Exelon Corporation · NASDAQ:EXC
Exelon — Q3 2018 Earnings Presentation
50 slides from Exelon's earnings presentation, Nov 1, 2018
Slide 1: Earnings Conference Call 3rd Quarter 2018
Earnings Conference Call 3rd Quarter 2018 November 1, 2018
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: 3rd Quarter Results
3rd Quarter Results Q3 2018 EPS Results(1,2) $0.88 • GAAP earnings were $0.76/share $0.76 in Q3 2018 vs. $0.85/share in Q3 2017 $0.33 ExGen $0.24 BGE $0.06 $0.07 • Adjusted operating earnings* were $0.88/share in Q3 2018 vs. $0.13 PECO $0.13 $0.85/share in Q3 2017, which is at the upper end of our g
Slide 6: Operating Highlights
Operating Highlights Exelon Utilities Operational Metrics Exelon Generation Operational Performance Q3 2018 (2) Operations Metric Exelon Nuclear Fleet BGE ComEd PECO PHI • Best in class performance across our Nuclear fleet: OSHA Recordable Rate o Q3 2018 Nuclear Capacity Factor: 93.6% Electric 2.5 B
Slide 7: Key Updates
Key Updates CostZEC Reductions Updates FERC CapacityZECS Order Market Reforms Committing to $200M in Seventh and Second Circuit Court FERC Capacity Market additional cost reductions with a of Appeals Uphold ZEC Programs: Proceeding: targeted run-rate date of 2021: • On September 13, the Seventh • On
Slide 8: 3rd Quarter Adjusted Operating Earnings Drivers
3rd Quarter Adjusted Operating Earnings* Drivers Q3 2018 Adjusted Operating EPS* Results Q3 2018 vs. Guidance of $0.80 - $0.90 $0.88 Exelon Utilities – Favorable weather ExGen $0.33 – Reduced storm activity BGE $0.07 Exelon Generation (1) PECO $0.13 – NDT realized gains – Generation performance – Ma
Slide 9: QTD Adjusted Operating Earnings Waterfall
QTD Adjusted Operating Earnings* Waterfall ($0.01) Interest Expense $0.01 Favorable Weather $0.88 ($0.01) $0.85 $0.05 ($0.03) $0.01 $0.01 $0.00 $0.01 Distribution Investment $0.01 Energy Efficiency Investment ($0.01) Other ($0.12) Market and Portfolio Conditions(1) $0.03 Rate Increases ($0.05) Nucle
Slide 10: Raising Lower End of 2018 Guidance Range
Raising Lower End of 2018 Guidance Range $2.90 - $3.20(1) $3.05 - $3.20(1) ExGen $1.35 - $1.45 $1.35 - $1.45 ExGen BGE $0.25 - $0.35 $0.25 - $0.35 BGE PHI $0.40 - $0.50 $0.40 - $0.50 PHI PECO $0.40 - $0.50 $0.40 - $0.50 PECO ComEd $0.60 - $0.70 $0.65 - $0.75 ComEd HoldCo ~($0.20) ~($0.20) HoldCo 201
Slide 11: Trailing Twelve Month Earned ROEs vs Allowed ROE
Trailing Twelve Month Earned ROEs* vs Allowed ROE Trailing Twelve Month Earned ROEs* Allowed ROE Q2 2018 TTM Earned ROE Q3 2018 TTM Earned ROE 9.9% 9.9% 10.3% 9.7% 10.2% 9.6% 9.4% 8.3% 7.7% 7.7% 7.7% 7.4% 5.4% ACE Delmarva Pepco Legacy Exelon Consolidated Utilities Exelon Utilities Note: Represents
Slide 12: Exelon Utilities' Distribution Rate Case Updates
Exelon Utilities’ Distribution Rate Case Updates Rate Case Schedule and Key Terms Requested Revenue Expected Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun ROE / Requirement Order Equity Ratio (1,8) 8.69% / ComEd RT EH IB RB FO ($24.1M) Dec 2018 47.11% Delmarva (1,3) 9.70% / August 21, FO ($6.9M) E
Slide 13: Utility CapEx Update
Utility CapEx Update ComEd Completes AMI Smart Meter Installations • Forecasted project capital cost: − $920M; more than $20M under budget − AMI installations are part of the broader $2.6B Energy Infrastructure Modernization Act program • In service date: − Over 4M meters have been exchanged as of S
Slide 14: Exelon Generation: Gross Margin Update
Exelon Generation: Gross Margin Update September 30, 2018 Change from June 30, 2018 Gross Margin Category ($M)(1) 2018 2019 2020 2018 2019 2020 Open Gross Margin(2,5) $4,800 $4,300 $3,900 $100 $250 $100 (including South, West, Canada hedged gross margin) Capacity and ZEC Revenues(2,5,6) $2,300 $2,05
Slide 15: 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, and $500M Run-Rate beginning in 2014 CENG Service Agreement Run-Rate Synergies of $70M
Slide 16: 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) ExGen Debt/EBITDA Ratio*(5) 25% 22% 4.0 18%-20% 20% 3.0x 3.0 2.5x 15% 2.0x S&P Threshold 2.0 10% Book Excluding Non-Recourse 5% 1.0 0% 0.0 2018 Target 2018 Target Credit Ratings by Operating Co
Slide 17: The Exelon Value Proposition
The Exelon Value Proposition ▪ Regulated Utility Growth with utility EPS rising 6-8% annually from 2017- 2021 and rate base growth of 7.4%, 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 18: Additional Disclosures
Additional Disclosures 18 Q3 2018 Earnings Release Slides
Slide 19: YTD Adjusted Operating Earnings Waterfall
YTD Adjusted Operating Earnings* Waterfall $0.04 Favorable Weather $0.01 Other ($0.04) Increased Storm Costs $2.55 $0.01 $0.04 $0.00 $0.00 $0.05 $0.39 $0.06 Rate Increases $2.06 $0.02 Favorable Weather $0.04 Distribution Investment ($0.03) Other $0.01 Energy Efficiency Investments ($0.01) Other $0.0
Slide 20: 2018 Projected Sources and Uses of Cash
2018 Projected Sources and Uses of Cash Total Exelon Cash (1) All amounts rounded to the nearest ($M)(1) BGE ComEd PECO PHI ExGen Corp(8) $25M. Figures may not add due to Utilities 2018E Balance rounding. Beginning Cash Balance*(2) 1,450 (2) Gross of posted counterparty Adjusted Cash Flow from Opera
Slide 21: Exelon Utilities Trailing Twelve Month Earned ROEs
Exelon Utilities Trailing Twelve Month Earned ROEs* Q3 2018: Trailing Twelve Month Earned ROEs* 12.0% Legacy Exelon Utilities Consolidated Exelon Utilities 11.0% 10.0% Pepco 9.0% Delmarva $4.7/8.3% $2.9/7.7% $28.0/10.2% 8.0% $37.8/9.6% 7.0% ACE $2.2/7.7% 6.0% 5.0% Earned(%)ROE 4.0% 3.0% 2.0% 1.0% 0.
Slide 22: Shared Principles for FRR-RS Have Broad Support From Many Sectors
Shared Principles for FRR-RS Have Broad Support From Many Sectors Renewable Shared Principles Industry Community Stakeholders An FRR-RS mechanism should: • Protect customers from paying duplicate capacity • Preserve states’ abilities to achieve clean energy policy goals FERC should: Consumer • Requi
Slide 23: Exelon Utilities
Exelon Utilities 23 Q3 2018 Earnings Release Slides
Slide 24: ACE Distribution Rate Case Filing
ACE Distribution Rate Case Filing Rate Case Filing Details Notes Docket No. ER-18080925 • August 21 2018, ACE filed a distribution base rate case with the New Jersey Board of Public Utilities Test Year January 1, 2018 – December 31, 2018 (BPU) to increase distribution base rates Test Period 6 months
Slide 25: BGE (Gas) Distribution Rate Case Filing
BGE (Gas) Distribution Rate Case Filing Rate Case Filing Details Notes Docket No. Case No. 9484 • Case filed on June 8, 2018 seeking an increase in gas distribution revenues only Test Year August 1, 2017 – July 31, 2018 • The increase is primarily driven by infrastructure investments since 2015/2016
Slide 26: ComEd Distribution Rate Case Filing
ComEd Distribution Rate Case Filing Rate Case Filing Details Notes Docket No. 18-0808 • April 16, 2018, ComEd filed its annual distribution formula rate update with the Illinois Test Year January 1, 2017 – December 31, 2017 Commerce Commission seeking a decrease to Test Period 2017 Actual Costs + 20
Slide 27: Delmarva DE (Electric) Distribution Rate Case Filing
Delmarva DE (Electric) Distribution Rate Case Filing Rate Case Filing Details Notes Docket No. 17-0977 – Per Settlement (Black Box) • August 17, 2017, Delmarva DE filed an application with Delaware Public Service Test Year January 1, 2017 – December 31, 2017 Commission (DPSC) seeking an increase in
Slide 28: Delmarva DE (Gas) Distribution Rate Case Filing
Delmarva DE (Gas) Distribution Rate Case Filing Rate Case Filing Details Notes Docket No. 17-0978 - Per Settlement (Black Box) • August 17, 2017, Delmarva DE filed an application with Delaware Public Service Test Year January 1, 2017 – December 31, 2017 Commission (DPSC) seeking an increase in Test
Slide 29: PECO Distribution Rate Case Filing
PECO Distribution Rate Case Filing Rate Case Settlement Details Notes Docket No. R-2018-3000164 • PECO filed an electric distribution base rate case on March 29, 2018 Test Year January 1, 2019 – December 31, 2019 • On October 18, 2018 the presiding Administrative Law Judges issued the Recommended De
Slide 30: Pepco DC (Electric) Distribution Rate Case Filing
Pepco DC (Electric) Distribution Rate Case Filing Rate Case Filing Details Notes Docket No. 1150 & 1151 – Per Settlement (Black Box) • December 19, 2017, Pepco DC filed an application with Public Service Commission of the Test Year January 1, 2017 – December 31, 2017 District of Columbia (PSCDC) see
Slide 31: Exelon Generation Disclosures September 30, 2018
Exelon Generation Disclosures September 30, 2018 31 Q3 2018 Earnings Release Slides
Slide 32: 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 Low End of Profit Purely ratable Capital Credit Rating Structure Actual hedge % % Hedged % Capital & Market views on timing,
Slide 33: Components of Gross Margin
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 34: ExGen Disclosures Gross Margin
ExGen Disclosures Gross Margin Category ($M)(1) 2018 2019 2020 Open Gross Margin (including South, West & Canada hedged GM)(2,5) $4,800 $4,300 $3,900 Capacity and ZEC Revenues(2,5,6) $2,300 $2,050 $1,900 Mark-to-Market of Hedges(2,3) $350 $250 $250 Power New Business / To Go $100 $550 $800 Non-Power
Slide 35: ExGen Disclosures Generation and Hedges
ExGen Disclosures Generation and Hedges 2018 2019 2020 Exp. Gen (GWh)(1) 196,300 201,900 192,900 Midwest 96,600 97,000 96,500 Mid-Atlantic(2,6) 60,300 54,000 48,500 ERCOT 16,900 25,500 23,700 New York(2,6) 16,200 16,600 15,600 New England 6,300 8,800 8,600 % of Expected Generation Hedged(3) 98%-101%
Slide 36: ExGen Hedged Gross Margin Sensitivities
ExGen Hedged Gross Margin* Sensitivities Gross Margin* Sensitivities (with existing hedges)(1) 2018 2019 2020 Henry Hub Natural Gas ($/MMBtu) + $1/MMBtu $(10) $190 $445 - $1/MMBtu $20 $(145) $(395) NiHub ATC Energy Price + $5/MWh - $100 $265 - $5/MWh - $(100) $(265) PJM-W ATC Energy Price + $5/MWh $
Slide 37: ExGen Hedged Gross Margin Upside/Risk
ExGen Hedged Gross Margin* Upside/Risk 9,000 8,500 (1) $8,100 8,000 $8,000 $7,850 $7,900 7,500 $7,400 7,000 $6,950 Approximate Gross ($ Margin* million) Gross Approximate 6,500 6,000 2018 2019 2020 (1) Represents an approximate range of expected gross margin, taking into account hedges in place, bet
Slide 38: Illustrative Example of Modeling Exelon Generation 2019 Total Gross Margin
Illustrative Example of Modeling Exelon Generation 2019 Total Gross Margin* South, Mid- New Row Item Midwest ERCOT New York West & Atlantic England Canada (A) Start with fleet-wide open gross margin $4.3 billion (B) Capacity and ZEC $2.05 billion (C) Expected Generation (TWh) 97.0 54.0 25.5 16.6 8.8
Slide 39: Additional ExGen Modeling Data
Additional ExGen Modeling Data Total Gross Margin Reconciliation (in $M)(1) 2018 2019 2020 Revenue Net of Purchased Power and Fuel Expense*(2,3) $8,525 $8,125 $7,800 Other Revenues(4) $(200) $(175) $(200) Direct cost of sales incurred to generate revenues for certain $(275) $(300) $(250) Constellati
Slide 40: Appendix Reconciliation of Non-GAAP Measures
Appendix Reconciliation of Non-GAAP Measures 40 Q3 2018 Earnings Release Slides
Slide 41: Q3 QTD GAAP EPS Reconciliation
Q3 QTD GAAP EPS Reconciliation Three Months Ended September 30, 2017 ExGen ComEd PECO BGE PHI Other Exelon 2017 GAAP Earnings Per Share(1) $0.32 $0.20 $0.12 $0.06 $0.16 $0.00 $0.85 Mark-to-market impact of economic hedging activities (0.05) - - - - - (0.05) Unrealized gains related to NDT fund inves
Slide 42: Q3 QTD GAAP EPS Reconciliation (continued)
Q3 QTD GAAP EPS Reconciliation (continued) Three Months Ended September 30, 2018 ExGen ComEd PECO BGE PHI Other Exelon 2018 GAAP Earnings (Loss) Per Share $0.24 $0.20 $0.13 $0.06 $0.19 ($0.07) $0.76 Mark-to-market impact of economic hedging activities (0.07) - - - - 0.01 (0.06) Unrealized gains rela
Slide 43: Q3 YTD GAAP EPS Reconciliation
Q3 YTD GAAP EPS Reconciliation Nine Months Ended September 30, 2017 ExGen ComEd PECO BGE PHI Other Exelon 2017 GAAP Earnings Per Share(1) $0.52 $0.47 $0.35 $0.24 $0.38 $0.06 $2.02 Mark-to-market impact of economic hedging activities 0.10 - - - - - 0.10 Unrealized gains related to NDT fund investment
Slide 44: Q3 YTD GAAP EPS Reconciliation (continued)
Q3 YTD GAAP EPS Reconciliation (continued) Nine Months Ended September 30, 2018 ExGen ComEd PECO BGE PHI Other Exelon 2018 GAAP Earnings (Loss) Per Share $0.56 $0.54 $0.35 $0.25 $0.35 ($0.13) $1.92 Mark-to-market impact of economic hedging activities 0.07 - - - - 0.01 0.08 Unrealized losses related
Slide 45: Projected GAAP to Operating Adjustments
Projected GAAP to Operating Adjustments • Exelon’s projected 2018 adjusted (non-GAAP) operating earnings excludes the earnings effects of the following: − Mark-to-market adjustments from economic hedging activities − Unrealized gains and losses from NDT fund investments − Impairments of certain wind
Slide 46: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations(1) (2) Exelon FFO/Debt = FFO (a) Adjusted Debt (b) Exelon FFO Calculation(2) GAAP Operating Income + Depreciation & Amortization = EBITDA - GAAP Interest Expense +/- GAAP Current Income Tax (Expense)/Benefit + Nuclear Fuel Amortization +/- GAAP to Operating Adjustmen
Slide 47: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations(1) ExGen Debt/EBITDA = Net Debt (a) ExGen Debt/EBITDA = Net Debt (c) Operating EBITDA (b) Excluding Non-Recourse Operating EBITDA (d) ExGen Net Debt Calculation ExGen Net Debt Calculation Excluding Non-Recourse Long-Term Debt (including current maturities) Long-Term
Slide 48: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Legacy Consolidated Q3 2018 Operating ROE Reconciliation ($M) ACE Delmarva Pepco EXC EU Net Income (GAAP) $77 $103 $191 $1,407 $1,778 Operating Exclusions $5 $8 $24 $2 $40 Adjusted Operating Earnings $82 $111 $215 $1,409 $1,817 Average Equity $1,065 $1,434 $2,590 $13
Slide 49: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations 2018 Adjusted Cash from Ops Calculation ($M)(1) BGE ComEd PECO PHI ExGen Other Exelon Net cash flows provided by operating activities (GAAP) $750 $1,650 $650 $1,100 $4,250 $175 $8,600 Other cash from investing activities - - - - ($275) - ($275) Counterparty collatera
Slide 50: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations ExGen Adjusted O&M Reconciliation ($M)(1) 2018 2019 2020 2021 GAAP O&M $5,475 $4,925 $4,825 $4,750 Decommissioning(2) 50 50 50 50 Oyster Creek Retirement(5) (100) - - - Direct cost of sales incurred to generate revenues for certain Constellation and Power (275) (275)