Constellation Energy Corporation (CEG) — Q3 2024 Transcript

Thank you, Latif. Good morning, everyone and thank you for joining Constellation Energy Corporation's third quarter earnings conference call. Leading the call today are Joe Dominguez, Constellation's President and Chief Executive Officer; and Dan Eggers, Constellation's Chief Financial Officer. They are joined by other members of Constellation's senior management team who will be available to answer your questions following our prepared remarks. We issued our earnings release this morning, along with the presentation, all of which can be found in the Investor Relations section of Constellation's website. The earnings release and other matters which we discuss during today's call contain forward-looking statements and estimates regarding Constellation and its subsidiaries that are subject to various risks and uncertainties. Actual results could differ from our forward-looking statements based on factors and assumptions discussed in today's material and comments made during this call. Please refer to today's 8-K and Constellation's other SEC filings for discussions of risk factors and other circumstances and considerations that may cause results to differ from management's projections, forecasts and expectations. Today's presentation also includes references to adjusted operating earnings and other non-GAAP measures. Please refer to the information contained in the appendix of our presentation and our earnings release for reconciliations between the non-GAAP measures and the nearest equivalent GAAP measures. I'll now turn the call over to Joe Dominguez.

Thanks, Emily. Good morning, everyone. Thank you for joining us today, and a big thank you to our talented team at Constellation. Today, Dan and I have the privilege to share results that exceed our expectations and necessitate an increase in our guidance. Before I dive into that, I want to address Friday's FERC ruling that many of you are likely concerned about. In our view, the 2:1 ruling rejecting Talen's ISA is not the final decision from FERC regarding colocation. The ruling is narrow, and we believe all commissioners, including those who recused themselves, understand the importance of providing additional guidance. The ways we might receive this guidance could vary. Either the commission or PJM could take action, or we might initiate action ourselves. It's too early to determine which path we will choose. However, we believe that colocation in competitive markets is key to establishing the large data centers necessary for leadership in AI. As Chairman Phillips highlighted, our economy and national security depend on our ability to lead in AI. This concern is echoed by both presidential candidates. National Security Advisor Jake Sullivan warned recently that even with the best AI models, if our competitors are quicker in deployment, they could gain an upper hand against our nation and allies. We recognize that power is critical to America's ability to address this challenge, and Constellation is uniquely positioned to assist. There are various regulatory and commercial avenues to resolve colocation issues, and we will work swiftly with customers and stakeholders to implement these solutions. In the PJM region, we have reliable baseload power available almost all year long. We can support AI growth. While we sometimes speak about energy issues related to AI, the real concern is a capacity issue that arises only a few hours each year. This challenge is straightforward to resolve with demand response, peakers, and batteries, provided we have the right market price signals. However, we have faced challenges in getting the capacity market moving. We support PJM's decision to postpone the latest auction and encourage changes to the reference unit and to address RMR units. These targeted reforms should clarify pricing and stabilize costs for customers and generators. PJM should also simplify the process for adding new generation, like our Crane restart. We are encouraged by PJM's progress on this front and are working diligently to bring Crane online in 2027. We trust that FERC will prioritize these RPM issues and urge action on them promptly. Demand is increasing, and the market requires the right price signals to respond. Recent utility filings with PJM indicate another 5 to 6 gigawatts of load in the upcoming auction, which we expect PJM to incorporate into its planning. The PJM capacity market has consistently delivered new capacity and promoted customer demand responses, but we need to let it function properly. Colocation will enhance reliability in PJM. Constellation's principles are straightforward. First, in emergencies, our power should support the grid. To be clear, this means that nuclear energy supporting a co-located load will be directed to the grid when necessary to avert a reliability crisis, and it should be compensated accordingly. Second, if a co-located load has backup power, it should be allowed to contribute that power to the grid, following state and environmental permitting rules. Third, co-located loads should contribute fairly to grid costs for their usage. These matters should be resolved and advanced at FERC. I believe part of the challenge with the ISA proceeding stemmed from not addressing these issues collectively, and understandably, some commissioners want to see a comprehensive solution. We will seek regulatory clarity while also exploring commercial strategies for colocation allowed under existing rules. Now, regarding our results and updates on guidance. In the third quarter, our 14,000-person team delivered GAAP earnings of $3.82 per share and adjusted operating earnings of $2.74 per share. Due to this strong performance, we are raising and refining our adjusted operating earnings guidance for the full year to $8 to $8.40 per share. This sets our midpoint at $8.20 per share, which is $0.60 above our initial guidance midpoint, and we remain optimistic for the rest of the year. Our core value proposition is strong, and our strategy is on track. We are committed to growing our base EPS by at least 13% through 2030, supported by nuclear production tax credits. We operate the largest and most efficient fleet of carbon-free, reliable nuclear plants that will be vital to our energy system for decades. These assets will thrive with the rising demand for carbon-free electricity. Through our leading C&I business, we provide the innovative products and services our customers seek. Our strong investment-grade balance sheet and robust free cash flows support growth opportunities for our stakeholders. Additionally, we have shown the capacity to exceed our base earnings levels through various strategies, including portfolio optimization and achieving better-than-average margins. It's been an incredible three years for Constellation, marked by significant milestones, such as the restart of the Crane Clean Energy Center we announced in September. Crane symbolizes the renewal of nuclear energy at a site that once represented its decline. It also confirms our belief that the most valuable energy commodity today is clean, reliable electricity. Furthermore, it emphasizes the growing demand for 24/7 clean energy, driven by the data economy, onshoring, and electrification, which benefits our stakeholders. In addition to Crane, we have at least 1,000 megawatts of additional nuclear generation potential through uprates, and I'm pleased to share that we're seeing increased interest from customers regarding these opportunities and our relicensing efforts. Negotiations with hyperscalers and others are intensifying. Our entire team is focused on executing transactions and supporting data center developments throughout PJM. It's essential to note that when Microsoft announced the Crane offtake agreement, they highlighted that their deal with Constellation enables them to utilize energy across four different states, not just Pennsylvania. This indicates that Constellation can effectively structure transactions to provide energy, capacity, and sustainability products to customers in the data economy, both within and occasionally outside PJM, at fixed prices for the desired duration. The governors in the states where we operate clean energy facilities understand the national security imperative and the economic development value of clean energy. They want us to utilize clean energy within their states, and we are aligned with that vision, but we will also follow our customers to all utilities and regions that collaborate with us to promote economic development and address critical national security needs. As we anticipate the necessary regulatory clarity and flexibility on co-location that Chairman Phillips noted in his dissent, Constellation continues to excel in exploring colocation opportunities, grid sales, and delivering new megawatts to the grid at competitive prices. We take pride in being leaders in sustaining and enhancing clean, reliable energy for America. We also remain at the forefront of research on new nuclear energy technologies, such as SMRs and natural gas with sequestration. Our collaboration with Rolls-Royce Nuclear is advancing a promising SMR design, and we are engaged with other SMR developers as well. Our groundbreaking investment in NET Power is nearing advanced engineering tests at our facility in La Porte, Texas, while we partner with GE on engineering tests and a pre-FEED study for CCUS at Colorado Bend. As I have previously mentioned, natural gas is integral to our bridging strategy, and we remain committed to playing a role in natural gas, provided we have a clear path to sustainability. While powering the data economy is crucial for our nation, combating the climate crisis is vital for the world. In summary, our team is excelling across all aspects. We are confident in our commitment to 13% compounded growth through the decade and believe we will surpass this target by capitalizing on new opportunities, as evidenced by our consistent performance quarter after quarter and year after year. Transitioning to our nuclear performance, we generated over 41 million megawatt-hours of reliable, carbon-free energy from our nuclear plants with a capacity factor of 95%. Our refueling outage performance was outstanding this quarter, with two outages completed in an average of less than 18 days each. Kudos to Bryan Hanson, David Rhoades, and their team for their efforts. For the year, our average outage duration is under 20 days, almost 10% better than our historical averages and significantly below the industry average of 40 days. Our renewables and natural gas operations also performed excellently, achieving 96% renewable energy capture and 98.2% power dispatch alignment. We often discuss the value generated from our premium generation fleet and exceptional commercial business. This year's results demonstrate the strategic benefits of integrating these functions. The numbers speak volumes about the commercial team's outstanding performance. Our success is attributed to effectively meeting customer demand through products like CORe+ and CFE, which facilitate new renewable generation and allow us to share carbon-free electricity with our clients. Since 2020, our CORe+ business has experienced remarkable growth as customers seek solutions to meet their energy and sustainability objectives. This initiative has contributed 2,800 megawatts of wind and solar capacity, benefitting both our clients and the broader electrical system. We believe CORe+ is an effective means for customers to advance their sustainability initiatives and complements our elite CFE product that guarantees 24/7 matched clean energy. I will now hand over the call to Dan for the financial update. Dan?

Thank you, Joe and good morning, everyone. Beginning on Slide 8, we earned $3.82 per share in GAAP earnings and $2.74 per share in adjusted operating earnings which was $0.61 higher than last year. Starting with the generation, when we look at the quarter and the year, we've seen actual power prices materialize well below the outlook at the start of the year largely given weather-driven declines in natural gas prices as well as generally good renewables performance. Fortunately, with the Nuclear PTC now in place, the means-based tax credit worked like it was supposed to providing the revenue support as anticipated and helping us to meet our expectations. We also benefited from the earnings contribution from our interest in the South Texas project which we acquired late last year. Turning to the commercial business. As Joe mentioned, we continue to perform exceptionally well. The team has done an excellent job managing the variability in loads and market prices, reinforcing how it thrives in volatile markets. We're also continuing to see margins above the long-term averages we use in our forecast and above the enhanced margins we disclosed in February. Finally, as we discussed last quarter, our financial results and our stock have continued to perform very well year-to-date which results in higher employee compensation expense year-over-year. Altogether, we had a strong third quarter that is contributing to our improved outlook for the year. Before I turn to guidance, given the timing of our announced Crane restart and where negotiations were during the quarter following our second quarter earnings call, we were unable to be in the market and unfortunately did not repurchase any shares during the quarter. We still have approximately $1 billion of share buybacks currently authorized by the Board, as well as $1.8 billion of unallocated capital for the 2024-2025 period which I should remind is not updated for the increase in 2024 earnings guidance or outlook for 2025. Moving to Slide 9; we are raising the midpoint and narrowing full year adjusted operating earnings guidance. The updated midpoint goes from $8 per share to $8.20 with a range of $8.00 to $8.40. The new range is effectively above the top end of our guidance of our original guidance range of $7.23 million to $8.03 per share. The commercial business continues to outperform plan, allowing us to increase our earnings outlook for the year once again. As you can see in the appendix on Slide 21. We increased our enhanced gross margin by $275 million as a result of the commercial team's continued strong performance, creating additional value compared to plan through the optimization of our portfolio. As previously discussed, we are seeing higher O&M due to the strong earnings results and stock comp. On the fourth quarter call, we will roll forward our earnings guidance and other disclosures to include 2026. As you think through your modeling and as reflected in the disclosures in this deck, I want to remind you that we'll have more refueling outages in 2026 than in 2025 and these outages will be longer than our average outages because we'll be installing the first of our planned uprates at Byron and Braidwood. As a result, we will produce less electricity and have higher O&M. In addition, we expect the PTC 4 to be flat in 2025. We still forecast at least 13% compound base EPS growth through 2030 and we'll look for ways to further enhance our opportunity from here. Thank you. And I'll turn the call back to Joe.

Thanks, Dan. Great job as always. Constellation is truly a unique company. We possess a distinctive range of existing assets that provide us with opportunities that are unmatched by others. As Dan mentioned, we anticipate a 13% compounded growth rate through the end of the decade, supported by federal backing. We are recognized as the leading operators of nuclear plants globally, and our plant performance continues to improve. We hold 20% market share with competitive commercial and industrial customers, which has enabled us to offer products and services tailored for the data economy. Our strategy has always been focused on delivering solutions to America’s energy challenges, and we are actively achieving that goal. We still have much more to accomplish as a company. The demand for power is increasing, while reliability is becoming increasingly valuable. The recent capacity auctions and load growth forecasts clearly illustrate this trend. We're observing heightened demand from the data sector, as well as from electrification and onshoring. This means our resources are more vital than ever. We see opportunities in the data economy for front of the meter projects, which we've demonstrated through our clean initiatives and CFE product. Additionally, we continue to discover opportunities behind the meter with co-location. We expect to contribute 2,000 megawatts of new nuclear energy to the grid starting in 2027, which is approximately equivalent to the Vogtle project, and we believe we can achieve this within the next few years. We will benefit from government investments in clean energy, allowing us to secure energy and capacity prices above the production tax credit floor. Lastly, I want to touch on tomorrow's election and its potential implications for Constellation. We are proud that nuclear energy enjoys robust bipartisan support from federal and state policymakers, as well as from the American populace. In fact, a majority of Americans back nuclear energy. Congress has approved several pro-nuclear legislation pieces in recent years, including the ADVANCE Act, which received strong bipartisan backing. It's worth noting that the foundation of the production tax credit was laid by Republicans in both the House and Senate. Both Vice President Harris and former President Trump have been strong advocates for nuclear energy during their time in office. Although there are significant political divisions in the country, all Americans desire clean and reliable energy, and we are proud to fulfill that need. Regardless of the election outcome tomorrow, we will continue providing what our customers and communities seek. With that, Latif, we will conclude our prepared remarks and open the floor for questions.

Just wanted to come back to post FERC here and thoughts. Just wondering if Constellation were to pursue more front-of-the-meter deals, how do you think that, I guess, impacts value creation and speed to market relative to, I guess, behind the meter solutions here. It seems like there's still an opportunity to get to the same place but just wondering any other thoughts that you can share.

Yes, Jeremy, we are fully committed to pursuing deals, whether they are front or behind the meter. We have shown through Crane that we can leverage our power stations to facilitate data center development in various locations. This opens up significant partnering opportunities with utilities that aim to provide their customers access to clean and dependable power to achieve their growth goals. We are eager to collaborate with them and with customers interested in those regions. Speed to market is a top priority for customers, which will be influenced by the transmission configurations in different areas. Some locations will naturally be more appealing to data economy customers, and we will follow their needs.

Got it. That makes sense. And then I guess also looking at the state level, you see certain states out there really looking to promote the data economy development in their states. And I think there's some actions coming out of the governors to really promote, I guess, quicker speed to market interconnect queue timelines and just wondering any other thoughts that you could share there as far as what could be done on the state level?

Yes, that's the irony of it. I have spoken with every governor in the states where we operate clean energy centers. They all want to boost the economy and recognize its importance for national security and economic development in their states. Additionally, they understand that they are part of an interstate grid. If they don’t generate the necessary power in their states, it will be produced elsewhere, benefiting other states with the associated economic advantages like jobs and taxes. I see that they are all leaning into this issue, and I believe we will see increased efforts to advance rules at FERC and attract data center development to their areas, with both Republicans and Democrats participating. We are monitoring this situation closely. As mentioned, we will keep engaging with utilities that share our interests to promote data economy development in those states, as we have the capability to sell hundreds of terawatt hours annually to customers across PJM and other RTOs. We know how to manage the risks and have a clear understanding of our costs for the next 10 to 20 years. We can deliver capacity to various locations, and as more transmission is established, we will be able to move even more capacity. Our focus is on following customers wherever they go, a priority for Jim's team and the work that Kathleen and others are currently doing. The discussions with hyperscalers are intensifying, particularly concerning how they will procure the energy capacity they need to deploy as they see fit.

I appreciate sort of the color you're giving around sort of the markets and stuff. But maybe just if you could speak a little more to the transmission capacity within the ComEd and PECO zones around your plants as you see it. I mean, one of your peers has pitched capacity in its primary zone is kind of advantageous in the shift towards more front of the meter deals. And obviously, some of the stock reactions we're seeing this morning is prompting that. So I just want to get a little bit more color there?

Yes. Look, sure, I think both from a temporal standpoint, a long-term standpoint, we happen to operate in markets that have fairly robust transmission capabilities, right? When you think about the ComEd zone, as an example, it has probably the most robust export capabilities of any zone within PJM. I think numerically that's accurate. And we're seeing new transmission being built all over the place, that's really expanding that. So the ability to move energy and capacity in different places is growing really as the plans come into fruition and transmission is built. But there's a lot of lanes right now for us to move our power. So that's what we're exploring.

Got it. Okay, perfect. I would like some clarity on the pathways to getting FRCC and BTM tariffs. What do you see as a realistic timeline? There could be a new chair next year with the election tomorrow. What is the fastest this could be resolved? Are you or PJM able to expedite the process? There are many options being considered, but nothing seems to be a quick fix except possibly shifting to a more front-of-the-meter approach.

I agree that there isn't a quick solution. It won't happen overnight, but there are many stakeholders eager to advance this. People are responding to the tech conference. A larger development isn't just the ISA, which was a minor issue. The challenge is how we address the feedback from the tech conference and create a global response to those remarks. I've mentioned some principles that could form the basis for a larger agreement. We're not just days away from the tech conference, and we're still working on this. We're engaging with various parties to determine the best way forward. At this point, it's uncertain whether FERC, PJM, or others will take the lead. It's too early to establish that. However, there is significant interest in this matter. Regardless of the political situation, AI will become increasingly important. I believe this is a pivotal issue for our time, impacting not just the energy sector, but defining America's success in this century. Whether we take the lead or lag behind is crucial. While some may not fully grasp this yet, I think perspectives will shift significantly by November 2024, and the urgency surrounding this topic will grow, prompting FERC and others to quickly clarify the rules.

I would like to ask Joe to elaborate on the broad themes of colocation, particularly regarding the idea of nuclear power being connected to the grid for emergencies and being adequately compensated for it. This seems different from what we have observed structurally so far. I would appreciate more insight on how that would function. Additionally, could you address the demand response aspect related to the data center, as that has been a challenge since they operate continuously? Discussing these two issues would be helpful.

Certainly, Steve. Let me approach this in reverse. Historically, we have seen significant demand response during peak hours when price signals in PJM are stable and strong enough for commercial and industrial customers like ours to reduce energy usage. The main challenge for the demand response market isn't that the concept is flawed; rather, it's that the prices in capacity markets fell dramatically, making it less appealing for businesses to adjust their operations. However, given the price levels observed in the last auction, if those levels are maintained, I expect demand response to become a relevant resource to manage peak demand hours. That is what I was referring to. We are well-positioned since we have clients who are likely to respond if the pricing is appropriate. Our commercial team believes these clients will engage if the price signal is appealing. However, we need to ensure the capacity market is functioning appropriately. We cannot just worry about capacity while simultaneously delaying auctions and distorting price signals which would help the market react. Historically, the market has always shown it can respond. Regarding the nuclear units, I think we're witnessing some of this in ERCOT, where there's advanced notice when the grid reaches certain thresholds, triggering a series of steps in a grid crisis, leading to the shutdown of the nuclear unit and its associated load. We can predict when this might occur, and we're prepared to take that action, with our customers fully aware of our commitment to do so. The idea that we take energy from the grid permanently or that a data center surrounding a nuclear facility would operate without any connection to the grid is a misleading narrative. We will always return to the grid when needed. Concerning compensation, we have proposed solutions that would allow us to participate in the capacity market and reconnect to the grid as required. Unfortunately, in the past, these ideas did not progress through the PJM committee process. My point in my opening remarks is that we need to integrate all of this feedback from the tech conference and create a feasible pathway for nuclear plants to return to the grid when necessary, while also addressing the co-located load that is essential for AI development.

One other, I guess, follow-up question. Just in the event that you wanted to shift to co-located structures that are more, I guess, front of the meter. Could you give us a sense of just the timeline that delay that, that would cause in your kind of key regions relative to being able to do it behind the meter.

Yes, I’m not certain, Steve. It will likely require more analysis, but it will depend on the transmission conditions at the site and how long that analysis will take. This could be a longer-term solution, but I believe it can be implemented gradually in a way that doesn't take up too much time. We have some strategies for how we can achieve this in line with the current tariffs that will enable us to reach the final state relatively quickly. We will need to be somewhat cautious about detailing exactly how this will work during an earnings call.

It's Julian. I appreciate it. I wanted to follow up on the previous questions regarding confidence, which seems to be crucial at this moment. How do you view your ability to enter the market with different arrangements, whether it's a behind-the-meter setup or a portfolio in front of the meter? Do you think that recent events represent any delays in your timeline, or are you still positioned to launch something soon?

I believe Friday's decision was limited and made by only three commissioners. I'm uncertain if we would have seen the same outcome had the two other commissioners not recused themselves. The timeline will depend on how quickly things progress. We always expected that after the tech conference, there would be a process to address the issues that emerged, which has been part of our strategic considerations and our customers' thinking. I’m not overly concerned about what transpired on Friday with the ISA, as I don't think it effectively addressed the issues at hand. Our internal planning remains unchanged. Regarding front-end meter deals, we are already engaged in that with many customers in PJM, and those results will be reflected in our disclosures. Additionally, other opportunities are advancing steadily, especially following the Microsoft deal with Crane, which has significantly increased interest in discussing uprates with us. We are progressing quickly on all fronts, and I believe these efforts will contribute to our growth. We just need to finalize the deals and integrate them into our projections, which you'll see soon.

Yes. I appreciate all this takes some time, right? I mean obviously, TMI it took a lot of planning. How do you think about the upgrade structures here? I mean, obviously, there's incremental megawatts potential here. But as you think about contracting here, would you think of that as being kind of an opportunity to recontract entire plants? Or would you think about this being more discrete to the additionality provided by the specific megawatt upgrades? What do you think about the structure of that timing?

All of the above. But guys, I think we're seeing such interest in the operates that we want to package it with other opportunities, okay? I think I have fewer operates than I have customers to sell them to. So there's a scarcity of that product. And so that tells us we should pair it with other things that we care about. Relicensing are another thing that hyperscalers want to be a part of and support, right? So that makes a good pairing. So, I think about the uprates as a scarce opportunity that we have at Constellation and an opportunity we want to share with customers that are interested in a broader, more strategic relationship and perhaps just the uprates.

Wondering what's the perspective that you're hearing from the hyperscalers? What's the urgency level? Are they worried about regulatory issues in PJM? Are they sticking with PJM and still looking for a behind-the-meter approach? Any changes in their thinking?

David, where else could they possibly go? It's not like the options outside of PJM are significantly better. The reality that everyone is confronting is that this power issue is key to unlocking the entire situation. They're investing billions, and based on their disclosures, they aren't reducing the pace of their investments. However, they are realizing that there isn't a perfect solution out there. There isn’t a place where they can easily connect the volume of energy they're aiming to tap into. So, I don’t see them concluding that PJM isn’t the right choice. Competitive markets, along with PJM, continue to be high on their list of priority locations. However, the reality, as Phillips aptly pointed out, is that this will require a level of regulatory flexibility and creativity that will challenge everyone involved. This is not the case in vertically integrated markets as it is here, which you can observe repeatedly. What I can say with complete certainty is that they will not be waiting a decade for someone to construct a power plant or transmission lines to support the data economy. If that is the plan for the U.S., we have much larger issues than simply selecting the appropriate RTO.

Yes, got you. I appreciate that. That makes a lot of sense. And then maybe thinking about the PJM market broadly to appreciate your comments before, and we're still waiting for this kind of supply response but there are some stakeholders that may not be as patient here. You mentioned demand response but what are you thinking there about potential major market changes or like subsidized new generation or re-regulation just some of these broader approaches that have started to pick up in PJM discussions.

Yes, I'd give you the same answer I gave you last quarter. I don't think that's realistic. I don't think it's lost on governors or stakeholders that we've had one auction and we've now delayed the second auction. We don't have final rules. We have a reference unit that was creating really this enormous variability in pricing against very few megawatts. That was the wrong decision. PJM is going to revisit that decision. They're going to do what they're going to do with the RMR units. And what I think the combination of those things is going to create is a more realistic pattern of pricing that's going to incentivize demand response and incentivize competitive supply options. So look, I know people talk about these things. They've been talking about these things for 20 years and they haven't made any significant progress on these fronts. But it's not the first time we've seen high prices result in utilities saying, 'Oh, we want to build.' We welcome them into the water anytime they want to create emerging part of their business and invest in power plant generation. But we got to kind of let this market work and I think folks will let the market work.

Many questions have been addressed. However, a few quarters ago, possibly even in the second quarter, you mentioned grid charges, particularly in light of the protest that was filed. You stated these charges were in the low single digits on a dollar per megawatt hour basis. If we are moving towards front-of-the-meter solutions, it's important to recognize that every T&D operator now has better visibility of the gigawatts on the grid, and their queues are becoming more valuable. Do you anticipate this affecting the overall front-of-the-meter charge? Additionally, how should we consider the impact on the economics and return hurdles you are aiming for? Could you provide an update on what the current front-of-the-meter charges are?

Yes, Nick, my perspective on this remains unchanged. I believe that if they're charged based on their usage of the grid, the ranges I provided earlier still apply. There's been no significant shift in that regard. What's often misunderstood is that when interconnections are handled efficiently, more users of the transmission system will help distribute costs broadly, which serves as a mitigating factor. This highlights the importance of correctly establishing those connections from the outset. Rushing to fund projects in illogical locations and attempting to distribute those expenses may benefit the utility but not the customers. Locating these projects close to data centers and power sources should lead to manageable interconnection costs. Therefore, you shouldn't expect to see dramatic increases in prices compared to what I've previously stated. I believe I clarified in my earlier comments that this issue is not primarily about costs, but about speed. If you listened closely to the recent tech conference, the customers in the data economy made it clear that they're willing to pay their fair share. However, they want to avoid delays caused by lengthy study processes. I think some utilities will be able to set themselves apart by completing these tasks more quickly than others.

I appreciate those thoughts. And then just one follow-up on the capital allocation. Do you see yourself leaning on the buyback more this year now that we've moved past this Crane announcement? And then just set the table on what you're expecting to bring in the fourth quarter. Are you going to wrap in the earnings guidance to that $1.8 billion figure? And should we have kind of a wider update in the fourth quarter?

Yes, Nick. So just to give kind of our cadence now, right, as we provide a pretty comprehensive update on our financials on the fourth quarter earnings call. We'll roll forward, right, and give formal '25 guidance, we'll give you the same significant inputs for '26 as we have for '25 today to give you some visibility into that multiyear view. We'll refresh the kind of the extended version of those numbers in the appendix, right? So we kind of go out to '28 now. So we'll probably add another year there. So you'll see even further horizon and keep supporting getting back to the growth rate we talk about out to 2030. On the 2-year cash available slide, yes, we'll update that for where we are closing out the year on cash and then our outlook for '25 and '26 will all go into that math. So you'll see a full new update on all those numbers and reflective of all of our CapEx plans and any growth opportunities that we haven't talked about with you guys at this point in time. On the buyback, we like you as long as we are not burdened by any material non-public information, we'll look to be in the market. We were bumped we weren't able to do it last quarter when the stock was lower and certainly we see opportunities. So as we were allowed to, we'll be there.

I have a question. Joe, thanks for your insights. Regarding the FERC decision, you noted that it was narrow. From our reading of the order, one of the commissioners seems open to finding the right solution and mentions not setting a precedent. Do you anticipate that FERC will begin a process or create a docket after the technical session on Friday, or does this need to be initiated by you or your fellow independent power producers?

Yes, I believe that's still uncertain. We lack clarity on FERC's direction, but we can influence the agenda if we are dissatisfied with their progress, and we are aware of that. However, we won't do this alone; we'll collaborate with others who share similar views to initiate that process. We want to observe where PJM and FERC are headed. It's challenging to assess the situation without insights from the two commissioners who recused themselves. Therefore, we have some work ahead to comprehend the issue, and we plan to begin that analysis this week and formulate a strategy over the next few weeks.

Well, listen, I appreciate all of the good questions today and the discussion. We're charging forward on all fronts, as I said. We think we have a pretty unique value proposition here with a 13% compounded growth and many, many opportunities not yet realized; and we're quite excited for the future. So, thanks again for your interest. And with that, Latif, conclude the call.