May 04, 2012

 Exelon Announces First Quarter 2012 Results 

 Exelon Corporation (NYSE: EXC) announced first quarter 2012 consolidated earnings. 

 

CHICAGO – Exelon Corporation (NYSE: EXC) announced first quarter 2012 consolidated earnings as follows:
                                                                              First Quarter
                                                                           2012           2011
Adjusted (non-GAAP) Operating Results:   
  Net Income ($ millions)                                        $603            $778
  Diluted Earnings per Share                                   $0.85           $1.17

GAAP Results:   
  Net Income ($ millions)                                        $200            $668
  Diluted Earnings per Share                                   $0.28           $1.01
  
“As expected, our lower operating earnings for first quarter 2012 reflected unfavorable market factors and mild weather,” said Christopher M. Crane, Exelon’s president and CEO. “However, I am pleased with our continued strong operational performance, such as the 93.6 percent capacity factor achieved by our nuclear operations. In the quarter’s most significant news, we successfully closed our merger with Constellation Energy on March 12 after securing all required regulatory approvals, less than one year after we first announced the transaction, and integration activities are progressing extremely well.”

First Quarter Operating Results

First quarter 2012 earnings include financial results for Constellation Energy (Constellation) and Baltimore Gas and Electric Company (BGE) beginning on March 12, 2012, the date the merger was completed. Therefore, the composition of results of operations from 2012 and 2011 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 $0.85 per share in the first quarter of 2012 from $1.17 per share in the first quarter of 2011. Earnings in 2012 primarily reflected the following negative factors:
• the effect on energy margins at Generation of 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 and contracting costs and the impact at Generation of increased scheduled nuclear refueling outage days;
• impact on earnings per share reflecting the increase in Exelon’s average diluted common shares outstanding as a result of the Constellation merger (merger);
• the effect of unfavorable weather in the PECO Energy Company (PECO) and Commonwealth Edison Company (ComEd) service territories; and
• increased depreciation and amortization expense primarily due to ongoing capital expenditures.

These factors were partially offset by:
• increased distribution revenue reflecting the effects of new distribution rates at ComEd effective June 1, 2011 and the Energy Infrastructure Modernization Act (EIMA);
• the addition of BGE’s financial results and the contribution to Generation’s energy margins from Constellation after the merger completion date; and
• realized gains in nuclear decommissioning trust (NDT) funds at Generation related to changes to the investment strategy and favorable market conditions in 2012.

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)
Mark-to-market gains primarily from Generation’s economic                                         hedging activities, net of intercompany eliminations                $43                $0.06

Unrealized gains related to NDT fund investments to the                                               extent not offset by contractual accounting                             $36                $0.05

Financial impacts associated with the retirement of certain                                            Generation fossil generating units                                          $(4)              $(0.01)

Certain costs related to the merger and integration initiatives $(113)            $(0.16)

Costs incurred as part of Maryland commitments in                                                      connection with the merger                                                  $(227)            $(0.32) 

Non-cash amortization of intangible assets, net, related to                                            commodity contracts recorded at fair value at the merger date $(78)            $(0.11)

Costs incurred as part of a March 2012 settlement with the                                           Federal Energy Regulatory Commission (FERC) related to                                             Constellation’s prior period hedging and risk management                                            transactions                                                                         $(172)           $(0.25)

Reassessment of state deferred income taxes                          $117              $0.17

Revenues and operating expenses related to three generation                                       facilities required to be sold within 180 days of the merger         $(2)                  -

Certain costs incurred associated with other acquisitions            $(3)                  -

Adjusted (non-GAAP) operating earnings for the first quarter of 2011 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                                                 $(89)             $(0.14)

Unrealized gains related to NDT fund investments to the                                               extent not offset by contractual accounting                             $24               $0.04

Non-cash charge to remeasure deferred taxes at higher                                               Illinois corporate tax rates                                                   $(29)             $(0.04)

Financial impacts associated with the retirement of certain                                            Generation fossil generating units                                         $(16)             $(0.02)

First Quarter and Recent Highlights

• Nuclear Operations: Generation’s nuclear fleet, including its owned output from the Salem Generating Station, produced 35,262 gigawatt-hours (GWh) in the first quarter of 2012, compared with 35,192 GWh in the first quarter of 2011. 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 93.6 percent capacity factor for the first quarter of 2012 compared with 94.8 percent for the first quarter of 2011. The Exelon-operated nuclear plants completed two scheduled refueling outages in the first quarter of 2012 and began a third, compared with completing one scheduled refueling outage and beginning two others in the first quarter of 2011. The number of planned refueling outage days totaled 67 in the first quarter of 2012 versus 44 days in the first quarter of 2011. The number of non-refueling outage days at the Exelon-operated plants totaled 16 days in the first quarter of 2012 compared with 14 days in the first quarter of 2011.

• Fossil and Renewables Operations: The equivalent demand forced outage rate for Generation’s fossil fleet was 1.1 percent in the first quarter of 2012, compared with 2.3 percent in the first quarter of 2011. The change was largely due to lower power prices and lower demand in 2012, attributable to the mild weather. The equivalent availability factor for the hydroelectric facilities was 99.6 percent in the first quarter of 2012, compared with 97.8 percent in the first quarter of 2011. The change was primarily due to the heavy rains and snow run-off in March 2011, which caused the dam at the Conowingo hydro station to enter spill conditions so it was unable to generate. The energy capture for the wind fleet was 95.0 percent in the first quarter of 2012, compared with 92.9 percent in the first quarter of 2011. The above statistics exclude the former Constellation plants.

• Whitetail Wind Energy Acquisition: On March 13, 2012, Exelon completed the purchase of Whitetail Wind Energy LLC, a 92-megawatt (MW) wind project to be constructed east of Laredo, Texas. The project has a 25-year power purchase agreement with Austin Energy for its entire output. Commercial operation is expected in late 2012.

• Antelope Valley Solar Ranch One: On April 5, 2012, Exelon and First Solar, Inc. announced that the Antelope Valley Solar Ranch One project had received the first advance of a loan guaranteed by the U.S. Department of Energy’s Loan Programs Office, finalizing Exelon’s ownership of the project. First Solar is constructing the 230-MW photovoltaic power project in northern Los Angeles County and will operate and maintain the project for Exelon. As Exelon and First Solar previously announced, the first portion of the project is expected to come online in late 2012, with full operation planned for late 2013. The project has a 25-year power purchase agreement, approved by the California Public Utilities Commission, with Pacific Gas & Electric Company for the full output of the plant.

• ComEd Distribution Formula Rate Cases: On November 8, 2011, ComEd filed under EIMA its performance-based formula rate tariff with the Illinois Commerce Commission (ICC). This tariff embodied the formula rate model that is to govern delivery service rate-setting as well as the initial data used to set rates. The resulting 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. On May 1, 2012, the Administrative Law Judges (ALJs) issued a proposed order in the case recommending a $146 million reduction in the revenue requirement, as opposed to ComEd’s final position that a $59 million reduction was appropriate. Certain significant provisions of the ALJs’ proposed order are consistent with ComEd’s initial filing. As a proposed order, it has no independent legal effect as the ICC must vote on a final order which may materially vary from the findings and conclusions in the proposed order. ComEd will file updated costs and a reconciliation with actual costs at the ICC each year. ComEd filed the first annual cost update and reconciliation for 2011 on April 30, 2012, and the adjusted rates are expected to take effect in January 2013 after the ICC’s review. If the ALJs’ proposed order related to the November 8, 2011 filing is implemented, the revenue requirement reduction as proposed by the ALJs would primarily delay the timing of cash flows, with a less significant impact on earnings given the annual reconciliation mechanism. ComEd does not believe it will have a material impact to the cumulative regulatory asset that has been recorded as of March 31, 2012.

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 2012 net income was $168 million compared with $495 million in the first quarter of 2011. First quarter 2012 net income included (all after tax) mark-to-market gains of $36 million from economic hedging activities, unrealized gains of $36 million related to NDT fund investments, net costs of $4 million associated with the retirement of certain fossil generating units, certain costs incurred of $45 million associated with the merger and integration initiatives, costs of $22 million incurred as part of the Maryland commitments in connection with the merger, amortization of commodity contract intangibles of $78 million, FERC settlement costs of $172 million, benefit of $13 million for the reassessment of state deferred income taxes, net expenses of $2 million for plant divestitures and certain other acquisition costs of $3 million. 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.

Excluding the effects of these items, Generation’s net income in the first quarter of 2012 decreased $188 million compared with the same quarter in 2011. This decrease primarily reflected:
• the impact on energy margins of 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, including the impact of increased scheduled nuclear refueling outage days; and
• increased depreciation and amortization expense primarily due to ongoing capital expenditures.

These items were partially offset by realized gains in NDT funds related to changes to the investment strategy and favorable market conditions in 2012.

Generation’s average realized margin on all electric sales, including sales to affiliates and excluding trading activity, was $32.57 per megawatt-hour (MWh) in the first quarter of 2012 compared with $44.30 per MWh in the first quarter of 2011.

ComEd consists of electricity transmission and distribution operations in northern Illinois. 
 
ComEd recorded net income of $87 million in the first quarter of 2012, compared with net income of $69 million in the first quarter of 2011. First quarter net income in 2012 included certain after-tax costs incurred of $1 million associated with the merger and integration initiatives. 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. Excluding the effects of these items, ComEd’s net income in the first quarter of 2012 was up $15 million from the same quarter in 2011, primarily due to increased distribution revenue reflecting the effects of new distribution rates effective June 1, 2011 and EIMA.

These favorable items were partially offset by:
• the effect of unfavorable weather in ComEd’s service territory; and
• higher operating and maintenance expenses reflecting increased labor and contracting costs driven, in part, by EIMA initiatives.

In the first quarter of 2012, heating degree-days in the ComEd service territory were down 28.5 percent relative to the same period in 2011 and were 24.7 percent below normal. Total retail electric deliveries decreased 3.7 percent quarter over quarter.

Weather-normalized retail electric deliveries increased 0.5 percent in the first quarter of 2012 relative to 2011, reflecting increases in deliveries to both small and large commercial and industrial (C&I) customers that were partially offset by a decrease in deliveries to residential customers. For ComEd, weather had an unfavorable after-tax effect of $11 million on first quarter 2012 earnings relative to 2011 and an unfavorable after-tax effect of $9 million relative to normal weather. 

PECO consists of electricity transmission and distribution operations and retail natural gas distribution operations in southeastern Pennsylvania.
 
PECO’s net income in the first quarter of 2012 was $96 million, compared with $125 million in the first quarter of 2011. First quarter net income in 2012 included certain after-tax costs incurred of $4 million associated with the merger and integration initiatives. Excluding the effect of this item, PECO’s net income in the first quarter of 2012 was down $25 million from the same quarter in 2011, primarily reflecting the effect of unfavorable weather in PECO’s service territory.

In the first quarter of 2012, heating degree-days in the PECO service territory were down 23.6 percent from 2011 and were 22.7 percent below normal. Total retail electric deliveries were down 7.0 percent from last year. On the retail gas side, deliveries in the first quarter of 2012 were down 21.9 percent from the first quarter of 2011.   

Weather-normalized retail electric deliveries were down 2.7 percent in the first quarter of 2012 relative to 2011, reflecting declines in deliveries to all customer classes. Weather-normalized retail gas deliveries were up 1.3 percent in the first quarter of 2012. For PECO, weather had an unfavorable after-tax effect of $29 million on first quarter 2012 earnings relative to 2011 and an unfavorable after-tax effect of $30 million relative to normal weather.

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

BGE’s net loss from March 12, the date the merger was completed, to March 31, 2012 was $66 million. The net loss included certain after-tax costs of $83 million incurred as part of the Maryland commitments in connection with the merger and $1 million incurred associated with the merger and integration initiatives. Excluding the effects of these items, BGE’s net income from March 12 to March 31, 2012 was $18 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. Additional earnings release attachments, which include the reconciliation on page 7, are posted on Exelon’s Web site (download attachment) and have been furnished to the Securities and Exchange Commission on Form 8-K on May 4, 2012.

Cautionary Statements Regarding Forward-Looking Information

This news 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 2011 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) Constellation Energy Group, Inc.’s 2011 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 (3) other factors discussed in filings with the Securities and Exchange Commission by Exelon, Generation, BGE, ComEd and PECO (the Companies) and Constellation. Readers are cautioned not to place undue reliance on these forward-looking statements, which apply only as of the date of this news 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 news release.

 

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About Exelon

Exelon Corporation (NYSE:EXC) is the nation’s leading competitive energy provider, with approximately $33 billion in annual revenues. Headquartered in Chicago, Exelon has operations and business activities in 47 states, the District of Columbia and Canada. Exelon is the largest competitive U.S. power generator, 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

JaCee Burnes
Exelon Investor Relations
312-394-2948
Judy Rader Exelon Corporate Communications
312.394.7417
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