Exelon Reports Fourth Quarter And Full Year 2019 Results And Initiates 2020 Financial Outlook

Exelon's GAAP Net Income for the fourth quarter of 2019 increased to $0.79 per share from $0.16 per share in the fourth quarter of 2018. Adjusted (non-GAAP) Operating Earnings increased to $0.83 per share in the fourth quarter of 2019 from $0.58 per share in the fourth quarter of 2018
Exelon introduces 2020 adjusted (non-GAAP) operating earnings guidance range of $3.00-$3.30 per share, reflecting growth in Utilities, offset by lower realized energy and capacity revenues
Exelon Utilities project capital expenditures of $26 billion over the next four years to benefit its customers, supporting 7.3% annual rate base growth
All four utilities ended the year with their best performance ever on customer satisfaction
ComEd had its best performance ever in SAIFI and CAIDI, performing in the top decile for both
Generation’s nuclear fleet capacity factor of 95.7% was the company's highest ever (owned and operated units)

CHICAGO — Exelon Corporation (Nasdaq: EXC) today reported its financial results for the fourth quarter and full year 2019.

“Each of our utilities achieved record-high customer satisfaction in 2019 as we continued to invest in infrastructure to increase reliability and prepare the grid to accommodate more renewable energy, electric vehicles and other technology necessary to meet the challenge of climate change,” said Christopher M. Crane, president and CEO of Exelon. “Our nuclear fleet achieved its highest capacity factor in company history, and our total generation output accounted for about 12 percent of all the carbon-free energy produced in the U.S., avoiding nearly 81 million metric tons of greenhouse gas emissions. We continued to support the communities we serve last year by volunteering a record-breaking 251,000 hours and donating nearly $52 million to nonprofits.”

“We reported another strong year, with full-year adjusted (non-GAAP) earnings of $3.22 per share coming in above our revised guidance of $3.05 to $3.20 per share,” said Joseph Nigro, senior executive vice president and CFO, Exelon. “Last year we invested $5.5 billion in capital at the utilities - or about $150 million more than originally planned - to modernize the electric grid, and we are on track to invest an additional $6.5 billion in the year ahead as we work to provide our customers with more reliable service and help our states meet their environmental goals. With these investments and our continuing focus on reducing costs, we are providing 2020 adjusted (non-GAAP) earnings guidance of $3.00 to $3.30 per share.”

Fourth Quarter 2019

Exelon's GAAP Net Income for the fourth quarter of 2019 increased to $0.79 per share from $0.16 per share in the fourth quarter of 2018. Adjusted (non-GAAP) Operating Earnings increased to $0.83 per share in the fourth quarter of 2019 from $0.58 per share in the fourth quarter of 2018. For the reconciliations of GAAP Net Income to Adjusted (non-GAAP) Operating Earnings, refer to the tables beginning on page 6.

Adjusted (non-GAAP) Operating Earnings in the fourth quarter of 2019 primarily reflect:

Higher utility earnings due to regulatory rate increases at PECO, BGE and PHI; and
Higher Generation earnings due to higher realized energy prices, decreased nuclear outage days, lower operating and maintenance expense and research and development income tax benefits, partially offset by lower capacity prices.

Full Year 2019

Exelon's GAAP Net Income increased to $3.01 per share from $2.07 per share in 2018. Exelon's Adjusted (non-GAAP) Operating Earnings for 2019 increased to $3.22 per share from $3.12 per share in 2018.

Adjusted (non-GAAP) Operating Earnings for the full year 2019 primarily reflect:

Higher utility earnings due to regulatory rate increases at PECO, BGE and PHI and higher electric distribution, transmission and energy efficiency earnings at ComEd; partially offset by,
Lower Generation earnings due to lower realized energy and capacity prices, partially offset by lower operating and maintenance expense, decreased nuclear outage days and research and development income tax benefits.

Operating Company Results¹

ComEd

ComEd's fourth quarter of 2019 GAAP Net Income and Adjusted (non-GAAP) Operating Earnings remained relatively consistent with the fourth quarter of 2018. Due to revenue decoupling, ComEd's distribution earnings are not affected by actual weather or customer usage patterns.

PECO

PECO’s fourth quarter of 2019 GAAP Net Income and Adjusted (non-GAAP) Operating Earnings remained relatively consistent with the fourth quarter of 2018. The favorable impacts of regulatory rate increases were offset by unfavorable weather conditions and volume and higher storm costs.

BGE

BGE’s fourth quarter of 2019 GAAP Net Income increased to $99 million from $71 million in the fourth quarter of 2018. BGE’s Adjusted (non-GAAP) Operating Earnings for the fourth quarter of 2019 increased to $101 million from $72 million in the fourth quarter of 2018, primarily due to regulatory rate increases. Due to revenue decoupling, BGE's distribution earnings are not affected by actual weather or customer usage patterns.

PHI

PHI’s fourth quarter of 2019 GAAP Net Income and Adjusted (non-GAAP) Operating Earnings remained relatively consistent with the fourth quarter of 2018. The favorable impacts of regulatory rate increases were offset by an increase in various expenses. Due to revenue decoupling, PHI's distribution earnings related to Pepco Maryland, DPL Maryland and Pepco District of Columbia are not affected by actual weather or customer usage patterns.

Generation

Generation had GAAP Net Income of $397 million in the fourth quarter of 2019 compared with a GAAP Net Loss of $178 million in the fourth quarter of 2018. Generation’s Adjusted (non-GAAP) Operating Earnings for the fourth quarter of 2019 increased to $427 million from $221 million in the fourth quarter of 2018, primarily reflecting higher realized energy prices, decreased nuclear outage days, lower operating and maintenance expense and research and development income tax benefits, partially offset by lower capacity prices.

The proportion of expected generation hedged for the Mid-Atlantic, Midwest, New York and ERCOT reportable segments as of Dec. 31, 2019, was 91.0% to 94.0% for 2020 and 61.0% to 64.0% for 2021.

_{1 Exelon’s five business units include ComEd, which consists of electricity transmission and distribution operations in northern Illinois; PECO, which consists of electricity transmission and distribution operations and retail natural gas distribution operations in southeastern Pennsylvania; BGE, which consists of electricity transmission and distribution operations and retail natural gas distribution operations in central Maryland; PHI, which consists of electricity transmission and distribution operations in the District of Columbia and portions of Maryland, Delaware, and New Jersey and retail natural gas distribution operations in northern Delaware; and Generation, which consists of owned and contracted electric generating facilities and wholesale and retail customer supply of electric and natural gas products and services, including renewable energy products and risk management services.}

Initiates Annual Guidance for 2020

Exelon introduced a guidance range for 2020 Adjusted (non-GAAP) Operating Earnings of $3.00-$3.30 per share. The outlook for 2020 Adjusted (non-GAAP) Operating Earnings for Exelon and its subsidiaries excludes the following items:

Mark-to-market adjustments from economic hedging activities;
Unrealized gains and losses from NDT funds to the extent not offset by contractual accounting as described in the notes to the consolidated financial statements;
Certain costs related to plant retirements;
Certain costs incurred to achieve cost management program savings;
Other items not directly related to the ongoing operations of the business; and
Generation's noncontrolling interest related to exclusion items

Recent Developments and Fourth Quarter Highlights

ComEd Distribution Formula Rate: On Dec. 4, 2019, the Illinois Commerce Commission issued an order approving ComEd’s 2019 annual distribution formula rate update. The final order resulted in a $17 million decrease to the revenue requirement, reflecting a $51 million increase for the initial revenue requirement for 2019 and a $68 million decrease related to the annual reconciliation for 2018. The decrease was set using an allowed return on rate base of 6.51% for the initial revenue requirement and the annual reconciliation, inclusive of an allowed ROE of 8.91%. The rates were effective on Jan. 1, 2020.
PECO Transmission Formula Rate: On Dec. 5, 2019, the Federal Energy Regulatory Commission (FERC) issued an order approving a settlement agreement related to PECO’s May 2017 request to implement a formula rate. The settlement agreement provided for an increase of $14 million with a return on base of 7.62% compared with PECO's initial formula rate filing and allows for an ROE of 10.35%, inclusive of a 50 basis point adder for being a member of a Regional Transmission Organization.
PECO Transmission Formula Rate: On Dec. 5, 2019, the Federal Energy Regulatory Commission (FERC) issued an order approving a settlement agreement related to PECO’s May 2017 request to implement a formula rate. The settlement agreement provided for an increase of $14 million with a return on base of 7.62% compared with PECO's initial formula rate filing and allows for an ROE of 10.35%, inclusive of a 50 basis point adder for being a member of a Regional Transmission Organization.
BGE Maryland Natural Gas and Electric Distribution Base Rate Case: On Dec. 17, 2019, the Maryland Public Service Commission (MDPSC) issued an order approving a settlement under which BGE’s annual electric and natural gas distribution revenues were increased by $18 million and $45 million, respectively. The rates were effective on Dec. 17, 2019. Under the settlement, the ROEs for purposes of calculating the Allowance for Funds Used During Construction and all authorized surcharges and regulatory asset carrying costs shall be 9.70% for electric and 9.75% for gas.
DPL Maryland Electric Distribution Rate Case: On Dec. 5, 2019, DPL filed an application with the MDPSC to increase its annual electric distribution rates by $19 million, reflecting a requested ROE of 10.3%. DPL currently expects a decision in the third quarter of 2020 but cannot predict if the MDPSC will approve the application as filed.
FERC Order on the PJM MOPR: On Dec. 19, 2019, FERC issued an order directing PJM Interconnection, LLC (PJM) to extend the Minimum Offer Price Rule (MOPR) to include new and existing resources, including nuclear, that receive state subsidies, effective as of PJM’s next capacity auction. Unless Illinois and New Jersey can implement a Fixed Resource Requirement (FRR) program in their PJM zones, the MOPR will apply to Generation's nuclear plants in those states receiving ZEC benefits, resulting in higher offers for those units that may not clear the capacity market. On Jan. 21, 2020, Exelon, PJM and a number of other entities submitted individual requests for rehearing. Exelon is currently working with PJM and other stakeholders to pursue the FRR option but cannot predict whether the legislative and regulatory changes can be implemented prior to the next capacity auction in PJM. If Generation’s state-supported nuclear plants in PJM or NYISO are subjected to the MOPR without compensation under an FRR or similar program, it could have a material adverse impact on Exelon's and Generation's financial statements.
CENG Put Option: On Nov. 20, 2019, Generation received notice of EDF’s intention to exercise the put option to sell its 49.99% equity interest in CENG to Generation and the put automatically exercised on Jan. 19, 2020 at the end of the sixty-day advance notice period. Under the terms of the Put Option, the purchase price is to be determined by agreement of the parties, or absent such agreement, by a third-party arbitration process. Any resulting sale would be subject to the approval of the New York Public Service Commission, FERC and the Nuclear Regulatory Commission. The process and regulatory approvals could take one to two years or more to complete.
Nuclear Operations: Generation’s nuclear fleet, including its owned output from the Salem Generating Station and 100% of the CENG units, produced 44,647 gigawatt-hours (GWhs) in the fourth quarter of 2019, compared with 45,809 GWhs in the fourth quarter of 2018. Excluding Salem, the Exelon-operated nuclear plants at ownership achieved a 95.0% capacity factor for the fourth quarter of 2019, compared with 95.1% for the fourth quarter of 2018. Excluding Salem, the number of planned refueling outage days in the fourth quarter of 2019 totaled 64, compared with 76 in the fourth quarter of 2018. There were eight non-refueling outage days in the fourth quarter of 2019, compared with 18 in 2018 in the fourth quarter of 2018.
Fossil and Renewables Operations: The Dispatch Match rate for Generation’s gas and hydro fleet was 98.6% in the fourth quarter of 2019, compared with 99.3% in the fourth quarter of 2018.

Energy Capture for the wind and solar fleet was 96.2% in the fourth quarter of 2019, compared with 97.0% in the fourth quarter of 2018.
Financing Activities:

On Nov. 12, 2019, ComEd issued $300 million of its First Mortgage Bonds, 3.20% Series due Nov. 15, 2049. ComEd used the proceeds to repay a portion of outstanding commercial paper obligations and for general corporate purposes.
On Dec. 12, 2019, DPL issued $75 million of its First Mortgage Bonds, 4.14% Series due Dec. 12, 2049. DPL used the proceeds to repay existing indebtedness and for general corporate purposes.

GAAP/Adjusted (non-GAAP) Operating Earnings Reconciliations

Adjusted (non-GAAP) Operating Earnings for the fourth quarter of 2019 do not include the following items (after tax) that were included in reported GAAP Net Income:

(in millions)	Exelon Earnings per Diluted Share	Exelon	ComEd	PECO	BGE	PHI	Generation
2019 GAAP Net Income (Loss)	$0.79	$773	$144	$118	$99	$65	$397
Mark-to-Market Impact of Economic Hedging Activities (net of taxes of $35 and $32, respectively)	0.10	101	—	—	—	—	95
Unrealized Gains Related to Nuclear Decommissioning Trust (NDT) Funds (net of taxes of $102)	(0.12)	(119)	—	—	—	—	(119)
Asset Impairments (net of taxes of $1)	—	4	—	—	—	—	4
Plant Retirements and Divestitures (net of taxes of $1)	—	3	—	—	—	—	3
Cost Management Program (net of taxes of $6, $0, $0, $1 and $4, respectively)	0.02	21	—	1	2	3	13
Change in Environmental Liabilities (net of taxes of $1)	—	4	—	—	—	—	4
Income Tax-Related Adjustments (entire amount represents tax expense)	(0.01)	(8)	—	—	—	—	(2)
Noncontrolling Interests (net of taxes of $8)	0.03	33	—	—	—	—	33
2019 Adjusted (non-GAAP) Operating Earnings	$0.83	$810	$144	$119	$101	$68	$427

Adjusted (non-GAAP) Operating Earnings for the fourth quarter of 2018 do not include the following items (after tax) that were included in reported GAAP Net Income:

(in millions)	Exelon Earnings per Diluted Share	Exelon	ComEd	PECO	BGE	PHI	Generation
2018 GAAP Net Income	$0.16	$152	$141	$124	$71	$62	$(178)
Mark-to-Market Impact of Economic Hedging Activities (net of taxes of $63 and $61, respectively)	0.19	178	—	—	—	—	176
Unrealized Losses Related to NDT Funds (net of taxes of $172)	0.25	243	—	—	—	—	243
Merger Commitments (net of taxes of $0 and $1, respectively)	—	—	—	—	—	4

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