Exelon Corporation · NASDAQ:EXC
Exelon — Non-Deal Roadshow (December 2017)
50 slides from Exelon's roadshow presentation, December 2017
Slide 1: December 2017 Investor Meetings
December 2017 Investor Meetings
Slide 2: Cautionary Statements Regarding Forward-Looking Information
Cautionary Statements Regarding Forward-Looking Information This presentation contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, that are subject to risks and uncertainties. The factors that could cause actual results to differ mat
Slide 3: Non-GAAP Financial Measures
Non-GAAP Financial Measures Exelon reports its financial results in accordance with accounting principles generally accepted in the United States (GAAP). Exelon supplements the reporting of financial information determined in accordance with GAAP with certain non-GAAP financial measures, including:
Slide 4: Non-GAAP Financial Measures Continued
Non-GAAP Financial Measures Continued This information is intended to enhance an investor’s overall understanding of period over period financial results and provide an indication of Exelon’s baseline operating performance by excluding items that are considered by management to be not directly relat
Slide 5: Exelon: An Industry Leader
Exelon: An Industry Leader Note: All numbers reflect year-end 2016; revenue accounts for PHI as of the merger effective date of March 24, 2016 through December 31, 2016. 5
Slide 6: The Exelon Value Proposition
The Exelon Value Proposition ▪ Regulated Utility Growth with utility EPS rising 6-8% annually from 2017- 2020 and rate base growth of 6.5%, representing an expanding majority of earnings ▪ ExGen’s strong free cash generation will support utility growth while also reducing debt by ~$3B over the next
Slide 7: Exelon Utilities Overview
Exelon Utilities Overview Note: All numbers reflect year-end 2016; revenue number accounts for PHI revenue as of March 24, 2016 merger date. 7
Slide 8: Exelon Utilities are an Industry Leader
Exelon Utilities are an Industry Leader US Utility Customers (millions) 10.0 9.8 9.2 8.9 6.8 6.0 5.5 5.4 5.1 5.0 4.9 4.8 4.2 3.1 EXC PCG SO DUK SRE FE XEL AEP EIX D NEE ED PEG ETR Total Capital Expenditures 2017-2019 ($B)(1) 30.9 25.5 22.1 18.0 17.3 14.3 12.0 11.1 10.9 10.4 10.2 6.9 DUK SO EXC(2) PC
Slide 9: Our Capital Plan Drives Stable Earnings Growth
Our Capital Plan Drives Stable Earnings Growth Capital Expenditures ($M) Rate Base ($B)(1) 5,275 5,175 +6.5% 40.8 38.6 4,775 4,825 36.6 1,375 34.4 10.5 1,400 9.9 31.7 1,350 1,425 9.4 8.9 775 8.3 800 7.8 7.4 775 750 7.0 6.6 925 6.2 950 6.9 6.5 975 875 6.1 5.7 5.3 2,200 2,025 15.5 1,775 13.2 14.0 14.8
Slide 10: Formulaic Mechanisms Cover Bulk of Rate Base Growth
Formulaic Mechanisms Cover Bulk of Rate Base Growth Rate Base Growth Breakout 2017-2020 ($B)(1) 2.1 9.0 Base Rate Case 0.8 Tracker/Formula Rate 1.3 2.3 2.0 0.9 2.1 1.1 9.0 2.3 2.8 6.7 (0.1) 0.7 2.1 2017E 2018E 2019E 2020E Total Of the approximately $9.0 billion of rate base growth Exelon Utilities f
Slide 11: Proven Track Record of Improving Operational Performance
Proven Track Record of Improving Operational Performance At CEG Merger (2012) 2015 Q3 2017 Operations Metric BGE ComEd PECO PHI BGE ComEd PECO PHI OSHA Recordable Rate Electric 2.5 Beta SAIFI (Outage Operations Frequency)(1) 2.5 Beta CAIDI (Outage Duration) Customer Satisfaction N/A Customer Service
Slide 12: Trailing 12 Month ROE vs Allowed ROE
Trailing 12 Month ROE vs Allowed ROE Twelve Month Trailing Earned ROEs* Allowed ROE Q2 2017 TTM Earned ROE Q3 2017 TTM Earned ROE 10.7% 9.9% 9.9% 10.3% 9.7% 9.7% 9.5% 7.8% 7.7% 7.3% 7.3% 6.4% 5.9% ACE Delmarva Pepco(1) Legacy EU Consolidated EU Note: Represents the period from 10/1/2016 to 9/30/2017
Slide 13: Exelon Utilities' Distribution Rate Case Updates
Exelon Utilities’ Distribution Rate Case Updates Pepco DC Order Delmarva MD Filing Authorized Revenue Requirement Increase(1) $36.9M Requested Revenue Requirement Increase(1) $21.6M(4) Authorized ROE 9.50% Requested ROE 10.10% Common Equity Ratio 49.14% Requested Common Equity Ratio 50.68% Order Rec
Slide 14: Utility Operating Earnings
Exelon Utilities EPS Growth of 6-8% to 2020 Exelon Utilities Operating Earnings 2017-2020 $2.10 $2.05 $2.00 $1.90 $1.90 $1.80 $1.80 $1.70 Utility Operating Earnings $1.70 $1.75 $1.60 $1.60 $1.50 $1.50 $1.40 $1.40 $0.00 2017E 2018E 2019E 2020E Rate base growth combined with PHI ROE improvement drives
Slide 15: Exelon Generation Overview
Exelon Generation Overview Note: All numbers reflect year-end 2016 15
Slide 16: Constellation Overview
Constellation Overview Note: All numbers reflect year-end 2016 (1) As calculated based on the national average generation supply mix used in EPA eGRID2014. 16
Slide 17: Exelon Generation: Gross Margin Update as of Sept. 30, 2017
Exelon Generation: Gross Margin Update as of Sept. 30, 2017 September 30, 2017 Change from June 30, 2017 (1) Gross Margin Category ($M) 2017 2018 2019 2017 2018 2019 (2,5) Open Gross Margin $3,600 $3,900 $3,700 $(150) $(100) $(100) (including South, West, Canada hedged gross margin) (2,5,6) Capacity
Slide 18: ExGen Forward Total Gross Margin Walk: Q3 2017 vs. Q2 2017
ExGen Forward Total Gross Margin* Walk: Q3 2017 vs. Q2 2017 FY 2017 ($M)(1,3,4) FY 2018 ($M)(1,3,4) $8,150 $8,100 ($150) $8,050 $8,000 ($100) ($50) $50 ($50) $150 ($50) Q2 IL ZEC Timing Power New Cumulative Q3 Q2 Power New Energy Capacity IL ZEC Q3 Business Rounding Business Prices Revenues(2,4) Tim
Slide 19: Forward Market Liquidity
Forward Market Liquidity Overall liquidity is declining Total calendar peak traded volumes for the rolling 5-year window have been trending lower over the past year July 2016 Calendar peak traded volumes beyond prompt year +1 account for less than 10% of total traded September 2017 volumes * Please
Slide 20: Exelon's Policy Priorities
Exelon’s Policy Priorities 20
Slide 21: Resiliency and Energy Market Reform
Resiliency and Energy Market Reform Price Formation Resiliency • PJM has laid out a stakeholder process that is proposed to • “Accurately valuing resilience is not a zero-sum game. conclude at the end of 3Q 2018 Compensating base-load generation does not equate to destruction of markets. On the cont
Slide 22: ZEC Updates
ZEC Updates New York ZEC Legal Challenges IL ZEC Legal Challenges Federal Case: • Both cases dismissed and judgment entered July • Case dismissed on July 25 and judgment entered 14 on July 27 • “The ZEC program does not conflict with the • “The ZEC program does not thwart the goal of an Federal Powe
Slide 23: Exelon Policy Priorities
Exelon Policy Priorities Modernize Utility Ratemaking to Ensure Appropriate Recovery ▪ Invest in infrastructure that provides customer benefit through grid resiliency and efficiency ▪ Ensure fair rate structures to support new technologies Regulatory Secure Proper Policies to Enable Innovative and p
Slide 24: Our Carbon Policy Principles
Our Carbon Policy Principles • Exelon believes in our nation’s ability to transition the generation fleet to a zero-carbon future while maintaining affordable and reliable electric service for consumers • For the foreseeable future, the most cost-effective carbon solution for our customers will be t
Slide 25: Financial Overview
Financial Overview 25 = = Exelon.
Slide 26: Narrowing 2017 Adjusted Operating Earnings Guidance Range
Narrowing 2017 Adjusted Operating Earnings* Guidance Range $2.50 - $2.80(1) $2.55 - $2.75(1) ExGen $1.05 - $1.15 $1.00 - $1.10 ExGen BGE $0.25 - $0.35 $0.25 - $0.35 BGE PHI $0.30 - $0.40 $0.30 - $0.40 PHI PECO $0.40 - $0.50 $0.40 - $0.50 PECO ComEd $0.60 - $0.70 $0.60 - $0.70 ComEd HoldCo ~($0.20) ~
Slide 27: Cost Management is Integral to Our Business Strategy
Cost Management is Integral to Our Business Strategy ExGen and BSC Cost Reductions Since Constellation Merger 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 CEG Merger Synergies of $170M in 2012, $350M in 2013, Announced Cost Reductions and $500M Run-Rate beginning in 2014 CENG Service Agreement
Slide 28: ExGen's Strong Free Cash Flow Supports Utility Growth and Debt Reduction
ExGen’s Strong Free Cash Flow Supports Utility Growth and Debt Reduction 2017-2020 Exelon Generation Free Cash Flow* and Uses of Cash ($B) ~$6.8 (~$1.3) ($2.3 - $2.7) ($2.8 - $3.2) Cumulative ExGen Committed ExGen Growth CapEx Utility Investment ExGen/HoldCo Debt Reduction FCF 2017-2020(1) Redeployi
Slide 29: Maintaining Strong Investment Grade Credit Ratings is a Top Financial Priority
Maintaining Strong Investment Grade Credit Ratings is a Top Financial Priority Exelon S&P FFO/Debt %*(1,4,6,7) ExGen Debt/EBITDA Ratio*(5,6,7) 25% 21% 4.0 18%-20% 20% 3.1x 3.0x 3.0 2.6x 15% S&P Threshold 2.0 10% Book Excluding Non-Recourse 5% 1.0 0% 0.0 2017 Target 2017 Target Credit Ratings by Oper
Slide 30: Theoretical Dividend Affordability from Utility less HoldCo
Theoretical Dividend Affordability from Utility less HoldCo(1,2) 95% Utility Earnings Payout Ratio (less HoldCo) Midpoint of Payout Ratio Range 90% 85% 84% 81% 80% 79% 75% 75% 70% 65% 60% 2017 2018 2019 2020 Utility less HoldCo payout ratio falling consistently even as dividend grows (1) Chart is il
Slide 31: Tax Rate and Utility Asset Projections at Current Plan
Tax Rate and Utility Asset Projections at Current Plan Tax Rate Expectations(1) Key Highlights • ExGen’s effective tax rate declines due to its 2018 2019 2020 declining pre-tax income relative to the tax credits it generates, which remain relatively constant ExGen Tax Rate 33% 28% 27% • Exelon’s con
Slide 32: Recognition for Stewardship and Employee Engagement
Recognition for Stewardship and Employee Engagement Supplier Diversity: Exelon is the only utility and energy company to be inducted into the Billion Dollar Roundtable, which recognizes corporations that have achieved spending of $1 billion with minority and women- owned suppliers; our 2016 spend wa
Slide 33: Appendix
Appendix 33 = = Exelon.
Slide 34: Exelon Debt Maturity Profile
Exelon Debt Maturity Profile(1) As of 9/30/17 LT Debt Balances (as of 9/30/17) BGE 2.6B ($M) ComEd 7.9B 900 PECO 3.1B PHI 5.9B ExGen 9.5B HoldCo 6.3B Consolidated 35.3B 1,150 2,512 741 750 1,023 300 750 788 807 1,594 1,430 1,400 623 1,189 833 1,225 1,200 1,275 910 850 900 700 800 833 763 258 675 700
Slide 35: Capacity Market: PJM
Capacity Market: PJM Cleared Volumes 2019/2020 2020/2021 PJM Capacity Revenues(1,2,3) (MW) (4) CP Price Base Price CP Price Calendar weighted avg. price ($/Mw-day) Comed Revenues ($ Million) Nuclear 6,925 $203 - $183 8,075 $188 $180 $1,300 Fossil/Other - $203 50 $183 - $188 $170 $1,200 Subtotal 6,92
Slide 36: Exelon Generation Disclosures
Exelon Generation Disclosures Data as of September 30, 2017 36
Slide 37: Portfolio Management Strategy
Portfolio Management Strategy Align Hedging & Financials Portfolio Management Over Time Exercising Market Views Establishing Minimum Hedge Targets % Hedged High End of Profit % Hedged Low End of Profit Purely ratable Capital Credit Rating Structure Actual hedge % Capital & Market views on timing, pr
Slide 38: Components of Gross Margin Categories
Components of Gross Margin Categories Gross margin from Gross margin linked to power production and sales other business activities Open Gross Capacity and ZEC MtM of “Power” New “Non Power” “Non Power” Margin Revenues Hedges(2) Business Executed New Business •Generation Gross •Expected capacity •Ma
Slide 39: ExGen Disclosures
ExGen Disclosures Gross Margin Category ($M) (1) 2017 2018 2019 Open Gross Margin (including South, West & Canada hedged GM) (2,5) $3,600 $3,900 $3,700 Capacity and ZEC Revenues(2,5,6) $1,700 $2,300 $2,000 (2,3) Mark-to-Market of Hedges $2,150 $650 $450 Power New Business / To Go $100 $700 $850 Non-
Slide 40: ExGen Disclosures
ExGen Disclosures Generation and Hedges 2017 2018 2019 Exp. Gen (GWh) (1) 200,200 199,300 202,000 Midwest 95,900 95,800 97,000 Mid-Atlantic (2,6) 60,700 60,500 59,000 ERCOT 17,800 19,500 20,800 New York (2,6) 14,700 15,500 16,600 New England 11,100 8,000 8,600 % of Expected Generation Hedged (3) 98%
Slide 41: ExGen Hedged Gross Margin Sensitivities
ExGen Hedged Gross Margin* Sensitivities Gross Margin* Sensitivities (with existing hedges) (1) 2017 2018 2019 Henry Hub Natural Gas ($/MMBtu) + $1/MMBtu $(20) $140 $515 - $1/MMBtu $(10) $(210) $(500) NiHub ATC Energy Price + $5/MWh - $120 $265 - $5/MWh - $(115) $(265) PJM-W ATC Energy Price + $5/MW
Slide 42: ExGen Hedged Gross Margin Upside/Risk
ExGen Hedged Gross Margin* Upside/Risk 9,000 Approximate Gross Margin* ($ million)(1,2,3) 8,500 $8,250 $8,300 $8,050 8,000 $7,950 $7,800 7,500 7,000 $7,050 6,500 6,000 2017 2018 2019 (1) Represents an approximate range of expected gross margin, taking into account hedges in place, between the 5th an
Slide 43: Illustrative Example of Modeling Exelon Generation 2018 Gross Margin
Illustrative Example of Modeling Exelon Generation 2018 Gross Margin* South, West & Row Item Midwest Mid-Atlantic ERCOT New York New England Canada (A) Start with fleet-wide open gross margin $3.9 billion (B) Capacity and ZEC $2.3 billion (C) Expected Generation (TWh) 95.8 60.5 19.5 15.5 8.0 (D) Hed
Slide 44: Additional ExGen Modeling Data
Additional ExGen Modeling Data Total Gross Margin Reconciliation (in $M)(1) 2017 2018 2019 Revenue Net of Purchased Power and Fuel Expense*(2,3) $8,575 $8,575 $8,025 Non-cash amortization of intangible assets, net, related to $50 - - commodity contracts recorded at fair value at merger date Other Re
Slide 45: Appendix Reconciliation of Non-GAAP Measures
Appendix Reconciliation of Non-GAAP Measures 45
Slide 46: GAAP to Operating Adjustments
GAAP to Operating Adjustments • Exelon’s 2017 adjusted (non-GAAP) operating earnings excludes the earnings effects of the following: − Mark-to-market adjustments from economic hedging activities − Unrealized gains from NDT fund investments to the extent not offset by contractual accounting as descri
Slide 47: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations (1,2,10,11) (1,2,10) YE 2017 Exelon FFO Calculation ($M) YE 2017 Exelon Adjusted Debt Calculation ($M) GAAP Operating Income $3,500 Long-Term Debt (including current maturities) $32,050 Depreciation & Amortization $3,350 Short-Term Debt $1,125 EBITDA $6,850 + PPA Imp
Slide 48: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations (1,3) (1,3) YE 2017 ExGen Net Debt Calculation ($M) YE 2017 ExGen Net Debt Calculation ($M) Long-Term Debt (including current maturities) $8,775 Long-Term Debt (including current maturities) $8,775 Short-Term Debt $350 Short-Term Debt $350 - Surplus Cash Adjustment (
Slide 49: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Legacy Consolidated Q3 2017 Operating ROE Reconciliation ($M)(1) ACE Delmarva Pepco EXC EU (1) Net Income (GAAP) $85 $114 $210 $1,281 $1,690 Operating Exclusions ($23) ($12) ($25) $34 ($25) (1) Adjusted Operating Earnings $63 $103 $185 $1,315 $1,665 Average Equity $1
Slide 50: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations ExGen Adjusted O&M Reconciliation ($M)(1) 2017 2018 2019 2020 GAAP O&M $6,325 $5,300 $5,150 $5,025 Decommissioning(2) 25 50 50 50 TMI Retirement (75) - - - EGTP Impairment (450) - - - Direct cost of sales incurred to generate revenues for certain Constellation and Po