Joe Dominguez: Yeah. I think just normal power sales, volatility and everything else, we factor into the sales of the power. We’ve talked about historic margins of $2 to $4 and we’ve been clear that we’re towards the top of that as this kind of market has reset itself. The sustainability offering is going to be considerably north of that because it’s a new product and provides new value to the customer. Beyond that, for competitive reasons, we haven’t really gone into the details of how big the margin is. And I think at the end of the day, pace is something that we’re yet to fully understand in terms of adoption. We’ve got 180 million megawatt hours of power. So we’ve got a lot of this to sell. It’s not all going to be deployed through CFE.
There’s going to be other things like hydrogen, hopefully, data centers that will take on the load. The customer piece of this is going to be a big part but policy is going to play a role as states and others think about how they want to procure carbon-free, time-matched energy. And at this point, I think we’re just — we’re hitting every opportunity and pushing everything, but it’s hard for me to sit here and say that we have enough data to talk about how quickly we’re going to be able to deploy all of it or a significant chunk of that 180 million megawatt hours. So it’s — I would say, it’s an incomplete at this point.
Steve Fleishman: Okay. Great. Thank you.
Joe Dominguez: Thanks, Steve.
Operator: One moment for our next question. Our next question comes from Shar Pourreza with Guggenheim Partners. Your line is open.
Joe Dominguez: Good morning, Shar.
Shar Pourreza: Good morning. The EBITDA obviously was raised again, but we didn’t get sort of that update on free cash flow guides or incremental buyback. Dan, I guess, can you maybe just provide some sort of an update why not move on incremental buybacks? I mean, we got past the key quarter. Is there any sense on — are you saving anything for dry powder, et cetera? Just maybe a little bit of an inkling would be great.
Dan Eggers: Yeah, Shar, we’ve had a $1 billion program in place. We’ve gotten through $750 million of it. And now with [indiscernible] kind of see us spend about $250 million a quarter thus far and so we still have some money to deploy. You could imagine we’ll be having conversations with the Board as far as our updated budget plan and how strong ’23, ’24 and the forwards look beyond that to inform kind of the next wave of capital allocation. Getting STP done was a great deployment of capital this year and kind of looks better by the day with ERCOT prices having moved as they have. Then we want to keep looking for opportunities like that and other things along that way to deploy meaningful amounts of capital if they come available.
So we do want to keep dry powder, but we certainly understand that as we get this program worked down, we’ve got a lot of capital still around and getting it back to our owners has always been a priority. We can’t find investments that exceed that double-digit unleveraged return.
Shar Pourreza: Got it. And then another quarter of obviously outsized marketing portfolio gains, right? I mean, can we just maybe unpack that $760 million year-over-year gain a little more? I guess, what percentage is durable margin expansion versus maybe opportunistic trading or more one-timey items like ERCOT sparks? Thanks.
Dan Eggers: Yeah. I mean, I think it’s probably hard to dismantle that as much as you would like to have, to be totally honest. If you think about how we run the portfolio, the Commercial business becomes responsible for managing our generation business once we get in the [Technical Difficulty] So working with the team on dispatch, how we set up positions will change. It’s kind of hard to say who is a generation dollar or commercial dollar at some point in time the way you’re thinking about it. But obviously, the Texas plants running as well as they did this summer with prices where they were, we have outpaced our production expectations. So there was some real contribution we got in the quarter or really in the year from ERCOT.
So that’s going to be a piece of it. But a piece of it is the fact that margins have been quite strong, right? I think part of that is we’ve seen outsized margins. We talked about the load auctions, right? And we’ve seen in the first half of this year what I fairly say is unprecedented margins in that business. And so that’s been great. We would expect that in normal courses, those moderate in time. And we’re seeing a bit of that, right? So there’s some that was going to be situational to this year. On the kind of the C&I markets and the mass markets, we’ve seen very good margins this year that are going to sit in the book for this year and next year and carrying into ’25. But as I said to David earlier, we expect some moderation in those margins as we think about what has not yet been committed or was not in our pockets at this point in time.
And then the last part, I’m not going to fully get into, but we have had — with volatility, there’s been opportunities to maximize our portfolio in the physical markets. And we’ve done well on that front again this year to our size, probably this year and last year.
Shar Pourreza: Got it. And then lastly, again, for me, I know you realize you guys are still working through your capital planning before the next role. But there have been a lot of recent data points around upgrades for — in light of like the IRA, especially for BWRs. Can you just get your updated thoughts here on sort of maybe the quantum of opportunity and potential timing there? Thanks.
Joe Dominguez: Shar, I think we’ve basically said that we think the total universe is less than 1,000, actionable somewhere between 500 and 1,000 megawatts that make a lot of economic sense. Bryan and his team have pretty much at this point, identified every opportunity we see. We’re re-costing those. I think they’ll roll into the fleet by the end of this decade and some of them will drag out even a little bit longer. But we’ll announce those as we complete the work and start ordering the parts for them. But we see opportunities certainly beyond that, which we’ve already announced. We just — we don’t have an update on that. But this is one of those where the duck looks calm on the surface, but there’s a lot of paddling underneath in Bryan’s organization, and we’ll continue to work those opportunities. We think they’re pretty good opportunities, spectacular results.
