Constellation Energy 10-K 2022-12-31

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

☒			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2022

or

☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number						Name of Registrant; State or Other Jurisdiction of Incorporation; Address of Principal Executive Offices; and Telephone Number						IRS Employer Identification Number
001-41137						CONSTELLATION ENERGY CORPORATION						87-1210716
						(a Pennsylvania corporation) 1310 Point Street Baltimore, Maryland 21231-3380 (833) 883-0162
333-85496						CONSTELLATION ENERGY GENERATION, LLC						23-3064219
						(a Pennsylvania limited liability company) 200 Exelon Way Kennett Square, Pennsylvania 19348-2473 (833) 883-0162

Securities registered pursuant to Section 12(b) of the Act:

Title of each class						Trading Symbol(s)						Name of each exchange on which registered
CONSTELLATION ENERGY CORPORATION:
Common Stock, without par value						CEG						The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Constellation Energy Corporation			Yes			x						No			☐
Constellation Energy Generation, LLC			Yes			☐						No			x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Constellation Energy Corporation			Yes			☐						No			x
Constellation Energy Generation, LLC			Yes			☐						No			x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Constellation Energy Corporation			Yes			x						No			☐
Constellation Energy Generation, LLC			Yes			x						No			☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Constellation Energy Corporation			Large Accelerated Filer			x			Accelerated Filer			☐			Non-accelerated Filer			☐			Smaller Reporting Company			☐			Emerging Growth Company			☐
Constellation Energy Generation, LLC			Large Accelerated Filer			☐			Accelerated Filer			☐			Non-accelerated Filer			x			Smaller Reporting Company			☐			Emerging Growth Company			☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. o

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No x

The estimated aggregate market value of the voting and non-voting common equity held by nonaffiliates of each registrant as of June 30, 2022 was as follows:

Constellation Energy Corporation			$18,711,601,222
Constellation Energy Generation, LLC			Not applicable

The number of shares outstanding of each registrant’s common stock as of January 31, 2023 was as follows:

Constellation Energy Corporation Common Stock, without par value			327,131,082
Constellation Energy Generation, LLC			Not applicable

Documents Incorporated by Reference

Portions of the Registrants’ Definitive Proxy Statement relating to the 2023 Annual Meeting of Shareholders are incorporated by reference into Part III of this report. The Registrants expect to file the Definitive Proxy Statement with the Securities and Exchange Commission within 120 days after December 31, 2022.

TABLE OF CONTENTS

						Page No.
GLOSSARY OF TERMS AND ABBREVIATIONS						1
FILING FORMAT						6
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION						6
WHERE TO FIND MORE INFORMATION						6
PART I
ITEM 1.			BUSINESS			7
			General			7
			Constellations Strategy and Outlook			19
			Employees			21
			Environmental Matters and Regulation			23
ITEM 1A.			RISK FACTORS			29
ITEM 1B.			UNRESOLVED STAFF COMMENTS			43
ITEM 2.			PROPERTIES			43
ITEM 3.			LEGAL PROCEEDINGS			46
ITEM 4.			MINE SAFETY DISCLOSURES			46
PART II
ITEM 5.			MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES			46
ITEM 6.			RESERVED			48
ITEM 7.			MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			49
			Executive Overview			49
			Significant 2022 Transactions and Developments			49
			Other Key Business Drivers			50
			Critical Accounting Policies and Estimates			51
			Financial Results of Operations			58
			Liquidity and Capital Resources			68
ITEM 7A.			QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			77
ITEM 8.			FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA			83
			Constellation Energy Corporation			87
			Constellation Energy Generation, LLC			93
			Combined Notes to Consolidated Financial Statements			98
			1. Basis of Presentation			98
			2. Mergers, Acquisitions, and Dispositions			105
			3. Regulatory Matters			106
			4. Revenue from Contracts with Customers			112
			5. Segment Information			114
			6. Accounts Receivable			117
			7. Early Plant Retirements			119
			8. Property, Plant, and Equipment			121
			9. Jointly Owned Electric Utility Plant			122
			10. Asset Retirement Obligations			122
			11. Leases			127
			12. Asset Impairments			129
			13. Intangible Assets			130

			14. Income Taxes			131
			15. Retirement Benefits			135
			16. Derivative Financial Instruments			143
			17. Debt and Credit Agreements			148
			18. Fair Value of Financial Assets and Liabilities			154
			19. Commitments and Contingencies			163
			20. Stock-Based Compensation Plans			168
			21. Changes in Accumulated Other Comprehensive Income			170
			22. Variable Interest Entities			171
			23. Supplemental Financial Information			174
			24. Related Party Transactions			178
ITEM 9.			CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE			179
ITEM 9A.			CONTROLS AND PROCEDURES			179
ITEM 9B.			OTHER INFORMATION			180
ITEM 9C.			DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS			180
PART III
ITEM 10.			DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE			180
ITEM 11.			EXECUTIVE COMPENSATION			181
ITEM 12.			SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS			182
ITEM 13.			CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE			182
ITEM 14.			PRINCIPAL ACCOUNTING FEES AND SERVICES			182
PART IV
ITEM 15.			EXHIBITS, FINANCIAL STATEMENT SCHEDULES			183
ITEM 16.			FORM 10-K SUMMARY			189
SIGNATURES						190
			Constellation Energy Corporation			190
			Constellation Energy Generation, LLC			191

GLOSSARY OF TERMS AND ABBREVIATIONS
Constellation Energy Corporation and Related Entities
CEG Parent						Constellation Energy Corporation
Constellation						Constellation Energy Generation, LLC (formerly Exelon Generation Company, LLC)
Registrants						CEG Parent and Constellation, collectively
Antelope Valley						Antelope Valley Solar Ranch One
CENG						Constellation Energy Nuclear Group, LLC
CR						Constellation Renewables, LLC (formerly ExGen Renewables IV, LLC)
CRP						Constellation Renewables Partners, LLC (formerly ExGen Renewables Partners, LLC)
FitzPatrick						James A. FitzPatrick nuclear generating station
Ginna						R. E. Ginna nuclear generating station
NER						NewEnergy Receivables LLC
NMP						Nine Mile Point nuclear generating station
RPG						Renewable Power Generation, LLC
SolGen						SolGen, LLC
TMI						Three Mile Island nuclear facility

Former Related Entities
Exelon						Exelon Corporation
ComEd						Commonwealth Edison Company
PECO						PECO Energy Company
BGE						Baltimore Gas and Electric Company
PHI						Pepco Holdings LLC (formerly Pepco Holdings, Inc.)
Pepco						Potomac Electric Power Company
DPL						Delmarva Power & Light Company
ACE						Atlantic City Electric Company
BSC						Exelon Business Services Company, LLC

GLOSSARY OF TERMS AND ABBREVIATIONS
Other Terms and Abbreviations
ABO						Accumulated Benefit Obligation
AEC						Alternative Energy Credit that is issued for each megawatt hour of generation from a qualified alternative energy source
AESO						Alberta Electric Systems Operator
AOCI						Accumulated Other Comprehensive Income (Loss)
APBO						Accumulated Post-Retirement Benefit Obligation
ARC						Asset Retirement Cost
ARO						Asset Retirement Obligation
ASA						Asset Sale Agreement
Atomic Energy Act						Atomic Energy Act of 1954, as amended
Bcf						Billion cubic feet
Brookfield Renewable						Brookfield Renewable Partners, L.P.
CAISO						California ISO
CBAs						Collective Bargaining Agreements
CERCLA						Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended
CES						Clean Energy Standard
C&I						Commercial and Industrial
Clean Air Act						Clean Air Act of 1963, as amended
Clean Energy Law						Illinois Public Act 102-0062 signed into law on September 15, 2021
Clean Water Act						Federal Water Pollution Control Amendments of 1972, as amended
CMC						Carbon Mitigation Credit
CODM						Chief Operating Decision Maker
CORe						Constellation Offsite Renewables
CPP						Clean Power Plan
CTV						Constellation Technology Ventures
DCPSC						District of Columbia Public Service Commission
DEPSC						Delaware Public Service Commission
DOE						United States Department of Energy
DOJ						United States Department of Justice
DPP						Deferred Purchase Price
EBITDA						Earnings Before Interest, Tax, Depreciation and Amortization
EDF						Electricite de France SA and its subsidiaries
EFEC						Emissions-Free Energy Certificate
EMT						Everett Marine Terminal
EPA						United States Environmental Protection Agency
ERCOT						Electric Reliability Council of Texas
ERISA						Employee Retirement Income Security Act of 1974, as amended
EROA						Expected Rate of Return on Assets
ESG						Environmental, Social, and Governance
ERP						Enterprise Resource Program
EV						Electric Vehicle
Federal Power Act						Federal Power Act of 1920, as amended
FERC						Federal Energy Regulatory Commission
Former PECO Units						Limerick, Peach Bottom, and Salem nuclear generating units
Former ComEd Units						Braidwood, Byron, Dresden, LaSalle and Quad Cities nuclear generating units
FRCC						Florida Reliability Coordinating Council

FRR						Fixed Resource Requirement
GAAP						Generally Accepted Accounting Principles in the United States
GHG						Greenhouse Gas
GWh						Gigawatt hour
ICC						Illinois Commerce Commission
ICE						Intercontinental Exchange
IPA						Illinois Power Agency
IRA						Inflation Reduction Act of 2022
IRC						Internal Revenue Code
IRS						Internal Revenue Service
ISO						Independent System Operator
ISO-NE						ISO New England Inc.
ITC						Investment Tax Credit
kWh						Kilowatt-hour
LIBOR						London Interbank Offered Rate
LLRW						Low-Level Radioactive Waste
LTIP						Long-Term Incentive Plan
MATS						U.S. EPA Mercury and Air Toxics Standards
MDE						Maryland Department of the Environment
MDPSC						Maryland Public Service Commission
MISO						Midcontinent Independent System Operator, Inc.
MOPR						Minimum Offer Price Rule
MRV						Market-Related Value
MPSC						Missouri Public Service Commission
MW						Megawatt
MWh						Megawatt hour
N/A						Not applicable
NAV						Net Asset Value
NASDAQ						Nasdaq Stock Market, Inc.
NDT						Nuclear Decommissioning Trust
NEIL						Nuclear Electric Insurance Limited
NEPA						National Environmental Policy Act of 1969
NERC						North American Electric Reliability Corporation
NGX						Natural Gas Exchange, Inc.
NJBPU						New Jersey Board of Public Utilities
NJDEP						New Jersey Department of Environmental Protection
Non-Regulatory Agreement Units						Nuclear generating units or portions thereof whose decommissioning-related activities are not subject to contractual elimination under regulatory accounting
NOSA						Nuclear Operating Services Agreement
NPDES						National Pollutant Discharge Elimination System
NPNS						Normal Purchase Normal Sale scope exception
NRC						Nuclear Regulatory Commission
NWPA						Nuclear Waste Policy Act of 1982
NYISO						New York ISO
NYMEX						New York Mercantile Exchange
NYPSC						New York Public Service Commission
OIESO						Ontario Independent Electricity System Operator
OPEB						Other Postretirement Employee Benefits

PA DEP						Pennsylvania Department of Environmental Protection
PAPUC						Pennsylvania Public Utility Commission
PCAOB						Public Company Accounting Oversight Board
PBO						Projected Benefit Obligation
Pension Protection Act (the Act)						Pension Protection Act of 2006
PG&E						Pacific Gas and Electric Company
PJM						PJM Interconnection, LLC
PPA						Power Purchase Agreement
PP&E						Property, Plant, and Equipment
Price-Anderson Act						Price-Anderson Nuclear Industries Indemnity Act of 1957
PRP						Potentially Responsible Parties
PSDAR						Post-shutdown Decommissioning Activities Report
PSEG						Public Service Enterprise Group Incorporated
PTC						Production Tax Credit
PUCT						Public Utility Commission of Texas
PV						Photovoltaic
RCRA						Resource Conservation and Recovery Act of 1976, as amended
REC						Renewable Energy Credit which is issued for each megawatt hour of generation from a qualified renewable energy source
Regulatory Agreement Units						Nuclear generating units or portions thereof whose decommissioning-related activities are subject to contractual elimination under regulatory accounting
RFP						Request for Proposal
RGGI						Regional Greenhouse Gas Initiative
RIN						Renewable Identification Number
RMC						Risk Management Committee
RMP						Risk Management Policy
RNF						Revenue Net of Purchased Power and Fuel Expense
RNG						Renewable Natural Gas
ROE						Return on equity
ROU						Right-of-use
RPS						Renewable Energy Portfolio Standards
RTO						Regional Transmission Organization
S&P						Standard & Poor’s Ratings Services
SEC						United States Securities and Exchange Commission
SERC						SERC Reliability Corporation (formerly Southeast Electric Reliability Council)
SNF						Spent Nuclear Fuel
SOA						Society of Actuaries
SOFR						Secured Overnight Financing Rate
SOS						Standard Offer Service
SPP						Southwest Power Pool
SSA						Social Security Administration
STEM						Science, Technology, Engineering, and Mathematics
TWh						Terawatt-hour
U.S. Court of Appeals for the D.C. Circuit						United States Court of Appeals for the District of Columbia Circuit
VIE						Variable Interest Entity
WECC						Western Electric Coordinating Council
ZEC						Zero Emission Credit

ZES						Zero Emission Standard

FILING FORMAT

This combined Annual Report on Form 10-K is being filed separately by Constellation Energy Corporation and Constellation Energy Generation, LLC, (Registrants). Information contained herein relating to any individual Registrant is filed by the Registrant on its own behalf.

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION

This report contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties. Words such as “could,” “may,” “expects,” “anticipates,” “will,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “predicts,” and variations on such words, and similar expressions that reflect our current views with respect to future events and operational, economic and financial performance, are intended to identify such forward-looking statements.

The factors that could cause actual results to differ materially from the forward-looking statements made by us include those factors discussed herein, including those factors discussed in (a) Part I, ITEM 1A. Risk Factors, (b) Part II, ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, (c) Part II, ITEM 8. Financial Statements and Supplementary Data: Note 19, Commitments and Contingencies, and (d) other factors discussed in filings with the SEC by the Registrants.

Readers are cautioned not to place undue reliance on these forward-looking statements, which apply only as of the date of this report. None of the Registrants undertakes any obligation to publicly release any revision to its forward-looking statements to reflect events or circumstances after the date of this report.

WHERE TO FIND MORE INFORMATION

The SEC maintains an Internet site at www.sec.gov that contains reports, proxy and information statements, and other information that we file electronically with the SEC. These documents are also available to the public from commercial document retrieval services and our website at www.ConstellationEnergy.com. Information contained on our website shall not be deemed incorporated into, or to be a part of, this report.

PART I

General

On February 21, 2021, the Board of Directors of Exelon Corporation (“Exelon”) authorized management to pursue a plan to separate its competitive generation and customer-facing energy businesses, conducted through Constellation Energy Generation, LLC (“Constellation”, formerly Exelon Generation Company, LLC) and its subsidiaries, into an independent, publicly traded company. Constellation Energy Corporation (“CEG Parent” or the “Company”), a Pennsylvania corporation and a direct, wholly owned subsidiary of Exelon, was newly formed for the purpose of separation and had not engaged in any activities except in preparation for the distribution. On February 1, 2022, Exelon completed the separation by distributing all the outstanding shares of the Company’s common stock, on a pro rata basis to the holders of Exelon’s common stock, with the Company holding all the interests in Constellation previously held by Exelon (the "Separation"). As of 2002, Constellation has been an individual registrant since the registration of their public debt securities under the Securities Act. As an individual registrant, Constellation has historically filed consolidated financial statements to reflect their financial position and operating results as a stand-alone, wholly owned subsidiary of Exelon.

Unless otherwise indicated or the context otherwise requires, references herein to the terms "we," "our," "us" and "the Company" refer collectively to CEG Parent and Constellation. See Glossary for defined terms.

Our Business

We are the nation’s largest producer of carbon-free energy and a leading supplier of energy products and services to businesses, homes, community aggregations and public sector customers across the continental United States, including three-fourths of Fortune 100 companies. Our generation fleet of nuclear, hydro, wind, natural gas, and solar generation facilities has the generating capacity to power the equivalent of 15 million homes, producing 11 percent of the carbon-free energy in the United States. Constellation’s fleet is helping to accelerate the nation’s transition to a carbon-free future with more than 32,355 megawatts of capacity and an annual output that is nearly 90 percent carbon-free. This makes us an important partner to businesses and state and local governments that are setting ambitious carbon-reduction goals and seeking long-term solutions to the climate crisis. We employ approximately 13,370 people, and do business in 48 states, the District of Columbia, Canada, and the United Kingdom.

Our generation fleet produces more clean, carbon-free energy than any other company in the United States. We are committed to a clean energy future, and we believe our generation fleet is essential to helping meet clean energy targets, at both the state and national level. Our customer-facing business is one of the nation's largest competitive energy suppliers, offering innovative solutions along the sustainability continuum to meet customer clean energy and climate goals.

Our Operations

We operate the largest carbon-free generation fleet in the nation and are one of the largest competitive electric generation companies in the country, as measured by owned and contracted MWs. Collectively, the combined fleet is nearly 90% carbon-free (based on generation output of electricity) and is the fourth largest generation portfolio in the U.S. in terms of total generation with meaningful geographic diversity.

At December 31, 2022, our generating resources consisted of the following:

Type of Capacity			MWs
Owned generation assets(a)
Nuclear			20,895
Natural gas and oil			8,807
Renewable(b)			2,653
Owned generation assets			32,355
Contracted generation(c)			3,883
Total generating resources			36,238

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(a)Net generation capacity is stated at proportionate ownership share. See ITEM 2. PROPERTIES for additional information.

(b)Includes wind, hydroelectric, and solar generating assets.

(c)Electric supply procured under unit-specific agreements.

The following map illustrates the locations of our owned generation facilities as of December 31, 2022:

The Company's Generation Fleet Map**(a)**

Owned Assets**(b)**

Nuclear Wind

Gas/Other Solar

Hydro

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(a)Note: One symbol is included per location. Some locations may have multiple generating units. Locations in tight geographic proximity may appear as one symbol. Units that are not currently operational are not captured.

(b)Does not reflect Grand Prairie Generating Station (Gas/Other), located in Alberta, Canada.

We have five reportable segments, as described in the table below, representing the different geographical areas in which our owned generating resources are located and our customer-facing activities are conducted.

Segment						Net Generation Capacity (MWs)****(a)						% of Net Generation Capacity						Geographical Area
Mid-Atlantic						10,495						32		%				Eastern half of PJM, which includes New Jersey, Maryland, Virginia, West Virginia, Delaware, the District of Columbia, and parts of Pennsylvania and North Carolina
Midwest						11,892						37		%				Western half of PJM and the United States footprint of MISO, excluding MISO’s Southern Region
New York						3,093						10		%				NYISO
ERCOT						3,610						11		%				Electric Reliability Council of Texas
Other Power Regions						3,265						10		%				New England, South, West, and Canada
Total						32,355						100		%

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(a)Net generation capacity is stated at proportionate ownership share as of December 31, 2022. See ITEM 2. PROPERTIES for additional information.

The following table shows sources of electric supply in GWhs for 2022 and 2021:

			Source of Electric Supply
			2022						2021
Nuclear(a)(b)			173,350						172,990
Purchases — non-trading portfolio			70,682						67,605
Natural gas and oil			21,563						19,960
Renewable(c)			6,049						6,577
Total Supply			271,644						267,132

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(a)Includes the proportionate share of output where we have an undivided ownership interest in jointly-owned generating plants and includes the total output of plans that are fully consolidated.

(b)2021 values have been revised from those previously reported to correctly reflect our 82% undivided ownership interest

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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:

Risks related to market and financial factors primarily include:

• the price of fuels, in particular the price of natural gas, which affects power prices,

• the generation resources in the markets in which we operate,

• our ability to operate our generating assets,

• our ability to access capital markets,

• the impacts of on-going competition, and

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

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

• the design of power markets,

• the renewal of permits and operating licenses,

• environmental and climate policy, and

• tax policy.

Risks related to operational factors primarily include:

• 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 ability of energy transmission and distribution companies to maintain the reliability, resiliency and safety of their energy delivery systems, which could affect our ability to deliver energy to our customers and affect our operating costs, and

• physical and cyber security risks for us as an owner-operator of generation facilities and as a participant in commodities trading.

Risks related to our separation from Exelon primarily include:

• challenges to achieving the benefits of separation, including the need to replicate certain services provided by Exelon (e.g. information technology), which will require additional resources and expense,

• performance by Exelon and us under the transaction agreements, including indemnification responsibilities tied to the allocation of businesses and liabilities, and

• limitations on future capital-raising or strategic transactions during the two-year period following the distribution arising from the need to protect the tax-free treatment of the distribution.

Risks Related to Market and Financial Factors

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

We are exposed to commodity price risk for natural gas and the unhedged portion of our generation portfolio. Our earnings and cash flows are therefore exposed to variability of spot and forward market prices in the markets in which we operate.

Price of Fuels. The spot market price of electricity for each hour is generally determined by the marginal cost of supplying the next unit of electricity to the market during that hour. Thus, the market price of power is affected by the market price of the marginal fuel used to generate the electricity unit.

Cost of Fuel. 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, counterparty default, and geopolitical risk, including the current Russia and Ukraine conflict and the potential for additional United States sanctions against Russia. The cycle of production and utilization of nuclear fuel is complex, and we engage a diverse set of suppliers to ensure we can 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. See ITEM 1. BUSINESS – Price and Supply Risk Management and See ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK for additional information on the nuclear fuel cycle and procurement.

Demand and Supply. 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 base-load generating plants such as our nuclear plants. Conversely, new demand sources such as electrification of transportation could increase demand and change demand patterns.

Retail Competition. Our retail operations compete for customers in a competitive environment, which affects the margins we can earn and the volumes we are able to serve. 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. 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 continue to rise or remain 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.

Advancements in power generation technology, including commercial and residential solar generation installations and commercial micro turbine installations, are improving the cost-effectiveness of customer self-supply of electricity. Improvements in energy storage technology, including batteries and fuel cells, could also better position customers to meet their around-the-clock electricity requirements. Improvements in energy efficiency of lighting, appliances, equipment and building materials will also affect energy consumption by customers. Changes in power generation, storage, and use technologies could have significant effects on customer behaviors and their energy consumption.

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.

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. The asset values are subject to market fluctuations and will yield uncertain returns, which could fall below our projected return rates. A decline in the market value of the NDT fund investments could increase our funding requirements to decommission our nuclear plants. A decline in the market value of the pension and OPEB plan assets would increase the funding requirements associated with our pension and OPEB plan obligations. Additionally, our pension and OPEB plan liabilities are sensitive to changes in interest rates. As interest rates decrease, the liabilities increase, potentially increasing benefit costs and funding requirements. Changes in demographics, including increased numbers of retirements or changes in life expectancy assumptions or changes to Social Security or Medicare eligibility requirements could also increase the costs and funding requirements of the obligations related to the pension and OPEB plans. See Note 10 — Asset Retirement Obligations and Note 15 — Retirement Benefits of the Combined Notes to Consolidated Financial Statements for additional information.

We could be negatively affected by unstable capital and credit markets and increased volatility in commodity markets.

We rely on the capital markets, particularly for publicly offered debt, as well as the banking and commercial paper markets, to meet our financial commitments and short-term liquidity needs. Disruptions in the capital and credit markets in the United States or abroad could negatively affect our ability to access the capital markets or draw on our bank revolving credit facilities. The banks may not be able to meet their funding commitments to us if they experience shortages of capital and liquidity or if they experience excessive volumes of borrowing requests within a short period of time. The inability to access capital markets or credit facilities, and longer-term disruptions in the capital and credit markets as a result of uncertainty, changing or increased regulation, reduced alternatives or failures of significant financial institutions could result in the deferral of discretionary capital expenditures, affect our ability to effectively hedge our generation portfolio, require changes to our hedging strategy in order to reduce collateral posting requirements, or require a reduction in discretionary uses of cash. In addition, we have exposure to worldwide financial markets, including Europe, Canada and Asia. Disruptions in these markets could reduce or restrict our ability to secure sufficient liquidity or secure liquidity at reasonable terms. As of December 31, 2022, approximately 38%, 13%, and 19% of our available credit facilities were with European, Canadian and Asian banks, respectively.

The strength and depth of competition in energy markets depend heavily on active participation by multiple trading parties, which could be negatively affected by disruptions in the capital and credit markets and legislative and regulatory initiatives that could affect participants in commodities transactions. Reduced capital and liquidity and failures of significant institutions that participate in the energy markets could diminish the liquidity and competitiveness of energy markets that are important to our business. Perceived weaknesses in the competitive strength of the energy markets could lead to pressures for greater regulation of those markets or attempts to replace market structures with other mechanisms for the sale of power, including the requirement of long-term contracts.

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. 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. One or both events could adversely affect available liquidity and, in the case of a rating downgrade, borrowing and credit support costs.

See ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS – Liquidity and Capital Resources – Credit Matters and Cash Requirements – Security Ratings for additional information regarding the potential impacts of credit downgrades on our cash flows.

If we fail to meet project-specific financing agreement requirements, we could experience an impairment or loss of the financed project.

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 into bankruptcy proceedings. The impact of bankruptcy could result in the impairment of certain project assets. See Note 17 — 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. 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 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. 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.

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

The impacts of significant economic downturns on our retail customers, such as less demand for products and services provided by commercial and industrial customers, could result in an increase in the number of uncollectible customer balances and related expense.

See ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK for additional information on our credit risk.

Our results were negatively affected by the impacts of COVID-19 in 2020 and future pandemics or other significant health issues could also adversely affect our results.

COVID-19 has previously disrupted economic activity in our markets and negatively affected our results of operations. The estimated impact of COVID-19 to our Net income was approximately $170 million for the year ended December 31, 2020 and was not material for the years ended December 31, 2021 and 2022. Any future widespread pandemic or other local or global health issue could adversely affect customer demand and our ability to operate our generation assets.

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 have affected the availability of generation and its transmission, limiting our ability to source or send power to where it is sold, and have also impaired the transportation of 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 capacity at a time when markets are weak.

Climate change 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.

Beginning on February 15, 2021, our Texas-based generating assets within the ERCOT market, specifically Colorado Bend II, Wolf Hollow II, and Handley, experienced periodic outages as a result of historically severe cold weather conditions. As a result of this weather event, we incurred a loss of approximately $800 million for the year ended December 31, 2021. By comparison, the estimated impact reduced our overall Net loss by approximately $50 million for the year ended December 31, 2022, see Note 3 — Regulatory Matters and Note 19 — Commitments and Contingencies of the Combined Notes to Consolidated Financial Statements for additional information.

Long-lived assets and other assets could become impaired.

Long-lived assets – principally, generation assets – represent the single largest asset class on our Consolidated Balance Sheets.

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. Factors such as, but not limited to, the business climate, including current and future energy and market conditions, environmental regulation, and the condition of assets are considered.

An impairment would require us to reduce the carrying value of the long-lived asset to fair value through a non-cash charge to expense by the amount of the impairment. See ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS – Critical Accounting Policies and Estimates, Note 8 — Property, Plant, and Equipment and Note 12 — Asset Impairments of the Combined Notes to Consolidated Financial Statements for additional information on long-lived asset impairments.

We could incur substantial costs in the event of non-performance by third-parties under indemnification agreements. We are exposed to other credit risks in the power markets that are beyond our control.

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.

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. We could incur substantial costs to fulfill our obligations under these indemnities.

In the bilateral markets, we are exposed to the risk that counterparties that owe us money or are obligated to purchase energy or fuel from us, will not perform under their obligations for operational or financial reasons. In the event the counterparties to these arrangements fail to perform, we could be forced to purchase or sell energy or fuel in the wholesale markets at less favorable prices and incur additional losses, to the extent amounts, if any, were already paid to the counterparties. In the spot markets, we are exposed to risk as a result of default sharing mechanisms that exist within certain markets, primarily RTOs and ISOs. We are also a party to agreements with entities in the energy sector that have experienced rating downgrades or other financial difficulties. In addition, our retail sales subject us to credit risk through competitive electricity and natural gas supply activities to serve commercial and industrial companies, governmental entities and residential customers. Retail credit risk results when customers default on their contractual obligations. 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. See Note 3 — Regulatory Matters of the Combined Notes to Consolidated Financial Statements for additional information on the February 2021 extreme cold weather event and Texas-based generating asset outages.

Risks Related to Legislative, Regulatory, and Legal Factors

Federal or state legislative or regulatory actions could negatively affect the scope and functioning of the wholesale markets.

Approximately 70% of our generating resources, which include directly owned assets and capacity obtained through long-term contracts, are in the area encompassed by PJM. Our future results of operations are impacted by (1) FERC’s and PJM's level of support for policies that favor the preservation of competitive wholesale power markets and recognize the value of carbon-free electricity and resiliency and for states' energy objectives and policies and (2) the absence of material changes to market structures that would limit or otherwise negatively affect us. Market rules in other regions could affect us in a similar fashion. We could also be affected by state laws, regulations or initiatives to subsidize existing or new generation.

FERC’s requirements for market-based rate authority could pose a risk that we may no longer satisfy FERC’s tests for market-based rates. A loss of market-based rate authority would mean that we would sell power at cost-based rates.

Our business is highly regulated and could be negatively affected by legislative and/or regulatory actions.

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. 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. See Note 3 — Regulatory Matters and Note 7 — Early Plant Retirements of the Combined Notes to Consolidated Financial Statements for additional information.

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.

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

Regulatory Risk. A change in the Atomic Energy Act or the applicable regulations or licenses could require a substantial increase in capital expenditures or could result in increased operating or decommissioning costs. Events at nuclear plants owned by others, as well as those owned by us, could cause the NRC to initiate such actions.

Spent Nuclear Fuel Storage. The approval of a national repository for the storage of SNF and the timing of that facility opening, will significantly affect the costs associated with storage of SNF and the ultimate amounts received from the DOE to reimburse us for these costs.

Any regulatory action relating to the timing and availability of a repository for SNF could adversely affect our ability to decommission fully our nuclear units. We cannot predict whether a fee may be established or to what extent, in the future for SNF disposal. See Note 19 — Commitments and Contingencies of the Combined Notes to Consolidated Financial Statements for additional information.

We could be subject to higher costs and/or penalties related to mandatory reliability standards.

We, as a user of the bulk power transmission system, are subject to mandatory reliability standards promulgated by NERC and enforced by FERC. The standards are based on the functions that need to be performed to ensure the bulk power system operates reliably and are guided by reliability and market interface principles. Compliance with or changes in the reliability standards could subject us to higher operating costs and/or increased capital expenditures. If we were found in non-compliance with the federal and state mandatory reliability standards, we could be subject to remediation costs as well as sanctions, which could include substantial monetary penalties.

We could incur substantial costs to fulfill our obligations related to environmental and other matters.

We are subject to extensive environmental regulation and legislation by local, state and federal authorities. 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. 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. See ITEM 1. BUSINESS – Environmental Matters and Regulation and Note 19 — Commitments and Contingencies of the Combined Notes to Consolidated Financial Statements for additional information.

We could be negatively affected by federal and state RPS and/or energy conservation legislation, along with energy conservation by customers.

Changes to current state legislation or the development of federal legislation that requires the use of clean, renewable and alternate fuel sources could significantly impact us. The impact could include reduced use of some of our generating facilities with effects on our operating revenues and costs.

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. See ITEM 1. 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.

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. 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. We could also lose operating revenues and incur increased purchased power and fuel expense to meet our supply commitments. In addition, conditions could be imposed as part of the license renewal process that could adversely affect operations, require a substantial

increase in capital expenditures, result in increased operating costs or render the project uneconomic. Similar effects could result from a change in the Federal Power Act or the applicable regulations due to events at hydroelectric facilities owned by others, as well as those owned by us. See Note 3 — Regulatory Matters of the Combined Notes to Consolidated Financial Statements for additional information regarding the license renewal for the Conowingo hydroelectric project.

We could be negatively affected by challenges to tax positions taken, tax law changes and the inherent difficulty in quantifying potential tax effects of business decisions.

We are required to make judgments in order to estimate our obligations to taxing authorities. These tax obligations include income, real estate, sales and use and employment-related taxes and ongoing appeal issues related to these tax matters. These judgments include reserves established for potential adverse outcomes regarding tax positions that have been taken that could be subject to challenge by the tax authorities. See Note 1 — Basis of Presentation and Note 14 — Income Taxes of the Combined Notes to Consolidated Financial Statements for additional information.

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

We are involved in legal proceedings, claims and litigation arising from our business operations. The material ones are summarized in Note 3 — Regulatory Matters and Note 19 — Commitments and Contingencies of the Combined Notes to Consolidated Financial Statements. Adverse outcomes in these proceedings could require significant expenditures, result in lost revenue, or restrict 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.

We could be the subject of public criticism. Adverse publicity of this nature could render public service commissions and other regulatory and legislative authorities less likely to view energy companies in a favorable light, and could cause those companies, including us, to be susceptible to less favorable legislative and regulatory outcomes, as well as increased regulatory oversight and more stringent legislative or regulatory requirements.

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 and East Coast of the United States, areas that have historically been prone to various types of severe weather events, and as such we have well-developed response and recovery programs based on these historical events. 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. 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.

See ITEM 1. BUSINESS – Environmental Matters and Regulation – Climate Change for additional information.

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

Nuclear capacity factors. Capacity factors for nuclear generating units significantly affect our results of operations. 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.

Nuclear refueling outages. In general, refueling outages are planned to occur once every 18 to 24 months. The total number of refueling outages, along with their duration, could have a significant impact on our results of operations. 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. 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 and fuel expense to meet supply commitments.

Further, our nuclear operations produce various types of nuclear waste materials, including SNF. The approval of a national repository for the storage of SNF and the timing of that facility opening, will significantly affect the costs associated with storage of SNF and the ultimate amounts received from the DOE to reimburse us for these costs. Any regulatory action relating to the timing and availability of a repository for SNF could adversely affect our ability to decommission fully our nuclear units. We cannot predict whether in the future a fee for SNF disposal may be reestablished or to what extent.

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

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. 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.

Nuclear major incident risk and insurance. The consequences of a major incident could be severe and include loss of life and property damage. Any resulting liability from a nuclear plant major incident within the United States, owned or operated by us or owned by others, could exceed our resources, including insurance coverage. We are a member of an industry mutual insurance company, NEIL, which provides property and accidental outage insurance for our nuclear operations. Uninsured losses and other expenses, to the extent not recovered from insurers or the nuclear industry, could be borne by us. Additionally, an accident or other significant event at a nuclear plant within the United States or abroad, whether owned by us or others, could result in increased regulation and reduced public support for nuclear-fueled energy.

As required by the Price-Anderson Act, we carry the maximum available amount of nuclear liability insurance, $450 million for each operating site. Claims exceeding that amount are covered through mandatory participation in a financial protection pool. In addition, the U.S. Congress could impose revenue-raising measures on the nuclear industry to pay claims exceeding the $13.7 billion limit for a single incident.

See Note 19 — Commitments and Contingencies of the Combined Notes to Consolidated Financial Statements for additional information of nuclear insurance.

Decommissioning obligation and funding. NRC regulations require that licensees of nuclear generating facilities demonstrate reasonable assurance that funds will be available in certain minimum amounts at the end of the life of the facility to decommission the facility.

Actual costs to decommission our nuclear facilities may substantially exceed our estimates as a result of changes in the approach and timing of decommissioning activities, changes in decommissioning costs, changes in federal or state regulatory requirements, other changes in our estimates or ability to effectively execute on our planned decommissioning activities.

We make contributions to certain trust funds of the former PECO units based on amounts being collected by PECO from its customers and remitted to us. While we, through PECO, have recourse to collect additional amounts from PECO customers (subject to certain limitations and thresholds), we have no recourse to collect additional amounts from utility customers for any of our other nuclear units if there is a shortfall of funds necessary for decommissioning. If circumstances changed such that there was an inability to continue to make contributions to the trust funds of the former PECO units based on amounts collected from PECO customers, or if we no longer had recourse to collect additional amounts from PECO customers if there was a shortfall of funds for decommissioning, the adequacy of the trust funds related to the former PECO units could be negatively affected. Any changes to the PECO regulatory agreements could impact our ability to offset decommissioning-related activities within the Consolidated Statement 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. For the year ended December 31, 2021, a pre-tax charge of $193 million was recorded in the Consolidated Statements of Operations and Comprehensive Income for decommissioning-related activities that were not offset for the Byron units due to contractual offset being temporarily suspended.

Forecasting trust fund investment earnings and costs to decommission nuclear generating stations requires significant judgment, and actual results could differ significantly from current estimates. If the investments held by our NDT funds are not sufficient to fund the decommissioning of our nuclear units, we could be required to take steps, such as providing financial guarantees through letters of credit or parent company guarantees or making additional contributions to the trusts, which could be significant, to ensure that the trusts are adequately funded and that current and future NRC minimum funding requirements are met.

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

We are subject to physical security and cybersecurity risks.

We face physical security and cybersecurity risks. Threat sources continue to seek to exploit potential vulnerabilities in the electric generation and natural gas industry associated with protection of sensitive and confidential information, grid infrastructure and other energy infrastructures. These attacks and disruptions, both physical and cyber, are becoming increasingly sophisticated and dynamic. Continued implementation of advanced digital technologies increases the potentially unfavorable impacts of such attacks. We expect these attacks and disruptions to continue to occur in the future and we are constantly managing efforts to infiltrate and compromise our physical assets and information technology systems and data.

A security breach, including physical or electronic break-ins, computer viruses, malware, attacks by hackers, ransomware attacks, phishing attacks, supply chain attacks, breaches due to employee error or misconduct and other similar breaches, of our physical assets or information systems, or those of our competitors, vendors,

business partners and interconnected entities in RTOs and ISOs, or regulators could impact the operation of the generation fleet and/or reliability of the transmission and distribution system or result in the theft or inappropriate release of certain types of information, including critical infrastructure information, sensitive customer, vendor and employee data, trading or other confidential data. The risk of these system-related events and security breaches occurring continues to intensify, and while we have not directly experienced a material breach or disruption to our network or information systems or our operations to-date, such attacks continue to increase in sophistication and frequency, and we may be unable to prevent all such attacks in the future.

If a significant breach were to occur, our reputation could be negatively affected, customer confidence in us or others in the industry could be diminished, or we could be subject to legal claims, loss of revenues, increased costs or operations shutdown. Moreover, the amount and scope of insurance maintained against losses resulting from any such events or security breaches may not be sufficient to cover losses or otherwise adequately compensate for any disruptions to business that could result. Furthermore, in the future, such insurance may not be available on commercially reasonable terms, or at all.

In addition, new or updated security regulations or unforeseen threat sources could require changes in current measures taken by us or our business operations and could adversely affect our consolidated financial statements.

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

Employees and contractors throughout the organization work in, and the general public could be exposed to, potentially dangerous environments near our operations. As a result, employees, contractors and the general public are at some risk for serious injury, including loss of life. These risks include, but are not limited to, nuclear accidents, dam failure, gas explosions, and electric contact cases.

Natural disasters, war, acts and threats of terrorism, pandemic and other significant events could negatively impact our results of operations, ability to raise capital and future growth.

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.

The impact that potential terrorist attacks could have on the industry and on us is uncertain. We face a risk that our operations would be direct targets or indirect casualties of an act of terror. Any retaliatory military strikes or sustained military campaign could affect our operations in unpredictable ways, such as changes in insurance markets and disruptions of fuel supplies and markets, particularly uranium and oil. Furthermore, these catastrophic events could compromise the physical or cybersecurity of our facilities, which could adversely affect our ability to manage our business effectively. Instability in the financial markets as a result of terrorism, war, natural disasters, pandemic, credit crises, recession or other factors also could result in a decline in energy consumption or interruption of fuel or the supply chain. In addition, the implementation of security guidelines and measures has resulted in and is expected to continue to result in increased costs.

We could be significantly affected by the outbreak of a pandemic. We have plans in place to respond to a pandemic. 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. However, there can be no assurance that the amount of insurance will be adequate to address such property and casualty losses.

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 utility 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. See ITEM 7. 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.

Our performance could be negatively affected if we fail to attract and retain an appropriately qualified workforce.

Certain events, such as the separation transaction, an employee strike, loss of employees, loss of contract resources due to a major event, and an aging workforce without appropriate replacements, could lead to operating challenges and increased costs for us. The challenges include lack of resources, loss of knowledge and a lengthy time period associated with skill development. In this case, costs, including costs for contractors to replace employees, productivity costs and safety costs, could arise. We are particularly affected due to the specialized knowledge required of the technical and support employees for generation operations.

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 repowering, co-location and the production of hydrogen, growing sustainability products and services for our customers, and investment opportunities in other emerging technologies and innovation. 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. All these factors could result in higher costs or lower revenues than expected, resulting in lower than planned returns on investment.

Risks Related to Our Separation from Exelon

We may not achieve some or all the expected benefits of the separation, and the separation may materially adversely affect our business.

We may not be able to achieve the full strategic and financial benefits expected to result from the separation, or such benefits may be delayed or not occur at all.

If we fail to achieve some or all the benefits expected to result from the separation, or if such benefits are delayed, it could have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows.

The terms in our agreements with Exelon could be less beneficial than the terms we may have otherwise received from unaffiliated third parties.

The agreements entered with Exelon in connection with the separation, including the separation agreement, a tax matters agreement, an employee matters agreement, and a transition services agreement, were prepared in the context of the separation while we were still a wholly owned subsidiary of Exelon. Accordingly, during the period in which the terms of those agreements were prepared, we did not have an independent Board of Directors or a management team that was independent of Exelon. As a result, the terms of those agreements may not reflect terms that would have resulted from negotiations between unaffiliated third parties.

Exelon may fail to perform under various transaction agreements that were executed as part of the separation, which could cause us to incur expenses or losses we would not otherwise incur.

In connection with the separation and prior to the distribution, we and Exelon entered into the separation agreement and entered into various other agreements, including a tax matters agreement, an employee matters agreement, and a transition services agreement. The separation agreement, the tax matters agreement and the employee matters agreement determined the allocation of assets and liabilities between the companies following the separation for those respective areas and include any necessary indemnifications related to liabilities and obligations. We will rely on Exelon to satisfy its performance and payment obligations under these agreements. If Exelon is unable or unwilling to satisfy its obligations under these agreements, including its indemnification obligations, we could incur operational difficulties and/or losses.

In connection with the separation into two public companies, we and Exelon indemnified each other for certain liabilities. If we are required to pay under these indemnities to Exelon, our financial results could be negatively impacted. The Exelon indemnities may not be sufficient to hold us harmless from the full amount of liabilities for which Exelon will be allocated responsibility, and Exelon may not be able to satisfy its indemnification obligations in the future.

Pursuant to the separation agreement and certain other agreements between Exelon and us, each party will agree to indemnify the other for certain liabilities, in each case for uncapped amounts. Indemnities that we may be required to provide Exelon are not subject to any cap, may be significant and could negatively impact our business. Third parties could also seek to hold us responsible for any of the liabilities that Exelon has agreed to retain. Any amounts we are required to pay pursuant to these indemnification obligations and other liabilities could require us to divert cash that would otherwise have been used in furtherance of our operating business. Further, the indemnities from Exelon for our benefit may not be sufficient to protect us against the full amount of such liabilities, and Exelon may not be able to fully satisfy its indemnification obligations.

Moreover, even if we ultimately succeed in recovering from Exelon any amounts for which we are held liable, we may be temporarily required to bear these losses ourselves. Each of these risks could negatively affect our business, results of operations and financial condition.

We may fail to have necessary systems and services in place when certain of the transaction agreements expire.

If we do not have in place our own systems and services, or if we do not have agreements with other providers of these services once certain separation transaction agreements expire, we may not be able to operate our business effectively, and our profitability may decline. We are in the process of creating our own, or engaging third parties to provide, systems and services to replace many of the systems and services that Exelon currently provides to us. We may incur temporary interruptions in business operations if we cannot transition effectively from Exelon’s existing operating systems, databases and programming languages that support these functions to our own systems. Our failure to implement the new systems and transition our data successfully and cost-effectively could disrupt our business operations and have a material adverse effect on our profitability. In addition, our costs for the operation of these systems may be higher than the amounts reflected in our historical financial statements.

We may not be able to engage in desirable strategic transactions or capital-raising following the separation.

Under current U.S. federal income tax law, a spin-off that otherwise qualifies for tax-free treatment can be rendered taxable to the parent corporation and its shareholders as a result of certain post-spin-off transactions, including certain acquisitions of shares or assets of the spun-off corporation. To preserve the tax-free treatment of the distribution, and in addition to potential tax indemnity obligations, we agreed to certain limitations or prohibitions in the tax matters agreement that may prohibit us, for the two-year period following the distribution and except in specific circumstances, from, among other things:

• entering into any transaction pursuant to which all or a portion of the shares of our stock, or substantially all of our assets, would be acquired, whether by merger or otherwise;

• issuing equity securities beyond certain thresholds;

• repurchasing shares of our stock other than in certain open-market transactions.

The tax matters agreement prohibits us from taking or failing to take any other action that would prevent the distribution and certain related transactions from qualifying as a transaction that is generally tax-free for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the IRC. These restrictions may limit our ability to pursue certain equity issuances, strategic transactions, repurchases or other transactions that we may believe to be in the best interests of our shareholders or that might increase the value of our business.

None.

The following table presents our interests in net electric generating capacity by station at December 31, 2022:

Station**(a)**						Location						No. of Units						Percent Owned**(b)**						Primary Fuel Type						Primary Dispatch Type**(c)**						Net Generation Capacity (MWs)****(d)
Midwest
Braidwood						Braidwood, IL						2												Uranium						Base-load						2,386
Byron						Byron, IL						2												Uranium						Base-load						2,347			(e)
LaSalle						Seneca, IL						2												Uranium						Base-load						2,320
Dresden						Morris, IL						2												Uranium						Base-load						1,845			(e)
Quad Cities						Cordova, IL						2						75						Uranium						Base-load						1,403			(f)
Clinton						Clinton, IL						1												Uranium						Base-load						1,080
Michigan Wind 2						Sanilac Co., MI						50						51			(g)			Wind						Intermittent						46			(f)
Beebe						Gratiot Co., MI						34						51			(g)			Wind						Intermittent						42			(f)
Michigan Wind 1						Huron Co., MI						46						51			(g)			Wind						Intermittent						35			(f)
Harvest 2						Huron Co., MI						33						51			(g)			Wind						Intermittent						30			(f)
Harvest						Huron Co., MI						31						51			(g)			Wind						Intermittent						26			(f)
Beebe 1B						Gratiot Co., MI						21						51			(g)			Wind						Intermittent						26			(f)
Blue Breezes						Faribault Co., MN						2												Wind						Intermittent						3
CP Windfarm						Faribault Co., MN						2						51			(g)			Wind						Intermittent						2			(f)
Southeast Chicago						Chicago, IL						8												Gas						Peaking						296			(h)
Clinton Battery Storage						Blanchester, OH						1												Energy Storage						Peaking						5
Total Midwest																																				11,892
Mid-Atlantic
Limerick						Sanatoga, PA						2												Uranium						Base-load						2,315
Calvert Cliffs						Lusby, MD						2												Uranium						Base-load						1,789
Peach Bottom						Delta, PA						2						50						Uranium						Base-load						1,324			(f)
Salem						Lower Alloways Creek Township, NJ						2						42.59						Uranium						Base-load						993			(f)
Conowingo						Darlington, MD						11												Hydroelectric						Base-load						572
Criterion						Oakland, MD						28						51			(g)			Wind						Intermittent						36			(f)

Station**(a)**						Location						No. of Units						Percent Owned**(b)**						Primary Fuel Type						Primary Dispatch Type**(c)**						Net Generation Capacity (MWs)****(d)
Fair Wind						Garrett County, MD						12												Wind						Intermittent						30
Fourmile Ridge						Garrett County, MD						16						51			(g)			Wind						Intermittent						20			(f)
Solar Horizons						Emmitsburg, MD						1						51			(g)			Solar						Intermittent						8			(f)
Solar New Jersey 3						Middle Township, NJ						5						51			(g)			Solar						Intermittent						1			(f)
Muddy Run						Drumore, PA						8												Hydroelectric						Intermediate						1,070
Eddystone 3, 4						Eddystone, PA						2												Oil/Gas						Peaking						760
Perryman						Aberdeen, MD						5												Oil/Gas						Peaking						404
Croydon						West Bristol, PA						8												Oil						Peaking						391
Handsome Lake						Kennerdell, PA						5												Gas						Peaking						268
Richmond						Philadelphia, PA						2												Oil						Peaking						98
Philadelphia Road						Baltimore, MD						4												Oil						Peaking						61
Eddystone						Eddystone, PA						4												Oil						Peaking						60
Delaware						Philadelphia, PA						4												Oil						Peaking						56
Southwark						Philadelphia, PA						4												Oil						Peaking						52
Falls						Morrisville, PA						3												Oil						Peaking						51
Moser						Lower Pottsgrove Twp., PA						3												Oil						Peaking						51
Chester						Chester, PA						3												Oil						Peaking						39
Schuylkill						Philadelphia, PA						2												Oil						Peaking						30
Salem						Lower Alloways Creek Township, NJ						1						42.59						Oil						Peaking						16			(f)
Total Mid-Atlantic																																				10,495
ERCOT
Whitetail						Webb County, TX						57						51			(g)			Wind						Intermittent						47			(f)
Sendero						Jim Hogg and Zapata County, TX						39						51			(g)			Wind						Intermittent						40			(f)
Colorado Bend II						Wharton, TX						3												Gas						Intermediate						1,143
Wolf Hollow II						Granbury, TX						3												Gas						Intermediate						1,115
Handley 3						Fort Worth, TX						1												Gas						Intermediate						395
Handley 4, 5						Fort Worth, TX						2												Gas						Peaking						870
Total ERCOT																																				3,610
New York
Nine Mile Point						Scriba, NY						2									(i)			Uranium						Base-load						1,675			(f)
FitzPatrick						Scriba, NY						1												Uranium						Base-load						842
Ginna						Ontario, NY						1												Uranium						Base-load						576
Total New York																																				3,093
Other
Antelope Valley						Lancaster, CA						1												Solar						Intermittent						242

Station**(a)**						Location						No. of Units						Percent Owned**(b)**						Primary Fuel Type						Primary Dispatch Type**(c)**						Net Generation Capacity (MWs)****(d)
Bluestem						Beaver County, OK						60						51			(g)(j)			Wind						Intermittent						101			(f)
Shooting Star						Kiowa County, KS						65						51			(g)			Wind						Intermittent						53			(f)
Sacramento PV Energy						Sacramento, CA						4						51			(g)			Solar						Intermittent						15			(f)
Bluegrass Ridge						King City, MO						27						51			(g)			Wind						Intermittent						29			(f)
Conception						Barnard, MO						24						51			(g)			Wind						Intermittent						26			(f)
Cow Branch						Rock Port, MO						24						51			(g)			Wind						Intermittent						26			(f)
Mountain Home						Glenns Ferry, ID						20						51			(g)			Wind						Intermittent						21			(f)
High Mesa						Elmore Co., ID						19						51			(g)			Wind						Intermittent						20			(f)
Echo 1						Echo, OR						21						50.49			(g)			Wind						Intermittent						17			(f)
Cassia						Buhl, ID						13						51			(g)			Wind						Intermittent						14			(f)
Wildcat						Lovington, NM						13						51			(g)			Wind						Intermittent						14			(f)
Echo 2						Echo, OR						9						51			(g)			Wind						Intermittent						9			(f)
Tuana Springs						Hagerman, ID						8						51			(g)			Wind						Intermittent						9			(f)
Greensburg						Greensburg, KS						10						51			(g)			Wind						Intermittent						6			(f)
Three Mile Canyon						Boardman, OR						6						51			(g)			Wind						Intermittent						5			(f)
Loess Hills						Rock Port, MO						4												Wind						Intermittent						5
Denver Airport Solar						Denver, CO						1						51			(g)			Solar						Intermittent						2			(f)
Mystic 8, 9						Charlestown, MA						6												Gas						Intermediate						1,413			(e)
Hillabee						Alexander City, AL						3												Gas						Intermediate						753
Wyman 4						Yarmouth, ME						1						5.9						Oil						Intermediate						34			(f)
West Medway II						West Medway, MA						2												Oil/Gas						Peaking						191
West Medway						West Medway, MA						3												Oil						Peaking						124
Grand Prairie						Alberta, Canada						1												Gas						Peaking						105
Framingham						Framingham, MA						3												Oil						Peaking						31
Total Other																																				3,265
Total																																				32,355

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(a)All nuclear stations are boiling water reactors except Braidwood, Byron, Calvert Cliffs, Ginna, and Salem, which are pressurized water reactors.

(b)100%, unless otherwise indicated.

(c)Base-load units are plants that normally operate to take all or part of the minimum continuous load of a system and, consequently, produce electricity at an essentially constant rate. Intermittent units are plants with output controlled by the natural variability of the energy resource rather than dispatched based on system requirements. Intermediate units are plants that normally operate to take load of a system during the daytime higher load hours and, consequently, produce electricity by cycling on and off daily. Peaking units consist of lower-efficiency, quick response steam units, gas turbines and diesels normally used during the maximum load periods.

(d)For nuclear stations, capacity reflects the annual mean rating. Natural gas and oil stations and wind and solar facilities reflect a summer rating.

(e)On August 9, 2020, we announced we would permanently cease generation operations at Byron and Dresden nuclear facilities in 2021 and Mystic Units 8 and 9 in 2024. On September 15, 2021, we reversed the previous decision to retire Byron and Dresden. See Note 7 — Early Plant Retirements of the Combined Notes to Consolidated Financial Statements for additional information.

(f)Net generation capacity is stated at proportionate ownership share.

(g)Reflects the prior sale of 49% of CRP to a third party. See Note 22 — Variable Interest Entities of the Combined Notes to Consolidated Financial Statements for additional information.

(h)We have deactivated the site and are evaluating for potential return of service or retirement beyond 2023.

(i)We wholly own Nine Mile Point Unit 1 and have an 82% undivided ownership interest in Nine Mile Point Unit 2.

(j)CRP owns 100% of the Class A membership interests and a tax equity investor owns 100% of the Class B membership interests of the entity that owns the Bluestem generating assets.

The net generation capability available for operation at any time may be less due to regulatory restrictions, transmission congestion, fuel restrictions, efficiency of cooling facilities, level of water supplies, or generating units being temporarily out of service for inspection, maintenance, refueling, repairs, or modifications required by regulatory authorities.

We also own EMT, which is a liquefied natural gas (LNG) import facility located on the Mystic River in Everett, MA. EMT connects to two interstate pipeline systems as well as a local gas utility's distribution system and the Mystic Generating Station.

We maintain property insurance against loss or damage to our principal plants and properties by fire or other perils, subject to certain exceptions. For additional information on insurance specific to our nuclear facilities, see Note 19 — Commitments and Contingencies of the Combined Notes to Consolidated Financial Statements. For our insured losses, we are self-insured to the extent that any losses are within the policy deductible or exceed the amount of insurance maintained. Any such losses could have a material adverse effect on our consolidated financial condition or results of operations.