Exelon Corporation · NASDAQ:EXC
Exelon — Investor Presentation (March 2018)
55 slides from Exelon's investor presentation, March 2018
Slide 1: February / March 2018 Investor Meetings
February / March 2018 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 2017 5 February / March 2018 Investor Meetings
Slide 6: 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 7: 2017 Milestones and Accomplishments
2017 Milestones and Accomplishments Financial Operational Regulatory & Policy Employees & Community • Delivered FY 2017 GAAP • Utilities performed largely at • Successful dismissal of legal • 2017 awards and earnings per share of $3.97 first quartile levels with challenges of NY and IL ZEC recogniti
Slide 8: 2018 Business Priorities and Commitments
2018 Business Priorities and Commitments Maintain industry leading operational excellence Effectively deploy $5.4B of 2018 utility capex Advance PJM power price formation changes in 2018 Prevail on legal challenges to the NY and IL ZEC programs Seek fair compensation for at-risk plants in NJ and PA
Slide 9: Exelon Utilities Overview
Exelon Utilities Overview Note: All numbers reflect year-end 2017 9 February / March 2018 Investor Meetings
Slide 10: Exelon Utilities are an Industry Leader
Exelon Utilities are an Industry Leader US Utility Customers (millions) 10.0 9.8 9.2 8.9 6.8 6.0 5.5 5.4 5.1 5.0 4.9 4.8 4.2 3.1 EXC PCG SO DUK SRE FE XEL AEP EIX D NEE ED PEG ETR Total Capital Expenditures 2017-2019 ($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 11: Our Capital Plan Drives Leading Rate Base Growth
Our Capital Plan Drives Leading Rate Base Growth Capital Expenditures ($M) Rate Base ($B)(1) 5,400 +7.4% 46.0 5,225 5,150 43.5 5,100 40.7 1,500 37.8 12.0 1,400 1,500 1,500 11.3 34.6 10.6 9.9 800 9.2 8.6 850 825 825 8.0 7.6 7.1 1,000 6.6 8.0 1,050 1,000 7.6 1,100 6.9 6.4 5.7 2,125 16.6 17.4 1,725 1,8
Slide 12: Mechanisms Cover Bulk of Rate Base Growth
Mechanisms Cover Bulk of Rate Base Growth Rate Base Growth Breakout 2018-2021 ($B) 2.5 11.5 Base Rate Case 1.1 Tracker/Formula Rate 1.5 3.4 2.8 1.0 1.8 2.9 1.1 11.5 1.8 8.0 3.2 0.2 3.0 2018E 2019E 2020E 2021E Total Of the approximately $11.5 billion of rate base growth Exelon Utilities forecasts ove
Slide 13: Proven Track Record of Improving Operational Performance
Proven Track Record of Improving Operational Performance At CEG Merger (2012) 2015 Q4 2017 Operations Metric BGE ComEd PECO PHI BGE ComEd PECO PHI OSHA Recordable Rate Electric 2.5 Beta SAIFI (Outage Operations Frequency) 2.5 Beta CAIDI (Outage Duration) Customer Satisfaction N/A Customer Service Le
Slide 14: Trailing 12 Month ROEs vs Allowed ROE
Trailing 12 Month ROEs* vs Allowed ROE Twelve Month Trailing Earned ROEs* Allowed ROE* Q4 2016 Q4 2017 10.5% 9.9% 9.9% 9.7% 10.3% 9.5% 9.5% 8.1% 7.7% 7.5% 6.3% 5.6% 5.6% ACE Delmarva Pepco Legacy Exelon Consolidated Utilities Exelon Utilities Note: Represents the 12-month periods ending 12/31/2016 a
Slide 15: Exelon Utilities' Distribution Rate Case Updates
Exelon Utilities’ Distribution Rate Case Updates ACE NJ Order Delmarva DE Electric Filing Authorized Revenue Requirement Increase(1) $43.0M Requested Revenue Requirement Increase(1,2) $12.6M Authorized ROE 9.60% Requested ROE 10.10% Common Equity Ratio 50.47% Requested Common Equity Ratio 50.52% Ord
Slide 16: Utility Adjusted Operating Earnings
Exelon Utilities EPS* Growth of 6-8% to 2021 Exelon Utilities Operating Earnings* 2018-2021 $2.20 $2.20 $2.10 $2.10 $2.00 $2.00 Utility Adjusted Operating Earnings* $1.90 $1.90 $1.80 $1.80 $1.80 $1.70 $1.70 $1.60 $1.50 $1.50 $0.00 2018E 2019E 2020E 2021E Rate base growth combined with PHI ROE improv
Slide 17: Exelon Generation Overview
Exelon Generation Overview Note: All numbers reflect year-end 2017 (1) Capacity factor excludes impacts of Salem 17 February / March 2018 Investor Meetings
Slide 18: Constellation Overview
Constellation Overview Note: All numbers reflect year-end 2017 (1) As calculated based on the national average generation supply mix used in EPA eGRID2014. 18 February / March 2018 Investor Meetings
Slide 19: Best in Class at ExGen and Constellation
Best in Class at ExGen and Constellation Exelon Generation Operational Metrics Constellation Metrics • Continued best in class performance across our Nuclear fleet: − Capacity factor for Exelon owned and 74% retail power 24% power new operated units was 94.1%(1) customer renewal customer win rate ra
Slide 20: Exelon Generation: Gross Margin Update
Exelon Generation: Gross Margin Update Change from December 31, 2017 September 30, 2017 (1) Gross Margin Category ($M) 2018 2019 2020 2018 2019 (2,5) Open Gross Margin $4,350 $3,900 $3,750 $450 $200 (including South, West, Canada hedged gross margin) (2,5,6) Capacity and ZEC Revenues $2,300 $2,000 $
Slide 21: ExGen Forward Total Gross Margin Walk: Q4 2017 vs. Q3 2017
ExGen Forward Total Gross Margin* Walk: Q4 2017 vs. Q3 2017 FY 2018 ($M)(1,3,4,5) FY 2019 ($M)(1,3,4) $50 $50 ($50) ($100) $8,050 $8,050 $7,550 $100 $7,500 Q3 Handley Oyster Creek Q4 Q3 Energy Prices Handley Oyster Creek Q4 FY 2020 versus FY 2019 ($M)(1,3,4) Key Takeaways $7,550 • In 2018, Total Gro
Slide 22: Comparing Winter 2017/2018 and the 2014 Polar Vortex
Comparing Winter 2017/2018 and the 2014 Polar Vortex 2014 Polar Vortex vs. 2017/2018 Winter Generation Forced Outages(1) +23,000MW Improvement Generation Fuel Mix (MW)(2) Key Takeaways • PJM power prices cleared at times over ~$200/MWh during the 2017/2018 winter, but were not as high as during the
Slide 23: Exelon's Policy Priorities
Exelon’s Policy Priorities 23 February / March 2018 Investor Meetings
Slide 24: Resiliency and Energy Market Reform
Resiliency and Energy Market Reform Price Formation Resiliency • PJM has stated that it is committed to advancing its • FERC issued “Grid Reliability and Resilience Pricing” order proposal to allow all resources to set LMP and to improving on January 8, 2018, to open new docket on resilience scarcit
Slide 25: ZEC Updates
ZEC Updates New York ZEC Legal Illinois ZEC Legal New Jersey ZEC Challenges Challenges Federal Case: • Both cases dismissed and • In December, two legislative • Case dismissed on July 25 and judgment entered July 14 committees in the New Jersey judgment entered on July 27 • “The ZEC program does not
Slide 26: Financial Overview
Financial Overview 26 February / March 2018 Investor Meetings
Slide 27: 2018 Adjusted Operating Earnings Guidance
2018 Adjusted Operating Earnings* Guidance $2.90 - $3.20(2) Key Year-Over-Year Drivers $0.25 - $0.35 BGE • BGE: Return to normal storm $2.60(1) (historical average) and inflation impacts $0.40 - $0.50 PECO BGE $0.33 • PECO: Higher transmission revenue, offset by inflation and higher $0.45 $0.40 - $0
Slide 28: Announced Cost Reductions
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 $500M Run-Rate beginning in 2014 CENG Service Agreement
Slide 29: ExGen's Strong Available Cash Flow Supports Utility Growth and Debt Reduction
ExGen’s Strong Available Cash Flow* Supports Utility Growth and Debt Reduction 2018-2021 Exelon Generation Available Cash Flow and Uses of Cash* ($B) ~$7.6 (~$0.7) ($3.3-$3.7) (~$0.4-$0.6) ($2.7-$3.3) ExGen Cumulative Committed ExGen Utility Investment External Dividend ExGen/HoldCo Available Cash G
Slide 30: Impacts from Tax Reform
Impacts from Tax Reform Tax Impacts Key Takeaways 2018 2019 2020 2021 • Changes in federal tax policy are expected to increase run- rate EPS by $0.10 per share in 2019 Cumulative Incremental Rate Base from Tax Policy $0.9 $1.4 $1.7 $2.0 • Utility rate base is expected to be $1.7B higher in 2020 than
Slide 31: 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% 21% 4.0 18%-20% 20% 3.0x 3.0 15% 2.5x S&P Threshold 2.0x 2.0 Book 10% Excluding Non-Recourse 5% 1.0 0% 0.0 2018 Target 2018 Target Credit Ratings by Operating Co
Slide 32: Raising Dividend Growth Rate to 5% Annually through 2020
Raising Dividend Growth Rate to 5% Annually through 2020 Dividends per Share(1) Implied Exelon Utilities less HoldCo(2) Dividend Implied ExGen(2) Dividend 5% $1.53 $1.45 $1.38 $1.31 2017A 2018E 2019E 2020E Assuming a steady 70% payout ratio on Utility less HoldCo earnings, ExGen’s contribution to th
Slide 33: 2017 Exelon Recognition and Partnerships
2017 Exelon Recognition and Partnerships Sustainability Diversity & Inclusion Dow Jones Sustainability Index HeforShe Exelon named to Dow Jones Sustainability Index for 12th Exelon joined U.N. Women’s HeForShe campaign, which is focused consecutive year on gender equality. Pledge includes a $3 milli
Slide 34: Appendix
Appendix 34 February / March 2018 Investor Meetings
Slide 35: 2018 Projected Sources and Uses of Cash
2018 Projected Sources and Uses of Cash (1) All amounts rounded to the nearest $25M. Figures may not add due to rounding. Total Exelon Cash ($M)(1) BGE ComEd PECO PHI ExGen Corp(8) (2) Gross of posted counterparty collateral Utilities 2018E Balance (3) Figures reflect cash CapEx and CENG fleet at Be
Slide 36: Exelon Debt Maturity Profile
Exelon Debt Maturity Profile(1) (1, 2) LT Debt Balances (as of 12/31/17) BGE 2.6B 500 As of 12/31/17 ComEd 7.8B PECO 3.1B ($M) PHI 5.9B ExGen recourse 6.8B ExGen non-recourse 2.2B HoldCo 6.3B Consolidated 34.7B 910 2,512 1,023 1,225 1,200 850 500 600 1,189 175 1,594 312 1,430 1,400 1,275 1,150 900 9
Slide 37: EPS Sensitivities
EPS Sensitivities 2018 2019 2020 Henry Hub Natural Gas ExGen EPS Impact* (1) + $1/MMBtu $0.15 $0.32 $0.50 - $1/MMBtu ($0.15) ($0.31) ($0.47) NiHub ATC Energy Price + $5/MWh $0.06 $0.16 $0.26 - $5/MWh ($0.05) ($0.16) ($0.26) PJM-W ATC Energy Price + $5/MWh $0.02 $0.08 $0.13 - $5/MWh ($0.01) ($0.07) (
Slide 38: Exelon Generation Disclosures
Exelon Generation Disclosures Data as of December 31, 2017 These disclosures were presented on February 7, 2018 and are not being updated at this time 38 February / March 2018 Investor Meetings
Slide 39: Portfolio Management Strategy
Portfolio Management Strategy Align Hedging & Financials Portfolio Management Over Time Exercising Market Views Establishing Minimum Hedge Targets % Hedged High End of Profit % Hedged Low End of Profit Purely ratable Capital Credit Rating Structure Actual hedge % Capital & Market views on timing, pr
Slide 40: Components of Gross Margin Categories
Components of Gross Margin Categories Gross margin from Gross margin linked to power production and sales other business activities Open Gross Capacity and ZEC MtM of “Power” New “Non Power” “Non Power” Margin Revenues Hedges(2) Business Executed New Business •Generation Gross •Expected capacity •Ma
Slide 41: ExGen Disclosures
ExGen Disclosures Gross Margin Category ($M) (1) 2018 2019 2020 Open Gross Margin (including South, West & Canada hedged GM) (2,5) $4,350 $3,900 $3,750 (2,5,6) Capacity and ZEC Revenues $2,300 $2,000 $1,850 (2,3) Mark-to-Market of Hedges $350 $400 $250 Power New Business / To Go $550 $750 $900 Non-P
Slide 42: ExGen Disclosures
ExGen Disclosures Generation and Hedges 2018 2019 2020 Exp. Gen (GWh) (1) 201,500 201,200 191,400 Midwest 95,900 97,200 96,700 Mid-Atlantic (2,6) 59,600 54,200 48,600 ERCOT 24,200 24,500 22,000 New York (2,6) 15,400 16,600 15,500 New England 6,400 8,700 8,600 % of Expected Generation Hedged (3) 85%-
Slide 43: ExGen Hedged Gross Margin Sensitivities
ExGen Hedged Gross Margin* Sensitivities Gross Margin* Sensitivities (with existing hedges) (1) 2018 2019 2020 Henry Hub Natural Gas ($/MMBtu) + $1/MMBtu $190 $410 $645 - $1/MMBtu $(190) $(400) $(615) NiHub ATC Energy Price + $5/MWh $75 $210 $345 - $5/MWh $(70) $(210) $(340) PJM-W ATC Energy Price +
Slide 44: ExGen Hedged Gross Margin Upside/Risk
ExGen Hedged Gross Margin* Upside/Risk 9,000 $8,450 Approximate Gross Margin* ($ million)(1,2,3) 8,500 $8,250 $8,150 8,000 $7,800 7,500 7,000 $7,150 6,500 $6,650 6,000 2018 2019 2020 (1) Represents an approximate range of expected gross margin, taking into account hedges in place, between the 5th an
Slide 45: Illustrative Example of Modeling Exelon Generation 2019 Gross Margin
Illustrative Example of Modeling Exelon Generation 2019 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 billion (C) Expected Generation (TWh) 97.2 54.2 24.5 16.6 8.7 (D) Hedge
Slide 46: 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) $8,500 $8,025 $7,700 Non-cash amortization of intangible assets, net, related to - - - commodity contracts recorded at fair value at merger date Other Reve
Slide 47: Driving Costs and Capital Out of the Generation Business
Driving Costs and Capital Out of the Generation Business Adjusted O&M* ($M)(1,2) Capital Expenditures ($M)(1,3,4) 2,275 -1.9% 4,550 4,300 4,275 4,300 375 1,850 1,825 1,825 75 125 175 950 900 825 800 950 875 875 850 2018E 2019E 2020E 2021E 2018E 2019E 2020E 2021E Committed Growth Nuclear Fuel Base Co
Slide 48: Appendix Reconciliation of Non-GAAP Measures
Appendix Reconciliation of Non-GAAP Measures 48 February / March 2018 Investor Meetings
Slide 49: Projected GAAP to Operating Adjustments
Projected GAAP to Operating Adjustments • Exelon’s projected 2018 adjusted (non-GAAP) operating earnings excludes the earnings effects of the following: − Mark-to-market adjustments from economic hedging activities − Unrealized gains and losses from NDT fund investments to the extent not offset by c
Slide 50: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations (1,2) (1,2) YE 2018 Exelon FFO Calculation ($M) YE 2018 Exelon Adjusted Debt Calculation ($M) GAAP Operating Income $3,450 Long-Term Debt (including current maturities) $33,075 Depreciation & Amortization $3,850 Short-Term Debt $1,125 EBITDA $7,300 + PPA and Operatin
Slide 51: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations (1,2) (1,2) YE 2018 ExGen FFO Calculation ($M) YE 2018 ExGen Adjusted Debt Calculation ($M) GAAP Operating Income $1,025 Long-Term Debt (including current maturities) $8,850 Depreciation & Amortization $1,800 Short-Term Debt $0 EBITDA $2,825 + PPA and Operating Lease
Slide 52: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations (1,2) (1,2) YE 2018 ExGen Net Debt Calculation ($M) YE 2018 ExGen Net Debt Calculation ($M) Long-Term Debt (including current maturities) $8,850 Long-Term Debt (including current maturities) $8,850 Short-Term Debt $0 Short-Term Debt $0 - Surplus Cash Adjustment ($950
Slide 53: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Legacy Consolidated Q4 2017 Operating ROE Reconciliation ($M)(1) ACE Delmarva Pepco EXC EU (1) Net Income (GAAP) $77 $121 $205 $1,308 $1,711 Operating Exclusions ($20) ($13) ($20) $28 ($24) (1) Adjusted Operating Earnings $58 $108 $185 $1,336 $1,687 Average Equity $1
Slide 54: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations 2018 Adjusted Cash from Ops Calculation ($M)(1) ComEd PECO BGE PHI ExGen Other Exelon Net cash flows provided by operating activities (GAAP) $1,625 $600 $625 $1,125 $4,125 $275 $8,375 Other cash from investing activities - - - - ($275) - ($275) Intercompany receivabl
Slide 55: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations ExGen Adjusted O&M Reconciliation ($M)(1) 2018 2019 2020 2021 GAAP O&M $5,225 $5,000 $4,925 $4,950 Decommissioning(2) - - - - TMI Retirement - - - - Oyster Creek Retirement (25) - - - Direct cost of sales incurred to generate revenues for certain Constellation and Po