Earnings Release Highlights
- GAAP Net Income of $0.76 per share and Adjusted (non-GAAP) Operating Earnings of $0.88 per share for the third quarter of 2018
- Raising the lower end of our guidance range for full year 2018 Adjusted (non-GAAP) Operating Earnings from $2.90 - $3.20 per share to $3.05 - $3.20 per share
- Announcing additional annual cost savings of $200 million gross, and $150 million net, reflecting ongoing initiatives leveraging process efficiency and technology; full run-rate savings to be achieved in 2021
- All Exelon Utilities achieved top quartile reliability performance in outage frequency and outage duration
- PECO, along with interested parties, filed a partial settlement agreement for its distribution rate case on Aug. 28, 2018
CHICAGO — Exelon Corporation (NYSE: EXC) today reported its financial results for the third quarter of 2018.
“Exelon had a strong third quarter as our utility and power businesses reported earnings at the upper end of our guidance range. Our strategy to invest in advanced technology and infrastructure continues to drive improved customer satisfaction across our utilities, and has allowed ComEd to complete its $920 million smart meter installation program three years ahead of its original schedule,” said Christopher M. Crane, Exelon’s President and CEO. “At the utilities, we continue to make progress with solid earned ROEs and strong key customer satisfaction and operating metrics. On the generation front, the Federal Circuit Courts in Illinois and New York strongly affirmed the legality of the ZEC programs, which will help preserve these states’ emissions-free nuclear power plants and the economic and environmental benefits they provide. Coupled with our pledge to join the Human Rights Campaign’s Business Coalition in support of passing the Equality Act and the successful completion of our first round of HeForShe STEM Innovation Leadership Academies, we are delivering on our commitment to be a positive force in our communities.”
“In the third quarter of 2018, Exelon also delivered financially with Adjusted (non-GAAP) operating earnings of $0.88 per share, which is near the top of our guidance range,” said Joseph Nigro, Exelon’s Senior Executive Vice President and CFO. “Exelon is raising the lower end of the full-year 2018 guidance from $2.90 - $3.20 to $3.05 - $3.20 per share as a result of the operational results across our family of businesses. As part of our ongoing efforts to improve operations, we are announcing another $200 million of annual cost savings by 2021. Together with previously announced cost savings, Exelon has identified total savings of over $900 million since 2015.”
Third Quarter 2018
Exelon's GAAP Net Income for the third quarter of 2018 decreased to $0.76 per share from $0.85 per share in the third quarter of 2017. Adjusted (non-GAAP) Operating Earnings increased to $0.88 per share in the third quarter of 2018 from $0.85 per share in the third quarter of 2017. 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 third quarter of 2018 primarily reflect higher electric distribution and energy efficiency earnings at ComEd, regulatory rate increases at PHI, favorable weather conditions at PECO and PHI, increased capacity prices, the favorable impacts of the Illinois Zero Emission Standard (ZES) and tax savings related to the Tax Cuts & Jobs Act (TCJA) at Generation, partially offset by the absence of ExGen Texas Power, LLC (EGTP) earnings resulting from its deconsolidation in the fourth quarter of 2017, lower realized energy prices and increased nuclear outage days at Generation.
Operating Company Results1
ComEd
ComEd's third quarter of 2018 GAAP Net Income increased to $193 million from $189 million in the third quarter of 2017. ComEd’s Adjusted (non-GAAP) Operating Earnings increased to $193 million for the third quarter of 2018 from $186 million in the third quarter of 2017, primarily reflecting higher electric distribution and energy efficiency earnings. Due to revenue decoupling, ComEd's distribution earnings are not affected by actual weather or customer usage patterns.
PECO
PECO’s third quarter of 2018 GAAP Net Income increased to $126 million from $112 million in the third quarter of 2017. PECO’s Adjusted (non-GAAP) Operating Earnings for the third quarter of 2018 increased to $127 million from $114 million in the third quarter of 2017, primarily due to favorable weather conditions and volumes.
Cooling degree days were up 13.7 percent relative to the same period in 2017 and were 12.5 percent above normal. Total retail electric deliveries were up 7.8 percent compared with the third quarter of 2017. Natural gas deliveries (including both retail and transportation segments) in the third quarter of 2018 were down 1.0 percent compared with the same period in 2017.
BGE
BGE’s third quarter of 2018 GAAP Net Income increased to $63 million from $62 million in the third quarter of 2017. BGE’s Adjusted (non-GAAP) Operating Earnings for the third quarter of 2018 remained consistent at $64 million compared with the third quarter of 2017. Due to revenue decoupling, BGE's distribution earnings are not affected by actual weather or customer usage patterns.
1Exelon’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.
PHI
PHI’s third quarter of 2018 GAAP Net Income increased to $187 million from $153 million in the third quarter of 2017. PHI’s Adjusted (non-GAAP) Operating Earnings for the third quarter of 2018 increased to $195 million from $146 million in the third quarter of 2017, primarily reflecting regulatory rate increases and favorable weather conditions and volumes in Delaware and New Jersey. 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's third quarter of 2018 GAAP Net Income decreased to $234 million from $304 million in the third quarter of 2017. Generation’s Adjusted (non-GAAP) Operating Earnings for the third quarter of 2018 decreased to $318 million from $346 million in the third quarter of 2017, primarily reflecting the absence of EGTP earnings resulting from its deconsolidation in the fourth quarter 2017, lower realized energy prices and increased nuclear outage days, partially offset by, the favorable impacts of the Illinois ZES, increased capacity prices and tax savings related to the TCJA.
The proportion of expected generation hedged as of Sept. 30, 2018, was 98 percent to 101 percent for 2018, 82 percent to 85 percent for 2019 and 48 percent to 51 percent for 2020.
Third Quarter and Recent Highlights
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Cost Management Program: In Nov. 2018, Exelon announced the elimination of approximately $200 million in annual ongoing costs, through initiatives primarily at Generation and BSC, by 2021. Approximately $150 million is expected to be related to Generation, with the remaining amount related to the Utility Registrants. This announcement is a result of Exelon’s continuous focus on improving its cost profile through enhanced efficiency and productivity. The targeted cost savings are incremental to the expected savings from previous cost management initiatives.
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Illinois and New York ZEC Programs: In Sept. 2018, the U.S. Court of Appeals for the Seventh Circuit and the Second Circuit affirmed dismissal of the complaints against Illinois’ and New York’s Zero Emissions Credit (ZEC) programs, respectively, which will allow them to continue supporting the clean, resilient electricity that nuclear power provides to each state’s residents. On Sept. 27, 2018, the plaintiffs filed a request for a panel rehearing with the U.S. Circuit Court of Appeals for the Seventh Circuit. On Oct. 9, 2018, the U.S. Circuit Court of Appeals for the Seventh Circuit panel denied the request for rehearing.
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PECO Electric Distribution Base Rate Case: On Aug. 28, 2018, PECO and interested parties filed with the Pennsylvania Public Utility Commission (PAPUC) a petition for partial settlement for an increase of $25 million in annual electric distribution service revenues, which includes annual ongoing TCJA tax savings. No overall ROE was specified in the partial settlement. The requested ROE was 10.95 percent in the filing with the PAPUC on March 29, 2018. On Oct. 18, 2018, the Administrative Law Judges issued a Recommended Decision to the PAPUC that the partial settlement be approved without modification. A final ruling from the PAPUC is expected before Dec. 31, 2018, and if approved, the new electric distribution base rates will become effective on Jan. 1, 2019.
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Pepco District of Columbia Electric Distribution Base Rate Case: On Aug. 9, 2018, the District of Columbia Public Service Commission approved a settlement agreement with an effective date of Aug. 13, 2018 that provides for a net decrease to Pepco's annual electric distribution rates of $24 million, which includes annual ongoing TCJA tax savings, and reflects a ROE of 9.525 percent. On Sept. 7, 2018, Pepco submitted an updated filing for a one-time bill credit to customers of approximately $20 million, and an increase of $4 million to the customer base rate credit established in connection with the merger between Exelon and PHI for residential customers, representing the TCJA benefits for the period Jan. 1, 2018 through Aug. 12, 2018. Following the expiration of the comment period with no objections filed, Pepco issued the $20 million to customers in Sept. 2018.
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DPL Delaware Electric Distribution Base Rate Case: On Aug. 21, 2018, the Delaware Public Service Commission (DPSC) approved the settlement agreement, which provides for a net decrease to annual electric distribution base rates of $7 million, which includes annual ongoing TCJA tax savings, and reflects a ROE of 9.7 percent. In addition, the settlement agreement separately provides for a one-time bill credit to customers of approximately $3 million representing the TCJA benefits for the period Feb. 1, 2018 through March 17, 2018, when full interim rates were put into effect. DPL expects to issue the $3 million to customers in the fourth quarter of 2018.
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DPL Delaware Gas Distribution Base Rate Case: On Sept. 7, 2018 (as amended and restated on Oct. 2, 2018), DPL entered into a partial settlement agreement with several parties in its pending gas distribution base rate case proceeding that provides for a net decrease to annual gas distribution base rates of $4 million, which includes annual ongoing TCJA tax savings, and reflects a ROE of 9.7 percent. In addition, the settlement agreement separately provides a one-time bill credit to customers of approximately $1 million representing the TCJA tax savings for the period Feb. 1, 2018 through March 17, 2018, when full interim rates were put into effect. DPL expects a decision on the settlement agreement in the fourth quarter of 2018 but cannot predict if the DPSC will approve the settlement agreement as filed.
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ACE New Jersey Electric Distribution Base Rate Case: On Aug. 21, 2018, ACE refiled its application with the New Jersey Board of Public Utilities (NJBPU), requesting an increase to its electric distribution rates of $109 million (before New Jersey sales and use tax), reflecting a requested ROE of 10.1 percent. Included in the $109 million request is $40 million of higher depreciation expense related to ACE's updated depreciation study. ACE currently expects a decision in this matter in the third quarter of 2019 but cannot predict if the NJBPU will approve the application as filed.
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Acquisition of Distrigas Liquefied Natural Gas Terminal: On Oct. 1, 2018, Generation acquired the Distrigas liquefied natural gas import terminal to ensure the continued reliable supply of fuel to Mystic Units 8 and 9 while they remain operating.
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Nuclear Operations: Generation’s nuclear fleet, including its owned output from the Salem Generating Station and 100 percent of the CENG units, produced 46,549 gigawatt-hours (GWhs) in the third quarter of 2018, compared with 47,747 GWhs in the third quarter of 2017. Excluding Salem, the Exelon-operated nuclear plants at ownership achieved a 93.6 percent capacity factor for the third quarter of 2018, compared with 96.1 percent for the third quarter of 2017. The number of planned refueling outage days in the third quarter of 2018 totaled 36, compared with 13 in the third quarter of 2017. There were 12 non-refueling outage days in the third quarter of 2018, compared with 15 in the third quarter of 2017.
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Fossil and Renewables Operations: The Dispatch Match rate for Generation’s gas and hydro fleet was 95.8 percent in the third quarter of 2018, compared with 98.4 percent in the third quarter of 2017. The lower performance was primarily due to outages at combined cycle gas units in Alabama and Texas.
Energy Capture for the wind and solar fleet was 95.7 percent in the third quarter of 2018, compared with 95.9 percent in the third quarter of 2017.
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Financing Activities:
- On Aug. 14, 2018, ComEd issued $550 million aggregate principal amount of its First Mortgage Bonds, 3.70 percent Series 125, due Aug. 15, 2028. ComEd used the proceeds to repay a portion of its outstanding commercial paper obligations and for general corporate purposes.
- On Sept. 11, 2018, PECO issued $325 million aggregate principal amount of its First and Refunding Mortgage Bonds, 3.90 percent due March 1, 2048. PECO used the proceeds to satisfy short-term borrowings from the Exelon intercompany money pool and for general corporate purposes.
- On Sept. 20, 2018, BGE issued $300 million aggregate principal amount of its 4.25 percent senior notes due Sept. 15, 2048. BGE used the proceeds to repay commercial paper obligations and for general corporate purposes.
- On Oct. 16, 2018, ACE issued $350 million aggregate principal amount of its First Mortgage Bonds, 4.00 percent due Oct. 15, 2028. ACE will use the proceeds to refinance its maturing 7.75 percent First Mortgage Bonds, repay outstanding commercial paper and for general corporate purposes.
GAAP/Adjusted (non-GAAP) Operating Earnings Reconciliation
Adjusted (non-GAAP) Operating Earnings for the third 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
|
$0.76
|
$733
|
$193
|
$126
|
$63
|
$187
|
$234
|
Mark-to-Market Impact of Economic Hedging Activities (net of taxes of $20 and $22)
|
(0.06)
|
(55)
|
—
|
—
|
—
|
—
|
(65)
|
Unrealized Gains Related to Nuclear Decommissioning Trust (NDT) Fund Investments (net of taxes of $4)
|
(0.06)
|
(53)
|
—
|
—
|
—
|
—
|
(53)
|
Long-Lived Asset Impairments (net of taxes of $2)
|
0.01
|
6
|
—
|
—
|
—
|
—
|
6
|
Plant Retirements and Divestitures (net of taxes of $70 and $68)
|
0.21
|
202
|
—
|
— |
—
|
—
|
204
|
Cost Management Program (net of taxes of $4, $0, $0, $1 and $3, respectively)
|
0.01
|
13
|
—
|
1
|
1
|
1
|
10
|
Asset Retirement Obligation (net of taxes of $6)
|
0.02
|
16
|
—
|
—
|
—
|
16
|
—
|
Change in Environmental Liabilities (net of taxes of $3)
|
(0.01)
|
(9)
|
—
|
—
|
—
|
—
|
(9)
|
Reassessment of Deferred Income Taxes (entire amount represents tax expense)
|
(0.02)
|
(18)
|
—
|
—
|
—
|
(9)
|
(30)
|
Noncontrolling Interests (net of taxes of $4)
|
0.02
|
21
|
—
|
—
|
—
|
—
|
21
|
2018 Adjusted (non-GAAP) Operating Earnings
|
$0.88
|
$856
|
$193
|
$127
|
$64
|
$195
|
$318
|
Adjusted (non-GAAP) Operating Earnings for the third quarter of 2017 do not include the following items (after tax) that were included in reported GAAP Net Income:
Dec 12, 2024
