Constellation Energy (CEG) risk factors, FY2024 10-K

Risks Related to Market and Financial Factors

1. 01We are exposed to price volatility associated with both the wholesale and retail power markets and the procurement of nuclear fuel, natural gas, and oil
2. 02We are exposed to commodity price risk for natural gas and the unhedged portion of our generation portfolio. Our earnings and cash flows are therefore exposed to variability of spot and forward market prices in the markets in which we operate
3. 03We may be adversely affected by the effects of sustained inflation
4. 04We are potentially affected by emerging technologies that could, over time, affect or transform the energy industry
5. 05Market performance and other factors could decrease the value of our NDT funds and employee benefit plan assets, which then could require significant additional funding
6. 06We could be negatively affected by unstable capital and credit markets and increased volatility in commodity markets
7. 07If we fail to meet project-specific financing agreement requirements, we could experience an impairment or loss of the financed project
8. 08Our risk management policies cannot fully eliminate the risk associated with our commodity trading activities
9. 09Financial performance and load requirements could be negatively affected if we are unable to effectively manage our power portfolio
10. 10The impacts of significant economic downturns on our retail customers, such as less demand for the products and services provided by our C&I customers, could result in an increase in the number of uncollectible customer balances and related expense
11. 11We could be negatively affected by the impacts of weather
12. 12Long-lived assets – principally, generation assets – represent the single largest asset class on our Consolidated Balance Sheets. In addition, we have a material goodwill balance as of December 31, 2024
13. 13We could incur substantial costs in the event of non-performance by third parties under indemnification agreements. We are exposed to other credit risks in the power markets that are beyond our control

Risks Related to Legislative, Regulatory, and Legal Factors

1. 14Federal or state legislative or regulatory actions could negatively affect the scope and functioning of the wholesale markets
2. 15Substantial aspects of our business are subject to comprehensive federal or state legislation and/or regulation
3. 16NRC actions could negatively affect the operations and profitability of our nuclear generating fleet
4. 17We could be subject to higher costs and/or penalties related to mandatory reliability standards
5. 18We could incur substantial costs to fulfill our obligations related to environmental and other matters
6. 19Changes to current state legislation or the development of federal legislation that requires the use of clean, renewable and alternate fuel sources could significantly impact us. The impact could include reduced use of some of our generating facilities with effects on our operating revenues and costs
7. 20Our financial performance could be negatively affected by risks arising from our ownership and operation of hydroelectric facilities
8. 21We could be negatively affected by challenges to tax positions taken, tax law changes and the inherent difficulty in quantifying potential tax effects of business decisions
9. 22Legal proceedings could result in a negative outcome, which we cannot predict
10. 23We could be subject to adverse publicity and reputational risks, which make us vulnerable to negative customer perception and could lead to increased regulatory oversight or other consequences

Risks Related to Operational Factors

1. 24Climate adaptation risk refers to risks to our facilities or operations that may result from changes in the physical climate, such as changes to temperatures, weather patterns and sea level rise
2. 25Climate mitigation and transition risks include changes to the energy systems as a result of new technologies, changing customer expectations and/or voluntary GHG goals, as well as local, state or federal regulatory requirements intended to reduce GHG emissions
3. 26Our financial performance could be negatively affected by matters arising from our ownership and operation of nuclear facilities
4. 27Decommissioning obligation and funding. NRC regulations require that licensees of nuclear generating facilities demonstrate reasonable assurance that funds will be available in certain minimum amounts at the end of the life of the facility to decommission the facility
5. 28We are subject to evolving physical security, cybersecurity, and third-party reliability risks
6. 29Our employees, contractors, customers and the general public could be exposed to a risk of injury due to the nature of the energy industry
7. 30Natural disasters, war, acts and threats of terrorism, pandemic and other significant events could negatively impact our results of operations, ability to raise capital, and future growth
8. 31generating units. Also, the ability of energy transmission and distribution companies to maintain the reliability, resiliency and safety of their energy delivery systems could affect our ability to deliver energy to our customers and affect our operating costs
9. 32Our business is capital intensive, and our assets could require significant expenditures to maintain and are subject to operational failure, which could result in potential liability
10. 33Our performance could be negatively affected if we fail to attract and retain an appropriately qualified workforce
11. 34We could make acquisitions or investments in new business initiatives and new markets, which may not be successful or achieve the intended financial results
12. 35factors could result in higher costs or lower revenues than expected, resulting in lower than planned returns on investment

Risks Related to the Proposed Acquisition of Calpine

1. 36We cannot assure that we will continue paying dividends at the current rate
2. 37Our current shareholders will have a reduced ownership and voting power after the merger
3. 38The merger may not be accretive to earnings and may cause dilution to our earnings per share, which may negatively affect the market price of our common stock
4. 39We have incurred and will incur significant transaction and merger-related costs, and these costs may be more than anticipated, negatively impacting our operating results
5. 40We may not realize all the expected benefits of the merger because of integration challenges
6. 41Uncertainties associated with the merger may cause a loss of management personnel and other key employees, which could adversely affect the future business and operations of the combined company
7. 42The merger may divert significant attention of our management team, which could detract from efforts to meet business goals
8. 43We are obligated to complete the transaction whether or not we have obtained the required funding for closing
9. 44The combined company’s assets, liabilities or results of operations could be negatively impacted by unknown or unexpected events, conditions or actions that might occur at Calpine prior to the closing of the merger
10. 45We may record goodwill that could become impaired and adversely affect our operating results
11. 46adjusted for changes in the price of our common stock, which may vary significantly. Any increase in the value of our common stock may be reflected as additional goodwill
12. 47The merger may be completed on terms different from those contained in the Merger Agreement
13. 48Lawsuits may be filed against us or our Board in connection with the merger. An adverse ruling in any such lawsuit could result in an injunction preventing the completion of the merger and/or substantial costs to us
14. 49Although we are not aware of any pending or threatened lawsuits relating to the transactions contemplated by the Merger Agreement, lawsuits arising out of the transactions contemplated by the Merger Agreement could be filed in the future