Exelon Announces Fourth Quarter and Full Year 2011 Results 

 Exelon Corporation (NYSE: EXC) announced fourth quarter and full year 2011 consolidated earnings. 

 

CHICAGO – Exelon Corporation (NYSE: EXC) announced fourth quarter and full year 2011 consolidated earnings as follows:

                                Exelon Consolidated Earnings (unaudited)
                                                                       Full Year              Fourth Quarter
                                                                   2011        2010         2011        2010
Adjusted (non-GAAP) Operating Results:    
  Net Income ($ millions)                              $2,763       $2,689         $544         $631
  Diluted Earnings per Share                          $4.16         $4.06         $0.82        $0.96
GAAP Results:    
  Net Income ($ millions)                              $2,495       $2,563         $606         $524
  Diluted Earnings per Share                          $3.75         $3.87         $0.91        $0.79
  
“Our full year 2011 operating earnings were within our guidance range, as well as above our original expectations for the year,” said John W. Rowe, Exelon’s chairman and CEO. “Despite the impact of adverse economic, market and weather conditions, we achieved our financial commitments and operational excellence across the company.”

Rowe added, “Our significant accomplishments in 2011 included making considerable progress towards completion of our strategic merger with Constellation Energy and continuing to improve our industry-leading environmental position with additions of clean generation assets.”

Fourth Quarter Operating Results

As shown in the table above, Exelon’s adjusted (non-GAAP) operating earnings declined to $0.82 per share in the fourth quarter of 2011 from $0.96 per share in the fourth quarter of 2010. Earnings in 2011 primarily reflected the following adverse factors:

• The effect on energy margins at Exelon Generation Company, LLC (Generation) of decreased capacity pricing related to the Reliability Pricing Model (RPM) for the PJM Interconnection, LLC (PJM) market and higher nuclear fuel costs;
• Higher operating and maintenance expenses at Generation, including the impact of increased scheduled nuclear refueling outage days;
• The effect of unfavorable weather in the PECO Energy Company (PECO) and Commonwealth Edison Company (ComEd) service territories; and
• Increased depreciation and amortization expense.

These factors were partially offset by:

• The net favorable effect on Generation’s energy margins primarily reflecting market and portfolio conditions in the Mid-Atlantic and Midwest regions;
• The effect of new distribution rates at PECO and ComEd effective January 1, 2011 and June 1, 2011, respectively;
• The effect of 2010 competitive transition charge (CTC) amortization expense, net of collections, at PECO associated with its transition period, which ended on December 31, 2010; and
• Increased distribution revenues at ComEd as a result of the annual reconciliation in the performance-based distribution formula rate tariff and a net reduction in operating and maintenance expenses at ComEd for the allowed recovery of certain 2011 storm costs, both pursuant to the Energy Infrastructure Modernization Act, which became effective in the fourth quarter of 2011.
 
Adjusted (non-GAAP) operating earnings for the fourth quarter of 2011 do not include the following items (after tax) that were included in reported GAAP earnings: 

                                                                                   (in millions) (per diluted share)
Unrealized gains related to nuclear decommissioning trust
(NDT) fund investments to the extent not offset by
contractual accounting                                                        $46                $0.07
Mark-to-market gains primarily from Generation’s                                                        economic hedging activities                                                 $45                $0.07
Certain costs associated with the proposed merger with                                                Constellation Energy Group, Inc. (Constellation)                  $(21)              $(0.03)
Financial impacts associated with the retirement of certain                                            Generation fossil generating units                                        $(4)               $(0.01)
Non-cash annual remeasurement of state deferred income                                            taxes                                                                                $(4)               $(0.01)

Adjusted (non-GAAP) operating earnings for the fourth 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 losses primarily from Generation’s                                                       economic hedging activities                                                $(113)             $(0.17)
Unrealized gains related to NDT fund investments to the
extent not offset by contractual accounting                            $26                 $0.04
Financial impacts associated with the retirement of certain                                            Generation fossil generating units                                        $(17)               $(0.03)
Decrease in costs related to adjustments to asset                                                         retirement obligations of ComEd and PECO                            $7                   $0.01
Certain costs related to the acquisition of Exelon Wind           $(6)                 $(0.01)
Costs associated with the 2007 Illinois electric rate                                                       settlement agreement                                                         $(4)                 $(0.01)

Fourth Quarter and Recent Highlights

• Constellation Merger Update:  Exelon and Constellation continue to move forward with the regulatory reviews needed to complete their proposed merger. On December 21, 2011, the U.S. Department of Justice (DOJ) cleared the way for the merger in connection with its review of the transaction under the Hart-Scott-Rodino Act.  The DOJ’s Antitrust Division filed court papers seeking approval by the U.S. District Court for the District of Columbia with regard to the merger. These papers detail the conditions for the merger agreed to by the DOJ, Exelon and Constellation.

The merger has been approved by the New York Public Service Commission, the Public Utility Commission of Texas and shareholders of Exelon and Constellation. It also requires regulatory approvals by the Federal Energy Regulatory Commission, the Nuclear Regulatory Commission and the Maryland Public Service Commission. In a merger settlement with the State of Maryland, the Maryland Energy Administration (MEA), the City of Baltimore and the Baltimore Building and Construction Trades Council announced December 15, 2011, Exelon, Constellation and Baltimore Gas and Electric Company agreed to provide a package of benefits totaling more than $1 billion and expected to create more than 6,000 jobs in Maryland. Exelon and Constellation continue to expect that the merger will be finalized in early 2012.

• U.S. Environmental Protection Agency (EPA) Mercury and Air Toxics Rule:  On December 16, 2011, the EPA signed a final Mercury and Air Toxics Standards (MATS) 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 MATS rule is largely in line with Exelon’s expectations and requires plants to meet the new standards three years after the rule takes effect, with specific guidelines for an additional one or two years in limited cases. The rule is effective 60 days after it is published in the Federal Register in early 2012.

• Nuclear Operations:  Generation’s nuclear fleet, including its owned output from the Salem Generating Station, produced 34,893 gigawatt-hours (GWh) in the fourth quarter of 2011, compared with 35,115 GWh in the fourth quarter of 2010. The Exelon-operated nuclear plants achieved a 93.0 percent capacity factor for the fourth quarter of 2011 compared with 93.1 percent for the fourth quarter of 2010. The Exelon-operated nuclear plants completed five scheduled refueling outages in the fourth quarter of 2011, compared with completing four scheduled refueling outages in the fourth quarter of 2010. The number of planned refueling outage days totaled 103 in the fourth quarter of 2011 versus 97 days in the fourth quarter of 2010. The number of non-refueling outage days at the Exelon-operated plants totaled 11 days in the fourth quarter of 2011 compared with 18 days in the fourth quarter of 2010.

For the full year 2011, the Exelon-operated nuclear plants achieved an average capacity factor of 93.3 percent, as compared with 93.9 percent for 2010. The average annual capacity factor for the Exelon-operated nuclear fleet has exceeded 93 percent for nine consecutive years.

• Fossil and Hydro Operations:  The equivalent demand forced outage rate for Generation’s fossil fleet (excluding the Wolf Hollow acquisition) was 1.6 percent in the fourth quarter of 2011, compared with 2.9 percent in the fourth quarter of 2010. The change was largely due to a series of minor forced outages that took place at the Mid-Atlantic peaking units in 2010. The equivalent availability factor for the hydroelectric facilities was 95.9 percent in the fourth quarter of 2011, compared with 99.8 percent in the fourth quarter of 2010. The change was primarily due to a planned inspection outage in December 2011 that was rescheduled from the third quarter.

• Exelon Wind Project Completion:  On December 30, 2011, Exelon Wind’s Michigan Wind 2 Project, located in Minden City, Michigan, was completed. The 50-turbine, 90-megawatt (MW) wind project is the first commercial wind project developed by Exelon Wind. Consumers Energy, based in Jackson, Michigan, is purchasing the output from the project through a 20-year renewable energy purchase agreement. The completion of Michigan Wind 2 brings Exelon Wind’s total generation in Michigan to 212 MW. In early 2012, Exelon Wind will begin construction on Harvest II Wind, a 59.4-MW project also located in Michigan.

• Shooting Star Wind Project Acquisition:  On December 7, 2011, Exelon Wind and Infinity Wind Holdings, LLC entered into a purchase agreement by which Exelon Wind purchased all of the membership interests in Shooting Star Wind Project, LLC, a 104-MW wind power generation project in Kiowa County, Kansas. The acquisition includes a 20-year power purchase agreement with Mid-Kansas Electric Company for 100 percent of the project’s output. Construction of Shooting Star began in November 2011, and the project is expected to begin full commercial operation in the fourth quarter of 2012.

• 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 December 31, 2011 is 88 to 91 percent for 2012, 61 to 64 percent for 2013 and 32 to 35 percent for 2014. 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 Infrastructure Investment, Performance Metrics and Formula Rate Filings:  On January 6, 2012, ComEd filed its 10-year, $2.6 billion Infrastructure Investment Plan with the Illinois Commerce Commission (ICC). The filing supports the Energy Infrastructure Modernization Act (EIMA), which was enacted late last year. EIMA includes a policy-based approach that will provide a more predictable ratemaking system and enable utilities to modernize the electric grid and set the stage for fostering economic development while creating and retaining jobs. EIMA also includes a process for determining distribution formula rates that will provide for the recovery of actual costs of service that are prudent and reasonable. ComEd will invest $1.3 billion to strengthen the electric system and another $1.3 billion to add new, digital smart grid and advanced meter technology. ComEd’s plan for 2012 outlines $139 million in capital investments that will be dedicated to improving system reliability and $94 million in smart grid investments. 

On December 8, 2011, ComEd made a filing under EIMA to request ICC approval of its proposed multi-year performance metrics plan. The metrics are designed to achieve improvement over baseline values in several performance categories over a 10-year period. The final ICC order must be issued by April 6, 2012.

On November 8, 2011, ComEd submitted its first filing with the ICC under EIMA for a performance-based formula rate tariff, which initiated a process to establish the model to govern delivery service rate-setting and to set new rates. The initial rate, which is expected to be lower than current rates but will be subject to reconciliation, will take effect within 30 days after the ICC order, which must be issued by May 31, 2012. The filing does not include costs relating to ComEd’s abovementioned Infrastructure Investment Plan. ComEd will file a distribution formula rate plan and updated costs with the ICC each year. ComEd will make its initial reconciliation filing in May 2012, and the adjusted rates will take effect on January 1, 2013 after the ICC’s review.  As of December 31, 2011, ComEd recorded its estimated reconciliation for 2011.

• PECO Default Service Plan Filing:  On January 13, 2012, PECO filed its Default Service Plan for approval with the Pennsylvania Public Utility Commission (PAPUC). The plan outlines how PECO will purchase electricity for customers not purchasing from a competitive electric generation supplier from June 1, 2013 through May 31, 2015, and proposes several new programs to continue PECO’s support of retail competition in Pennsylvania. To continue to ensure a competitive procurement process for residential customers, PECO proposes to procure electricity through a combination of one-year and two-year fixed full requirements contracts, reduce the amount of time between when the energy is purchased and when it is provided to customers and complete an annual, rather than quarterly, reconciliation of costs for actual versus forecasted energy use. Public hearings for the filing are scheduled in the spring of 2012, with a PAPUC ruling expected in mid-October 2012.

OPERATING COMPANY RESULTS

Generation consists of owned and contracted electric generating facilities, wholesale energy marketing operations and competitive retail sales operations. 
 
Fourth quarter 2011 net income was $446 million compared with $424 million in the fourth quarter of 2010. Fourth quarter 2011 net income included (all after tax) unrealized gains of $46 million related to NDT fund investments, mark-to-market gains of $45 million from economic hedging activities, a $6 million benefit due to the non-cash annual remeasurement of state deferred income taxes, certain costs of $6 million associated with the proposed merger with Constellation and net costs of $4 million associated with the retirement of certain fossil generating units. Fourth quarter 2010 net income included (all after tax) mark-to-market losses of $113 million from economic hedging activities, unrealized gains of $26 million related to NDT fund investments, costs of $17 million associated with the retirement of certain fossil generating units, a charge of $6 million for certain costs associated with the acquisition of Exelon Wind and a charge of $4 million for costs associated with the 2007 Illinois electric rate settlement.

Excluding the effects of these items, Generation’s net income in the fourth quarter of 2011 decreased $179 million compared with the same quarter in 2010. This decrease primarily reflected:

• The impact on energy margins of decreased capacity pricing related to RPM for the PJM market and higher nuclear fuel costs;
• Higher operating and maintenance expenses, including the impact of increased scheduled nuclear refueling outage days; and
• Increased depreciation and amortization expense.

These items were partially offset by the net favorable effect on energy margins primarily reflecting market and portfolio conditions in the Mid-Atlantic and Midwest regions.

Generation’s average realized margin on all electric sales, including sales to affiliates and excluding trading activity, was $39.31 per megawatt-hour (MWh) in the fourth quarter of 2011 compared with $41.45 per MWh in the fourth quarter of 2010.

ComEd consists of electricity transmission and distribution operations in northern Illinois. 
 
ComEd recorded net income of $121 million in the fourth quarter of 2011, compared with net income of $91 million in the fourth quarter of 2010. Fourth quarter net income in 2010 included an after-tax decrease in costs of $6 million associated with an adjustment to ComEd’s asset retirement obligation. Excluding the effects of these items, ComEd’s net income in the fourth quarter of 2011 was up $36 million from the same quarter in 2010, primarily reflecting:

• Increased distribution revenues as a result of the annual reconciliation in the performance-based distribution formula rate tariff pursuant to EIMA, which became effective in the fourth quarter of 2011;
• A net reduction in operating and maintenance expenses for the allowed recovery of certain 2011 storm costs also pursuant to EIMA; and
• The impact of new electric distribution rates effective June 1, 2011.

These items were partially offset by increased other operating and maintenance expenses and the effect of unfavorable weather in ComEd’s service territory.

In the fourth quarter of 2011, heating degree-days in the ComEd service territory were down 20.1 percent relative to the same period in 2010 and were 19.6 percent below normal. Total retail electric deliveries decreased 2.6 percent quarter over quarter.

Weather-normalized retail electric deliveries increased 0.4 percent in the fourth quarter of 2011 relative to 2010, reflecting increases in deliveries to residential and large commercial and industrial (C&I) customers that were partially offset by a decrease in deliveries to small C&I customers. For ComEd, weather had an unfavorable after-tax effect of $7 million on fourth quarter 2011 earnings relative to 2010 and an unfavorable after-tax effect of $6 million relative to normal weather that is incorporated in Exelon’s earnings guidance. 

PECO consists of electricity transmission and distribution operations and retail natural gas distribution operations in southeastern Pennsylvania.
 
PECO’s net income in the fourth quarter of 2011 was $74 million, up from $21 million in the fourth quarter of 2010. Fourth quarter net income in 2011 included certain after-tax costs of $1 million associated with the proposed merger with Constellation. Fourth quarter net income in 2010 included an after-tax decrease in costs of $1 million associated with an adjustment to PECO’s asset retirement obligation. Excluding the effects of these items, PECO’s net income in the fourth quarter of 2011 was up $55 million from the same quarter in 2010, primarily reflecting:

• The effect of 2010 CTC amortization expense, net of collections, associated with PECO’s transition period, which ended on December 31, 2010; and
• The impact of new electric and gas distribution rates effective January 1, 2011.

Partially offsetting these items was the effect of unfavorable weather in PECO’s service territory.

In the fourth quarter of 2011, heating degree-days in the PECO service territory were down 22.8 percent from 2010 and were 20.3 percent below normal. Total retail electric deliveries were down 6.1 percent from last year. On the retail gas side, deliveries in the fourth quarter of 2011 were down 22.7 percent from the fourth quarter of 2010.   

Weather-normalized retail electric deliveries were down 2.2 percent in the fourth quarter of 2011 relative to 2010, reflecting a decline in large C&I deliveries that was partially offset by increased deliveries to residential and small C&I customers. Weather-normalized retail gas deliveries were up 1.9 percent in the fourth quarter of 2011. For PECO, weather had an unfavorable after-tax effect of $25 million on fourth quarter 2011 earnings relative to 2010 and an unfavorable after-tax effect of $22 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 pages 7 and 8, are posted on Exelon’s Web site (download attachment) and have been furnished to the Securities and Exchange Commission on Form 8-K on January 25, 2012.
 
Conference call information: Exelon has scheduled a conference call for 11:00 AM ET (10:00 AM CT) on January 25, 2012. 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 40223937.  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 February 8, 2012. The U.S. and Canada call-in number for replays is 855-859-2056, and the international call-in number is 404-537-3406. The conference ID number is 40223937.

Cautionary Statements Regarding Forward-Looking Information

Except for the historical information contained herein, certain of the matters discussed in this communication constitute “forward-looking statements” within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, both as amended by the Private Securities Litigation Reform Act of 1995. Words such as “may,” “will,” “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “target,” “forecast,” and words and terms of similar substance used in connection with any discussion of future plans, actions, or events identify forward-looking statements. These forward-looking statements include, but are not limited to, statements regarding benefits of the proposed merger of Exelon Corporation (Exelon) and Constellation Energy Group, Inc. (Constellation), integration plans and expected synergies, the expected timing of completion of the transaction, anticipated future financial and operating performance and results, including estimates for growth. These statements are based on the current expectations of management of Exelon and Constellation, as applicable. There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements included in this communication regarding the proposed merger. For example, (1) the companies may be unable to obtain regulatory approvals required for the merger, or required regulatory approvals may delay the merger or result in the imposition of conditions that could have a material adverse effect on the combined company or cause the companies to abandon the merger; (2) conditions to the closing of the merger may not be satisfied; (3) an unsolicited offer of another company to acquire assets or capital stock of Exelon or Constellation could interfere with the merger; (4) problems may arise in successfully integrating the businesses of the companies, which may result in the combined company not operating as effectively and efficiently as expected; (5) the combined company may be unable to achieve cost-cutting synergies or it may take longer than expected to achieve those synergies; (6) the merger may involve unexpected costs, unexpected liabilities or unexpected delays, or the effects of purchase accounting may be different from the companies’ expectations; (7) the credit ratings of the combined company or its subsidiaries may be different from what the companies expect; (8) the businesses of the companies may suffer as a result of uncertainty surrounding the merger; (9) the companies may not realize the values expected to be obtained for properties expected or required to be divested; (10) the industry may be subject to future regulatory or legislative actions that could adversely affect the companies; and (11) the companies may be adversely affected by other economic, business, and/or competitive factors. Other unknown or unpredictable factors could also have material adverse effects on future results, performance or achievements of Exelon, Constellation or the combined company. Discussions of some of these other important factors and assumptions are contained in Exelon’s and Constellation’s respective filings with the Securities and Exchange Commission (SEC), and available at the SEC’s website at www.sec.gov, including: (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 Quarterly Report on Form 10-Q for the quarterly period ended September 30, 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 13; (3)  Constellation’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 12; and (4) Constellation’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2011 in (a) Part II, Other Information, ITEM 1A. Risk Factors and ITEM 5. Other Information, (b) Part I, 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: Notes to Consolidated Financial Statements, Commitments and Contingencies. These risks, as well as other risks associated with the proposed merger, are more fully discussed in the definitive joint proxy statement/prospectus included in the Registration Statement on Form S-4 that Exelon filed with the SEC and that the SEC declared effective on October 11, 2011 in connection with the proposed merger.  In light of these risks, uncertainties, assumptions and factors, the forward-looking events discussed in this communication may not occur. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this communication. Neither Exelon nor Constellation undertake any obligation to publicly release any revision to its forward-looking statements to reflect events or circumstances after the date of this communication.

Additional Information and Where to Find It

In connection with the proposed merger between Exelon and Constellation, Exelon filed with the SEC a Registration Statement on Form S-4 that included the definitive joint proxy statement/prospectus. The Registration Statement was declared effective by the SEC on October 11, 2011. Exelon and Constellation mailed the definitive joint proxy statement/prospectus to their respective security holders on or about October 12, 2011. WE URGE INVESTORS AND SECURITY HOLDERS TO READ THE DEFINITIVE JOINT PROXY STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, BECAUSE THEY CONTAIN IMPORTANT INFORMATION about Exelon, Constellation and the proposed merger. Investors and security holders may obtain copies of all documents filed with the SEC free of charge at the SEC's website, www.sec.gov. In addition, a copy of the definitive joint proxy statement/prospectus may be obtained free of charge from Exelon Corporation, Investor Relations, 10 South Dearborn Street, P.O. Box 805398, Chicago, Illinois 60680-5398, or from Constellation Energy Group, Inc., Investor Relations, 100 Constellation Way, Suite 600C, Baltimore, MD 21202.

 

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About Exelon

Exelon Corporation is one of the nation’s largest electric utilities with more than $19 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 494,000 customers in the Philadelphia area. Exelon is headquartered in Chicago and trades on the NYSE under the ticker EXC.

Contacts

Judith Rader Exelon Communications
312.394.7417
Stacie Frank Investor Relations
312.394.3094
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