Good morning, ladies and gentlemen, welcome to the Constellation Energy Corporation first quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. As a reminder, this call may be recorded. I would now like to introduce your host for today's call, Tim Flottemesch, Vice President, Investor Relations. You may begin.
Thank you, Daniel. Good morning, everyone, and thank you for joining Constellation Energy Corporation's first quarter earnings call. Leading the call today are Joseph Dominguez, Constellation's President and Chief Executive Officer, and Shane Smith, Constellation's Chief Financial Officer. They are joined by other members of Constellation 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 are discussed 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 materials 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 estimates by our earnings release for reconciliations between non-GAAP measures and the nearest equivalent GAAP measures. I'll now turn the call over to Joe.
Thanks, Tim. Good morning, everyone. I hope you enjoyed a wonderful Mother's Day celebrating the great moms in our lives. Thanks for joining us today and for your continued interest in Constellation. Our prepared remarks this morning will be relatively brief. We spent a good amount of time with you just over a month ago when we shared our business and earnings outlook, so we could be more efficient with your time today. I'll begin by summarizing the key messages from the business update and then talk about the quarter, some of our generation development activities and the PJM regulatory landscape.
First and foremost, I want to remind you that our long-term outlook is compelling, with a base earnings growth rate that exceeds 20% through 2029, anchored by highly visible drivers that include the nuclear production tax credit, which grows with inflation, long-term contracts with high-quality counterparties and durable customer margins supported by the nation's largest commercial and industrial retail platform. We also have conviction that we could grow the business at a long-term rolling 10%+ base EPS growth rate, which we see as a common characteristic of high quality and well-valued companies. Further, our outlook is arguably conservative through 2029, with considerable levers to drive upside that are quantified on page 13 of this deck.
You will see that this is an updated version of page 23 of the business update that we reviewed last month, which so many of our owners told us that they liked. As Shane will cover in more detail, some of the opportunities include additional long-term offtakes for data center customers at our nuclear and gas plants, as well as with customers wanting clean, firm and reliable power with price visibility. Higher utilization of our gas fleet due to rising around-the-clock demand. Positive gearing to higher than 2% inflation through the nuclear PTC construct. Finally, the benefit of higher returns on our strong and growing free cash flow. The second big storyline here is the mix of our base and enhanced earnings. The Calpine business brings high quality visible earnings to Constellation, supporting our growth outlook and reinforces the value of bringing these two companies together.
Lastly, I would call out here the free cash flow outlook, which upon reflection, we could have probably done a better job of when we provided the business outlook, but we've provided the updated numbers now on page 13. Much like the strong EPS growth, we see similar growth in our free cash flow outlook with the 2026, 2027 period producing a forecasted $8.4 billion and the 2028, 2029 period rising to $11.5 billion-$13 billion before the levers I just mentioned. We will have significant opportunity to productively deploy capital over the balance of the decade to drive value. Turning to slide 6 and the quarterly results, I want to, as I always do, first start out by thanking the women and men here at Constellation for their dedication and for delivering another strong operational and financial performance quarter.
We posted first quarter GAAP earnings of $4.49 per share and adjusted operating earnings of $2.74 per share. Based on our performance year-to-date and our outlook for the remainder of the year, we are affirming our full-year adjusted operating earnings guidance range of $11-$12 per share. Shane will cover the details in his section. Since we last spoke, we moved quickly to get back into the market, buying our stock in a pretty narrow window. Over the past few weeks, we have successfully repurchased approximately 1.2 million shares at an average price of roughly $285 per share for a total of $335 million of purchases. These purchases underscore our commitment to disciplined capital allocation and our confidence in the long-term value of the business.
The buyback was an intentional statement from management and our board that we are excited about the growth opportunities ahead, but that at these prices, we see our stock as a compelling use of our cash. We were excited to be named Barron's 2026 Most Sustainable U.S. Company in the quarter, ranking number one among the 1,000 largest publicly traded companies in the U.S. This recognition is based on an evaluation of more than 230 performance indicators measuring how companies treat a broad range of stakeholders, including their employees, their owners, customers, communities, and of course, the environment. Being recognized by Barron's as the most sustainable U.S. company is a very, very big deal to us. It validates our approach to doing business. At Constellation, we have a culture of doing hard things and doing them well.
Despite an increasingly challenging market environment for new development, this quarter, we successfully delivered two new generation projects to the grid, demonstrating our ability to execute and deliver when it matters. First, we placed the 105 megawatt Pastoria Solar project into service. This solar project is next to a combined cycle machine of over 750 megawatts at the same location, and it's the first part of a combined solar and battery storage project that supports the California Department of Water Resources goal of achieving carbon neutrality by 2035. It further strengthens Constellation's leading position as the largest producer of carbon-free energy in the country. Second, we commenced commercial operations at our 460 megawatt Pin Oak Creek Natural Gas Peaking Facility in Texas.
Designed for rapid startup, Pin Oak Creek will provide critical peak demand support and enhance grid reliability during periods of elevated electricity demand. Together, these projects demonstrate Constellation's ability, post the Calpine acquisition, to execute on complex development efforts and deliver new generation that meets the evolving needs of both our customers and the grid. On the transaction front, last week, we received PUCT approval of the net metering agreement associated with our powered land deal with CyrusOne at the Freestone Energy Center. This approval is an important signal to the market regarding expectations for co-located projects going forward. Construction is currently underway on the substation that will enable power delivery to the data center, which we expect to be energized in the fourth quarter of this year. Turning to slide 7, we are making good progress on regulatory clarity in PJM.
PJM has put forward a market-based solution to address the incremental capacity needs driven by large load customer growth, creating a pathway with options for customers to manage their capacity requirements and cost exposure. There have been constructive conversations with stakeholders since the release of the initial proposal. While we expect to see further refinements over the coming weeks, PJM has established a proposed timeline for providing clarity on when it expects to vote on the final framework, with the goal of submitting the proposal to FERC in June. Frankly, this is faster than we had hoped, and having this defined timeline and a pathway to final rules will provide greater certainty for market participants as they plan and invest.
Clarity is critical to unlocking economic expansion across the Mid-Atlantic and Midwest regions by providing a clear path for new large loads to connect to the grid. We think this is a great opportunity for robust economic development in our states, providing the benefits of meaningful construction jobs, ongoing employment, property tax, and local community support, while helping to advance the most important economic and national security we have as a country. We are also excited for the customers in our states, both residential and commercial, who are paying the high cost of fixed grid infrastructure. By bringing on these large loads and by being more dynamic in managing peak usage, we have a real opportunity to improve system utilization and lower the average hourly usage costs for all customers. On the contracting front, customer engagement has varied as PJM works through these policy issues.
As I mentioned during our last update, some customers have been willing to continue advancing project discussions and agreement negotiations, while others have chosen to pause and wait for regulatory clarity. That's why I'm pleased to see PJM moving forward so quickly to address this need for clarity. The backstop pro-proposal needs to happen on the timeline PJM has laid out, and PJM has to replicate that timeline on the co-location document. Last year, there was a prevailing concern that Senate Bill 6 in Texas would significantly constrain data center development in ERCOT. Instead, once the requirements were established for co-locating new load with generation, we began to see transactions come forward. We expect to see the same thing in PJM. The bottom line is that customers want to get their data centers online as quickly as they can.
They need regulatory clarity for that to happen, and once the options are understood, they will make the decisions that work for their specific needs. We will continue to work with PJM to help shape the rules to support economic growth, protect residential customers, and to stabilize and perhaps actually lower costs for all Americans. Turning to slide 8. 1 point that has remained clear is that demand for additional compute, and by extension, additional power, has not slowed from hyperscaler customers. In fact, projected spending levels for 2026 are nearly 75% higher than last year and continue to be revised upward. There's also a growing recognition that reliability must be supported and done in a way that does not burden existing customers. Constellation is well-positioned to provide solutions for our customers.
We have submitted approximately 5,000 MW of new capacity resources into PJM's interconnection queue, including unique nuclear uprates, new natural gas generation, and new battery storage projects. As customers look to contract new capacity to offset incremental demand at peak, we have a diverse set of projects that align well with PJM's proposed framework and can meet those needs. If a customer prefers to participate in demand response or enable participation through third parties, we can provide those solutions as well through our retail business. We are highly motivated to identify and provide workable capacity solutions for both customers and for the broader market. Ultimately, our objective is to unlock the full value of our clean, firm energy and associated attributes in a way that benefits all stakeholders. Turning to slide 9.
While we continue to engage with customers and regulators in PJM, it is important to recognize that our opportunity to drive meaningful upside to our outlook extends beyond any single region. We have a demonstrated track record of delivering powered land solutions to customers in ERCOT, and we see additional opportunities across our broader fleet to build on that success. Importantly, we have sites with available land and a path to grid interconnection, along with a proven ability to successfully navigate the regulatory framework, positioning us well to continue advancing customer solutions. At our three data center projects in Texas, we have customers addressing their reliability commitments, both by bringing firm backup generation to cover peak constraints and in another instance, accepting full curtailability during times of grid stress.
These gas-adjacent powered land deals command a meaningful privilege in their own right, importantly, they allow full access to the grid. Customers could pair them with purchases of firm carbon-free energy from grid-connected nuclear plants, we are working with customers on those offerings. Before I turn to Shane, I want to share an observation about this slide and the Pastoria and Pin Oak Creek development projects that I covered back on slide 6. All of this good work was underway at Calpine when we bought the company. When we announced the Calpine transaction a little more than a year ago, we talked about the compatibility and complementary nature of the commercial and retail businesses. We talked about Calpine's industry-leading natural gas and geothermal assets, of course, we talked about its terrific people.
We also shared with you that in the future we saw coming, Calpine would help to supplement Constellation's existing skills in new natural gas, solar, and battery storage development, as well as Constellation's abilities in connection with natural gas data center transactions. As you reflect on the regulatory requirements in PJM and ERCOT and in other places, I trust that you can now see how supplemental development and commercial capabilities will help us to unlock the value of Constellation's amazing and unique fleet of nuclear natural gas assets in a way that help our customers and America grow while stabilizing and potentially reducing costs for everyday American families. With that, let me turn the call over to Shane to talk a little bit more about our financial performance in the first quarter. Shane?
Thanks, Joe. Good morning, everyone. Beginning on slide 10. For the first quarter, we earned $4.49 per share of GAAP earnings and $2.74 per share of adjusted operating earnings. This is $0.60 per share better than the first quarter of last year and consistent with our expectations. Higher earnings for the quarter can mostly be attributed to the EPS accretion from Calpine. As a reminder, our guidance included approximately $2 per share of accretion for Calpine on a full year basis. In addition to incremental earnings from Calpine, results benefited from higher capacity prices in PJM and lower stock-based compensation expense. These positives were partially offset by more planned nuclear refueling outage days compared to the first quarter of last year, lower ZEC pricing across state programs, and higher cost to serve load associated with Winter Storm Fern.
While the business performed well operationally through the storm, the extended nature of the event caused the grid operator to call on operating reserves to support system reliability. Those incremental ancillary charges resulted in higher costs to serve customer load. Looking to the full year 2026, we are affirming our adjusted operating earnings range of $11-$12 per share that we provided on March 31st. Moving to slide 11. Our nuclear performance was once again strong this quarter. We generated 40 million megawatt hours of firm and emissions-free energy from our operated nuclear plants with a capacity factor of 92.3%. Our capacity factor included the aforementioned impact of more planned outage days than typical in the first quarter. Our combined cycle and cogeneration fleet generated 23 million megawatt hours with a 47.1% capacity factor.
It's important to note that operational metrics differ across these asset types. The thermal fleet is subject to dispatch signals that vary by weather and system conditions. Operationally, the CCGT and cogeneration fleet had a forced outage factor of 5.1%, meaning our units delivered when called upon nearly 95% of the time. As large load customers, including data centers, come online, we believe our strong operations will be a differentiator in meeting that increased demand, higher utilization of existing assets will benefit customers over time. Turning to slide 12. Our commercial team continues to support our customers by delivering tailored energy solutions that address their evolving needs.
In our business and earnings outlook, we showed customer margins in our base earnings assumptions, those that we view as highly visible and predictable, that were higher than our previous disclosures for both the power and gas portfolios. This margin expansion has been driven by three factors. First, traditional C&I power margins have expanded. Second, the growing customer demand for carbon-free solutions we spoke to in our outlook adds incremental margin. Third, incorporating the Calpine retail portfolio further enhances our outlook, reflecting a higher mix of tailored products in attractive high-value markets. The scale of our customer solutions platform has delivered durable value and growing earnings for over a decade. With the addition of Calpine's retail business, we now serve approximately 275 million megawatt hours of electricity and 800 BCF of natural gas annually to customers across 40 states.
Importantly, most of that volume is to commercial and industrial customers, including over 80% of the Fortune 100. These are the customers most likely to recognize the value we bring as a strategic partner with the ability to tailor solutions to meet their needs, as they are the customers most likely to place a premium value on the firm clean megawatts produced by Constellation. On slide 13. In our business and earnings outlook, we outlined the expected free cash flow before growth of $8.4 billion across 2026 and 2027, and how we plan to deploy our cash flow within our established capital allocation framework over that two-year period.
Today, I am focusing on our forecast for free cash flow before growth in 2028 and 2029 and providing transparency about how the optionality that we highlighted for our earnings also applies to free cash flow. I think given our track record of success in allocating capital, it's important we highlight projected free cash flow before growth that we expect will be available for accretive deployment. Over 2028 and 2029, we expect to generate between $11.5 billion and $13 billion of free cash flow before growth. Using the midpoint of that range, that re-represents approximately a 45% increase relative to the $8.4 billion we expect in 2026 and 2027.
On the right side of the slide, we reflect the same opportunities we shared last month, now including what each lever could provide in growing free cash flow before growth on an annual basis starting in 2029. These figures are illustrative and not intended to necessarily be additive, but they provide useful context for how the optionality we have highlighted will also drive incremental free cash flow. All of this upside for both earnings and cash sits on top of a highly visible and durable base with meaningful growth that exists today, reinforcing the strength of the core business and the optionality we have to create additional long-term value. Turning to slide 14.
As Joe mentioned, we got to work right away deploying capital towards share buybacks under our increased authorization, utilizing $335 million to repurchase about 1.2 million shares. We will continue to execute opportunistically. Our capital allocation framework remains consistent and disciplined. We are committed to maintaining our strong investment-grade credit metrics, investing in growth opportunities across the portfolio that meet our double-digit unlevered return targets, maintaining and growing the dividend at 10% per year, and returning excess capital to our owners.
Supported by strong and growing free cash flow, we will continue to apply this framework thoughtfully and intentionally. With that, I'll turn it back to Joe.
Hey, thanks, Shane. Good job. To close, we continue to work hard to deliver value for our owners and the communities in which we operate. For nearly 2 years, we've navigated regulatory uncertainty alongside of our customers and other stakeholders as they seek to connect large load projects to the grid. Meaningful progress has been made. ERCOT's moved the ball forward, now it's time for PJM to move the ball forward. We see that once regulatory clarity exists, projects move forward. The light now is clearly visible at the end of the tunnel in PJM, we'll continue to work constructively with policymakers and market regulators to ensure we arrive at a framework that makes sense for all stakeholders, while also helping to facilitate potential cost relief for American families.
Our customers are keen to get moving in PJM, and we're working with them to make that happen. While we await final clarity, our focus remains firmly on execution. We'll continue to operate our assets at world-class levels and deepen our engagement with customers across our platform, including those in the data economy, to secure durable, premium-priced agreements for our clean, firm, and reliable generation. I want to thank you again for your time this morning, and we'll open it up to questions now.
Star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. In the interest of time, we ask that you please limit yourself to 1 question and 1 follow-up. Please stand by while we compile the Q&A roster. Our first question comes from David Arcaro with Morgan Stanley. Your line is open.
Morning, David.
Hey, thanks so much. Good morning. I was wondering if I could get your latest views on the power markets. Maybe ERCOT in particular. You know, just curious your interpretation and viewpoint here, as to the weakness in the forwards, even despite some of the very strong, you know, data center activity in the pipeline that we're seeing there. What do you make of that and thoughts on the evolution of that market?
David, I'm gonna turn this over to Andrew Novotny here for a moment. I think the short answer on ERCOT is it's about timing. We've seen that market be all over the place in the last, call it 90, 120 days in terms of pricing. The real questions are, you know, how much load and when. While there's been a lot of talk about data center and other development activities in ERCOT, it's kind of important to remember that that load isn't yet on the system. It's getting built. The timing of that is gonna be one driver.
There is, you know, I think as you know, an incredibly wide range of forecasted additional potential growth in the ERCOT market, and when that comes in and how it's interconnected remain the questions. We think ERCOT's undervalued, and we don't think that the, you know, the, that the prices in the outer years in particular make a great deal of sense. Andrew, chime in, you know.
Yeah, Joe, I agree with all that. Maybe just to get specific, you know, when Joe says the market's undervalued, we're really focused on the 28, 29 and beyond period of time. That's really where the load growth can come. You know, there's been over 400,000 megs of large loads in the queue. Obviously we don't expect anything near that. The forward market beyond 29, you know, to us appears like something that's only expecting 10,000-15,000 megs. If we see numbers like 30,000 megs, we believe that the market will see upward pressure. In the meantime, in the short term, we're not surprised by the weakness, and we've been well hedged and protected against it.
Got it. Understood. That's helpful. Then maybe, separately, wondering if you might be able to just comment on the current level of state support in Pennsylvania, just direction around favorability toward data center activity. You know, we saw the governor recently sending a letter to the regulated utilities in the state. Wondering kind of what the posturing is? Maybe does that shift perspectives on how they see the wholesale market and general impression of, you know, support for data centers in Pennsylvania?
Look, I, I, you know, even that letter which obviously pertained to regulated utilities and not to entities like Constellation, referenced the importance of the competitive market. I think, look, Pennsylvania is very supportive, has been very supportive of competitive market solutions. The governor was clearly one of the leaders in terms of the cost cap in RPM, and was likewise one of the leading voices in the large load, you know, bring your own generation kinds of discussions that we see now as part of this regulatory proceeding in PJM. With the exception of those things, you know, continues to be very supportive under the right circumstances in data economy development and reindustrialization in Pennsylvania.
The governor has spoken about the importance of the jobs and the economic development for Pennsylvania to be a leader in AI and other technologies under, you know, the right conditions. You know, we see it as continuing to be very constructive, David.
Great. Appreciate the color. Thank you.
Thank you. Our next question comes from Steve Fleishman with Wolfe Research. Your line is open.
Hi, Steve.
Hi. Good morning. I guess first on Crane. Any updates on the timeline there and just what should we be watching for to suggest that, you know, maybe it comes on sooner than the 2031 connection?
Hey, Steve, it'll come on sooner. I mean, what we're talking about is getting full capacity credit for the assets. I don't want anybody to be under the misconception.
Yeah, no.
that the plant won't start sooner. In terms of getting the full capacity credit, right now the ball is actually in FERC's court. We have filed, as you know, to transfer the CIRs from Eddystone to Crane, which we think will facilitate a 27 capacity credit. We're also continuing to work every day with the utilities on speeding up the transmission interconnection process. You know, kind of normally is the case that they start off with a pretty long timeline and shorten that up, and we're working with the utilities involved here to shorten up these projects so that we can get on sooner. That is really the update. We'll know more when we hear back from FERC. David, do you have anything? I'll ask David Dardis if he's got anything more on that.
No, I just Steve, we're hoping to get a response back from FERC in the June-July timeframe. You also saw that PJM acknowledged the importance of the requested waiver without taking any substantive position otherwise. You know, everything Joe said, you know, I just wanna, you know, double down on. Really this is about who bears responsibility for the congestion being ultimately relieved by the RTEP projects. Eddystone does not need those CIRs. It will continue to perform per the DOE order as an energy-only resource, but we think there is a clear path for FERC to approve the CIR transfer to meet the 2027 deadline.
Okay. Great. Other question, just it was good to see the buybacks. We do have this first lockup coming up for the Calpine holders the end of June. Any kind of sense on where their heads are at, and should we read in anything into the fact you were willing to buy stock kind of before that kind of came up?
Look, I don't think you should read anything into the, you know, the fact that we bought early. I think I covered that in prepared remarks. We thought that was a very compelling price to be buying back our shares. We're gonna be pretty careful about kind of signaling, you know, how different investors, you know, may be acting in this space. Shane, why don't you provide whatever color you can?
Yeah. Just to remind folks of the context here. In the consideration for Calpine, we issued 50 million Constellation shares to the owners. 25 million are the lockup expires on June 30, 2026, and the remaining 25 million are June 30, 2027. You know, when we contemplated the $5 billion authorization, we certainly wanted to have flexibility to the extent there could be a transaction of note around the lockup. To Joe's point, it's really conditional upon what the current owners of the shares want to do. Just in the nature of being prudent, won't speak on their behalf around their intent. We will have the flexibility if there's something that makes sense for both sides.
Makes sense. Thank you very much.
Thanks, Steve.
Thanks, Steve.
Thank you. Our next question comes from Shar Pourreza with Wells Fargo. Your line is open.
Morning, Shar.
Morning, Joe. Morning, guys. Joe, maybe just starting on PJM. You noted that some hyperscaler conversations stopped, some continued. Peers have been a little bit more open to working on deals in parallel with the FERC and PJM process. Is anything preventing having a bilateral deal in hand before the RBP? I mean, do you need to match new capacity plus existing capacity to get a contract?
No. First of all, there's two questions there, Shar. Nothing is stopping us from moving forward on a deal now. I think as I indicated during the last update, we see clients that are interested in doing that, and they figure they'll manage whatever comes out of the regulatory process with the tools that they have or other purchases. For other clients, they kind of wanna see what this looks like, what the cost implications are, what our solutions look like, how our solutions pair up with other things they're looking at in the market before they're gonna move forward. I, you know, I don't think this is a full stop. I do think it is a pause to see what this looks like and then a quick resumption, hopefully, of those conversations.
Got it. Okay. Perfect. Then just maybe, Joe, follow up. There's obviously a substantial amount of cash to allocate, $5 billion buyback authorized, $8.4 billion of free cash through 2027 and even higher run rate thereafter. How does that kind of tie into the $0.50 of upside sensitivity? Do you anticipate incremental investment opportunity to be more accretive versus the $0.50? Are the alternatives on asset acquisitions limited at this point, just given market power? Just an overall capital allocation update would be great. Thanks.
Sure. I'm going to turn it over to Shane. Look, I don't know that, I don't see it as a competition given our free cash flow capability at the company. We're going to have organic investment opportunities over 10% IRRs. We've talked about a number of those things like the upgrades on prior calls. Those things are going to move forward. We're also going to be in a position where if our stock is trading at a level that we think is inconsistent from a value standpoint with the future that we think we're going to be able to accomplish with all the different levers that are in front of us and capabilities, then we're not afraid to buy back our shares. I think at the end of the day, it's going to be a mixture of all those things. Shane?
Yeah. Joe, you said it well. I think, Shar, what I would say about the $0.50 is where we wanted to ensure that there was a range or some flexibility is the nature that those investments could take. To the extent that you're bringing development online, it obviously has a longer period of time until it becomes accretive. Whereas if it's M&A, obviously in the case of Calpine, being of scale and you're adding $2 per share of EPS, you know, a year later. I think we just wanted to be thoughtful and measured and help people think through what the range of outcomes would be as you deploy capital at the right return profile, and that could take a number of different shapes and sizes.
The $0.50 was intended to be illustrative based on assumptions you can make on that capital allocation.
Got it. super helpful caller, guys. Thanks so much. Appreciate it.
Thank you. Our next question comes from Nicholas Campanella with Barclays. Your line is open.
Hey, Nick.
Hey, good morning. Thanks for taking the questions, and all the updates. I wanted to ask, I appreciate the free cash flow clarity out to 29. I mean, could you maybe just talk a little bit about the cash conversion between EBITDA and free cash through 2029? As you get some of these projects up and running, like Crane's gonna ramp and a few other things in the back end of the plan, how do you kinda think about cash conversion?
Hey, Nick, it's Shane. I mean, it's not gonna change materially from what you've seen historically with regard to the nature that most of the cash contribution is from the nuclear fleet. If you think about the appropriate assumptions around cash tax, maintenance CapEx, how you're accounting for fuel, the conversion won't look significantly different than historical. What I would highlight is to the extent we're able to execute those levers identified in that conversion between the EPS and free cash flow, a lot of that you'll see drops to the bottom line. Those aren't requiring incremental investments, and so a lot of those are really just a tax adjustment from the earnings to cash flow.
Okay. No, thanks for that. I wanted to ask just on the new capacity resources, you're highlighting about 5 GW into the interconnect queue between upgrades and natural gas and battery storage. How does that kinda compare to where you were in the March 31st update? I know you spoke about some idle turbines then. Are you willing to kinda commit to more new build in this plan here? How should we kinda think about the threshold for that? Thanks.
Look, I think it probably is a good bit more just because we're adding in some of the Calpine capability. At the end of the day, in terms of how we're going to utilize it or what's gonna move forward, I think we're also waiting to see a little bit more from PJM in terms of what projects will qualify and also, you know, where they are in the queue process. I, you know, I don't know that at this point we're in a position to commit anything until we get a little bit more detail from PJM on the backstop proposal and obviously get further along on contracts that might call for some of our resources as part of the bilateral agreements we enter into.
Thanks for the thoughts.
Thank you. Our next question comes from Julien Dumoulin-Smith with Jefferies. Your line is open.
Hi, Julien.
Hey, good morning, team. Hey, thanks for the time. Appreciate it, Joe, team. just maybe to follow up a little bit about the conversation we were having about, the cadence of things. How do you think about Calvert here versus Limerick or versus any other permutation? Is there sort of given the evolution of the regulatory dialogues you've had, is there a specific direction? Obviously, we heard more about Calvert in recent weeks from you all at the Analyst Day. How would you set expectations around that? And then to go back a little bit to this conversation, is there like a specific ratio that you guys think about, you know, in terms of additionality? Or, or how does the curtailment demand response piece, you know, you guys just did this net metering thing in Texas, for instance.
How does that play out into kind of firming up a specific process to be able to move forward on this?
Julien, I'm going to give you a bit of a non-answer on the first one on who's going to get through the finish line first as between any different site. We mentioned Calvert because as folks probably undoubtedly saw later on during the course of the day when we did the business outlook, there was a newspaper article on it, and so we wanted to share some thoughts before the newspaper article came out. Otherwise, we're going to let our customers announce transactions when they're ready to announce transactions, as opposed to us doing it here. In terms of how folks are going to manage it, Julien, and what the ratio of new to existing might be, I think we're going to see a mix is my personal opinion.
We talked a little bit about the Texas deals during our prepared remarks today. I think that's a pretty good indicator of how wide this range could be, from folks who are completely comfortable with using backup generation or other curtailment tools that they might have to manage. Keep in mind that these are sophisticated buyers that, in many instances, are already out there buying things like battery storage and solar and other things. Sometimes they're coming into these transactions with some, you know, with some existing contracts. You remember when James McHugh was talking 2 years ago about our CFE, our original CFE agreements, the first one with Microsoft, in fact. It was exactly that situation, where somebody came in through the door and said, "Look, we've got this big portfolio.
We want you to manage it, set it up so that we have really, round-the-clock, 24/7 environmental attributes. We have clients that'll walk in with that capability, and I think all the way to clients that are gonna want things like demand response and backup generation. The mix is gonna be interesting, because I think it's gonna be different for different customers in terms of their ability to handle curtailment, and their willingness to handle curtailment. I'll make another point, the data centers themselves are going to increasingly be able to manage some of the curtailment risk by moving data economy jobs around.
As you, as you think about the U.S., as data centers proliferate in different regions, I think it's gonna give them the ability to identify jobs that don't either have to happen at peak hours of energy consumption or could be shipped away to other data centers in different regions of the country that might not be experiencing a reliability issue at that moment in time. I, I just think the landscape is changing, and I think we're gonna see a mixture of solution sets that is gonna be really broad, all the way from people being able to manage curtailment by shifting jobs and doing that sort of thing, depending on that data center, all the way to people who are gonna need backup generation for every single megawatt of the data center in terms of peaking capacity.
I just think any attempt to kind of generically say, "This is the ratio," is kind of a fool's errand at this point based on what we know of the market.
I totally hear you. I respect that. Just as a quick follow-up, you talk about clarity a lot in the prepared remarks and otherwise here. Is there a specific threshold, docket you're looking for to really unlock things? At the same time, I heard you in the Q&A comment saying, "Look, other customers are working for it on this anyway." Is there a moment that you think that you get this docket resolved and that could unleash some of this? Again, as you suggested earlier, some of them and some may or may not be waiting for said deadlines.
Again, I don't wanna speak for all of them. I think just the mere filing will be clarity for some because they'll anticipate given where the FERC has been on. I think, you know, the FERC clearly has an appetite for moving quickly here, right? I think, you know, the details of the filing themselves have been helpful already. I don't know. You know, at some point in time, some of these guys may wait all the way to the end of the Backstop proceeding. If they have a co-location, you know, idea that they're working on, it might need to wait for the co-location filings and for FERC's final order on that.
The important thing is we're seeing speed here that is really, you know, I've been doing this 20-plus years with PJM, and I'm seeing this stuff move at a speed that is really unprecedented. The only other time, you know, I saw anything move with this kind of speed was when we had the, you know, some of the RPM changes when PJM first adopted the internal rules that allowed them to move forward in an expedited way without a stakeholder vote. You know, we're seeing a commission that anxiously wants to solve this. They understand the importance of getting this right, but also the importance of the data economy to America, and that's very, very clear. The administration is clearly focused on this, and we're seeing PJM act very quickly here.
I would like to see the co-location implementation date, you know, which PJM had indicated was 2029. I'd like to see that moved up. I think on that, we're aligned with the signals that are coming out of FERC. Stuff is moving very quickly, and I expect we'll have clarity on all these issues by the end of the year.
Yeah, absolutely. Appreciated it. Good luck.
Yeah, thanks.
Thank you. Our next question comes from Jeremy Tonet with J.P. Morgan Securities. Your line is open.
Morning, Jeremy.
Hi, good morning. Hi, thanks. Thanks for all the details today. I was wondering if I could ask a question, a bit about high level to start off here. You know, looking at the white paper last week out of PJM, Powering Reliability through Market Design, and wondering if you were able to provide any initial reactions to paths A, B, and C. Just, any high-level thoughts would be welcome.
Let me turn it over to David Dardis for his thoughts on that.
Yeah. Hey Jeremy, thanks. You know, we certainly appreciate PJM issuing the white paper and acknowledging the need to revisit its market rules, and frankly, its commitment to competitive markets for ensuring reliability. You know, a lot of what's in that white paper are things we've talked to PJM for a number of years about, including, in particular, optimizing the energy and reserve markets together and better reflecting value in the energy market as opposed to as much reliance as it's had on capacity markets for a number of years. We think that's very positive. In addition, we've been very supportive. We've been talking for at least two years to anyone who will listen to us about bilaterally contracting and firming up their supply given what we saw on the horizon around rising energy prices. We think that's also quite positive.
As it relates to option B and the differential reliability, I think that one needs some more time to digest that and think about what that could potentially mean. We certainly agree with the flexibility of load being a very important solution going forward in the marketplace. You know, like some sort of a permanently, you know, put in the rules, discriminatory treatment of different loads around the reliability, allocating reliability on that basis, I think there's some real legal questions embedded in that one, and that's gonna require some more consideration. If we can start moving more quickly, in particular on energy market reform and the reserve market and co-optimizing that we see is quite positive.
Jeremy, that's something we've urged them to do for a long, long time, and frankly, something that PJM has put on the back burner to its detriment. Look, there are two things that got us into the pickle we're in. One is capacity prices were ridiculously low because we weren't considering the actual capacity capabilities of the resources adequately. That has changed. We saw a pop up in capacity prices. That should have been managed better all along. The other thing that should have been managed better all along is that more of the revenue should have been recognized in the energy market, putting less strain on the capacity market, which, you know, as we've learned, could be punitive to residential customers. It's good to see in this white paper that these issues are back in front of PJM.
That's where they need to be. Competitive market solutions are gonna be the right answer. These markets need to enable that quickly. You know, hopefully PJM actually follows up with real action on the white paper. They're gonna be pressed. I mean, I think this commission is very hot to trot on getting clarity and getting this stuff settled very quickly. PJM's gotta keep moving this issue forward.
Got it. That's very helpful. Pricing scarcity is difficult. That's it for me. Thanks.
It is.
Thank you. Our final question comes from Nicholas Amicucci with Evercore ISI. Your line is open.
Good morning, Nick.
Hey, guys. Thanks. Good morning. How are you guys? Just wanted to get a sense just on the near term kind of nuclear upgrades. How near term are those, and what's kind of baked into the 2029 assumptions?
All right. The ones that are in plan are, Byron and Braidwood as a general rule. Is there anything else in the plan right now?
None, none of the upgrades. The capital is out the door, but nothing is showing up as EPS accretion in 2029. 2030 is the earliest that they'll add to EPS.
Yep. Except for Byron and Braidwood, that are in plan.
Right.
Perfect. Perfect. Just given kind of the strong results in the first quarter, right? You guys had mentioned they were relatively in line with your expectations. Historically, we've seen, you know, kind of the biggest question mark around the first quarter. Just wanted to get some type of sense, I guess, where what would you guys need to see kinda going forward to get kinda more confidence in the upper half of the range? Understanding, you know, you just spoke a little over a month ago.
Oh, look, at least another quarter. Look, when you think about the timing of our business update call, we were well into the first quarter. We had a pretty good sense of how the quarter was going to come out when we set guidance initially.
Sure. Great. Well, thanks, guys.
Thanks.
All right, operator, are there any additional calls or questions? Excuse me.
Thank you. I'm showing no further questions at this time. This does conclude the question and answer session. I would now like to turn it back to Joseph Dominguez for closing remarks.
Well, just thanks again, everybody, for your interest in Constellation. We had a good first quarter thanks to our folks. We'll continue to strive to execute through the balance of 2026, and we'll talk again in about 90 days. Operator, we'll end the call.
Ladies and gentlemen, thank you for participating on today's call. This concludes today's program. You may disconnect. Everyone, have a great day.