-free electrical energy to the grid. We are able to turn out to be clear power facilities that may clear up the local weather disaster by serving to to supply the fuels that may assist decarbonize different sectors of the financial system. I need to discuss hydrogen right here.

With the suitable coverage assist, we have performed sufficient work now to imagine that nuclear energy crops would be the best place in America to supply clear hydrogen. As we converse, we’re finishing the development of our first electrolyzer venture in New York underneath a DOE grant to check the know-how. Like many others, we imagine that clear hydrogen will play an extremely essential function in mitigating that — the air air pollution that’s inflicting the local weather disaster and the native well being points within the communities that we serve. Hydrogen can be utilized to create clear aviation fuels to cut back air air pollution, scale back emissions in metal manufacturing and different industrial processes.

It may be used to energy gasoline cells that energy long-haul trucking, and even to create fertilizers and different clear agricultural merchandise. The alternatives for clear hydrogen are nearly limitless. And once more, we predict we are able to make it at our plans cheaper and extra successfully than some other place within the U.S. For the previous six months, we have been working with a various set of private and non-private companions to develop a bid for a hydrogen hub, powered by nuclear power and funded underneath the grants that have been included as a part of the bipartisan infrastructure construct.

We’ll have much more to say about this as we get nearer to fruition, nearer, frankly, to the submission of the bid and you must search for us to offer a extra detailed replace subsequent quarter. Lastly, I need to finish with the know-how piece right here, with a brand new DOE grant that we obtained. We have been awarded a multimillion-dollar grant to discover utilizing new direct air seize know-how, so-called DAC know-how, direct air seize, that will assist scrape carbon out of the air utilizing our cooling towers on the clear power facilities. It is fairly cool the way it works.

Occidental has created a brand new membrane that may set up within the cooling towers of our energy crops. It is bought a fabric that chemically interacts with excessive moisture, increased temperature air. And because the water vapor from our cooling towers passes over the membranes, the membranes really lure the CO2 within the yr and will then be extracted. We count on this course of will enable us to seize as much as 250,000 tons of carbon dioxide every year, which is able to do one thing actually distinctive at our nuclear energy crops.

These clear power facilities will not be — will not simply be this place the place we produce as a lot clear power as wherever within the planet in a concentrated foundation, however they’re going to really enable us to take away CO2. So we’ll be capable of go internet adverse at these clear power facilities, and we’ll be capable of use that know-how to satisfy our 2030 and 2040 emissions objectives. Then lastly, on the business aspect, I need to say that we introduced our five-year collaboration with Microsoft for that 24/7, 365-day power real-time matching answer. By combining renewable power, clear power, with thrilling new battery storage, gasoline cells, hydrogen applied sciences, we’re going to have the ability to present our prospects with a real-time data-driven accounting answer that matches their consumption of fresh power with the manufacturing of fresh power on a geographic and time standpoint.

As we develop the product, we’ll be working with Microsoft to present prospects a clear and independently verified view of their sustainability efforts. We have additionally been working with the RTOs. Specifically, we work with PJM and others to make sure that their methods give us the geographic and timestamp information in order that we are able to match renewables and clear power technology with the consumption by our governmental and business prospects. We count on PJM to offer load matching information to members this yr.

That is essential as a result of we’re not going to have the ability to decarbonize the facility sector with clear power till now we have the aptitude to do with clear power, what we have been doing with power for the reason that daybreak of electrical energy. That is matched consumption to manufacturing. I need to thank PJM for performing upon our request and leaning into this physique of labor. And eventually, earlier than I flip it over to Dan, I’ll contact on slide 10 to reiterate our capital allocation technique.

We intend to ship worth to our shareholders by means of our capital allocation technique and thru a really disciplined technique of capital administration. We’re dedicated to sustaining robust investment-grade credit score rankings, which offer us a aggressive benefit. We are going to present a $180 million annual dividend rising at 10% per yr. As I stated, we awarded the primary dividend within the first quarter.

We imagine that there are alternatives to develop our enterprise organically and inorganically, and we are going to search alternatives that exceed a double-digit return threshold and can ship worth over the long run to you, our house owners. And the place we do not discover these alternatives, or the place they don’t meet the thresholds, we are going to give a reimbursement to you, our house owners, by means of particular dividends or share buybacks. As I discussed on analyst day, we’ll give you that readability on precisely how we are going to return worth within the again half of the yr. And with that, let me flip it to Dan for his replace.

Dan EggersGovernment Vice President and Chief Monetary Officer

Thanks, Joe, and good morning, everybody. As we speak, I’ll cowl our first quarter outcomes, energy and gasoline markets, and supply an replace on our gross margin disclosures and stability sheet. Beginning with slide 11. We delivered robust monetary leads to our first quarter as a stand-alone firm.

We earned $866 million in adjusted EBITDA, which is up almost $1.3 billion yr over yr. These robust outcomes replicate the absence of Winter storm Uri from final yr, which is a $1.2 billion EBITDA influence. This quantity is in step with the primary quarter 2021 influence of Exelon Technology of $0.90 per share on the Exelon share rely, or roughly $880 million after tax. We additionally benefited from increased hedge costs within the first a part of this yr, with the reversal of retirements of Byron and Dresden in September, we’re capable of promote that output at increased costs, offering some timing favorability earlier than the CMC contracts go into impact in June.

We must always see a few of this profit proceed over the primary two months of the second quarter as properly. Our business enterprise captured worth by means of optimizing the portfolio, and powerful new enterprise execution throughout this era of upper costs. Nuclear gasoline amortization expense was decrease within the first quarter of 2022 relative to 2021, primarily because of the absence of accelerated amortization following the reversals of the client and curiosity in retirements. Decrease capability revenues replicate much less volumes clearing, notably within the Midwest, and we confronted extra prices for nuclear outages as we catch up from our COVID- and Uri-related upkeep deferrals that Joe referenced.

We’re reaffirming our full yr adjusted EBITDA steering vary of $2.35 billion to $2.75 billion. As you consider full yr expectations, within the first quarter, we benefited from some distinctive alternatives, together with the anticipated stronger energy worth realizations at Byron and Dresden, and a few timing alternatives within the business enterprise. Additionally, we ended the yr absolutely hedged within the Midwest and Mid-Atlantic. And as I am going to focus on in a couple of minutes, are actually absolutely hedged throughout our portfolio, which limits the influence of rising costs in 2022, however they’re exhibiting up in our 2023 disclosures.

Turning to slip 12. As , now we have seen a dramatic rise in pure gasoline and energy costs over the past 12 months or so. each within the immediate yr and in addition throughout the 23 to 25 ahead worth curves, which you’ll see on these charts. Beginning with Henry Hub pure gasoline costs, forwards have elevated on common $0.75 per million BTU for the reason that starting of the yr by means of March 31 and $1.50 for the reason that starting of 2021.

As of Tuesday, spot gasoline was $6.49 per million BTU, and forwards in ’23 are at $5.25, ranges now we have not seen since 2008. The rise in gasoline costs are pushed by a mix of rising demand put up COVID, decrease storage ranges and a good provide and demand stability within the home pure gasoline market. As well as, the tragedy within the Ukraine has exacerbated the rise in gasoline costs because the EU and the U.Okay. look to replenish, depleted storage and discover different sources of provide outdoors Russia.

Sadly, for these concerned, we don’t see a change in these dynamics within the close to time period on the very least, and count on increased pure gasoline costs to proceed. As , increased gasoline prices could have a major influence on the worth of energy. The continued rise of each pure gasoline and coal costs have actually supported increased energy costs out the curve. Energy costs are additional being supported by various different elements, together with clear air rules anticipated to extend allowance costs in a few of our key markets, and the continued retirement of coal models.

As you possibly can see within the charts, 2023 NiHub and West Hub forwards are 80% to 100% increased since January of 2021. Turning to hedging. We have elevated our hedge place since final quarter that may be put into two major buckets. First, with these upward strikes in costs, now we have used the flexibleness in our ratable hedging program to lock in additional ahead gross sales for 2023 and past.

Locking in these costs reduces the volatility in our earnings outlook, supplies extra certainty to future earnings and money flows, and supplies us with larger visibility and confidence in future capital allocation choices. Second, our New York hedge place is significantly increased than final yr — final quarter, which displays the interaction of the New York ZEC program and ahead costs. We’ve a refresher on the New York ZEC program on slide 18, however in easy phrases, the New York ZECs have been designed with the patron safety mechanism that alter the ZEC costs as we cross income thresholds, which we are actually projecting for tranche 4 that begins in April 2023 for the following two-year time period. At present costs, we’re successfully absolutely hedged for our New York output over the tranche frac time period.

With that context, taking a look at 2023, we are actually 86% to 89% hedged on a fleetwide foundation, which is between 11% to 14% increased than the place we’re hedged on the analyst day. And whereas we don’t present it right here, you are secure to imagine that now we have elevated our 2024 hedge place by an analogous quantity, which displays each our regular hedging exercise and the New York ZEC impact. As a reminder, the carbon mitigation credit in Illinois signify roughly 27% of our hedge place in every year of the contract. Transferring to our gross margin replace on slide 13, and I ought to word, these numbers are calibrated at March 31 to the costs and positions.

As you might recall, the gross margin desk that we shared at our analyst day in January have been based mostly on November 30 ahead costs, however we included a $50 million downward adjustment in our EBITDA steering to replicate the drop in costs throughout December. Accounting for these costs, whole gross margin would have been $7.3 billion for 2022. Wanting on the chart, you possibly can see the overall gross margin for 2022 is unchanged accounting for this adjustment. Open gross margin is up considerably since analyst day because of the increased costs throughout all areas, which is then offset by the mark-to-market of our hedges.

We had robust efficiency throughout energy and non-power new enterprise, executing $250 million of energy new enterprise and $150 million in non-power through the quarter. As I referenced on the final slide, we are actually successfully 100% hedged for 2022, so energy worth information are having very restricted influence on our outcomes at this level. In 2023, whole gross margin is up $300 million since analyst day, the $7.95 billion, pushed by increased costs in all areas. We executed $150 million in energy and non-power new enterprise.

Contracted revenues decreased by $50 million, pushed by the interaction of present increased costs and the dynamics of setting the ZEC degree for the following tranche of the New York ZEC program, which I stated begins in April 2023. These increased costs resulted in a decline within the ZEC degree itself however is offset by increased energy costs which can be exhibiting up in our open gross margin calculation. Turning to the financing and liquidity replace on slide 15. As Joe stated, our investment-grade credit standing is the cornerstone of our monetary coverage.

— investment-grade rankings and a powerful stability sheet present us with many aggressive benefits, together with ample entry to liquidity and the flexibility to take part in buyer channels like wholesale load auctions and supplies flexibility in how we offer credit score assist, comparable to utilizing penal ensures in lieu of letters of credit score. Our credit score metrics stay very robust and are properly above company thresholds. Following separation, S&P raised their outlook from steady to optimistic, and Moody’s from adverse to steady, each whereas reaffirming rankings at BBB minus and Baa2, respectively. Since separation, now we have retired or paid down almost $2.5 billion of long-term debt and time period loans, which accomplished our debt paid out for the following two years.

We noticed alternatives to speed up our debt discount this quarter and pulled ahead a $523 million senior word attributable to be retired in June, after which in April, we paid off the $880 million time period mortgage initially due in August for the CENG acquisition. Given the sharp horizon commodity costs and better volatility we have obtained lots of questions on our collateral place. So I’ll spend a second on it. At the beginning, our investment-grade credit score rankings present vital benefits to our liquidity and our capability to run the enterprise.

Within the backside left chart, you possibly can see now we have entry to $5.7 billion in liquidity amenities and use lower than half of our availability, leaving ample capability for instances of stress. Additionally, you will see in our 10-Q that now we have a money place as of March 31 of $1.6 billion, very similar to you noticed on our September 30 financials final fall, now we have benefited from vital money collateral postings to us, pushed by the dramatic rise in gasoline and energy costs through the quarter. As a reminder, we noticed a major quantity of technology on to prospects by means of our retail and wholesale channels, limiting the quantity of transactions throughout the exchanges, which thereby reduces our collateral wants when costs transfer in both path. This association positions us in another way from some market individuals.

So let me now reply the query as to why a lot money collateral got here into us once more this quarter. Two major causes. One, we noticed a major quantity of gasoline to our prospects. In contrast to energy, now we have technology size, we’re naturally brief pure gasoline as a result of we do not produce the bodily molecules.

We procure the gasoline might execute the sale to a buyer, and given our contracting cycle, we procured gasoline at a lot decrease ranges than the market at present. These rising costs have, in flip, required counterparties to put up money collateral to us. And two, we take part in some energy markets the place now we have extra masses than technology size with New England being an excellent instance, as a result of now we have procured energy for these buyer obligations as costs rise, the counterparties, once more, must put up to us. The mixture of those two positions results in the a lot increased money balances that you simply see in our 10-Q.

For these calibrating your fashions excluding these money collateral actions, we might nonetheless level you to a year-end internet debt stability within the low $5 billion vary, which might be in step with the credit score metrics on this web page, assuming our free money obtainable for allocation is used for functions apart from incremental debt pay down. I would prefer to now flip the decision again to Joe for his closing remarks.

Joe DominguezPresident and Chief Government Officer

Sure. Thanks, Dan, for that good complete abstract. Look, as I take into consideration the final quarter, I’ll flip to slip 15, you are conversant in our worth proposition. However the issues that have been essential for us have been to get the separation performed, exhibit that we proceed the efficiency and the business enterprise and the opposite working companies to the identical ranges are higher.

than what we had performed once we have been all a part of Exelon. We have actually benefited from a number of the altering fundamentals round pure gasoline and coal. And properly, I am certain we’ll get questions on our long-term views. I feel it is secure to say that the short-term market, the 12- to 18-month market is one thing that’s closely influenced by lots of behaviors.

However we have seen elementary modifications. We’re not going to return to the gasoline worth and coal worth surroundings that we noticed simply actually, frankly, 12 to 18 months in the past. And that gives robust assist for nuclear. I talked just a little bit about coverage the place now we have gotten some successes on the state degree, and we’re clearly nonetheless ready on the federal authorities.

This is what we imagine. Given the significance of nuclear power, we do not suppose there might be an power bundle that occurs this yr or wherever down the highway that is not going to incorporate nuclear power. And that is a C-change distinction. And once you’re an proprietor of this firm, that is an choice you could have.

Talked just a little bit concerning the technical optionality we see with the nuclear crops changing into clear power facilities, the place we are able to energy the grid, however we might do a lot, far more than that. We seize carbon on the websites, and we are able to make different hydrogen-related merchandise on the websites that I feel are going to be aggressive benefits for years to return. You have seen lots of provide chain points, inflationary pressures occurring to different companies. I am not saying we’re immune from these issues.

However actually, given the composition of our fleet, and the truth that our prices aren’t rising with the oil and gasoline and coal prices actually to the identical diploma as others provides us, once more, a aggressive benefit. After which, lastly, Look, we will handle this enterprise in a really disciplined approach, each with regard to progress, but additionally the stability sheet itself. Dan talked about that stability sheet giving us a aggressive benefit and it has we’re seeing margin enlargement as others who frankly haven’t got the identical stability sheet functionality actually having to extend margins, and we’re getting the upside of that. So I like the place we’re at right here on the finish of the primary quarter.

We’ve hedged into higher-priced markets. And albeit, our goal is to make sure that we hit the targets we have given to the Avenue or do higher. And so, we have hedged and we have continued to hedge, as Dan stated, into ’24 and past, into the upper costs that we prefer to see. I am certain you will have some questions on that.

However I like the place we’re positioned. So with that, let me flip it again to you on your particular questions. As I stated, the senior workforce right here is able to reply.

Questions & Solutions:


Thanks. [Operator instructions] Our first query comes from Stephen Byrd with Morgan Stanley. Your line is open.

Stephen ByrdMorgan Stanley — Analyst

Hey, good morning and congrats on the nice outcomes. So I wished to possibly focus first on simply the outlook for federal laws, and also you offered some nice commentary — how are you pondering simply given the evolution of the whole lot we have seen politically, might you simply possibly converse just a little bit extra to your sense for the probabilities of success? I do agree along with your level that if something passes, it does seem extremely doubtless that nuclear assist might be in that. So I feel that is properly appreciated. However I am simply curious extra about your sense of the prospects for one thing getting throughout the end line?

Joe DominguezPresident and Chief Government Officer

Sure, certain, Steve. Look, as you all would properly think about, as a brand new CEO of a brand new firm, spent an excellent little bit of time over the previous couple of months in Washington, actually having dozens of conferences with White Home policymakers and others, I nonetheless imagine that there’s a robust urge for food to get one thing performed on clear power. I feel they do not prefer to name them the Construct Again Higher tax items, however there’s lots in there that every one sectors of the power enterprise like when it comes to the tax insurance policies. And I feel there’s robust assist actually persevering with inside the Democratic Occasion, Senator Manchin and others to get one thing performed.

What we’re seeing is whether or not or not there’s an urge for food to do it from a bipartisan standpoint. And Stephen, as a lot as I feel — as I stated, that there is one thing in it for Republicans and Democrats, we’re all observing the challenges of getting something performed from a bipartisan standpoint, and positively, this near an election that is likely to be left. What I do imagine is that the Democrats will attempt to get this performed, specifically Senator Manchin will attempt to see if there’s an urge for food, however they don’t seem to be going to be strung out without end making an attempt to get bipartisan assist if it turns into evident that the votes simply aren’t there to get to 60. So I feel persons are assessing that in D.C.

One of many issues that, truthfully, I assumed was a little bit of a catastrophe with Construct Again Higher was the quantity of which the type of political interaction was being spelled out day-after-day within the newspapers. It was counterproductive — usually is counterproductive in negotiations to have that type of play-by-play happening. It actually was there. I feel they’ve discovered their lesson they usually’re very clearly making an attempt not to try this.

However there is a distinction between not being vocal about it and never doing one thing about it. We see exercise on the bottom. I feel very clearly right here, the following couple of months are going to be telling, proper? Whether or not or not there’s something from a bipartisan standpoint or the Democrats can resolve on the finish of the day that they’ve to maneuver their very own invoice. We’ll know that right here within the subsequent 4 to eight weeks.

However my level is, as I stated, extra elementary. We’re constructing this firm for the lengthy haul. And I feel all of it’s essential to type of spend a while and take a day out and keep in mind how far we have come. And I feel all the momentum is at our backs.

As at the least I admire these bipartisan discussions, there’s nothing however assist for the nuclear elements of the invoice. And I am comfortable to see that. We have labored on it for a very long time. And truthfully, as I stated in my scripted feedback right here, the work or the issues that we have seen in Germany and Europe, I feel, have merely bolstered the U.S.

policymakers the significance of preserving this fleet alive from a nationwide safety standpoint, an power safety standpoint. And though we’re hyper centered on these issues proper now, the local weather change issues will not be going away. That is what we constructed this firm to deal with. That is what we are going to tackle, and I am assured that coverage will again it up.

Stephen ByrdMorgan Stanley — Analyst

That is tremendous useful colour. Perhaps simply my final query, simply constructing in your level on nationwide safety, is uranium. I feel you all have taken a really considerate strategy to making sure you could have uranium provide. However we do get in america a good quantity of uranium from Russia.

And I used to be simply curious, what do you see as attainable strikes when it comes to provide chain changes on the trade degree? And be at liberty to remark in your place, however I feel you guys are in good condition. However extra broadly, I am fascinated by your tackle what changes would possibly happen on the nationwide degree when it comes to how we procure uranium?

Joe DominguezPresident and Chief Government Officer

I feel — it isn’t simply uranium. I feel it is all fuels and lots of applied sciences we will see an onshoring motion. And we actually assist that. And I’ll ask Bryan Hanson to offer some colour.

You identified that we’re in a fairly great spot, and we’re, about what we’re seeing within the market. However as a basic rule, Stephen, I feel uranium and uranium-related companies, like different issues in power, we will be taught from this example, and we will resolve to maneuver these onshore. Once more, what I am liking when it comes to what I am seeing at a Congress is a give attention to these areas. We’re speaking about it.

And once more, to the extent that there are limits on imports from Russia over some time frame, we assist weaning ourselves off of Russian fuels, however it must be performed in a practical approach. And I feel policymakers perceive that. Bryan?

Bryan HansonGovernment Vice President and Chief Technology Officer

Sure, I would say we’re working properly with policymakers, each the trade and policymakers working collectively to increase the capability and functionality in america to offer enrichment conversion companies. So I see that accelerating extra in order we discuss it among the many utilities. I feel for our firm, as we glance ahead, we have stated we’re good out by means of a number of years round our enrichment conversion capabilities. And if you consider the price influence to us total, three issues I would remind you of.

One is nuclear fuels, 20% of our manufacturing prices at our nuclear crops. Two, our gasoline workforce does an impressive job of their hedging insurance policies and methods to ensure we use a number of contracts, long-term contracts, completely different hedges collars across the excessive aspect, low aspect of the costs we’d pay to make sure that now we have a strong provide. After which, lastly, as soon as that gasoline is definitely loaded within the reactor, it is amortized over 5 to 6 years, relying on the size of gasoline cycle for that individual plant. The prices are actually muted for us, possibly $1 a megawatt hour out by means of previous 2025 for us proper now.

So we’re sitting in a great spot.

Stephen ByrdMorgan Stanley — Analyst

Nice. Thanks a lot. Respect it.


Our subsequent query comes from Steve Fleishman with Wolfe Analysis. Your line is open.

Steven FleishmanWolfe Analysis — Analyst

Yeah. Hey, good morning. Thanks. First, simply on hedging technique.

Simply given the change world surroundings and the truth that you could have much more core hedged by means of the Illinois settlement, plus additionally, I assume, the potential PTC, are you interested by possibly hedging much less going ahead than you could have?

Joe DominguezPresident and Chief Government Officer

Steven, I’ll ask Jim to leap in right here. We’re not vigorously tied to a 3rd, a 3rd, a 3rd that you simply noticed from this firm in prior years. We’ve, as you identified, by means of the state assist mechanisms, lots of our quantity already hedged. However look, we noticed an excellent run of costs through the course of the quarter.

And Jim’s message to the workforce was, opportunistically, seasonally, the place it is smart, let’s seize a few of that worth. And really, as we’re sitting right here at present, a number of the excessive factors that we noticed through the quarter have now labored their approach again just a little bit. And we’re fairly glad that we had these hedges. So look, I do not suppose we will be slaves to a 3rd, a 3rd, a 3rd, however we will see worth.

And also you must know that, as we will run this firm, we will be disciplined across the stability sheet, however we will be disciplined about ensuring that each time we give a projection to you, we hit it or do higher. And so, we will proceed to make use of the hedging technique to present us that form of assurance. Jim, soar in right here with extra colour.

Jim McHughGovernment Vice President and Chief Business Officer

Sure. Thanks, Joe. I assume what I might add to your query about, properly, on condition that now we have the coverage offers, the way in which we take into consideration this hedging window is often in this sort of three-year window. There’s some buyer contracts that go just a little longer.

So the way in which we take into consideration that’s we need to find a way, to Joe’s level, seize the moments when now we have the chance once you see costs run like this. And I feel total, we’re nonetheless going to have the ability to have some flexibility and did point out the flexibleness — so we tie that in consistently to what are we making an attempt to realize in hitting the targets that we have offered, as Joe talked about, and achieved with the stability sheet the purpose of preserving a powerful stability sheet. So I feel we’ll proceed the identical basic technique with flexing up or down right here and there as we see the market transfer in intervals like this. I do not suppose there is a huge change to the general philosophy of what we’re making an attempt to realize.

Steven FleishmanWolfe Analysis — Analyst

OK. Thanks. And one different query. You guys in all probability noticed the Vitality Harbor announcement this previous week, with a contract on web site — 10-year contract on web site, I feel, with a knowledge middle host buyer.

And I am simply curious how a lot are you taking a look at alternatives like that? And is that one other approach to probably get type of above market hedges or primarily contracts? Are you able to discuss that?

Joe DominguezPresident and Chief Government Officer

Positive, Steve. We’ve checked out it. And as , we introduced at our analyst day, we did a deal at our mixed cycle machines down in Texas, the place we get extremely robust curiosity from information middle firms that come behind the fence line and never solely on the fossil crops in Texas. However after all, making the most of the clear power manufacturing at our nuclear crops and the excessive reliability that they get sitting behind the fence line there.

We have held again just a little bit on that. First, not fascinated by moving into extra commodity danger round bitcoin and cryptocurrency. And truthfully, I feel all the occasions which have transpired since analyst day type of bolstered that sense of working the enterprise and never having commodity publicity when it comes to the manufacturing. Up to now, that is the way in which we have run issues.

We are going to take a look at contracts. However proper now, I am holding tight to see what occurs in Washington. As a result of I need to see how that coverage would work and interaction with any contract we’d have with a knowledge middle behind the fence line. However is a chance, certain, it’s.

The tier zero information middle market goes to do nothing however develop even when the cryptocurrency piece of it begins to stagnate just a little bit, and people might be alternatives for us. However they don’t seem to be issues that we have to soar at with our nuclear crops. I feel hydrogen and positively how the manufacturing tax credit score work are issues that we have to see fairly clearly earlier than we enter into long-term offers.

Jim McHughGovernment Vice President and Chief Business Officer

Nice. Thanks very a lot.

Steven FleishmanWolfe Analysis — Analyst

Thanks, Steve.


Our subsequent query comes from Paul Zimbardo with Financial institution of America. Your line is open.

Paul ZimbardoFinancial institution of America Merrill Lynch — Analyst

Hello. Thanks. I wished to proceed on Steve’s line of questioning. Simply extra particularly round retail.

How have these conversations gone? Not speaking concerning the crypto information mine, however simply giant business, industrial, the Microsofts of the world chief, in recognizing that zero carbon worth, is it about increased margins, extra length? Simply in case you might give just a little extra taste on these conversations?

Jim McHughGovernment Vice President and Chief Business Officer

Sure. Positive. It is Jim. I can begin.

I feel the conversations with our giant business and industrial prospects goes very properly. They’re very fascinated by sustainability merchandise on the whole. We’re speaking to them about various issues. The least of which I feel is 24/7 and 365 that we have talked about.

And our partnership with Microsoft on that product goes rather well. We plan to pilot that product on this quarter popping out with some prospects with the plan to have business choices towards the second half of this yr for these merchandise. And lots of our prospects are asking for various flavors from a kind of carbon-free matching and technology provide, in addition to what share of an hourly math you are on the lookout for on this platform that we’re constructing with them. goes to assist us be capable of provide that.

We do are inclined to see in a majority of these custom-made options increased margins than the pure commodity gross sales once we’re simply promoting power provide contracts. So I feel that is an amazing alternative for us on the whole as these type of custom-made sustainability merchandise that they are on the lookout for. There’s been, with the excessive power markets, prospects have actually wished to know what the sustainability of those costs are they usually’ve lower down their phrases on some offers, however the margin enlargement has occurred for us, as Joe talked about. So we have seen good outcomes when it comes to margin enlargement, even simply on the provision deal after which the sustainability merchandise have margin on prime of that.

Plenty of curiosity we hear suggestions on a regular basis and get suggestions from our prospects about how we may also help them go forward and meet their sustainability aspirations and one are a part of their ESG objectives.

Joe DominguezPresident and Chief Government Officer

Sure. Paul, I feel if I might complement Jim’s factors right here, simply there’s one piece of it that is the purchasers are asking us for the sustainability merchandise. The opposite piece is we see, clearly, beginning with the U.S. authorities, a give attention to load matching from a geography and a time standpoint.

That is following a pattern we have seen in Europe the place regulators, prospects, governmental entities and producers are all making an attempt to, as I stated, carry collectively the manufacturing of fresh power with the consumption of fresh power. We’re actually going to maneuver to a clear power financial system. We have got to make it possible for these issues match up. We ship the suitable worth alerts for issues like storage and different applied sciences that may assist us match these items up.

So starting with the chief order that President Biden signed earlier on this yr, there was a rising give attention to load match. The opposite piece of that’s what’s going to occur out of the SEC course of. What are folks going to should exhibit to assist their assertions round sustainability? These are all massive focus areas. However we have got to be prepared with the know-how to fill the area of interest to have the ability to ship that worth to our prospects.

And I discussed this earlier in my feedback, the RTOs, too, have to offer the trade with the info that tells us when renewable power is being produced, when storage is being operated, and the place it is occurring relative to consumptive load. And many people are stunned to be taught that proper now, the RTOs do not supply that functionality. So we have labored with PJM and others, and I complemented PJM’s management for getting after this. However there are lots of items that also want to return collectively for the 24/7 enterprise to essentially develop to it is type of full muscularity.

There are lots of these regulatory questions that have to be answered, technical capabilities. However what we’re making an attempt to do is transfer this enterprise, and we clearly have the assist of provide however transfer this enterprise right into a place the place it anticipates the persevering with pattern within the path of matching load and technology, which now we have to do if we will make a dent within the local weather disaster.

Paul ZimbardoFinancial institution of America Merrill Lynch — Analyst

OK. Thanks. Very complete. After which, one different, if I can, simply in gentle of the $300 million increased whole gross margin for 2023, is there a refreshed view or a approach to consider the analyst day disclosure concerning the $2.8 billion to $3.2 billion free money circulate for 2022 and 2023?

Joe DominguezPresident and Chief Government Officer

Sure, Paul, it is a good query. We’re not going to comment that annual steering or the multiyear steering on a quarterly foundation. However actually, I feel we talked concerning the thought, we’re assured in our capital budgets and our price budgets. So there’s extra on the prime line.

You may in all probability translate it right down to what it means for us.

Paul ZimbardoFinancial institution of America Merrill Lynch — Analyst

OK, nice. Thanks all.


Our subsequent query comes from Michael Lapides with Goldman Sachs. Your line is open.

Michael LapidesGoldman Sachs — Analyst

Hey, guys. I even have two questions: one for Dan, one for Joe. Dan, type of just a little little bit of a modeling or simply type of making an attempt to consider the gross margin line. Once we see ahead curves transfer up lots in a yr like 2023, secure to imagine that you aren’t getting to seize for the unhedged portion or uncontracted portion of the portfolio.

You do not get to seize all of that profit just because a few of your retail contracts, they’ve costs set, or in the event that they’re floating, they’ve caps. And due to this fact, once we take into consideration type of the curves for the unhedged portion of the portfolio that there is some portion of that transfer that simply will not type of trickle right down to your backside line?

Joe DominguezPresident and Chief Government Officer

Michael, the ahead gross sales for our buyer enterprise are going to be mirrored in our hedge values, proper? So these costs are locked in, and you may see that within the hedge share within the tough worth. So when costs transfer, that does translate by means of. We offer sensitivities within the appendix pages, the costs. These work awfully properly to be completely sincere.

And so, when you consider the actions available in the market, I feel that is a great way to assist calibrate the place we’re heading. However in any other case, we should always seize. I imply typically once you get into the ultimate yr and the small percentages, there is likely to be some seasonality the place our hedges are. However typically talking, when you consider a ’23 with our place, you must count on that to hold by means of.

Michael LapidesGoldman Sachs — Analyst

Obtained it. After which, Joe, you made a remark in your opening remarks, you talked lots about how some components of the world, and particularly Europe, might not have centered on the criticality of nuclear technology. I need to discuss that just a little bit, and I am curious on your suggestions. Considered one of Europe’s largest nuclear turbines has made no strikes to retire crops.

In truth, they’re constructing crops. However they’ve confronted given legacy points with the crops or just simply aged, large operational points which have introduced crops off-line decreased the quantity of nuclear energy in France and that impacts the broader European market. I am simply curious the way you suppose and your workforce thinks about your nuclear fleet within the U.S. nuclear fleet? The potential whereas these crops age, that operational efficiency, which has improved dramatically within the U.S.

over the past 10, 15 years for the nuclear fleet really turns the opposite path or faces headwinds or dangers?

Joe DominguezPresident and Chief Government Officer

Sure, it is a good one, Michael. I feel what’s aged at our clear power facilities is the title of late. I feel once you take a look at nearly each different piece of kit inside, we have up to date them aggressively. You already know from watching this firm for a very long time, and I do know you could have, that we have invested capital in these machines even throughout instances the place commodities have been, frankly, at an actual trough degree.

And so, it is — I feel some people who’re neophytes in our enterprise take a look at the age when the plant was commissioned and suppose the plant is that previous. When in actuality, the pumps, the primary items of kit, oftentimes, steam turbines and different issues that have to be changed have been changed generators. We have successfully rebuilt laptop methods and digital controls and cabling methods. So we have performed lots of that work.

The state of affairs in France is one which we have talked about. We do not have — the weld points have been a attribute of the design they use that we do not. The opposite factor that tends to occur in France is once they have a problem, they shut down the whole lot of the fleet. The U.S.

regulators have taken a extra structured strategy to coping with points as they arrive up and permitting operators to deal with them throughout outages. And it is presumptuous for me to query the way in which the regulatory surroundings works in France. However truthfully, it is a massive a part of the story there. However I really feel very snug concerning the investments we have made within the crops.

And I do not suppose it is like a coal plant, for example, the place the whole lot is of the classic that it was when the plant was initially constructed, and also you see type of this sliding efficiency and growing price profile. We’ve not seen that. I feel one good illustration of that, frankly, is once we did Peach Backside, and we went from 60 to 80 years and thru the NRC licensing course of. What we discovered was that the investments now we have been making to get the crops from 40 to 60 years, had much more life than that incremental 20-year improve of their license life and carried us by means of all the way in which to 80.

And I feel that is illustrative that lots of the modifications that Brian and his workforce are making, the know-how enhancements we have made now for many years, are issues that may carry us for a lot of a long time with out anticipating any diminishment within the efficiency of the unit. In truth, simply the other. Or any improve in the price of working and sustaining the models. In truth, simply the other.

In order that’s the way in which I might summarize it. Brian, something extra so as to add.

Bryan HansonGovernment Vice President and Chief Technology Officer

I would just add simply a lot to Dan’s chagrin, we spend money on the crops like they will run without end, Joe. So we simply keep attuned to that, proper? There’s nothing vital sooner or later that is not already on our forecast round making these crops robust by means of the years.

Joe DominguezPresident and Chief Government Officer

There you go, Michael. You bought just a little little bit of taste of the dialogue in our administration workforce.

Michael LapidesGoldman Sachs — Analyst

Obtained it. Thanks, guys. A lot appreciated.


Our subsequent query comes from Shar Pourreza with Guggenheim Companions. Your line is open.

Shar PourrezaGuggenheim Companions — Analyst

Hey. Good morning, guys. Joe, are you able to simply possibly elaborate in your capital allocation alternatives? It is type of in gentle of the potential enchancment in money flows particularly as we’re type of interested by progress, are you seeing extra natural or inorganic alternatives as we take into consideration type of asset-level alternatives? After which conversely, does this sort of surroundings type of make your fossil gasoline property extra engaging as we take into consideration sale alternatives. So possibly some ideas on accelerating decarbonization right here, for example, with ERCOT or the Japanese gasoline property?

Joe DominguezPresident and Chief Government Officer

Sure. I might say our Texas property are price extra now when it comes to our personal valuation than three months in the past once we kicked the corporate off. however they’re additionally producing extra worth. They usually stay a number of the lowest emitting sources within the entirety of the Texas market.

Look, I feel we personal the 2 greatest mixed cycle machines in Texas, not solely when it comes to their operational efficiency and their emissions ranges, however one thing we have not talked about in Texas, however in all probability ought to is the flexibility to resist drought circumstances as a result of we do not want cooling water, they’re air chilly machines. So not solely are they excellent, however they’re air chilly machines. So when you’ve got drought, they are going to have the ability to run by means of that. we like the place we’re positioned there.

And whereas the work actually is not performed and the Texas Fee has acknowledged as a lot when it comes to market design there, they’ve taken lots of danger off the desk, and the weatherization efforts there have labored. Level is, sure, I see the rising worth of these issues, however they’re additionally delivering lots of worth to our prospects in Texas proper now. No hurry to present them up. I feel the pattern when it comes to upward worth goes to develop even stronger there.

Not — however that is in all probability the place issues are going to cease. We’re not going to be an organization that’s going to be shopping for lots of extra fossil gasoline models. We have made that clear from an ESG dedication standpoint, and that is the place issues stand proper now on that. Does that tackle your query on fossil?

Shar PourrezaGuggenheim Companions — Analyst

No, it does. That is tremendous useful. After which, simply actually last item, form of possibly beat a useless horse right here on the hedge profile. However possibly simply give just a little bit extra colour as we’re interested by the efforts in ’24 and ’25? I imply, a few of your friends have been capable of at the least converse possibly directionally with a said EBITDA vary, and the size of the chance appears actually giant?

Joe DominguezPresident and Chief Government Officer

Look, I feel now we have a a lot greater open place on the market. And as Dan stated, we attempt to give some good sensitivities. I feel these are projectable and the costs are fairly wholesome on the market. However I’ll type of stick with the place Dan and I’ve been all through the decision.

We’ll have a time frame in a while within the yr once we can present the replace, we’ll present updates when it comes to our efficiency this yr. I need to get by means of the summer time. I need to have the ability to see how the fleet performs this summer time. I need to then be capable of consider issues like capital return.

We owe you a giant replace on the finish of the yr on these kinds of issues, after which we’ll begin wrapping in ’24 to ’25. I am cognizant of what a number of the different gamers on this house have stated. Clearly, the improved pricing has lifted our boats there. However I need to draw back from being particular till we get some extra floor underneath our toes.

Dan, something extra so as to add there.

Dan EggersGovernment Vice President and Chief Monetary Officer

Sure, no, I agree. I imply, Shar, simply you are taking a look at hedge percentages and that form of factor in ’24, it’s a start line. A, we gave you ’24 on the analyst day. We talked concerning the improve since then.

I’ve highlighted the truth that the Illinois CMC is about 27% of our output. In order that’s going to be hedged as it’s. The New York property, given the place costs are with the ZEC mechanism, goes to appear like that is ahead. You may get a deal with on type of the constructing blocks of a few of these items.

However as Joe stated, you do the maths, there’s nonetheless lots of open publicity there on our technology hyperlink. And we predict that is going to be a possibility, notably with the costs you are seeing within the Mid-Atlantic.

Joe DominguezPresident and Chief Government Officer

And hopefully, Congress will act, and we’ll have some sense of what that appears like for us on the identical time. So nonetheless lots of shifting items, however an amazing begin.

Shar PourrezaGuggenheim Companions — Analyst

No, bought it. Particularly reasonable level. Thanks, guys, very a lot. Respect it.


Thanks. This concludes the question-and-answer session. I might now like to show the decision again over to Joe Dominguez, president and CEO, for closing remarks.

Joe DominguezPresident and Chief Government Officer

Nicely, simply I simply need to find yourself the place I began off. Thanks all on your curiosity within the firm. Grateful for the women and men who run this firm. They have been doing an amazing job.

Sit up for persevering with this dialogue in our subsequent quarter, and admittedly, persevering with the great efficiency. Have an exquisite day.


[Operator signoff]

Period: 66 minutes

Name individuals:

Emily DuncanVice President, Investor Relations

Joe DominguezPresident and Chief Government Officer

Dan EggersGovernment Vice President and Chief Monetary Officer

Stephen ByrdMorgan Stanley — Analyst

Bryan HansonGovernment Vice President and Chief Technology Officer

Steven FleishmanWolfe Analysis — Analyst

Jim McHughGovernment Vice President and Chief Business Officer

Paul ZimbardoFinancial institution of America Merrill Lynch — Analyst

Michael LapidesGoldman Sachs — Analyst

Shar PourrezaGuggenheim Companions — Analyst

Extra CEG evaluation

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