Exelon Corporation · NASDAQ:EXC
Exelon — Q3 2017 Earnings Presentation
54 slides from Exelon's earnings presentation, Nov 2, 2017
Slide 1: Earnings Conference Call Third Quarter 2017
Earnings Conference Call Third Quarter 2017 November 2, 2017
Slide 2: Cautionary Statements Regarding Forward-Looking Information
2 Q3 2017 Earnings Release Slides 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
Slide 3: Non-GAAP Financial Measures
3 Q3 2017 Earnings Release Slides 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-GA
Slide 4: Non-GAAP Financial Measures Continued
4 Q3 2017 Earnings Release Slides 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 m
Slide 5: Strong Third Quarter Results
5 Q3 2017 Earnings Release Slides Note: Amounts may not sum due to rounding * Refer to pages 3 and 4 for information regarding non-GAAP financial measures Strong Third Quarter Results $0.85 $0.00 $0.20 $0.12 $0.16 $0.06 $0.32 Q3 2017 EPS Results • GAAP earnings were $0.85/share in Q3 2017 vs. $0.53/
Slide 6: Operating Highlights
6 Q3 2017 Earnings Release Slides Operating Highlights Q1 Q2 Q3 Q4 (1) 2.5 Beta SAIFI is YE projection (2) Excludes Salem Exelon Utilities Operational Metrics Exelon Generation Operational Metrics • Continued best in class performance across our Nuclear fleet: o Q3 Nuclear Capacity Factor: 96.1%(2)
Slide 7: Resiliency and Energy Market Reform
7 Q3 2017 Earnings Release Slides Resiliency and Energy Market Reform Price Formation Resiliency • PJM has stated that it is prepared to implement its reforms allowing all resources to set LMP by mid-2018 • “FERC should expedite its efforts with states, RTO/ISOs, and other stakeholders to improve en
Slide 8: Q3 2017 Adjusted Operating EPS Results
8 Q3 2017 Earnings Release Slides HoldCo ComEd PECO PHI BGE ExGen Q3 2017 $0.85 $0.19 ($0.04) $0.15 $0.12 $0.07 $0.36 Q3 2017 Adjusted Operating EPS* Results Exelon Utilities – Reduced storm activity – Lower O&M Exelon Generation – Constellation Gross Margin – Timing of O&M Third Quarter Adjusted Op
Slide 9: QTD Adjusted Operating Earnings Waterfall
9 Q3 2017 Earnings Release Slides QTD Adjusted Operating Earnings* Waterfall Q3 2017 $0.85 Corp ($0.01) PHI $0.01 BGE $0.01 PECO ($0.01) ComEd ($0.01) ExGen ($0.05) Q3 2016 $0.91 ($0.19) Market and Portfolio Conditions(1) $0.08 Zero Emission Credit Revenue(2) $0.05 Capacity Pricing $0.01 Increased T
Slide 10: Narrowing 2017 Adjusted Operating Earnings Guidance Range
10 Q3 2017 Earnings Release Slides ~($0.20) $0.40 - $0.50 $2.50 - $2.80(1) $0.60 - $0.70 $0.30 - $0.40 $1.05 - $1.15 $0.25 - $0.35 2017 Initial Guidance $1.00 - $1.10 $0.25 - $0.35 $0.30 - $0.40 $0.40 - $0.50 $0.60 - $0.70 $2.55 - $2.75(1) 2017 Revised Guidance ExGen BGE ExGen BGE PHI PECO ComEd Hol
Slide 11: Q3 2017 TTM Earned ROE
11 Q3 2017 Earnings Release Slides Q3 2017 TTM Earned ROE Trailing 12 Month ROE vs Allowed ROE Twelve Month Trailing Earned ROEs* 9.7% 9.9%9.9% ACE Delmarva Consolidated EU Pepco(1) Legacy EU Allowed ROE Note: Represents the period from 10/1/2016 to 9/30/2017. ROEs represent weighted average across
Slide 12: Exelon Utilities' Distribution Rate Case Updates
12 Q3 2017 Earnings Release Slides Exelon Utilities‟ Distribution Rate Case Updates Pepco DC Order Authorized Revenue Requirement Increase(1) $36.9M Authorized ROE 9.50% Common Equity Ratio 49.14% Order Received 7/25/17 Pepco MD Order Authorized Revenue Requirement Increase(1) $32.4M Authorized ROE
Slide 13: Utility CapEx Update
13 Q3 2017 Earnings Release Slides Utility CapEx Update 2017 Exelon Utilities CapEx Spend ($M) Notable Projects • Pepco‟s Waterfront Substation − $182 million invested to date. Expected completion by end of 2017 − Part of “Capital Grid” project − Replaces aging infrastructure and improves substation
Slide 14: Exelon Generation: Gross Margin Update
14 Q3 2017 Earnings Release Slides Exelon Generation: Gross Margin Update • Delay in recognition of Illinois ZEC revenues lowers the Capacity and ZEC Revenues line in 2017 by $150M and increases the 2018 line by $150M – see slide 21 for details • Excluding impact of Illinois ZEC timing: − In 2017, $
Slide 15: Cost Management is Integral to Our Business Strategy
15 Q3 2017 Earnings Release Slides 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Ann oun ced Cos t Re duct ions Cost Management is Integral to Our Business Strategy ExGen Forecast O&M* Q3 2017 ($M)(1) ExGen Forecast O&M*: Q3 2017 vs. Q4 2016(1) 125 225 150 25075 2018 4,300 2020 2019 4,450 4,600
Slide 16: ExGen's Strong Free Cash Flow Supports Utility Growth and Debt Reduction
16 Q3 2017 Earnings Release Slides ExGen‟s Strong Free Cash Flow Supports Utility Growth and Debt Reduction 2017-2020 Exelon Generation Free Cash Flow* and Uses of Cash ($B) (1) Sources include change in margin, tax parent benefit, equity investments, and acquisitions and divestitures Redeploying Ex
Slide 17: Hurricane Support
17 Q3 2017 Earnings Release Slides Hurricane Support • More than 2,200 employees, contractors and support personnel from Exelon’s six utilities mobilized to assist residents in the southeastern U.S. impacted by Hurricane Irma − Exelon teams shared our experience with severe weather restoration effor
Slide 18: The Exelon Value Proposition
18 Q3 2017 Earnings Release Slides 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 r
Slide 19: Additional Disclosures
19 Q3 2017 Earnings Release Slides Additional Disclosures
Slide 20: 2017 Projected Sources and Uses of Cash
20 Q3 2017 Earnings Release Slides 2017 Projected Sources and Uses of Cash Consistent and reliable free cash flows Enable growth & value creation Supported by a strong balance sheet Strong balance sheet enables flexibility to raise and deploy capital for growth $0.9B of long-term debt at the utili
Slide 21: ExGen Forward Total Gross Margin Walk
21 Q3 2017 Earnings Release Slides ExGen Forward Total Gross Margin* Walk: Q3 2017 vs. Q2 2017 Cumulative Rounding $50 Power New Business ($50) IL ZEC Timing ($150) Q2 $8,150 Q3 $8,000 $150 Q3 $8,050 IL ZEC Timing(5) Capacity Revenues(2,4) ($50) Energy Prices ($50) Power New Business ($100) Q2 $8,10
Slide 22: YTD Earnings Results
22 Q3 2017 Earnings Release Slides DRAFT Note: Amounts may not sum due to rounding * Refer to pages 3 and 4 for information regarding non-GAAP financial measures YTD Earnings Results $0.47 $0.50 $0.35 $0.35 $0.38 $0.31 $0.24 $0.25 $0.51 $0.76 ($0.12) Adjusted Operating Earnings* $2.05 GAAP Earnings
Slide 23: YTD Adjusted Operating Earnings Waterfall
23 Q3 2017 Earnings Release Slides YTD Adjusted Operating Earnings* Waterfall $0.11 2017 $2.05 Corp ($0.01) PHI BGE $0.05 PECO ($0.02) ComEd $0.02 ExGen ($0.34) 2016 $2.24 ($0.37) Market and Portfolio Conditions(1) ($0.07) O&M Impact of Outages(2) ($0.03) Interest Expense $0.13 Zero Emission Credit
Slide 24: Maintaining Strong Investment Grade Credit Ratings
24 Q3 2017 Earnings Release Slides Maintaining Strong Investment Grade Credit Ratings is a Top Financial Priority Current Ratings(2,3) ExCorp ExGen ComEd PECO BGE ACE DPL Pepco Moody‟s Baa2 Baa2 A1 Aa3 A3 A3 A2 A2 S&P BBB- BBB A- A- A- A A A Fitch BBB BBB A A A- A- A A- (1) Due to ring-fencing, S&P
Slide 25: Theoretical Dividend Affordability from Utility less HoldCo
25 Q3 2017 Earnings Release Slides Theoretical Dividend Affordability from Utility less HoldCo(1,2) Utility less HoldCo payout ratio falling consistently even as dividend grows (1) Chart is illustrative and shows theoretical payout ratio if utilities supported 100% of the external dividend and inter
Slide 26: Exelon Generation Disclosures
26 Q3 2017 Earnings Release Slides Exelon Generation Disclosures September 30, 2017
Slide 27: Portfolio Management Strategy
27 Q3 2017 Earnings Release Slides Portfolio Management Strategy Protect Balance Sheet Ensure Earnings Stability Create Value Exercising Market Views % H e d ge d Purely ratable Actual hedge % Market views on timing, product allocation and regional spreads reflected in actual hedge % High End of Pro
Slide 28: Components of Gross Margin Categories
28 Q3 2017 Earnings Release Slides Components of Gross Margin Categories Open Gross Margin •Generation Gross Margin at current market prices, including ancillary revenues, nuclear fuel amortization and fossils fuels expense •Power Purchase Agreement (PPA) Costs and Revenues •Provided at a consolidat
Slide 29: ExGen Disclosures
29 Q3 2017 Earnings Release Slides ExGen Disclosures Gross Margin Category ($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 Mark-to-Market of Hedges (2,3) $2,150 $650 $450 Power New
Slide 30: ExGen Disclosures
30 Q3 2017 Earnings Release Slides ExGen Disclosures (1) Expected generation is the volume of energy that best represents our commodity position in energy markets from owned or contracted for capacity based upon a simulated dispatch model that makes assumptions regarding future market conditions, wh
Slide 31: ExGen Hedged Gross Margin Sensitivities
31 Q3 2017 Earnings Release Slides ExGen Hedged Gross Margin* Sensitivities (1) Based on September 30, 2017, market conditions and hedged position; gas price sensitivities are based on an assumed gas-power relationship derived from an internal model that is updated periodically; power price sensitiv
Slide 32: ExGen Hedged Gross Margin Upside/Risk
32 Q3 2017 Earnings Release Slides ExGen Hedged Gross Margin* Upside/Risk 6,000 6,500 7,000 7,500 8,000 8,500 9,000 2017 2018 2019 A p p ro xima te G ro ss Margin* ( $ m illion )( 1 ,2 ,3 ) $8,050 $7,950 $8,250 $7,800 (1) Represents an approximate range of expected gross margin, taking into account
Slide 33: Illustrative Example of Modeling Total Gross Margin
33 Q3 2017 Earnings Release Slides Row Item Midwest Mid-Atlantic ERCOT New York New England South, West & Canada (A) Start with fleet-wide open gross margin (B) Capacity and ZEC (C) Expected Generation (TWh) 95.8 60.5 19.5 15.5 8.0 (D) Hedge % (assuming mid-point of range) 75.5% 91.5% 78.5% 72.5% 87
Slide 34: Additional ExGen Modeling Data
34 Q3 2017 Earnings Release Slides 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 commodity contracts recorded at fair va
Slide 35: Exelon Utilities' Rate Case Filing Summaries
35 Q3 2017 Earnings Release Slides Exelon Utilities‟ Rate Case Filing Summaries
Slide 36: Exelon Utilities' Distribution Rate Case Schedule
36 Q3 2017 Earnings Release Slides 9/17 10/17 11/17 12/17 Delmarva – DE Electric Distribution Rates Delmarva – MD Electric Distribution Rates ACE Electric Distribution Rates - NJ Exelon Utilities‟ Distribution Rate Case Schedule 1/18 2/18 Note: Based on current schedules of Illinois Commerce Commiss
Slide 37: Delmarva DE (Gas) Distribution Rate Case Filing
37 Q3 2017 Earnings Release Slides Delmarva DE (Gas) Distribution Rate Case Filing 37 Docket No. 17-0978 Test Year January 1, 2017– December 31, 2017 Test Period 3 months actual and 9 months estimated Requested Common Equity Ratio 50.52% Requested Rate of Return ROE: 10.10%; ROR: 6.98% Proposed Rate
Slide 38: Delmarva DE (Electric) Distribution Rate Case Filing
38 Q3 2017 Earnings Release Slides Delmarva DE (Electric) Distribution Rate Case Filing 38 Docket No. 17-0977 Test Year January 1, 2017– December 31, 2017 Test Period 3 months actual and 9 months estimated Requested Common Equity Ratio 50.52% Requested Rate of Return ROE: 10.10%; ROR: 6.98% Proposed
Slide 39: Delmarva MD (Electric) Distribution Rate Case Filing
39 Q3 2017 Earnings Release Slides Delmarva MD (Electric) Distribution Rate Case Filing Formal Case No. 9455 Test Year October 1, 2016 – September 30, 2017 Test Period 7 months actual and 5 months estimated Requested Common Equity Ratio 50.68% Requested Rate of Return ROE: 10.10%; ROR: 7.05% Propose
Slide 40: ComEd April 2017 Distribution Formula Rate
40 Q3 2017 Earnings Release Slides ComEd April 2017 Distribution Formula Rate Docket # 17-0196 Filing Year 2016 Calendar Year Actual Costs and 2017 Projected Net Plant Additions are used to set the rates for calendar year 2018. Rates currently in effect (docket 16-0259) for calendar year 2017 were b
Slide 41: Pepco MD Distribution Rate Case Final Order
41 Q3 2017 Earnings Release Slides Pepco MD Distribution Rate Case Final Order Formal Case No. 9443 Per Commission Order Test Year May 1, 2016 – April 30, 2017 Test Period 8 months actual and 4 months estimated (Updated on August 24, 2017) Requested Common Equity Ratio 50.15% 50.15% Requested Rate o
Slide 42: Atlantic City Electric NJ Rate Case Final Order
42 Q3 2017 Earnings Release Slides Atlantic City Electric NJ Rate Case Final Order 42 BPU Docket No. ER17030308 Per Settlement Test Year August 1, 2016 – July 31, 2017 (Updated on July 14, 2017) Test Period 5 months actual and 7 months forecasted Stipulated Common Equity Ratio Requested 50.14% 50.47
Slide 43: Pepco DC Distribution Rate Case Final Order
43 Q3 2017 Earnings Release Slides Pepco DC Distribution Rate Case Final Order 43 Formal Case No. 1139 Per Commission Order Test Year April 1, 2015 – March 31, 2016 Test Period 12 months actual Requested Common Equity Ratio 49.14% 49.14% Requested Rate of Return ROE: 10.60%; ROR: 8.00% ROE: 9.50%; R
Slide 44: Appendix Reconciliation of Non-GAAP Measures
44 Q3 2017 Earnings Release Slides Appendix Reconciliation of Non-GAAP Measures
Slide 45: Q3 2016 QTD GAAP EPS Reconciliation
45 Q3 2017 Earnings Release Slides Q3 2016 QTD GAAP EPS Reconciliation NOTE: All amounts shown are per Exelon share and represent contributions to Exelon's EPS. Amounts may not add due to rounding. Three Months Ended September 30, 2016 ExGen ComEd PECO BGE PHI Other Exelon 2016 GAAP Earnings (Loss)
Slide 46: Q3 2017 QTD GAAP EPS Reconciliation
46 Q3 2017 Earnings Release Slides Q3 2017 QTD GAAP EPS Reconciliation NOTE: All amounts shown are per Exelon share and represent contributions to Exelon's EPS. Amounts may not add due to rounding. Three Months Ended September 30, 2017 ExGen ComEd PECO BGE PHI Other Exelon 2017 GAAP (Loss) Earnings
Slide 47: Q3 2016 YTD GAAP EPS Reconciliation
47 Q3 2017 Earnings Release Slides Q3 2016 YTD GAAP EPS Reconciliation NOTE: All amounts shown are per Exelon share and represent contributions to Exelon's EPS. Amounts may not add due to rounding. Nine Months Ended September 30, 2016 ExGen ComEd PECO BGE PHI Other Exelon 2016 GAAP Earnings (Loss) P
Slide 48: Q3 2017 YTD GAAP EPS Reconciliation
48 Q3 2017 Earnings Release Slides Q3 2017 YTD GAAP EPS Reconciliation Nine Months Ended September 30, 2017 ExGen ComEd PECO BGE PHI Other Exelon 2017 GAAP Earnings (Loss) Per Share $0.51 $0.47 $0.35 $0.24 $0.38 $0.06 $2.01 Mark-to-market impact of economic hedging activities 0.10 - - - - - 0.10 Unr
Slide 49: GAAP to Operating Adjustments
49 Q3 2017 Earnings Release Slides 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
Slide 50: YE 2017 Exelon FFO Calculation
50 Q3 2017 Earnings Release Slides (1) All amounts rounded to the nearest $25M (2) Calculated using S&P Methodology. Due to ring-fencing, S&P deconsolidates BGE from Exelon and analyzes solely as an equity investment. (3) Reflects impact of operating adjustments on GAAP EBITDA (4) Includes other adj
Slide 51: YE 2017 ExGen Net Debt Calculation
51 Q3 2017 Earnings Release Slides YE 2017 ExGen Net Debt Calculation ($M) (1,3) Long-Term Debt (including current maturities) $8,775 Short-Term Debt $350 - Surplus Cash Adjustment ($300) = Net Debt (a) $8,825 YE 2017 Book Debt / EBITDA Net Debt (a) = 3.1x Operating EBITDA (b) (1) All amounts rounde
Slide 52: GAAP to Non-GAAP Reconciliations: Operating ROE
52 Q3 2017 Earnings Release Slides GAAP to Non-GAAP Reconciliations (1) ACE, Delmarva, and Pepco represents full year of earnings Q3 2017 Operating ROE Reconciliation ($M)(1) ACE Delmarva Pepco Legacy EXC Consolidated EU Net Income (GAAP) (1) $85 $114 $210 $1,281 $1,690 Operating Exclusions ($23) ($
Slide 53: GAAP to Non-GAAP Reconciliations: Cash Flow
53 Q3 2017 Earnings Release Slides GAAP to Non-GAAP Reconciliations 2017 Adjusted Cash from Ops Calculation ($M)(1) ComEd PECO BGE PHI ExGen Other Exelon Net cash flows provided by operating activities (GAAP) $1,375 $750 $775 $1,175 $3,400 ($250) $7,225 Other cash from investing activities - - - - (
Slide 54: GAAP to Non-GAAP Reconciliations: ExGen Free Cash Flow and O&M
54 Q3 2017 Earnings Release Slides GAAP to Non-GAAP Reconciliations 2017-2020 ExGen Free Cash Flow Calculation ($M)(1) Cash from Operations (GAAP) $15,150 Other Cash from Investing and Activities ($650) Baseline Capital Expenditures (4) ($4,025) Nuclear Fuel Capital Expenditures ($3,625) Free Cash F