Constellation Energy Corp

Strategy

We believe shareholder value is built on a foundation of operational excellence and the pairing of our majority carbon-free energy fleet with our customer-facing platform. We are committed to maintaining investment grade credit ratings. We are focused on optimizing cash returns through a disciplined approach to safe and efficient operations and cost management, underpinned by stable and durable margins from our customer-facing businesses and coupled with distinct payments to our generation plants for the clean energy attributes. We may pursue future growth opportunities that provide additional value building on our core businesses, or expanding our competitive advantages. We are committed to maintaining a strong balance sheet, returning value to our shareholders, and investing in clean energy and sustainable solutions.

As environmental sustainability continues to build momentum for businesses across the country, the demand for carbon-free and sustainability solutions increases. We are committed to a carbon-free energy future and aim to serve as a partner to businesses and the federal, state and local governments that are setting ambitious carbon-reduction goals and seeking long-term solutions to the climate crisis. We will be a leading advocate at the federal level and in our states for policies that will reduce GHG emissions and preserve and grow clean energy.

We are committed to reducing our GHG emissions and enabling our C&I customers through the following:

•Achieving a generation portfolio mix with 100% of our owned generation carbon-free by 2040, including an interim goal of 95% carbon-free by 2030, subject to policy support and technology advancements,

•A 100% reduction of our operations-driven emissions by 2040, including an interim goal to reduce carbon emissions by 65% from 2020 levels by 2030 and reduce methane emissions 30% from 2020 by 2030, subject to policy support and technology advancements and

•Prior to the end of 2022, successfully delivered on our commitment to provide 100% of our C&I customers with customer-specific information on their GHG impact for facilities contracting for power or gas supply from Constellation, that include hourly carbon-free energy matching.

The principles of our sustainable business strategy demonstrate our commitment to a carbon-free future while maintaining a strong balance sheet, advancing our Environmental, Social, and Governance initiatives and investing in clean energy solutions.

Power America's Clean Energy Future. We will operate and grow the nation’s largest fleet of clean, zero-emissions generation facilities, with world-class levels of safety, reliability and resiliency.

Expand America's Largest Fleet of Clean Energy Centers. We will leverage and expand our state-of-the-art clean energy assets by exploring co-location of customer load, direct air capture of CO2, and, if supported by policy, producing clean hydrogen and other sustainable fuels to reduce industrial emissions.

Uplift and Strengthen our Communities. We will advance respect, belonging, diversity and equity by driving community investment and creating family-sustaining clean energy jobs.

Provide Energy and Sustainability Solutions for Customers. We will provide reliable, resilient energy and deliver innovative sustainability solutions that help customers achieve their clean energy goals.

We are committed to maintaining sufficient financial liquidity and an appropriate capital structure to support safe, secure and reliable operations, even in volatile market conditions. We believe our investment grade credit rating is a competitive advantage and we intend to maintain our credit position and best-in-class balance sheet. In line with that commitment, available cash flow will first be used to meet investment grade credit targets, with incremental capital allocated towards disciplined growth and shareholder return. We will build upon a strong compliance and risk management foundation and recognize the critical role this serves in maximizing operational results. We will continue to manage cash flow volatility through prudent risk management strategies across our business.

Growth Opportunities. We continually evaluate growth opportunities aligned with our businesses, assets, and markets leveraging our expertise in those areas and offering durable returns. We may pursue growth opportunities that optimize our core business or expand upon our strengths, including, but not limited to the following:

•Opportunistic carbon-free energy acquisitions, particularly nuclear plants with supportive policy,

•Create new value from the existing fleet through nuclear uprates, repowering of renewables, co-location of customer load (including hydrogen with supportive policy), and other opportunities,

•Grow sustainability solutions for our customers focused on clean energy, efficiency, storage and electrification; help our C&I customers develop and meet sustainability targets,

•Engagement with the technology and innovation ecosystem through continued partnerships with national labs, universities, startups, and research institutions, and

•Continue to monitor opportunities to participate in advanced nuclear to maintain our leadership position as stewards of a carbon-free energy future.

We will employ a disciplined approach to acquisitions that grow future cash flow and support strategic initiatives. We will also continue to evaluate asset and business divestitures to rationalize the portfolio and optimize cash proceeds.

Various market, financial, regulatory, legislative and operational factors could affect our success in pursuing these strategies. We continue to assess infrastructure, operational, policy, and legal solutions to these issues. See ITEM 1A. RISK FACTORS for additional information.

Outlook

The U.S. energy sector is experiencing unprecedented changes that we believe will increase the demand for reliable, clean power generation and benefit our business. We believe our generation fleet, including our nuclear assets, is well-positioned to deliver reliable, carbon-free power and benefit from growing demand for carbon-free electricity. Key drivers of increased demand for carbon-free energy include:

•Governmental and corporate policies designed to accelerate the decarbonization of the economy,

•Policy support for nuclear energy sources that also enable energy security, reliability and diversification,

•Rapid electrification of the U.S. economy, and

•Evolving customer preferences favoring clean energy, choice and digitization.

Policy Support for Decarbonization and Emerging Carbon-Free Technologies. Driven by concerns about climate change, governments, corporations, and investors are increasingly advocating for the reduction of GHG emissions across all sectors of the economy, with reduction of GHG emissions by the energy sector being a key focus. Governments at the international, national and state levels have established or are currently contemplating increasingly stringent policies that require the reduction of GHG emissions over time. Corporations have also adopted targets to reduce the carbon emissions in their business operations, spurred in part by demand from investors and customers for sustainable, environment-friendly business practices. These governmental and corporate policies support the retention and expansion of carbon-free generation and the development and use of clean fuels like hydrogen. We are committed to a clean energy future and we believe our business is well-positioned to benefit from growing policy support for decarbonization as our generation fleet is essential to helping meet climate goals at both the state and federal levels.

Policy Support for Nuclear Energy. As decarbonization accelerates, we expect our generation fleet will continue to play a critical role in meeting baseload power needs. Nuclear energy is currently the largest source of zero-emissions electricity in the U.S., accounting for over 50% of the nation’s carbon-free power and our nuclear plants are meaningful contributors to the clean energy mix in the states in which they operate. Through enactment of the nuclear PTC in the IRA, federal policymakers have recognized the need to ensure the continued operation of the nation’s nuclear power plants. This federal support builds on actions taken by states to recognize that existing nuclear generation facilities are essential to meeting policy objectives to reduce GHG emissions, with 10 states introducing bills in 2023 to add nuclear energy to clean energy targets and four of those states, including Connecticut, Michigan, North Carolina and Tennessee, finalizing such legislation. In addition, nuclear energy generation supports jobs and regional economies, and helps to ensure reliability and security of the electrical grid. For these reasons, the International Energy Agency concluded in a 2022 report, “Nuclear Power and Secure Energy Transitions,” that extending the lifetimes of existing nuclear plants is an indispensable part of a cost-effective path to net zero by 2050. As such, we plan to file applications to extend the licenses of our nuclear fleet to 80 years for our units that receive continued policy support for their long-term operation.

Electrification of the U.S Economy. The push to significantly reduce or eliminate GHG emissions could lead to acceleration of the electrification of the U.S. economy, including electrification of transportation, industrial operations, heating and cooling, and appliances, which could materially increase demand for electricity. We expect widespread electrification, hydrogen production, data centers, and direct air capture could cause U.S. electricity demand to more than double from what it is today by 2050. Although EV sales in North America are well behind Europe and China, increased policy support through the IRA and other federal and state policies, together with an increasing number of EV offerings hitting the market over the next five years, will drive market share gains in the U.S. market. A 2023 Rhodium Group study forecasts as much as 66% of light duty vehicles sold in 2035 will be electric. Electrification of industrial processes, commercial equipment and residential appliances that currently utilize gas and oil as a fuel source will also play a role in increasing the net demand for electricity. According to the International Energy Agency, heat makes up two-thirds of industrial energy demand, and almost one-fifth of global energy consumption, prompting efforts by energy companies and industrial manufacturers to electrify their thermal processes. For companies like us whose core competency is safely generating and serving electricity and related products to its customers, the increasing demand from electrification provides natural growth opportunities.

Evolving Customer Preferences. Consumers are increasingly purpose-driven and knowledgeable of services that drive decarbonization, leading them to value the ability to be connected to and trace the source of their clean energy choices. Growing awareness of climate change and green energy helps drive customer interest in value-add services and products around their energy usage, such as solar, behind-the-meter storage, EV charging, and the ability to choose 100 percent clean power 24 hours a day, 365 days a year in competitive retail energy markets. Continuing innovation in the digitization of the broader economy will facilitate greater control and opportunities for customers and businesses to more frequently engage with their energy providers and become more knowledgeable of their energy choices, including the solutions we provide.