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Item 1A. Risk Factors

2026-02-24 compared with 2025-02-18 · 199 added, 187 removed, 255 unchanged (60% of the section changed)

We operate in a complex market and regulatory environment that involves significant risks, many of which are beyond our direct control.

Such risks, which could negatively affect our consolidated financial statements, fall primarily under the categories below:

Such risks, which could negatively affect our results of operations or financial condition, fall primarily under the categories below:

Risks related to market and financial factors primarily include:

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• the impacts of ongoing competition, and

• emerging technologies and business models, including those related to climate change mitigation and transition to a low-carbon economy.

• emerging technologies, business models, and demand driven by industry trends, including those related to climate change mitigation and transition to a low-emissions economy.

Risks related to legislative, regulatory, and legal factors primarily include changes to, and compliance with, the laws and regulations that govern:

• the renewal of operating licenses,

• the ability to retire or repower units,

• energy policy, including market design,

• environmental and climate policy, and

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• changes in the global climate could produce extreme weather events, which could put our facilities at risk, and such changes could also affect the levels and patterns of demand for energy and related services,

• the safe, secure and effective operation of our nuclear facilities and the ability to effectively manage the associated decommissioning obligations,

• the safe, secure and effective operation of our facilities and the ability to effectively manage nuclear decommissioning obligations,

• physical, cybersecurity, and third-party reliability risks for us as an owner-operator of generation facilities and as a participant in commodities trading,

• rapid development and integration of AI technologies,

• ability to attract and retain an appropriately qualified workforce, and

• acquisitions or investments in new business initiatives and new markets.

Risks related to the proposed acquisition of Calpine primarily include:

• challenges in satisfying conditions, obtaining regulatory approvals, and potential delays or abandonment of the merger agreement,

• no assurance of the dividends at the current rate post-acquisition, reduced ownership and voting power for current shareholders, and potential dilution to earnings per share and significant transaction costs,

Risks related to the acquisition of Calpine primarily include:

• no assurance of the dividends at the current rate post-acquisition, reduced ownership and voting power for current shareholders, and potential dilution to earnings per share,

• integration challenges including the complex, costly and time-consuming integration process with potential unknown liabilities, and the possible loss of key employees and customers, and

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We are exposed to price volatility associated with both the wholesale and retail power markets and the procurement of nuclear fuel, natural gas, and oil.

We are exposed to commodity price risk for natural gas and the unhedged portion of our generation portfolio.

We are exposed to commodity price risk for fuel 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.

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We depend on nuclear fuel, natural gas, and oil to operate most of our generating facilities.

The supply markets for nuclear fuel, natural gas, and oil are subject to price fluctuations,

availability restrictions, tariffs, counterparty default, and geopolitical risk, including the ongoing Russia and Ukraine conflict which has yielded sanctions and legislation by the United States, United Kingdom, European Union, and Canada impacting the exports and imports of Russian nuclear fuel.

The supply markets for nuclear fuel, natural gas, and oil are subject to price fluctuations, availability restrictions, tariffs, counterparty default, and geopolitical risk, which could have a material adverse impact on our results of operations or financial condition.

Geopolitical risks specific to nuclear fuel include the ongoing Russia and Ukraine conflict which has yielded sanctions and legislation by the United States, United Kingdom, European Union, Russia, and Canada impacting the exports and imports of Russian nuclear fuel.

An example of such sanctions includes the “Prohibiting Russian Uranium Imports Act” which bans the import of low-enriched uranium into the U.S.

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The cycle of production and utilization of nuclear fuel is complex, and we engage a diverse set of suppliers to secure the nuclear fuel needed to continue to operate our nuclear fleet long-term.

Non-performance by these suppliers could have a material adverse impact on our consolidated financial statements.

Non-performance by these suppliers could have a material adverse impact on our results of operations or financial condition.

BUSINESS – Price and Supply Risk Management and ITEM 7A.

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The market price for electricity is also affected by changes in the demand for electricity and the available supply of electricity.

Unfavorable economic conditions, milder than normal weather, and the growth of energy efficiency and demand response programs can depress demand.

In addition, in some markets, the supply of electricity can exceed demand during some hours of the day, resulting in loss of revenue for baseload generating plants such as our nuclear plants.

Unfavorable economic conditions, milder than normal weather, regulatory intervention, and the growth of energy efficiency and demand response programs can rapidly increase supply or depress demand.

In addition, in some markets, the supply of electricity can exceed demand during some hours of the day, resulting in lower market prices, including periods of negative pricing, and loss of revenue for baseload generating plants such as our nuclear plants.

Retail Competition.

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In periods of sustained low natural gas and power prices and low market volatility, retail competitors can aggressively pursue market share because the barriers to entry can be low and wholesale generators (including us) use their retail operations to hedge generation output.

Market Designs.

Likewise, retail competition is dependent upon continued support of the host state, and state legislative sessions can present repeated opportunities for adjustment and full or partial repeal of retail competition in certain markets.

Market Design.

The wholesale markets vary from region to region with distinct rules, practices, and procedures.

Changes in these market rules, problems with rule implementation, or failure of any of these markets could adversely affect our business.

In addition, a significant decrease in market participation could affect market liquidity and have a detrimental effect on market stability.

We may be adversely affected by the effects of sustained inflation.

The existence of inflation in the economy has resulted in, or may result in, higher interest rates and capital costs, increased costs of labor, and other similar effects.

If inflation rates rise or become elevated for a sustained period, they could have a material adverse effect on our business, financial condition, results of operations and liquidity.

Although we may take measures to mitigate the impact of inflation, those measures may not be effective.

We are potentially affected by emerging technologies that could, over time, affect or transform the energy industry.

Changes in these market rules, problems with rule implementation, or failure of any of these markets could adversely affect our business with little notice.

The imposition of price caps, the issuance of orders extending the operation of generation resources slated for retirement, the imposition of requirements that new large load secure supply from new generation resources or agree to be interrupted, policies allowing utility-owned generation in restructured states, and policies favoring new resources at the expense of existing resources may lead to a market design that results in the premature retirement of existing resources, which would negatively affect our portfolio of assets as well as the market as a whole.

For example, PJM is considering market rule changes as part of its stakeholder process, and the Trump administration, in conjunction with Governors of PJM states, have proposed a framework to govern new load connection and the generation that can serve that load.

The outcome of this process is uncertain.

Management’s Discussion and Analysis of Financial

Condition and Results of Operations - Other Key Business Drivers for additional information on proposed PJM market reforms.

Our risk management policies cannot fully eliminate the risk associated with our commodity trading activities.

Our asset-based power position as well as our power marketing, fuel procurement and other commodity trading activities expose us to risks of commodity price movements.

We buy and sell energy and other products and enter financial contracts to manage risk and hedge various positions in our portfolio.

We are exposed to volatility in financial results for unhedged positions as well as the risk of ineffective hedges.

We attempt to manage this exposure through enforcement of established risk limits and risk management procedures.

These risk limits and risk management procedures may not work as planned and cannot eliminate all risks associated with these activities.

Even when our policies and procedures are followed, and decisions are made based on projections and estimates of future performance, results of operations could be diminished if the judgments and assumptions underlying those decisions prove to be incorrect.

Factors, such as future prices and demand for power, natural gas and other energy-related commodities, become more difficult to predict and the calculations become less reliable the further into the future estimates are made.

As a result, we cannot predict the impact that our commodity trading activities and risk management decisions could have on our results of operations or financial condition.

Financial performance and load requirements could be negatively affected if we are unable to effectively manage our power portfolio.

A significant portion of our power portfolio is used to provide power under procurement contracts with load serving entities and other customers.

To the extent portions of the power portfolio are not needed for that purpose, our output is sold in the wholesale power markets.

To the extent our power portfolio is not sufficient to meet the requirements of our customers under the related agreements, we must purchase power in the wholesale power markets.

Our financial results could be negatively affected if we are unable to cost-effectively meet the load requirements of our customers, manage our power portfolio or effectively address the changes in the wholesale power markets.

We may be affected by emerging technologies that could, over time, affect or transform the energy industry.

Advancements in both distributed and utility-scale power generation technology could impact market prices and demand size and behaviors.

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Improvements in energy efficiency of lighting, appliances, equipment and building materials will also affect energy consumption by customers.

Advancements in nuclear technology, carbon capture sequestration, storage and advanced geothermal may contribute to a substantial increase in the supply of clean, reliable baseload power, impacting market prices.

Carbon sequestration technology may also allow for gas generation to continue to be a viable source of clean electricity and provide for future growth of clean gas-powered generation.

Advancements in nuclear technology, CCUS, storage and advanced geothermal may contribute to a substantial increase in the supply of clean, reliable baseload power, impacting market prices.

CCUS technology may also allow for gas generation to continue to be a viable source of clean electricity and provide for future growth of clean gas-powered generation.

Further, advancements in AI and other technology could lead to reduced barriers of entry resulting in increased competition from new market participants.

These developments could affect the price of energy, levels of customer-owned generation, customer expectations and current business models and make portions of our generation facilities uneconomic prior to the end of their useful lives.

These technologies could also result in further declines in commodity prices or demand for delivered energy.

Each of these factors could affect our consolidated financial statements through, among other things, reduced operating revenues, increased operating and maintenance expenses, increased capital expenditures, and potential asset impairment charges or accelerated depreciation and decommissioning expenses over shortened remaining asset useful lives.

Each of these factors could affect our results of operations or financial condition through, among other things, reduced operating revenues, increased operating and maintenance expenses, increased capital expenditures, and potential asset impairment charges or accelerated depreciation and decommissioning expenses over shortened remaining asset useful lives.

Market performance and other factors could decrease the value of our NDT funds and employee benefit plan assets, which then could require significant additional funding.

Disruptions in the capital markets and their actual or perceived effects on particular businesses and the broader economy could adversely affect the value of the investments held within our NDTs and employee benefit plan trusts.

We have significant obligations in these areas and hold substantial assets in these trusts to meet those obligations.

We have significant obligations in these areas and hold substantial assets in these trusts to meet those

The asset values are subject to market fluctuations and will yield uncertain returns, which could fall below our projected return rates.

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If we were to experience a downgrade in our credit ratings to below investment grade or otherwise fail to satisfy the credit standards in our agreements with our counterparties or regulatory financial requirements, we would be required to provide significant amounts of collateral that could affect our liquidity and we could experience higher borrowing costs.

Our business is subject to credit quality standards that could require market participants to post collateral for their obligations upon a decline in ratings.

Our business is subject to credit quality standards that could require us to post collateral for our obligations upon a decline in ratings.

We are also subject to certain financial requirements under NRC regulations as a result of our operation of nuclear power plants that could require us to provide cash collateral or surety bonds if those requirements are not met.

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We have project-specific financing arrangements and must meet the requirements of various agreements relating to those financings.

Failure to meet those arrangements could give rise to a project-specific financing default which, if not cured or waived, could result in the specific project being required to repay the associated debt or other borrowings earlier than otherwise anticipated, and if such repayment were not made, the lenders or security holders would generally have broad remedies, including rights to foreclose against the project assets and related collateral or to force our subsidiaries in the project-specific financings to enter bankruptcy proceedings.

The impact of bankruptcy could result in the impairment of certain project assets.

other borrowings earlier than otherwise anticipated, and if such repayment were not made, the lenders or security holders would generally have broad remedies, including rights to foreclose against the project assets and related collateral or to force our subsidiaries in the project-specific financings to enter bankruptcy proceedings.

The impact of bankruptcy could result in the impairment or loss of certain project assets.

See Note 16 — Debt and Credit Agreements of the Combined Notes to Consolidated Financial Statements for additional information.

Our risk management policies cannot fully eliminate the risk associated with our commodity trading activities.

Our asset-based power position as well as our power marketing, fuel procurement and other commodity trading activities expose us to risks of commodity price movements.

We buy and sell energy and other products and enter financial contracts to manage risk and hedge various positions in our portfolio.

We are exposed to volatility in financial results for unhedged positions as well as the risk of ineffective hedges.

We attempt to manage this exposure through enforcement of established risk limits and risk management procedures.

These risk limits and risk management procedures may not work as planned and cannot eliminate all risks associated with these activities.

As a result, we cannot predict the impact that our commodity trading activities and risk management decisions could have on our consolidated financial statements.

Financial performance and load requirements could be negatively affected if we are unable to effectively manage our power portfolio.

A significant portion of our power portfolio is used to provide power under procurement contracts with load serving entities and other customers.

To the extent portions of the power portfolio are not needed for that purpose, our output is sold in the wholesale power markets.

To the extent our power portfolio is not sufficient to meet the requirements of our customers under the related agreements, we must purchase power in the wholesale power markets.

The impacts of significant economic downturns (i.e., recession) could lead to decreased volumes delivered and increased expense for uncollectible customer balances.

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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK and Note 15 — Derivative Financial Instruments of the Combined Notes to Consolidated Financial Statements for additional information on our credit risk.

We could be negatively affected by the impacts of weather.

Our operations are affected by weather, which impacts demand for electricity and natural gas, the price of energy commodities, as well as operating conditions.

To the extent that weather is warmer in the summer or colder in the winter than assumed, we could require greater resources to meet our contractual commitments.

Extreme weather conditions or storms could affect the availability of generation and the transmission of electricity, limiting our ability to source electricity or transmit it to our customers.

It could also impair our ability to transport natural

gas to our generating assets and our ability to supply natural gas to our customers.

In addition, drought-like conditions limiting water usage could impact our ability to run certain generating assets at full capacity.

These conditions, which cannot be accurately predicted, could cause us to seek additional replacement supply at a time when supply is constrained.

Weather projections suggest increases to summer temperature and humidity trends, as well as more erratic precipitation and storm patterns over the long term in the areas where we have generation assets.

The frequency in which weather conditions emerge outside the current expected climate norms could contribute to the weather-related impacts discussed above.

We may be adversely affected by the effects of sustained inflation.

An increase in inflation rates could result in higher interest rates and capital costs, increased costs of labor, and other similar effects.

If inflation rates rise or become elevated for a sustained period, they could have a material adverse effect on our business, financial condition, results of operations and liquidity.

Although we may take measures to mitigate the impact of inflation, those measures may not be effective.

Long-lived assets, goodwill, and other assets could become impaired.

Long-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.

In addition, we expect to have a significant goodwill balance following the acquisition of Calpine in January 2026.

In accordance with GAAP, the acquisition of Calpine will be accounted for as a business combination.

We expect that the consideration transferred is greater than the fair value of the net assets acquired, and therefore we anticipate recording goodwill on the opening balance sheet.

The acquired goodwill will be allocated to the appropriate reporting units of the combined company.

We evaluate the recoverability of the carrying value of long-lived assets to be held and used whenever events or circumstances indicating a potential impairment may exist.

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Changes in significant assumptions, including discount rates, energy prices, projected operating costs, and cash flows could potentially result in future impairments of goodwill.

An impairment would require us to reduce the carrying value of the long-lived asset and goodwill to fair value through a non-cash charge to expense by the amount of the impairment.

An impairment would require us to reduce the carrying value of the long-lived asset and goodwill to fair value through a non-cash charge to expense by the amount of the impairment and could have a material adverse impact on our future operating results or financial condition.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS – Critical Accounting Policies and Estimates, Note 1 — Basis of Presentation, Note 8 — Property, Plant, and Equipment, and Note 12 — Intangible Assets of the Combined Notes to Consolidated Financial Statements for additional information on long-lived asset impairments.

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We have entered into various agreements with counterparties that require those counterparties to reimburse us and hold us harmless against specified obligations and claims.

To the extent that any of these counterparties are affected by deterioration in their creditworthiness or the agreements are otherwise determined to be unenforceable, we could be held responsible for the obligations.

To the extent that any of these counterparties are

affected by deterioration in their creditworthiness or the agreements are otherwise determined to be unenforceable, we could be held responsible for the obligations.

We have issued indemnities to third parties regarding environmental or other matters in connection with purchases and sales of assets, including several of the Exelon utilities in connection with our absorption of their former generating assets.

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This risk represents the loss that could be incurred due to the nonpayment of a customer’s account balance, as well as the loss from the resale of energy previously committed to serve the customer.

Expiration or termination of our PPAs and other contractual agreements may significantly reduce our revenue and allow the counterparty or customer to seek liquidated damages.

A material portion of our portfolio is sold under PPAs that expire at various times.

We seek to extend contracts or sell any generation not sold under PPAs on a short-term basis as market opportunities arise.

Our non-contracted generation is generally sold on the spot market at current market prices as merchant energy.

When the terms of each of our various PPAs expire, it is possible that the price paid to us for generation under subsequent arrangements or in short-term markets may be significantly less than the price paid to us under the PPA.

Without the benefit of PPAs, we may not be able to sell any or all of the capacity from these generation facilities at commercially attractive rates, and these generation facilities may not be able to operate profitably.

The counterparty or customer may terminate or fail to comply with the terms of our PPAs, construction agreements, commodity contracts, maintenance agreements and other contractual arrangements.

Additionally, if we fail to meet our contractual obligations they may seek to enforce the liquidated damages provisions contained in such agreements.

Risks Related to Legislative, Regulatory, and Legal Factors

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Substantial aspects of our business are subject to comprehensive federal or state legislation and/or regulation.

Our consolidated financial statements are significantly affected by our sales and purchases of commodities at market-based rates, as opposed to cost-based or other similarly regulated rates, and federal and state regulatory and legislative developments related to emissions, climate change, capacity market mitigation, energy price information, resilience, fuel diversity, and RPS.

Our results of operations and financial condition are significantly affected by our sales and purchases of commodities at market-based rates, as opposed to cost-based or other similarly regulated rates.

Federal and state regulatory and legislative action designed to limit market-based rates through capacity market mitigation, energy and capacity pricing restrictions, new generation mandates, or other means, may negatively impact our results of operations.

Federal or state legislative and regulatory efforts to preserve the environmental attributes and reliability benefits of zero-emission nuclear-powered generating facilities could be subject to legal and regulatory challenges and, if overturned, could result in the early retirement of certain of our nuclear plants.

The PTC benefiting existing nuclear plants included in the IRA (starting January 1, 2024) continues to be the subject of additional guidance issued from the U.S.

The PTC benefiting existing nuclear plants included in the IRA (starting January 1, 2024) and affirmed by the OBBBA continues to be the subject of additional guidance issued from the U.S.

Treasury and IRS, which may negatively impact the amount of benefits we ultimately receive.

In addition, the duration of the PTC program, the value of the PTC, and/or the existence of the PTC could be affected by legislative action and may have significant adverse effects on our financial performance depending on the future gross receipts received by our nuclear units.

Additionally, Federal Power Act Section 202(c) authorizes the issuance of emergency orders requiring power plants to operate or to mandate temporary electricity connections to prevent grid failure during emergencies such as severe weather, fuel shortages, or sudden demand spikes.

The exercise of such authority could have an adverse impact on our results of operations if we are required to operate units when it is not economical.

Fundamental changes in regulations or other adverse legislative actions affecting our business would require changes in our business planning models and operations.

We cannot predict when or whether legislative and regulatory proposals could become law or what their effect would be.

See Note 3 — Regulatory Matters of the Combined Notes to Consolidated Financial Statements for additional information on the nuclear PTC.

See Note 3 — Regulatory Matters of the Combined Notes to Consolidated Financial Statements for additional information.

NRC actions could negatively affect the operations and profitability of our nuclear generating fleet.

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These laws and regulations affect the way we conduct our operations and make capital expenditures, including how we handle air and water emissions, hazardous and solid waste, and activities affecting surface waters, groundwater, and aquatic and other species.

Violations of these requirements could subject us to enforcement actions, capital expenditures to bring existing facilities into compliance, additional operating costs for remediation and clean-up costs, civil penalties and exposure to third parties’ claims for alleged health or property damages or operating restrictions to achieve compliance.

In addition, we are subject to liability under these laws for the remediation costs for environmental contamination of property now or formerly owned by us and of property contaminated by hazardous substances we generated or released.

Violations of these requirements could subject us to enforcement actions, capital expenditures to bring existing facilities into compliance, additional operating costs for remediation and cleanup

costs, civil penalties and exposure to third parties’ claims for alleged health or property damages or operating restrictions to achieve compliance.

In addition, we are subject to liability under these laws for the remediation costs for environmental contamination of property currently or formerly owned by us and of property contaminated by hazardous substances we generated or released.

Also, we are currently involved in several proceedings relating to sites where hazardous substances have been deposited and could be subject to additional proceedings in the future.

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The impact could include reduced use of some of our generating facilities with effects on our operating revenues and costs.

Federal and state legislation mandating the implementation of energy conservation programs and new energy consumption technologies could cause declines in customer energy consumption and lead to a decline in our operating revenues.

BUSINESS – Environmental Matters and Regulation – Renewable and Clean Energy Standards and “We are potentially affected by emerging technologies that could over time affect or transform the energy industry” above for additional information.

Federal and state legislation mandating the implementation of energy conservation programs, GHG emission limitations, and new energy consumption technologies could cause declines in customer energy consumption and lead to a decline in our operating revenues.

We could incur costs to further limit the GHG emissions from our operations or otherwise comply with applicable requirements.

To the extent such additional regulation or legislation does not become effective, the potential competitive advantage offered by our low-emissions profile may be reduced.

BUSINESS – Environmental Matters and Regulation – Renewable and Clean Energy Standards and “We may be affected by emerging technologies that could, over time, affect or transform the energy industry” above for additional information.

Our financial performance could be negatively affected by risks arising from our ownership and operation of hydroelectric facilities.

FERC has the exclusive authority to license most non-federal hydropower projects located on navigable waterways, federal lands, or connected to the interstate electric grid.

FERC has the exclusive authority to license most non-federal hydropower projects located on navigable waterways, federal lands, or connected to the interstate electrical grid.

If FERC does not issue new operating licenses for our hydroelectric facilities in the future or a station cannot be operated through the end of its current operating license, our results of operations could be adversely affected by increased depreciation rates and accelerated future decommissioning costs, since depreciation rates and decommissioning cost estimates are currently based on the available license term for each facility.

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See Note 1 — Basis of Presentation and Note 13 — Income Taxes of the Combined Notes to Consolidated Financial Statements for additional information.

Following the Calpine acquisition in January 2026, we have several government awards for projects involving cost-share agreements with the DOE, which could be affected by our inadvertent failure to comply with certain laws, rules, and regulations.

At five facilities, Calpine has completed or commenced front-end engineering design studies for post-combustion CCUS technology and has also received funding from the DOE for certain geothermal drilling technologies for the Geysers Assets.

As a recipient of federal funds under grants and cooperative agreements, in addition to our ordinary contractual obligations, we must comply with various rules and regulations applicable to entities that perform awards in support of government entities.

Many of these additional obligations are contained in the terms of the awards themselves and in federal regulations, which regulate the formation, administration and performance of non-procurement federal financial assistance awards, which are subject to change.

We must also comply with various national policy requirements prescribed by statute, executive order, policy guidance issued by the Executive Office of the President or other regulations subject to change.

Additionally, our contractors must also comply with these federal requirements, and any non-compliance by our contractors or their subcontractors could similarly affect our grant status and expose us to additional risks and liabilities.

While we will continue to implement audits and monitor contractual rights for our contractors, failure by our contractors to comply with all regulatory requirements fully could materially affect our business and prospects.

Our performance under our U.S.

government awards and our compliance with the terms of those awards and applicable laws and regulations are subject to periodic investigation audits, reviews and investigations by various U.S.

government agencies.

The current environment may lead to increased regulatory scrutiny and sanctions for non-compliance by such agencies.

Compliance with these laws and regulations affects how we do business and may impose added costs on our business.

Failure to comply may lead to penalties, including whole or partial suspension or termination of our U.S.

government awards and/or suspension or debarment from contracting with federal agencies.

Legal proceedings could result in a negative outcome, which we cannot predict.

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Our material legal proceedings, claims, and litigation are summarized in Note 3 — Regulatory Matters and Note 18 — Commitments and Contingencies of the Combined Notes to Consolidated Financial Statements.

Adverse outcomes in these proceedings could require significant expenditures, result in loss of revenue, or restrict existing business activities.

Adverse outcomes in these proceedings could lead to significant expenditures, loss of revenue, or the restriction of existing business activities.

We 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.

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Risks Related to Operational Factors

We are subject to risks associated with climate change.

Climate 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.

We periodically perform analyses to better understand how climate change could affect our facilities and operations.

We primarily operate in the Midwest, Mid-Atlantic, Northeast, and Texas areas that have historically been prone to various types of severe weather events.

As such, we have well-developed response and recovery programs based on historical weather events and patterns.

However, our physical facilities could be placed at greater risk of damage should changes in the global climate impact temperature and weather patterns, and result in more intense, frequent and extreme weather events, unprecedented levels of precipitation, sea level rise, increased surface water temperatures, and/or other effects.

We are subject to risks associated with weather, including its effect on the supply and demand for electricity, as well as impacts from climate change, including extreme weather events.

Our operations are affected by weather, which impacts demand for electricity and natural gas, the price of energy commodities, and operating conditions.

Warmer weather in the summer or colder weather in the winter than assumed could require greater resources to meet our contractual commitments.

Extreme weather conditions or storms could affect the availability of generation and the transmission of electricity, limiting our ability to source electricity or transmit it to our customers.

It could also impair our ability to transport natural gas to our generating assets and regassification facilities as well as our ability to supply natural gas to our customers.

Drought-like conditions limiting water usage could impact our ability to run certain generating assets at full capacity.

These conditions, which cannot be accurately predicted, could cause us to seek additional replacement supply at a time when supply is constrained.

Various forms of power generation and energy-intensive activities, such as data centers, depend on water access to operate.

Certain of our assets in the West and Texas Regions, including Calpine's Geysers Assets acquired in January 2026, have experienced drought conditions in the recent past.

Disruptions in water

availability such as droughts, curtailment, or high prices may impact our ability to generate energy or serve customers, adversely impacting our operations and financial condition.

Further, disruptions in water availability at the Geysers Assets may affect the water injection program, steam production and generation levels.

Weather projections suggest increases to summer temperature, humidity trends, and more erratic precipitation and storm patterns over the long term in the areas where we have generation assets.

The frequency of weather conditions outside the current expected climate norms could contribute to the weather-related impacts discussed above.

We primarily operate in areas that have historically been prone to various types of severe weather events.

Our physical facilities could be placed at greater risk of damage should changes in the global climate impact temperature and weather patterns, and result in more intense, frequent and extreme weather events, unprecedented levels of precipitation, sea level rise, increased surface water temperatures, and/or other effects.

Over time, we may need to make additional investments to protect our facilities from physical climate-related risks.

In addition, changes to the climate may impact levels and patterns of demand for energy and related services, which could affect our operations.

Over time, we may need to make additional investments to adapt to changes in operational requirements as a result of climate change.

Climate 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.

We also periodically perform analyses of potential pathways to reduce power sector and economy-wide GHG emissions to mitigate climate change.

To the extent additional GHG reduction regulation or legislation becomes effective at the federal and/or state levels, we could incur costs to further limit the GHG emissions from our operations or otherwise comply with applicable requirements.

To the extent such additional regulation or legislation does not become effective, the potential competitive advantage offered by our low-carbon emission profile may be reduced.

BUSINESS – Environmental Matters and Regulation – Climate for additional information.

We may be exposed to climate mitigation and transition risks if we are adversely affected by 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.

BUSINESS – Environmental Matters and Regulation – GHG & Climate Risks for additional information.

We are subject to certain risks associated with the operation and maintenance of generation facilities.

Operations at any of our generation facilities that we operate as well as those that we own and are operated by others could degrade to the point where the operator must shut down the plant or operate at less than full capacity.

If this were to happen, identifying and correcting the causes could require significant time and expense.

The operator could choose to close a plant rather than incurring the expense of restarting it or returning the plant to full capacity.

In either event, we could lose revenue and incur increased purchased power and fuel expense to meet supply commitments.

In addition, we depend on facilities and assets that we do not own or control for the transmission to our customers or the distribution to our generation facilities.

If these transmission and distribution systems are disrupted or the capacity of those systems is inadequate, our ability to sell and deliver power products or obtain fuel may be hindered.

Our financial performance could be negatively affected by matters arising from our ownership and operation of nuclear facilities.

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Lower capacity factors could decrease our revenues and increase operating costs by requiring us to produce additional energy from our natural gas and oil-fueled facilities or purchase additional energy in the spot or forward markets in order to satisfy our supply obligations to committed third-party sales.

These sources generally have higher costs than we incur to produce energy from our nuclear stations.

These sources generally have higher costs to produce energy relative to our nuclear stations.

Nuclear refueling outages.

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When refueling outages last longer than anticipated or we experience unplanned outages, capacity factors decrease, and we face lower margins due to higher energy replacement costs and/or lower energy sales and higher operating and maintenance costs.

Nuclear fuel quality.

The quality of nuclear fuel utilized by us could affect the efficiency and costs of our operations.

Nuclear fuel.

In addition to the risks around the cost and availability of nuclear fuel discussed previously, the quality of nuclear fuel we use could affect the efficiency and costs of our operations.

Remediation actions could result in increased costs due to accelerated fuel amortization, increased outage costs and/or increased costs due to decreased generation capabilities.

Operational risk.

Operations at any of our nuclear generation plants could degrade to the point where we must shut down the plant or operate at less than full capacity.

If this were to happen, identifying and correcting the causes could require significant time and expense.

We could choose to close a plant rather than incur the expense of restarting it or returning the plant to full capacity.

In either event, we could lose revenue and incur increased purchased power costs and fuel expense to meet supply commitments.

If we are required to arrange for the safe and permanent disposal of SNF beyond current expectations, this could lead to substantial expense or capital expenditures.

See "NRC actions could negatively affect the operations and profitability of our nuclear generating fleet" above for additional information on the storage of SNF.

For plants operated but not wholly owned by us, we could also incur liability to our co-owners.

For nuclear plants not operated and not wholly owned by us, from which we receive a portion of the plants’ output, our results of operations are dependent on the operational performance of the operators and could be adversely affected by a significant event at those plants.

We do not procure the fuel for the sites we do not operate.

The operator's nuclear fuel procurement plan could impact our results of operations.

Additionally, poor operating performance at nuclear plants not owned by us could result in increased regulation and reduced public support for nuclear-fueled energy.

Closure of generating plants owned by others, or extended interruptions of generating plants or failure of transmission lines, could adversely affect transmission systems and the sale and delivery of electricity in markets served by us.

If the operator is unable to procure fuel sufficient to operate the plant or at an uneconomical price, our results of operations could be adversely impacted.

Additionally, if we are required to arrange for the safe and permanent disposal of SNF beyond current expectations, this could lead to substantial expense or capital expenditures.

See “NRC actions could negatively affect the operations and profitability of our nuclear generating fleet” above for additional information on the storage of SNF.

Nuclear major incident risk and insurance.

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Congress could impose revenue-raising measures on the nuclear industry to pay claims exceeding the $16.3 billion limit for a single incident.

See Note 18 — Commitments and Contingencies of the Combined Notes to Consolidated Financial Statements for additional information of nuclear insurance.

See Note 18 — Commitments and Contingencies of the Combined Notes to Consolidated Financial Statements for additional information on nuclear insurance.

Decommissioning obligation and funding.

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If circumstances changed such that there was an inability to continue to make contributions to the trust funds of the former PECO or STP units based on amounts collected from utility customers, or if we no longer had recourse to collect additional amounts from the respective utility customers if there was a shortfall of funds for decommissioning, the adequacy of the trust funds related to these units could be negatively affected.

Any changes to the utilities' regulatory agreements could impact our ability to offset decommissioning-related activities for these units within the Consolidated Statements of Operations and Comprehensive Income, and the impact to our consolidated financial statements could be material.

Should the expected value of the NDT fund for any former ComEd unit fall below the amount of the expected decommissioning obligation for that unit, the accounting to offset decommissioning-related activities for that unit may be temporarily suspended or discontinued, and the decommissioning-related activities would be recognized in the Consolidated Statements of Operations and Comprehensive Income, the impact of which could be material.

Any changes to the utilities' regulatory agreements could impact our ability to offset decommissioning-related activities for these units within our results of operations, and the impact to our results of operations or financial condition could be material.

Should the expected value of the NDT fund for any former ComEd unit fall below the amount of the expected decommissioning obligation for that unit, the accounting to offset decommissioning-related activities for that unit may be temporarily suspended or discontinued, and the decommissioning-related activities would be recognized in our results of operations, the impact of which could be material.

Forecasting trust fund investment earnings and costs to decommission nuclear generating stations requires significant judgment, and actual results could differ significantly from current estimates.

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See Note 10 — Asset Retirement Obligations of the Combined Notes to Consolidated Financial Statements for additional information.

The productivity of Calpine's geothermal resources acquired in January 2026 may be lower than expected, and it is possible that certain of leases for geothermal steam fields may not be renewed or may be renewed at less favorable terms.

Geothermal resource productivity can decline unexpectedly, leading to insufficient reserves for sustained power generation at desired power capacity.

Mismanagement or inaccurate estimates of steam reserves could adversely affect our results of operations or financial condition.

Geothermal steam fields are leased for the Geysers Assets, with most leases lasting 5 to 20 years initially and continuing as long as resources are produced and sold.

Many leases are over 30 years old and remain active.

Federal leases start at 10 years and can be renewed for up to 50 years.

Most other leases continue for the economic life of the assets, with renewal options if resources remain commercially viable.

While we expect to renew leases as needed, some may not be renewed or could have less favorable terms.

We are subject to evolving physical security, cybersecurity, and third-party reliability risks.

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Our customers depend on the continuous availability of our commercial and generation operations.

A failure, interruption, or breach of our operational or information security systems, or those of our third-party service providers, as a result of cyber-attacks or information security breaches could disrupt our business, result in the disclosure or misuse of confidential or proprietary information, damage our reputation, cause loss of customers or revenue, increase our costs, result in litigation and/or regulatory action, and/or cause other losses, any of which might have a materially adverse impact on our business operations and our financial position or results of operations.

Operational harm could be in the form of impact to the generation fleet, our commercial operations, and/or reliability of the bulk

electric system.

Operational harm could be in the form of impact to the generation fleet, our commercial operations, and/or reliability of the bulk power system.

Impacts to confidential or proprietary information could include inappropriate release of certain types of information, including critical infrastructure, sensitive customer, vendor and employee, trading, export control or other confidential information.

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We currently utilize a mix of third-party managed service providers to host and support our information technology, customer support, and generation operations.

As an example, our data centers are hosted in vendor-managed co-location facilities.

For example, our data centers are hosted in vendor-managed co-location facilities;

we also host infrastructure with major cloud service providers and utilize enterprise business systems.

Consequently, we may be subject to short- and long-term interruptions, delays and outages in service and availability due to third-party cybersecurity or reliability incidents that are outside of our direct control.

We expect that in the future we may experience interruptions, delays and outages in service and availability from time to time due to a variety of factors, including infrastructure changes, human or software errors, website hosting disruptions and capacity constraints.

Coordinated physical and or cyber-attacks that disrupt multiple key electric assets of unaffiliated parties responsible for real-time planning and management of the bulk electric system could impact our ability to provide generation, potentially resulting in localized and regional blackouts affecting third parties and the public, many of which will have no direct commercial relationship with the Company.

In the future we may experience interruptions, delays and outages in service and availability from time to time due to a variety of factors, including infrastructure changes, human or software errors, website hosting disruptions and capacity constraints.

Coordinated physical and or cyber-attacks that disrupt multiple key electric or natural gas assets of unaffiliated, interconnected parties (such as parties responsible for real-time planning and management of the bulk power system) could impact our ability to provide generation, potentially resulting in localized and regional blackouts affecting third parties and the public, many of which might have no direct commercial relationship with the Company.

We cannot anticipate, detect, repel, or implement fully effective preventative measures against all cyber threats, particularly because the techniques used are constantly evolving.

Similarly, we cannot guarantee uninterrupted availability of third-party managed systems that may be affected by factors unrelated to cybersecurity incidents.

Continued implementation of advanced digital technologies increases the potentially unfavorable impacts of such attacks and reliability, and may introduce new vulnerabilities and threat tactics.

For example, threat actors could use Artificial Intelligence (AI) to develop malicious code and sophisticated phishing attempts.

Our implementation of generative AI to improve business and operational performance has led to the introduction of enhanced technologies that pose distinct governance and security risk management challenges.

Continued implementation of advanced digital technologies, including generative AI and machine learning, increases the potentially unfavorable impacts of such attacks and reliability, and may introduce new vulnerabilities and threat tactics.

For example, threat actors could use AI to develop malicious code and sophisticated phishing attempts.

As threats continue to evolve, we may be required to expend additional resources to continue to enhance our information security measures and/or to investigate and remediate information security vulnerabilities.

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There can be no assurance that such insurance will be available on commercially reasonable terms in the future.

In addition, new or updated security regulations or new vulnerabilities identified by security researchers, third-party suppliers, or threat actors could require changes in current measures taken by security or our business operations and could adversely affect our consolidated financial statements.

Our acquisition of Calpine in January 2026 introduces expanded cybersecurity and physical security risks.

As part of the integration, we have and expect to continue to evolve our systems, processes, and technical controls in connection with Calpine's information technology and operational technology.

Our acquisition of Calpine and the visibility of the transaction will likely increase attention from potential cyber threat actors, potential insider threats, and opportunistic adversaries.

We are continuously evolving our cybersecurity strategy and technical controls to prepare for, identify, protect, detect, respond, and recover our technology systems, information and operations from such attacks.

CYBERSECURITY for more information.

The rapid development and integration of AI technologies into our processes presents several risks to our business.

The use of AI technologies in our operations presents risks that could adversely affect our business, financial condition, results of operations and reputation.

AI systems, whether developed internally or used by our vendors, service providers or business partners, may produce inaccurate, biased or misleading outputs or experience errors, security vulnerabilities or other failures, which could result in operational disruptions, flawed decision‑making, data loss, cybersecurity incidents or reputational harm.

The use of AI may also increase the risk of inadvertent disclosure or misuse of proprietary, confidential or personal information.

In addition, the legal and regulatory landscape governing AI technologies is rapidly evolving and uncertain, and compliance with new or changing requirements may impose significant costs or limit our ability to develop, deploy or use AI.

If we fail to keep pace with the rapid evolution of AI technologies in our industry and the segments we serve, our competitive position and business results could be negatively impacted.

Our employees, contractors, customers and the general public could be exposed to a risk of injury due to the nature of the energy industry.

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Our fleet of power plants and the transmission infrastructure to which they are connected could be affected by natural disasters and extreme weather events, which could result in increased costs, including supply chain costs.

Natural disasters and other significant events increase our risk that the NRC or other regulatory or legislative bodies could change the laws or regulations governing, among other things, operations, maintenance, operating licenses, decommissioning, SNF storage, insurance, emergency planning, security and environmental and radiological matters.

In addition, natural disasters could affect the availability of a secure and economical supply of water in some locations, which is essential for our continued operation, particularly the cooling of

generating 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.

Natural disasters and other significant events increase our risk that the NRC or other regulatory or

legislative bodies could change the laws or regulations governing, among other things, operations, maintenance, operating licenses, decommissioning, SNF storage, insurance, emergency planning, security and environmental and radiological matters.

In addition, natural disasters could affect the availability of a secure and economical supply of water in some locations, which is essential for our continued operation, particularly the cooling of generating units.

Some of Calpine's geothermal, natural gas power plants, and battery storage sites, which were acquired in January 2026 are exposed to frequent minor earthquakes and wildfire risks, mainly in the West.

Severe weather and wildfires, especially in California, have disrupted operations and damaged assets like the Geysers Assets.

Such events can cause injuries, property damage, and service interruptions, resulting in significant liabilities.

Electric utilities may shut down power for public safety reasons during periods of extreme fire hazard.

Any shutdown that halts operation at our power plants may reduce our revenues.

The impact that potential terrorist attacks could have on the industry and on us is uncertain.

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However, depending on the severity of a pandemic and the resulting impacts to workforce and other resource availability, the ability to operate our generating assets could be adversely affected.

In addition, we maintain a level of insurance coverage consistent with industry practices against property, casualty, and cybersecurity losses subject to unforeseen occurrences or catastrophic events that could damage or destroy assets or interrupt operations.

We maintain a level of insurance coverage consistent with industry practices against property, casualty, and cybersecurity losses subject to unforeseen occurrences or catastrophic events that could damage or destroy assets or interrupt operations.

However, there can be no assurance that the amount of insurance will be adequate to address such property and casualty losses.

Furthermore, the scenarios above could result in adverse changes in insurance deductibles, premiums, coverage and/or limits.

Our 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.

Our business is capital intensive and requires significant investments in electric generating facilities.

Equipment, even if maintained in accordance with good industry practices, is subject to operational failure, including events that are beyond our control, and could require significant expenditures to remedy.

Our consolidated financial statements could be negatively affected if we were unable to effectively manage our capital projects or raise the necessary capital.

The operation of power plants and battery storage facilities involves risks, including the breakdown or failure of power generation or storage equipment, transmission lines, pipelines or other equipment or processes, performance below expected levels of output or efficiency, and other issues beyond our control that could be costly to remedy.

Our results of operations or financial condition could be negatively affected if we were unable to effectively manage our capital projects or raise the necessary capital.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS – Liquidity and Capital Resources for additional information regarding our potential future capital expenditures.

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We are particularly affected due to the specialized knowledge required of the technical and support employees for generation operations.

In 2024 we announced the planned restart of our Crane nuclear generation facility which will require hiring skilled employees to restart and operate the plant.

Our ability to source qualified employees will impact the timing and cost of the restart.

If we are unable to source the necessary workforce it could result in unfavorable financial results and/or a delay to Crane's restart.

We could make acquisitions or investments in new business initiatives and new markets, which may not be successful or achieve the intended financial results.

We could continue to pursue growth in our existing businesses and markets and further diversification across the competitive energy value chain.

This could include opportunistic carbon-free energy acquisitions, creating new value from our existing fleet through nuclear uprates, renewable repowerings, co-location of customer load, growing sustainability solutions for our customers, and investment opportunities in other emerging technologies and innovation.

We could continue to pursue growth in our existing businesses and markets and seek further diversification across the competitive energy value chain.

This could include opportunistic emissions-free energy acquisitions, creating new value from our existing fleet through nuclear uprates, renewable repowerings, development of additional capacity for battery storage, natural gas, and CCUS, co-location of customer load, growing sustainability solutions for our customers, and investment opportunities in other emerging technologies and innovations.

Such initiatives could involve significant risks and uncertainties, including distraction of management from current operations, inadequate return on capital, and unidentified issues not discovered during diligence performed prior to launching an initiative or entering a market.

Additionally, it is possible that FERC, state public utility commissions, or others could impose certain other restrictions on such transactions.

factors could result in higher costs or lower revenues than expected, resulting in lower than planned returns on investment.

We are actively pursuing the restart of our Crane nuclear generation facility.

The restart is estimated to cost $1.6 billion and is subject to certain regulatory approvals, including the NRC comprehensive safety and environmental review, as well as permits from relevant state and local agencies.

Additionally, it is possible that FERC, state public utility commissions, or others could limit our ability to make acquisitions or investments or otherwise impose certain restrictions on such transactions due to market power concerns in certain regions or other factors.

All these factors could result in higher costs or lower revenues than expected, resulting in lower than planned returns on investment.

We are actively implementing the restart of our Crane nuclear generation facility.

The restart is subject to certain regulatory approvals, including the NRC comprehensive safety and environmental review, as well as permits from relevant state and local agencies.

Additionally, through separate requests, we will pursue obtaining a renewed license to operate the plant and a FERC interconnection agreement.

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Failure to meet contractual timelines could result in significant penalties.

Overages in costs or unforeseen issues could result in lower than planned returns on the investment.

Risks Related to the Proposed Acquisition of Calpine

We may encounter difficulties in satisfying the conditions for the completion of the Merger Agreement, including obtaining the necessary regulatory approvals, within the expected time frame or at all.

Such challenges could delay the completion of the merger or impose conditions that could cause abandonment of the Merger Agreement.

Consummation of the merger is subject to the satisfaction or waiver of specified closing conditions, including:

(1) the receipt of regulatory approvals required to consummate the Merger Agreement;

(2) the expiration or termination of the applicable waiting period under the HSR Act;

and (3) other customary closing conditions.

Completion of the merger is conditioned upon the receipt of consents, orders, approvals or clearances, to the extent required, from various regulatory authorities, including DOJ, FERC, and public utility commissions or similar entities in certain states in which the companies operate.

We cannot provide assurance that all required regulatory approvals will be obtained or that these approvals will not contain terms, conditions or restrictions that would be unacceptable and, accordingly, the merger may be delayed or may not be consummated.

In connection with the required regulatory approvals and to prevent market power concerns, we are expecting to sell certain of the combined company’s PJM natural-gas-fired generating assets following the closing of the merger.

The Merger Agreement generally permits us to terminate the Merger Agreement if the final terms of any of the required regulatory consents or approvals include any Burdensome Condition (as defined in the Merger Agreement).

In addition, the Merger Agreement provides that either we or Calpine could terminate the Merger Agreement if the merger is not completed by December 31, 2025 (which date may be automatically extended to June 1, 2026, as further provided in the Merger Agreement).

If the Merger Agreement is terminated under certain circumstances due to the failure to obtain regulatory approvals, the failure to obtain regulatory approvals without Burdensome Conditions, or the breach by us of our obligations in respect of obtaining regulatory approvals, we would be required to pay Calpine a termination fee of $500 million as liquidated damages.

Further, the share price of our common stock may decline to the extent that the current market price reflects an assumption by the market that the merger will be completed.

See Note 2 — Mergers, Acquisitions, and Dispositions of the Combined Notes to Consolidated Financial Statements for additional information regarding the status of the transaction.

Overages in costs, potential interconnection delays, or other unforeseen issues could result in lower than planned returns on the investment.

The demand for our generation may be impacted by changes in industry trends, including the demand associated with the developing data economy.

Industry trends can significantly impact the demand and market pricing of our generation portfolio.

This includes the demand and perceived value of certain attributes of our generation, such as reliability or clean energy, as well as the overall demand for energy in the markets in which we operate.

Recently, we have benefited from increased demand for our generation as a result of the developing data economy, including demand driven by data centers and AI and other high-performance computing applications, evidenced by the execution of long-term contracts with technology companies as well as increased interest in prospective contracts from our customers.

Demand associated with data centers and AI applications may be subject to technological change, shifts in customer behavior, regulatory developments, or changes in capital investment cycles and may not grow at the pace currently anticipated by the market.

Our results of operations, growth opportunities, and the price of our common stock could be adversely impacted if the demand for energy driven by the data economy does not continue or fails to achieve current market expectations.

Risks Related to the Acquisition of Calpine

We cannot assure that we will continue paying dividends at the current rate.

We currently expect to pay dividends in an amount consistent with the dividend policy in effect prior to the completion of the merger.

However, there is no assurance that our shareholders will receive the same dividends following the merger for reasons that may include capital spending plans, financing agreements, cash flow or financial position.

Decisions on whether, when, and in which amounts to make any future distributions will remain at all times entirely at the discretion of our Board of Directors, which reserves the right to change our dividend practices at any time and for any reason.

Our current shareholders will have a reduced ownership and voting power after the merger.

We will issue or reserve for issuance 50 million newly issued shares of common stock to Calpine stockholders as noted in the Merger Agreement (including shares of our common stock issuable pursuant to Calpine restricted

stock units and other equity-based awards).

Based on the number of shares of our common stock as of the transaction announcement date, our current shareholders and former Calpine stockholders would own approximately 85% and 15% of the outstanding shares of Constellation common stock, respectively, immediately following the consummation of the merger.

Each current shareholder will remain a shareholder of Constellation with a percentage ownership of the combined company that will be smaller than the shareholder’s percentage of Constellation prior to the merger.

As a result of this reduced ownership percentage, our current shareholders will have less influence on the policies of the combined company than they did prior to the transaction.

Our shareholders prior to the merger have a reduced ownership and voting power after the merger, and former Calpine stockholders are not obligated to maintain their ownership interest indefinitely.

We issued 50 million newly issued shares of common stock to Calpine stockholders as noted in the Merger Agreement (including shares of our common stock issuable pursuant to Calpine restricted stock units and other

equity-based awards).

Our prior shareholders and former Calpine stockholders owned approximately 86% and 14% of the outstanding shares of our common stock, respectively, immediately following the consummation of the merger.

Each shareholder prior to the merger that remained a shareholder has a percentage ownership of the combined company that is smaller than the shareholder’s percentage held prior to the merger.

As a result of this reduced ownership percentage, prior shareholders will have less influence on the policies of the combined company.

Additionally, upon the expiration of certain lock-up restrictions on transfers or sales of our securities, former Calpine stockholders will not be subject to any obligation to maintain their ownership interest in us and reducing their ownership interest could adversely impact the price of our common stock.

See Note 2 — Mergers, Acquisitions, and Dispositions of the Combined Notes to Consolidated Financial Statements for additional information.

The 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.

We currently anticipate that the merger will be accretive to earnings per share in 2026, which is expected to be the first full year following completion of the merger.

We currently anticipate that the merger will be accretive to earnings per share in 2026.

This expectation is based on preliminary estimates that are subject to change.

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We have incurred and expect to incur non-recurring costs associated with consummation of the transaction.

Most of these costs will be transaction costs, including fees paid to financial and legal advisors related to the merger and related financing arrangements, and employment-related costs, including change-in-control related payments made to certain Calpine executives.

Most of these costs will be transaction-related, including fees paid to financial and legal advisors for the merger and related financing arrangements, and employment-related costs, such as change-in-control payments made to certain Calpine executives.

We will also incur transition costs related to formulating integration plans.

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The integration process will be complex, costly and time-consuming.

Even if achieved, anticipated benefits and efficiencies from the merger may take longer to realize, or require greater costs to achieve, than currently expected.

The challenges associated with integrating the operations of Calpine’s business include, among others:

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• integrating relationships with industry contacts and business partners;

• possible inconsistencies in standards, controls, procedures and policies, and compensation structures between Calpine and us;

• possible inconsistencies in standards, controls, procedures and policies, and compensation structures;

• performance of Calpine’s generating assets and the costs to operate and maintain them, relative to expectations.

In addition, the companies have operated and, until the completion of the merger, will continue to operate, independently.

It is possible that the integration process could result in the disruption of, or the loss of momentum

in, our ongoing businesses or inconsistencies in standards, controls, procedures and policies, which could negatively impact the combined company.

It is possible that the integration process could result in the disruption of, or the loss of momentum in, our ongoing businesses or inconsistencies in standards, controls, procedures and policies, which could negatively impact the combined company.

Uncertainties 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.

We are dependent on the experience and industry knowledge of our officers and other key employees to execute our business plans.

Our success until the merger and the combined company’s success after the merger will depend in part upon our ability to retain key management personnel and other key employees of both companies.

Current and prospective employees may experience uncertainty about their future roles within the combined company following completion of the merger, which may have an adverse effect on our ability to attract or retain key management and other key personnel.

The success of the combined company will depend in part upon our ability to retain key management personnel and other key employees of both companies.

Employees may experience uncertainty about their future roles within the combined company following completion of the merger, which may have an adverse effect on our ability to attract or retain key management and other key personnel.

Accordingly, no assurance can be given that the combined company will be able to attract or retain key management personnel and other key employees to the same extent that we have previously been able to attract or retain our employees.

The merger may divert significant attention of our management team, which could detract from efforts to meet business goals.

The pursuit of the merger and the preparation for the integration could place a burden on management and internal resources.

Any significant diversion of management attention away from ongoing business concerns and any difficulties encountered in the transition and integration process may negatively impact our financial results.

We are obligated to complete the transaction whether or not we have obtained the required funding for closing.

We are funding the transaction using $4.5 billion in cash and by issuing 50 million shares of common stock.

While we expect to have cash on hand needed for closing, we would be required to complete the transaction even if we experience a cash shortfall.

This could require us to obtain additional financing which may cause us to incur additional costs.

The 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.

The Calpine assets, liabilities, business, financial condition, cash flows, operating results and prospects to be acquired or assumed by us in the merger could be negatively impacted before or after the merger closing as a result of previously unknown events or conditions occurring or existing before the merger closes.

Adverse changes in Calpine’s business or operations could occur or arise as a result of actions by Calpine, legal or regulatory developments including the emergence or unfavorable resolution of pre-merger loss contingencies, deteriorating general business, market, industry or economic conditions, and other factors both within and beyond the control of Calpine.

A significant decline in the value of Calpine assets to be acquired or a significant increase in Calpine liabilities to be assumed could negatively impact the combined company’s future business, operating results, cash flows, financial conditions or prospects.

In addition, there could be potential unknown liabilities and unforeseen expenses as a result of the merger, some of which we may not discover during our due diligence or adequately adjust for in our merger arrangements.

We may record goodwill that could become impaired and adversely affect our operating results.

In accordance with GAAP, the merger will be accounted for as a business combination.

The assets and liabilities of Calpine will be consolidated in our balance sheet.

Any excess of consideration transferred over the fair values of Calpine’s assets and liabilities, if any, will be recorded as goodwill.

The amount of goodwill, which could be material, will be allocated to the appropriate reporting units of the combined company.

Pursuant to the Merger Agreement, the stock consideration at the closing will consist of 50 million newly issued shares of Constellation common stock, with no par value.

However, the total value of consideration transferred will be determined, in part, based on the market price of the 50 million shares at the closing date.

The number of shares we expect to issue in connection with the stock consideration will not be

adjusted 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.

We are required to assess goodwill for impairment at least annually by comparing the fair value of reporting units to the carrying value of those reporting units.

A potential impairment could result in a material non-cash charge that would have a material negative impact on our future operating results or financial position.

The merger may be completed on terms different from those contained in the Merger Agreement.

Prior to the completion of the merger, we and Calpine could, by mutual agreement, amend or alter the terms of the Merger Agreement, including with respect to, among other things, the consideration to be received by Calpine stockholders or any covenants or agreements with respect to the parties’ respective operations pending completion of the merger.

In addition, we could choose to waive requirements of the Merger Agreement, including some conditions to closing of the merger.

Lawsuits 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.

Securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered acquisition, merger or other business combination agreements like the Merger Agreement.

Even if such a lawsuit is without merit, defending against these claims can result in substantial costs and divert management time and resources.

An adverse judgment could result in monetary damages, which could have a negative impact on our liquidity and financial condition.

Although 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.

One of the conditions to the closing of the merger is that no applicable law of any governmental entity having competent jurisdiction is in effect at the time of closing, which makes the consummation of the merger illegal or otherwise prohibits, restrains or enjoins the consummation of the merger.

Consequently, if a plaintiff is successful in obtaining an injunction prohibiting completion of the merger, that injunction may delay or prevent the merger from being completed within the expected timeframe or at all, which may adversely affect our business, financial position and results of operations.

Even if such injunction is eventually lifted and the merger is later completed, the resulting delays and costs incurred may continue to affect the combined company following the completion of the merger.

Additionally, there can be no assurance that any of the defendants will be successful in the outcome of any potential lawsuits.

The defense or settlement of any lawsuit or claim that remains unresolved at the time the merger is completed may adversely affect the combined company’s business, financial condition, results of operations and cash flows.

Merger integration efforts could place a burden on management and internal resources.

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What changed 10-K

Item 1A. Risk Factors