May 01, 2013

 Exelon Announces First Quarter 2013 Results 

 Earnings were at the top of guidance range 

 

CHICAGO — Exelon Corporation (NYSE: EXC) announced first quarter 2013 consolidated earnings as follows:

     
  First Quarter  
  2013  2012
Adjusted (non-GAAP) Operating Results:
  Net Income (Loss) ($ millions) $602 $603
  Diluted Earnings per Share $0.70 $0.85
GAAP Results: 
  Net Income (Loss) ($ millions) $(4) $200
  Diluted Earnings per Share $(0.01)  $0.28
  

“Exelon delivered earnings at the top end of our guidance range and our nuclear fleet achieved a 96.4 percent capacity factor this quarter, highlighting our commitment to financial discipline and operational excellence,” said Christopher M. Crane, Exelon’s president and CEO.

First Quarter Operating Results

First quarter 2013 earnings include financial results for Constellation Energy and Baltimore Gas and Electric Company (BGE) while first quarter 2012 earnings only contains the financial results for those companies from March 12, 2012, to March 31, 2012.  Therefore, the composition of results of operations from 2013 and 2012 are not comparable for Exelon Generation Company, LLC (Generation), BGE and Exelon.

As shown in the table above, Exelon’s adjusted (non-GAAP) operating earnings declined to $0.70 per share in the first quarter of 2013 from $0.85 per share in the first quarter of 2012. Earnings in first quarter 2013 primarily reflected the following negative factors:

• Lower energy margins at Generation, resulting from decreased capacity pricing related to the Reliability Pricing Model (RPM) for the PJM Interconnection, LLC (PJM) market, higher nuclear fuel costs and lower realized market prices for the sale of energy across all regions;

• Higher operating and maintenance expenses, including increased labor, contracting and materials costs;

• Increased depreciation and amortization expense due to ongoing capital expenditures; and

• Impact of increased average diluted common shares outstanding as a result of the merger.

These factors were partially offset by:

• The addition of Constellation Energy’s contribution to Generation’s energy margins;

• The addition of a full quarter of BGE’s financial results;

• Higher nuclear volume due to fewer planned and unplanned outage days; and

• Impact of favorable weather in the ComEd and PECO territories.

Adjusted (non-GAAP) operating earnings for the first quarter of 2013 do not include the following items (after tax) that were included in reported GAAP earnings:
      
  (in millions) (per diluted share)
Exelon Adjusted (non-GAAP) Operating Earnings  $602 $0.70
Mark-to-Market Impact of Economic Hedging Activities (235) (0.27)
Unrealized Gains Related to NDT (Nuclear Decommissioning Trust) Fund Investments  35 0.04
Plant Retirements and Divestitures 13 (0.02)
Constellation Merger and Integration Costs (27) (0.03)
Amortization of Commodity Contract Intangibles  (117)  (0.14)
Amortization of the Fair Value of Certain Debt 3 -
Re-measurement of Like-Kind Exchange Tax Position (265) (0.31)
Nuclear Uprate Project Cancellation (13) (0.02)
Exelon GAAP Net Income (Loss) (4) (0.01)

 

Adjusted (non-GAAP) operating earnings for the first quarter of 2012 do not include the following items (after tax) that were included in reported GAAP earnings:
   
  (in millions)  (per diluted share)
Exelon Adjusted (non-GAAP) Operating Earnings $603 $0.85
Mark-to-Market Impact of Economic Hedging Activities  43 0.06
Unrealized Losses Related to NDT Fund Investments   36 0.05
Plant Retirements and Divestitures  (6) 0.01)
Constellation Merger and Integration Costs (113) (0.16)
Maryland Commitments (227) (0.32)
Amortization of Commodity Contract Intangibles (78) (0.11)
FERC Settlement (172) (0.25)
Non-Cash Re-measurement of Deferred Income Taxes 117 0.17
Other Acquisition Costs (3) -
Exelon GAAP Net Income (Loss) 200 0.28

   
First Quarter and Recent Highlights

• Nuclear Operations:  Generation’s nuclear fleet, including its owned output from the Salem Generating Station, produced 36,031 gigawatt-hours (GWh) in the first quarter of 2013, compared with 35,262 GWh in the first quarter of 2012. The output data excludes the units owned by Constellation Energy Nuclear Group LLC (CENG).  Excluding Salem and the units owned by CENG, the Exelon-operated nuclear plants achieved a 96.4 percent capacity factor for the first quarter of 2013, compared with 93.6 percent for the first quarter of 2012. The number of planned refueling outage days totaled 49 in the first quarter of 2013 versus 67 days in the first quarter of 2012. The number of non-refueling outage days totaled six days in the first quarter of 2013, compared with 16 days in the first quarter of 2012.

• Fossil and Renewables Operations:  The dispatch match rate for Generation’s fossil and hydro fleet was 98.4 percent in the first quarter of 2013, compared with 87.8 percent in the first quarter of 2012.  The 2013 results include former Constellation plants and Exelon hydro plants, whereas the 2012 data includes only legacy Exelon fossil plants. The performance in 2012 was driven by an outage at one of the peaking units in Texas. Energy capture for the wind and solar fleet was 94.9 percent in the first quarter of 2013, compared with 94.4 percent in the first quarter of 2012.

Dispatch match is used to measure market responsiveness.  Expressed as a percentage, it reflects the unit’s revenue capture when it is called upon for generation.  Factors that impact dispatch match adversely include forced outages, derates and failure to operate to the desired generation signal.

• Illinois Senate Bill 9:  During March 2013, the Illinois House and Senate each passed Senate Bill 9 (SB9) with supermajority votes to clarify the intent of the Energy Infrastructure Modernization Act (EIMA) on three major issues:  average versus year-end rate base and capital structure, return on pension asset, and a weighted average cost of capital interest rate on the prior year reconciliation.  In addition, SB9 provides for accelerated advanced metering infrastructure (AMI) deployment that would commence earlier than 2015. 

On March 21, 2013, SB9 was sent to the governor for his consideration.  The governor has 60 days to approve or veto the legislation.   If the governor does nothing, the bill becomes law after 60 days.  If he vetoes the bill, the legislature will have the opportunity to override the veto with supermajority votes in each house, at which time it becomes law.  If the legislation becomes law by June 15, 2013, ComEd will update certain elements of its AMI deployment schedule to provide for an accelerated deployment as called for by SB9.

• ComEd Distribution Formula Rate Case:  On April 29, 2013, ComEd filed its 2013 annual distribution formula rate update, which establishes the net revenue requirement used to set the rates that will take effect in January 2014 after review by the Illinois Commerce Commission (ICC).  The revenue requirement requested in the filing is based on 2012 actual costs and forecasted 2013 capital additions as well as an annual reconciliation of the revenue requirement in effect in 2012 to the actual costs incurred for that year. ComEd requested a total increase to the net revenue requirement of $311 million, reflecting an increase of $169 million for the initial revenue requirement for 2013 and an increase of $142 million for the annual reconciliation for 2012.

Rates effective in 2013 as a result of the 2012 distribution formula rate update are subject to a reconciliation to actual 2013 costs, which will be filed with the ICC in 2014. This reconciliation will be reflected in customer rates beginning in January 2015. Throughout each year, ComEd records regulatory assets or regulatory liabilities and corresponding increases or decreases to revenue for any differences between the revenue requirement in effect and its best estimate of the probable increase or decrease in the revenue requirement expected to ultimately be approved by the ICC in that year’s reconciliation proceedings based on the year’s actual costs incurred.

The filing does not reflect the SB9 legislation.  If that legislation becomes law, an update to the distribution formula will be filed with the ICC shortly thereafter to reflect the passage of such legislation.

• BGE Gas and Electric Distribution Rate Case:  On Feb. 22, 2013, the Maryland Public Service Commission (MDPSC) issued Order No. 85374 related to the application filed by BGE on July 27, 2012 seeking an increase in electric and gas base rates.  Under the MDPSC’s Order, BGE is authorized to increase annual electric base rates by $81 million, which is approximately 62 percent of the $131 million requested in the application and annual gas base rates by $32 million, which is approximately 71 percent of the $45 million requested. The electric distribution rate increase was set using an allowed return on equity of 9.75 percent and the gas distribution rate increase was set using an allowed return on equity of 9.60 percent. The new electric and natural gas distribution rates took effect for services rendered on or after Feb. 23, 2013.

• PECO Preferred Stock Redemption:  On March 25, 2013, PECO announced that it issued a notice of redemption for all of the following series of preferred stock:

Series       CUSIP No.                                      Redemption Price Per Share
$3.80         Series A (NYSE: PEPRA)            693304206 $106.00
$4.30         Series B (NYSE: PEPRB)           693304305 $102.00
$4.40         Series C (NYSE: PEPRC)          693304404 $112.50
$4.68         Series D (NYSE: PEPRD)          693304503 $104.00

The redemption date for each of the above series of preferred stock is May 1, 2013. The total amount of preferred stock being redeemed is $87 million in stated value.  The redemption price per share of each series of preferred stock shown above equals the stated value per share plus a premium, if applicable, plus accrued and unpaid dividends to, but excluding, the redemption date, less the previously announced quarterly dividend that will be paid separately on May 1, 2013, to shareholders of record as of the close of business on March 28, 2013. No dividends on the preferred stock being redeemed will accrue on or after the redemption date, nor will any interest accrue on amounts held to pay the redemption price.

• Antelope Valley Solar Ranch One Project:  Three additional blocks of the Antelope Valley Solar Ranch One Project totaling 69 megawatts (MW) became operational in the first quarter of 2013, bringing the total capacity in operation to 98 MW. The remaining phases of the project are on track to be completed by the original planned commercial operation date of December 2013.

• Hedging Update:  Exelon’s hedging program involves the hedging of commodity risk for Exelon’s expected generation, typically on a ratable basis over a three-year period.  Expected generation represents the amount of energy estimated to be generated or purchased through owned or contracted-for capacity.  The proportion of expected generation hedged as of March 31, 2013, is 98 to 101 percent for 2013, 70 to 73 percent for 2014, and 33 to 36 percent for 2015.  The primary objective of Exelon’s hedging program is to manage market risks and protect the value of its generation and its investment-grade balance sheet, while preserving its ability to participate in improving long-term market fundamentals.

Operating Company Results

Generation 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, risk management services and natural gas exploration and production activities.

First quarter 2013 GAAP net loss was $18 million, compared with net income of $168 million in the first quarter of 2012. Adjusted (non-GAAP) operating earnings for the first quarter of 2013 and 2012 do not include various items (after tax) that were included in reported GAAP earnings.   A reconciliation of Adjusted (non-GAAP) Operating Earnings to GAAP Net Income (Loss) is in the table below:

(in millions) 1Q13 1Q12
Generation Adjusted (non-GAAP) Operating Earnings   $336 $409
Mark-to-Market Impact of Economic Hedging Activities  (246) 36
Unrealized Gains/Losses Related to NDT Fund Investment 35 36
Plant Retirements and Divestitures 13 (6)
Constellation Merger and Integration Costs  (29)  (45)
Maryland Commitments - (22)
Amortization of Commodity Contract Intangibles (117) (78)
FERC Settlement - (172)
Non-Cash Re-measurement of Deferred Income Taxes - 13
Other Acquisition Costs - (3)
Amortization of the Fair Value of Certain Debt 3 -
Nuclear Uprate Project Cancellation (13) -
Generation GAAP Net Income (Loss) $(18) $168

Generation’s Adjusted (non-GAAP) Operating Earnings in the first quarter of 2013 decreased $73 million compared with the same quarter in 2012. This decrease primarily reflected:

• Lower energy margins at Generation, resulting from decreased capacity pricing related to RPM for the PJM market, higher nuclear fuel costs and lower realized market prices for the sale of energy across all regions;

• Higher operating and maintenance expenses; and

• Increased depreciation and amortization expense due to ongoing capital expenditures.

These items were partially offset by contribution to Generation’s energy margins from the addition of Constellation Energy to Generation’s operations and higher nuclear volume due to fewer planned and unplanned outage days.

Generation’s average realized margin on all electric sales, including sales to affiliates and excluding trading activity, was $27.23 per megawatt-hour (MWh) in the first quarter of 2013, compared with $32.57 per MWh in the first quarter of 2012.

ComEd consists of electricity transmission and distribution operations in northern Illinois. 

ComEd recorded GAAP net loss of $81 million in the first quarter of 2013, compared with net income of $87 million in the first quarter of 2012. Adjusted (non-GAAP) operating earnings for the first quarter of 2012 and 2013 do not include various items (after tax) that were included in reported GAAP earnings.   A reconciliation of Adjusted (non-GAAP) Operating Earnings to GAAP Net Income (Loss) is in the table below:

 ($ millions) 1Q13  1Q12
ComEd Adjusted (non-GAAP) Operating Earnings $89 $88
Re-measurement of Like-Kind Exchange Tax Position (170)
Constellation Merger and Integration Costs - (1)
ComEd GAAP Net Income $(81) $87

ComEd’s Adjusted (non-GAAP) Operating Earnings in the first quarter of 2013 were up $1 million from the same quarter in 2012, primarily due to favorable weather in ComEd’s service territory partially offset by lower realized prices resulting from changes in customer mix.

For the first quarter of 2013, heating degree-days in the ComEd service territory were up 36.7 percent relative to the same period in 2012 and were 3.0 percent above normal. Total retail electric deliveries increased 2.9 percent quarter over quarter.

Weather-normalized retail electric deliveries decreased 1.2 percent in the first quarter of 2013 relative to 2012, reflecting decreases in deliveries to both small and large commercial and industrial (C&I) customers. For ComEd, weather had favorable after-tax effect of $10 million on first quarter 2013 earnings relative to 2012 and a favorable after-tax effect of $2 million relative to normal weather. 

PECO consists of electricity transmission and distribution operations and retail natural gas distribution operations in southeastern Pennsylvania.

PECO’s GAAP net income in the first quarter of 2013 was $121 million, compared with $96 million in the first quarter of 2012. Adjusted (non-GAAP) Operating Earnings for the first quarter of 2012 and 2013 do not include various items (after tax) that were included in reported GAAP earnings.   A reconciliation of Adjusted (non-GAAP) Operating Earnings to GAAP Net Income is in the table below:

($ millions) 1Q13 1Q12
PECO Adjusted (non-GAAP) Operating Earnings $123 $100
Constellation Merger and Integration Costs (2) (4)
PECO GAAP Net Income (Loss) $121 $96

PECO’s Adjusted (non-GAAP) Operating Earnings in the first quarter of 2013 increased $23 million from the same quarter in 2012, primarily due to favorable weather in PECO’s service territory. 

For the first quarter of 2013, heating degree-days in the PECO service territory were up 27.5 percent relative to the same period in 2013 and were 1.5 percent below normal. Total retail electric deliveries were up 4.3 percent quarter over quarter. On the gas side, deliveries in the first quarter of 2013 were up 23.6 percent from the first quarter of 2012.   

Weather-normalized retail electric deliveries were flat in the first quarter of 2013 relative to 2012, reflecting declines in deliveries to small C&I customers offset by increases in deliveries to large C&I and residential customers. Weather-normalized gas deliveries were up 2.0 percent in the first quarter of 2013. For PECO, weather had favorable after-tax effect of $27 million on first quarter 2013 earnings relative to 2012 and an unfavorable after-tax effect of $4 million relative to normal weather.

BGE consists of electricity transmission and distribution operations and retail natural gas distribution operations in central Maryland.

For the first quarter of 2013, BGE’s GAAP net income was $77 million and adjusted (non-GAAP) Operating Earnings were $74 million. 

Adjusted (non-GAAP) Operating Earnings

Adjusted (non-GAAP) operating earnings, which generally exclude significant one-time charges or credits that are not normally associated with ongoing operations, mark-to-market adjustments from economic hedging activities and unrealized gains and losses from NDT fund investments, are provided as a supplement to results reported in accordance with GAAP. Management uses such adjusted (non-GAAP) operating earnings measures internally to evaluate the company’s performance and manage its operations. Reconciliation of GAAP to adjusted (non-GAAP) operating earnings for historical periods is attached. (download attachment) Additional earnings release attachments, which include the reconciliation on page 8 are posted on Exelon’s Web site: www.exeloncorp.com and have been furnished to the Securities and Exchange Commission on Form 8-K on May 1, 2013.  

Cautionary Statements Regarding Forward-Looking Information

This news release 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 materially from the forward-looking statements made by Exelon Corporation, Commonwealth Edison Company, PECO Energy Company, Baltimore Gas and Electric Company and Exelon Generation Company, LLC (Registrants) include those factors discussed herein, as well as the items discussed in (1)  Exelon’s 2012 Annual Report on Form 10-K in (a) ITEM 1A. Risk Factors, (b) ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and (c) ITEM 8. Financial Statements and Supplementary Data: Note 19; and (2) other factors discussed in filings with the SEC by the Registrants. Readers are cautioned not to place undue reliance on these forward-looking statements, which apply only as of the date of this presentation. None of the Registrants undertakes any obligation to publicly release any revision to its forward-looking statements to reflect events or circumstances after the date of this news release.

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About Exelon

Exelon Corporation (NYSE: EXC) is the nation’s leading competitive energy provider, with 2012 revenues of approximately $23.5 billion. Headquartered in Chicago, Exelon has operations and business activities in 47 states, the District of Columbia and Canada. Exelon is one of the largest competitive U.S. power generators, with approximately 35,000 megawatts of owned capacity comprising one of the nation’s cleanest and lowest-cost power generation fleets. The company’s Constellation business unit provides energy products and services to approximately 100,000 business and public sector customers and approximately 1 million residential customers. Exelon’s utilities deliver electricity and natural gas to more than 6.6 million customers in central Maryland (BGE), northern Illinois (ComEd) and southeastern Pennsylvania (PECO).

Contacts

Paul Adams Exelon Corporate Communications
410.470.4167
Ravi Ganti Investor Relations
312.394.2348
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