Exelon Reports Second Quarter 2020 Results

Earnings Release Highlights

GAAP Net Income of $0.53 per share and Adjusted (non-GAAP) Operating Earnings of $0.55 per share for the second quarter of 2020
Reaffirming full year 2020 adjusted (non-GAAP) operating earnings guidance of $2.80-$3.10 per share
Strong utility reliability and customer operations performance - every utility achieved top quartile in outage frequency & duration, customer satisfaction, abandon rate, and gas odor response
Generation’s nuclear fleet capacity factor of 95.4% was the highest Q2 value in over a decade
First Multi-Year Plan rate filing in Maryland was filed by BGE in May; filing proposes flat rates through 2022
The annual Benchmarking Air Emissions report published in July showed that Exelon continues to have the lowest carbon intensity among major electricity producers in the United States with an intensity that is 90 percent lower than the industry average.
Exelon Utilities announced that by 2025, 30 percent of vehicle fleets will be electrified. By 2030, that number will increase to 50 percent.

CHICAGO — Exelon Corporation (Nasdaq: EXC) today reported its financial results for the second quarter of 2020.

“From a financial and operational standpoint, we finished the quarter strong, with each of our utilities maintaining high reliability in the face of a particularly active storm season and our nuclear fleet delivering its highest capacity factor in a decade,” said Christopher M. Crane, president and CEO of Exelon. “We also reached an agreement with the U.S. Attorney’s Office to resolve its investigation into ComEd’s past lobbying practices in Illinois. The conduct cited in the agreement did not live up to our values, and we took immediate action to identify deficiencies and implement new policies to ensure it won’t happen again. As we go forward, our employees remain focused on doing their essential work safely during this pandemic, and serving our customers and communities with the highest standards of ethics, integrity and performance.”

“Accelerated cost savings at Exelon Generation helped offset the impact of damaging storms that affected utility earnings in the mid-Atlantic, resulting in solid adjusted (non-GAAP) earnings of $0.55 per share, which exceeded our guidance range of $0.35 to $0.45 per share,” said Joseph Nigro, senior executive vice president and CFO of Exelon. “Despite challenges caused by the pandemic, we continue to move forward with capital projects at our utilities, investing $1.5 billion during the second quarter to improve infrastructure, increase reliability and deliver better service to customers.”

Second Quarter 2020

Exelon's GAAP Net Income for the second quarter of 2020 increased to $0.53 per share from $0.50 per share in the second quarter of 2019. Adjusted (non-GAAP) Operating Earnings for the second quarter of 2020 decreased to $0.55 per share from $0.60 per share in the second quarter of 2019. For the reconciliations of GAAP Net Income to Adjusted (non-GAAP) Operating Earnings, refer to the tables beginning on page 5.

Adjusted (non-GAAP) Operating Earnings in the second quarter of 2020 primarily reflect:

Lower utility earnings primarily due to higher storm costs at PECO related to the June 2020 storms, higher credit loss expense at PECO and PHI that includes the impact of COVID-19, and distribution formula rate timing at ComEd, partially offset by favorable weather conditions at PECO; and
Higher Generation earnings due to lower operating and maintenance expense, partially offset by lower capacity revenues and reduction in load due to COVID-19.

Operating Company Results¹

ComEd

ComEd had a GAAP Net Loss of $61 million in the second quarter of 2020 compared with GAAP Net Income of $186 million in the second quarter of 2019. ComEd's Adjusted (non-GAAP) Operating Earnings for the second quarter of 2020 decreased to $150 million from $186 million in the second quarter of 2019, primarily due to distribution formula rate timing. Due to revenue decoupling, ComEd's distribution earnings are not affected by actual weather or customer usage patterns.

PECO

PECO’s second quarter of 2020 GAAP Net Income decreased to $39 million from $102 million in the second quarter of 2019. PECO’s Adjusted (non-GAAP) Operating Earnings for the second quarter of 2020 decreased to $44 million from $103 million in the second quarter of 2019, primarily due to increased storm costs related to the June 2020 storms and credit loss expense that includes the impacts of COVID-19, partially offset by favorable weather conditions.

BGE

BGE’s second quarter of 2020 GAAP Net Income and Adjusted (non-GAAP) Operating Earnings remained relatively consistent with the second quarter of 2019. Due to revenue decoupling, BGE's distribution earnings are not affected by actual weather or customer usage patterns.

PHI

PHI’s second quarter of 2020 GAAP Net Income decreased to $94 million from $106 million in the second quarter of 2019. PHI’s Adjusted (non-GAAP) Operating Earnings for the second quarter of 2020 decreased to $98 million from $107 million in the second quarter of 2019, primarily due to credit loss expense that includes the impacts of COVID-19. 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 second quarter of 2020 GAAP Net Income increased to $476 million from $108 million in the second quarter of 2019. Generation’s Adjusted (non-GAAP) Operating Earnings for the second quarter of 2020 increased to $252 million from $202 million in the second quarter of 2019, primarily due to lower operating and maintenance expense, partially offset by lower capacity revenues and reduction in load due to COVID-19.

As of June 30, 2020, the percentage of expected generation hedged is 98%-101% and 76%-79% for 2020 and 2021, respectively.

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.}

Recent Developments and Second Quarter Highlights

COVID-19: Exelon continues to monitor developments related to the global outbreak (pandemic) of the 2019 novel coronavirus (COVID-19) pandemic and has taken proactive measures to protect the health and safety of employees, contractors and customers. As a provider of critical resources, Exelon has robust plans and contingencies in place to ensure business and operational continuity across a wide range of potentially disruptive events, including extensive preparedness for major public health crises. Exelon and its operating companies are working in close coordination with designated state and local emergency preparedness and health officials, and at the federal level through the Electric Subsector Coordinating Council. All Exelon employees have access to up-to-date information and resources and are following Centers for Disease Control guidelines to ensure safety. In addition, Exelon utilities have established incident command centers to address emergent customer and employee needs in real time.
The estimated impact of COVID-19 to Exelon utilities’ and Generation’s GAAP Net income as a result of COVID-19 is approximately $100 million and $50 million, respectively, for the second quarter of 2020 and primarily reflects the impact of reduction in load, incremental credit loss expense and direct costs related to COVID-19. Direct costs related to COVID-19 are excluded from Adjusted (non-GAAP) Operating Earnings. The Utility Registrants and Generation also expect a reduction in operating revenues for the second half of 2020 due to expected reduction in electric load. Further, Generation expects an increase in credit loss expense in the second half of 2020. There remains significant uncertainty in the economic forecast for the remainder of the year and its impact on Exelon’s operating revenues. However, Exelon identified and is pursuing approximately $250 million in cost savings across its operating companies to offset part of the expected unfavorable impacts on operating revenues.
BGE Maryland Electric and Natural Gas Rate Case: On May 15, 2020, BGE filed an application for a three-year cumulative multi-year plan for 2021 through 2023 with the Maryland Public Service Commission (MDPSC) to increase its electric distribution rates by $140 million and natural gas distribution rates by $95 million in 2023 to recover capital investments made in late 2019 and planned capital investments from 2020 to 2023, reflecting an ROE of 10.1%. BGE currently expects a decision in the fourth quarter of 2020 but cannot predict if the MDPSC will approve the application as filed or the requested schedule.
DPL Maryland Electric Distribution Rate Case: On July 14, 2020, the MDPSC approved an increase in DPL's annual electric distribution rates of $12 million with an effective date of July 16, 2020 and reflecting an ROE of 9.6%.
Nuclear Operations: Generation’s nuclear fleet, including its owned output from the Salem Generating Station and 100% of the CENG units, produced 43,416 gigawatt-hours (GWhs) in the second quarter of 2020, compared with 44,748 GWhs in the second quarter of 2019. Excluding Salem, the Exelon-operated nuclear plants at ownership achieved a 95.4% capacity factor for the second quarter of 2020, compared with 95.1% for the second quarter of 2019. The number of planned refueling outage days in the second quarter of 2020 totaled 92, compared with 56 in the second quarter of 2019. There were no non-refueling outage days in the second quarter of 2020 and 28 in the second quarter of 2019.
Fossil and Renewables Operations: The Dispatch Match rate for Generation’s fossil and hydro fleet was 97.4% in the second quarter of 2020, compared with 99.7% in the second quarter of 2019. The lower performance in the quarter was primarily due to outages at gas units in Texas. Energy Capture for the wind and solar fleet was 92.7% in the second quarter of 2020, compared with 96.0% in the second quarter of 2019. The lower performance in the quarter was attributed to turbines in outage awaiting parts to perform repairs.
Financing Activities:

On June 8, 2020, PECO issued $350 million of its First and Refunding Mortgage Bonds, 2.80% Series due June 15, 2050. PECO used the proceeds for general corporate purposes.
On June 5, 2020, BGE issued $400 million of its 2.90% Senior Notes due June 15, 2050. BGE used the proceeds to repay commercial paper obligations and for general corporate purposes.
On June 9, 2020, DPL issued $100 million of its First Mortgage Bonds, 2.53% Series due June 9, 2030. DPL used the proceeds to repay existing indebtedness and for general corporate purposes.
On July 1, 2020, DPL issued $78 million of its 1.05% Tax-Exempt Bonds due January 1, 2031. DPL used the proceeds to repay existing indebtedness.
On June 2, 2020, ACE issued $23 million of its 2.25% Tax-Exempt First Mortgage Bonds due June 1, 2029. ACE used the proceeds to repay existing indebtedness.
On June 9, 2020, ACE issued $100 million of its First Mortgage Bonds, 3.24% Series due June 9, 2050. ACE used the proceeds to repay existing indebtedness and for general corporate purposes.
On May 15, 2020, Generation issued $900 million of its 3.25% Senior Notes due June 1, 2025. Generation used the proceeds to repay existing indebtedness and for general corporate purposes.

GAAP/Adjusted (non-GAAP) Operating Earnings Reconciliation

Adjusted (non-GAAP) Operating Earnings for the second quarter of 2020 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
2020 GAAP Net Income (Loss)	$0.53	$521	$(61)	$39	$39	$94	$476
Mark-to-Market Impact of Economic Hedging Activities (net of taxes of $18 and $20, respectively)	(0.05)	(51)	—	—	—	—	(60)
Unrealized Gains Related to Nuclear Decommissioning Trust (NDT) Fund Investments (net of taxes of $275)	(0.31)	(305)	—	—	—	—	(305)
Asset Impairments (net of taxes of $7, $4 and $3, respectively)	0.02	19	11	—	—	—	8
Plant Retirements and Divestitures (net of taxes of $2)	0.01	7	—	—	—	—	7
Cost Management Program (net of taxes of $3, $1 and $2, respectively)	0.01	6	—	—	—	1	5
Change in Environmental Liabilities (net of taxes of $0)	—	1	—	—	—	—	1
COVID-19 Direct Costs (net of taxes of $10, $2, $2, $1 and $6, respectively)	0.03	27	—	5	4	3	16
Deferred Prosecution Agreement Payments (net of taxes of $0)	0.20	200	200	—	—	—	—
Income Tax-Related Adjustments (entire amount represents tax expense)	0.01	5	—	—	—	—	—
Noncontrolling Interests (net of taxes of $20)	0.11	104	—	—	—	—	104
2020 Adjusted (non-GAAP) Operating Earnings	$0.55	$536	$150	$44	$43	$98	$252

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

(in millions)

Exelon

Earnings per