Exelon Announces First Quarter 2011 Results; Reaffirms Full Year Operating Earnings Guidance Range 

 Exelon Corporation (NYSE: EXC) announced first quarter 2011 consolidated earnings. 

 

CHICAGO – Exelon Corporation (NYSE: EXC) announced first quarter 2011 consolidated earnings as follows: 
                                                                                   First Quarter
                                                                               2011            2010
Adjusted (non-GAAP) Operating Results:   
  Net Income ($ millions)                                            $778             $662
  Diluted Earnings per Share                                       $1.17            $1.00
GAAP Results:   
  Net Income ($ millions)                                            $668             $749
  Diluted Earnings per Share                                       $1.01            $1.13

“Our first quarter earnings were above our expectations primarily driven by results at Generation, including the performance of our generating units during a February cold snap in the Dallas area,” said John W. Rowe, chairman and chief executive officer.  “Our operating and financial performance in the first quarter keeps us comfortably on track to be within our earnings guidance range of $3.90 to $4.20 per share.  Our nuclear operations also had a strong quarter, with a 94.8 percent capacity factor.  Our fleet remains safe and reliable, and we are working closely with regulators, policymakers and the industry to ensure we stay current with any lessons learned from the Fukushima event.”

First Quarter Operating Results

As shown in the table above, Exelon’s adjusted (non-GAAP) operating earnings increased to $1.17 per share in the first quarter of 2011 from $1.00 per share in the first quarter of 2010, primarily due to:
• The effect at Exelon Generation Company, LLC (Generation) of higher realized energy prices in the Mid-Atlantic region due to the expiration of the power purchase agreement (PPA) with PECO Energy Company (PECO), favorable capacity pricing primarily related to the Reliability Pricing Model (RPM) for the PJM Interconnection, LLC (PJM) market, and increased nuclear volume primarily reflecting the effect of fewer nuclear outage days in 2011; and
• The effect of new electric and gas distribution rates at PECO effective January 2011.

Higher first quarter 2011 earnings were partially offset by:
• The effect of a credit in 2010 for the recovery of uncollectible accounts expense at Commonwealth Edison Company (ComEd);
• The effect of competitive transition charge (CTC) recoveries in 2010, net of amortization expense, associated with PECO’s transition period, which ended on December 31, 2010; and
• Higher operating and maintenance expense.

Adjusted (non-GAAP) operating earnings for the first quarter of 2011 do not include the following items (after tax) that were included in reported GAAP earnings: 
                                                                                  (in millions) (per diluted share)
Mark-to-market losses primarily from Generation’s                                                      economic hedging activities                                               $(89)             $(0.14)
Non-cash charge to remeasure deferred taxes at higher                                               Illinois corporate tax rates                                                 $(29)             $(0.04)
Unrealized gains related to nuclear decommissioning                                                    trust (NDT) fund investments to the extent not offset by                                               contractual accounting                                                        $24               $0.04
Costs associated with the planned retirement of certain                                                Generation fossil generating units                                       $(16)            $(0.02)

Adjusted (non-GAAP) operating earnings for the first quarter of 2010 did not include the following items (after tax) that were included in reported GAAP earnings:
                                                                                  (in millions) (per diluted share)
Mark-to-market gains primarily from Generation’s                                                       economic hedging activities                                               $142               $0.21
Non-cash charge resulting from health care legislation                                                 related to Federal income tax changes                               $(65)              $(0.10)
Unrealized gains related to NDT fund investments to the                                                      extent not offset by contractual accounting                        $20                $0.03
Costs associated with the retirement of certain                                                            Generation fossil generating units                                       $(8)              $(0.01)
Costs associated with the 2007 Illinois electric rate                                                      settlement agreement                                                        $(2)                   -

2011 Earnings Outlook

Exelon reaffirmed a guidance range for 2011 adjusted (non-GAAP) operating earnings of $3.90 to $4.20 per share.  Operating earnings guidance is based on the assumption of normal weather for the balance of the year.

The outlook for 2011 adjusted (non-GAAP) operating earnings for Exelon and its subsidiaries excludes the following items:
• Mark-to-market adjustments from economic hedging activities
• Unrealized gains and losses from NDT fund investments to the extent not offset by contractual accounting as described in the notes to the consolidated financial statements
• Significant impairments of assets, including goodwill
• Changes in decommissioning obligation estimates
• Non-cash charge to remeasure deferred taxes at higher Illinois corporate tax rates
• Financial impacts associated with the planned retirement of fossil generating units
• Other unusual items
• Significant changes to GAAP

First Quarter and Recent Highlights

• U.S. Environmental Protection Agency (EPA) Air Toxics and Cooling Water Rules:  On March 16, 2011, the EPA issued a draft air toxics rule under the Clean Air Act, which will require existing and new coal-fired electricity generating plants to reduce emissions of mercury and other hazardous air pollutants.  The proposed rule is in line with Exelon’s expectations and provides for facilities to meet the standards by late 2014, with limited exceptions.  A public comment period lasts 60 days after the rule is published in the Federal Register.  Final action by the EPA is required by November 2011.

On March 28, 2011, the EPA proposed standards to protect fish and other aquatic life under section 316(b) of the Clean Water Act for cooling water systems at large power plants and industrial facilities.  The proposed rules address the primary issues in the manner Exelon anticipated; cooling towers are not required as the best technology available for entrainment standards and cost-benefit analysis must be performed.  The public comment period lasts 90 days after the rule is published in the Federal Register.  A final rule is due by July 2012.

• Nuclear Operations:  On March 11, 2011, Japan experienced a 9.0 magnitude earthquake and ensuing tsunami that seriously damaged the nuclear units at the Fukushima Daiichi plant, which is operated by Tokyo Electric Power Co.  Generation is confident its nuclear generating facilities do not have the same operating risks as the Fukushima Daiichi plant because they are designed to withstand extreme environmental hazards, including floods and earthquakes, even though Generation’s plants are not located in significant earthquake zones or in regions where tsunamis are a threat.  Generation continues to work with regulators and industry organizations to understand the events in Japan and apply lessons learned.  The industry is already taking specific steps to respond.  Generation has completed actions requested by the Institute of Nuclear Power Operations (INPO), which include tests that verified its emergency equipment is available and functional, walk-downs on its procedures related to critical safety equipment, and verification of current qualifications of operators and support staff needed to implement the procedures.  Generation will continue to engage in industry assessments and actions.

Generation’s nuclear fleet, including its owned output from the Salem Generating Station, produced 35,192 gigawatt-hours (GWh) in the first quarter of 2011, compared with 34,109 GWh in the first quarter of 2010.  The Exelon-operated nuclear plants achieved a 94.8 percent capacity factor for the first quarter of 2011 compared with 92.3 percent for the first quarter of 2010.  The Exelon-operated nuclear plants completed one scheduled refueling outage and began two others in the first quarter of 2011, compared with completing three scheduled refueling outages and beginning two others in the first quarter of 2010.  Among the planned outages completed in last year’s first quarter was the extended refueling outage at Three Mile Island Unit 1, which included the replacement of steam generators.  As a result, the number of refueling outage days totaled 44 in the first quarter of 2011 versus 101 days in the first quarter of 2010.  The number of non-refueling outage days at the Exelon-operated plants totaled 14 days in the first quarter of 2011 compared with 5 days in the first quarter of 2010.

• Nuclear Uprate Program: On April 8, 2011, the U.S. Nuclear Regulatory Commission (NRC) approved Generation’s request to increase the generating capacity of both units of the Limerick Generating Station by 1.65 percent, or 16 megawatts, each.  The NRC’s evaluation determined that Generation could safely increase the power output of the units.  Exelon plans to implement the uprate for Unit 1 within 90 days of the NRC’s approval and for Unit 2 within 90 days of the completion of its refueling outage on April 24, 2011.

• Fossil and Hydro Operations:  The equivalent demand forced outage rate for Generation’s fossil fleet was 2.3 percent in the first quarter of 2011, compared with 3.8 percent in the first quarter of 2010.  The improvement was largely due to approximately the same forced outage hours in the first quarter of 2011 while the fossil units operated more hours, primarily reflecting cold weather in Texas in February.  The equivalent availability factor for the hydroelectric facilities was 97.8 percent in the first quarter of 2011, compared with 95.4 percent in the first quarter of 2010.  The improvement in 2011 was due to planned inspections that were performed in March 2010.

• 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, 2011 is 93 to 96 percent for 2011, 73 to 76 percent for 2012 and 38 to 41 percent for 2013.  The primary objectives of Exelon’s hedging program are 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.

• ComEd Electric Distribution Rate Case:  On June 30, 2010, ComEd filed a rate increase request with the Illinois Commerce Commission (ICC) to allow the utility to continue modernizing its electric delivery system and recover the cost of substantial investments made since the last rate filing in 2007.  In subsequent testimony, ComEd revised its requested revenue increase to $343 million, reflecting certain adjustments to its original request of $396 million.  On April 1, 2011, the Administrative Law Judges issued a proposed order, which recommends a $152 million increase.  After an 11-month proceeding with input from all stakeholders, the ICC is expected to issue its decision about any increase in rates in late May 2011.

• Illinois Proposed Energy Infrastructure and Modernization Act:  On February 8, 2011, legislation (House Bill 14) was introduced in the Illinois General Assembly that would modernize Illinois’ electric grid.  The proposal includes a policy-based approach which would provide a more predictable ratemaking system and would enable utilities to modernize the electric grid and set the stage for fostering economic development while creating and retaining jobs.  The proposed legislation includes a process for determining formula rates that would provide for the recovery of actual costs of service that are prudent and reasonable.  On April 14, 2011, House Bill 14 was unanimously passed out of the Illinois House Public Utilities Committee subject to the commitment that there would be further negotiations with stakeholders.  The current legislative session is scheduled to adjourn at the end of May 2011.

• Financing Activities:  On March 23, 2011, Exelon Corporate, Generation and PECO replaced their unsecured revolving credit facilities with new facilities with aggregate bank commitments of $500 million, $5.3 billion and $600 million, respectively.  These credit facilities expire on March 23, 2016, unless extended.  On March 25, 2010, ComEd had replaced its $952 million credit facility with a similar $1 billion unsecured revolving credit facility that expires on March 25, 2013, unless extended.

OPERATING COMPANY RESULTS

Generation consists of owned and contracted electric generating facilities, wholesale energy marketing operations and competitive retail sales operations. 
 
First quarter 2011 net income was $495 million compared with $561 million in the first quarter of 2010.  First quarter 2011 net income included (all after tax) mark-to-market losses of $89 million from economic hedging activities, a non-cash charge of $21 million to remeasure deferred taxes at higher Illinois corporate tax rates, unrealized gains of $24 million related to NDT fund investments and costs of $16 million associated with the planned retirement of certain fossil generating units.  First quarter 2010 net income included (all after tax) mark-to-market gains of $142 million from economic hedging activities, unrealized gains of $20 million related to NDT fund investments, a charge of $26 million related to the passage of Federal health care legislation, costs of $8 million associated with the retirement of certain fossil generating units and a charge of $1 million for costs associated with the 2007 Illinois electric rate settlement.  Excluding the effects of these items, Generation’s net income in the first quarter of 2011 increased $163 million compared with the same quarter in 2010 primarily due to:
• The impact on energy gross margin of higher realized energy prices in the Mid-Atlantic region due to the expiration of the PPA with PECO, favorable capacity pricing primarily related to RPM and increased nuclear volume largely reflecting fewer outage days.

The increase in net income was partially offset by:
• Increased depreciation expense;
• The impact on energy gross margin of higher nuclear fuel costs; and
• Higher interest expense.

Generation’s average realized margin on all electric sales, including sales to affiliates and excluding trading activity, was $44.30 per MWh in the first quarter of 2011 compared with $37.26 per MWh in the first quarter of 2010.

ComEd consists of the electricity transmission and distribution operations in northern Illinois. 
 
ComEd recorded net income of $69 million in the first quarter of 2011, compared with net income of $116 million in the first quarter of 2010.  First quarter net income in 2011 included an after-tax non-cash charge of $4 million to remeasure deferred taxes at higher Illinois corporate tax rates.  First quarter net income in 2010 included after-tax charges of $12 million related to the passage of Federal health care legislation and $1 million associated with the 2007 Illinois electric rate settlement.  Excluding the effects of these items, ComEd’s net income in the first quarter of 2011 was down $56 million from the same quarter in 2010 primarily reflecting:
• The credit in 2010 for the recovery of uncollectible accounts expense; and
• The recording of an estimated refund obligation as a result of the September 2010 Illinois Appellate Court ruling regarding ComEd’s 2007 rate case.

In the first quarter of 2011, heating degree-days in the ComEd service territory were up 7.1 percent relative to the same period in 2010 and were 3.9 percent above normal.  As a result, ComEd’s total retail electric deliveries increased 1.2 percent quarter over quarter.

Weather-normalized retail electric deliveries decreased 0.1 percent in the first quarter of 2011, primarily reflecting a decrease in deliveries to residential customers.  For ComEd, weather had a favorable after-tax effect of $3 million on first quarter 2011 earnings relative to 2010 and a favorable after-tax effect of $2 million relative to normal weather that is incorporated in Exelon’s earnings guidance. 

PECO consists of the electricity transmission and distribution operations and the retail natural gas distribution business in southeastern Pennsylvania.
 
PECO’s net income in the first quarter of 2011 was $126 million, up from $101 million in the first quarter of 2010.  First quarter net income in 2010 included an after-tax charge of $10 million related to the passage of Federal health care legislation.  Excluding the effect of this item, PECO’s net income in the first quarter of 2011 was up $15 million from the same quarter in 2010 primarily reflecting:
• The effect of new electric and gas distribution rates effective January 2011; and
• Lower interest expense on long-term debt.

The increase in net income was partially offset by the effect of CTC recoveries in 2010, net of amortization expense, associated with PECO’s transition period, which ended on December 31, 2010.

In the first quarter of 2011, heating degree-days in the PECO service territory were up 3.9 percent from 2010 and were close to normal.  Total retail electric deliveries were down 0.6 percent from last year, primarily reflecting a decrease in deliveries to large commercial and industrial customers.  On the retail gas side, deliveries in the first quarter of 2011 were up 4.2 percent from the first quarter of 2010, largely driven by the effects of colder weather conditions compared with last year.   

Weather-normalized retail electric deliveries were down 1.1 percent in the first quarter of 2011, primarily reflecting a decline in large commercial and industrial deliveries.  Weather-normalized retail gas deliveries were up 0.7 percent in the first quarter of 2011.  For PECO, weather had a favorable after-tax effect of $4 million on first quarter 2011 earnings relative to 2010 and an unfavorable after-tax effect of $2 million relative to normal weather that is incorporated in Exelon’s earnings guidance.

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.  Additional earnings release attachments, which include the reconciliation on page 6, are posted on Exelon’s Web site (download attachment) and have been furnished to the Securities and Exchange Commission on Form 8-K on April 27, 2011.
 
Conference call information: Exelon has scheduled a conference call for 11:00 AM ET (10:00 AM CT) on April 27, 2011.  The call-in number in the U.S. and Canada is 800-690-3108, and the international call-in number is 973-935-8753.  If requested, the conference ID number is 58390808.  Media representatives are invited to participate on a listen-only basis.  The call will be web-cast and archived on Exelon’s Web site in the Investors section.)

Telephone replays will be available until May 11.  The U.S. and Canada call-in number for replays is 800-642-1687, and the international call-in number is 706-645-9291.  The conference ID number is 58390808.

Forward Looking Statements

This press release includes 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 these forward-looking statements include those discussed herein as well as those discussed in (1) Exelon’s 2010 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 18; (2) Exelon’s First Quarter 2011 Quarterly Report on Form 10-Q (to be filed on April 27, 2011) in (a) Part II, Other Information, ITEM 1A. Risk Factors, (b) Part 1, Financial Information, ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations and (c) Part I, Financial Information, ITEM 1. Financial Statements: Note 12 and (3) other factors discussed in filings with the Securities and Exchange Commission (SEC) by Exelon Corporation, Commonwealth Edison Company, PECO Energy Company and Exelon Generation Company, LLC (Companies). Readers are cautioned not to place undue reliance on these forward-looking statements, which apply only as of the date of this press release. None of the Companies undertakes any obligation to publicly release any revision to its forward-looking statements to reflect events or circumstances after the date of this press release.

###

 

About Exelon

Exelon Corporation is one of the nation’s largest electric utilities with more than $18 billion in annual revenues. The company has one of the industry’s largest portfolios of electricity generation capacity, with a nationwide reach and strong positions in the Midwest and Mid-Atlantic. Exelon distributes electricity to approximately 5.4 million customers in northern Illinois and southeastern Pennsylvania and natural gas to approximately 490,000 customers in the Philadelphia area. Exelon is headquartered in Chicago and trades on the NYSE under the ticker EXC.

Contacts

Stacie Frank Investor Relations
312.394.3094
Judith Rader Exelon Communications
312.394.7417
pr_20110427_EXC_q1earnings