July 31, 2013

 Exelon Announces Second Quarter 2013 Results 

 Reaffirms full-year earnings guidance 

 

CHICAGO (July 31, 2013) — Exelon Corporation (NYSE: EXC) announced second quarter 2013 consolidated earnings as follows:

Second Quarter

2013

2012

Adjusted (non-GAAP) Operating Results:

Net Income (Loss) ($ millions)

$454

$522

Diluted Earnings per Share

$0.53

$0.61

GAAP Results:

Net Income (Loss) ($ millions)

$490

$286

Diluted Earnings per Share

$0.57

$0.33

“Exelon delivered earnings within its guidance range and continued to operate well this quarter, both in the generation and utility businesses,” said Christopher M. Crane, Exelon’s president and CEO. “The nuclear capacity factor for the first six months of the year was nearly 95%. We maintained our constant focus on creating value and our commitment to financial discipline.”

Exelon also reaffirmed its full-year operating earnings guidance of $2.35 - $2.65 per share.

Second Quarter Operating Results

As shown in the table above, Exelon’s adjusted (non-GAAP) operating earnings declined to $0.53 per share in the second quarter of 2013 from $0.61 per share in the second quarter of 2012. Earnings in the second quarter of 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, lower realized energy prices, and a reduction in load volumes;
  • Higher operating and maintenance (O&M) expenses, including increased labor, contracting and materials costs;
  • Increased depreciation and amortization expense primarily due to ongoing capital expenditures; and
  • The impact of unfavorable weather at ComEd.

These factors were partially offset by:

  • Increased distribution revenue at ComEd due to recovery of increased costs and capital investment pursuant to the formula rate under the Energy Infrastructure Modernization Act (EIMA);
  • Merger O&M synergies; and
  • Favorable income taxes, primarily reflecting an increase in investment tax credit (ITC) benefits related to the AVSR solar project at Generation and a benefit for the gas property repairs deduction at PECO.

Adjusted (non-GAAP) operating earnings for the second 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

$454

$0.53

Mark-to-Market Impact of Economic Hedging Activities

253

0.30

Unrealized Losses Related to Nuclear

Decommissioning Trust (NDT) Fund Investments

(22)

(0.03)

Constellation Merger and Integration Costs

(15)

(0.02)

Amortization of Commodity Contract Intangibles

(115)

(0.13)

Amortization of the Fair Value of Certain Debt

4

-

Long-Lived Asset Impairment

(69)

(0.08)

Exelon GAAP Net Income (Loss)

$490

$0.57

Adjusted (non-GAAP) operating earnings for the second 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

$522

$0.61

Mark-to-Market Impact of Economic Hedging Activities

123

0.15

Unrealized Losses Related to Nuclear

Decommissioning Trust (NDT) Fund Investments

(19)

(0.02)

Plant Retirements and Divestitures

1

-

Constellation Merger and Integration Costs

(67)

(0.08)

Amortization of Commodity Contract Intangibles

(281)

(0.33)

Amortization of the Fair Value of Certain Debt

3

-

Non-cash Remeasurement of Deferred Income Taxes

4

-

Exelon GAAP Net Income (Loss)

$286

$0.33

Second Quarter and Recent Highlights

Nuclear Operations: Generation’s nuclear fleet, including its owned output from the Salem Generating Station, produced 34,601 gigawatt-hours (GWh) in the second quarter of 2013, compared with 35,137 GWh in the second 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 92.8 percent capacity factor for the second quarter of 2013, compared with 93.4 percent for the second quarter of 2012. The number of planned refueling outage days totaled 47 in the second quarter of 2013 versus 51 days in the second quarter of 2012. The number of non-refueling outage days totaled 31 days in the second quarter of 2013, compared with 16 days in the second quarter of 2012.

Fossil and Renewables Operations: The dispatch match rate for Generation’s fossil and hydro fleet was 99.1 percent in the second quarter of 2013, compared with 93.7 percent in the second quarter of 2012. Energy capture for the wind and solar fleet was 92.4 percent in the second quarter of 2013, compared with 95.0 percent in the second quarter of 2012. Energy capture in the second quarter of 2013 was impacted by late season winter weather, outages, transmission constraints and economic dispatch.

Constellation Energy Nuclear Group (CENG) Operating Services Agreement: On July 29, 2013, Exelon, Generation and subsidiaries of Generation entered into a Master Agreement with Electricité de France, S.A. (EDF), a subsidiary of EDF, Constellation Energy Nuclear Group LLC (CENG), and subsidiaries of CENG. The Master Agreement contemplates that the parties will execute a series of additional agreements at a closing that will occur following the receipt of regulatory approvals and the satisfaction of other customary closing conditions. Exelon currently expects that the closing will occur during the first quarter or early second quarter of 2014.

Under the terms of the agreement, the CENG plant operating licenses will be transferred to Exelon; Exelon will integrate the CENG fleet under its management model; Exelon will lend $400 million to CENG to support a special dividend to EDF; and EDF will retain an option to sell its CENG stake to Exelon at fair market value between 2016 and 2022. For additional information, please see the Form 8-k that Exelon filed on July 30, 2013.

Nuclear License Renewals: On May 29, 2013, Exelon Generation filed license renewal applications with the Nuclear Regulatory Commission (NRC) for its Braidwood and Byron Generating Stations. The application filings begin a multiyear review by the NRC to extend the stations’ licenses to operate for another 20 years. Braidwood Units 1 and 2 currently are licensed to operate until 2026 and 2027, respectively. Byron Units 1 and 2 are licensed to operate until 2024 and 2026 respectively. A final NRC decision on the applications is expected in 2015.

Nuclear Uprates: On June 5, 2013, Exelon decided, based on market conditions, to cancel the previously deferred extended power uprate projects at the LaSalle County and Limerick Generating Stations. As a result of this decision, the costs for these projects previously capitalized in property, plant and equipment became impaired, and therefore, Exelon and Exelon Generation recorded in the second quarter of 2013 a pre-tax charge, including early contract termination costs, to operating and maintenance expense of $100 million. Management has excluded these charges from adjusted (non-GAAP) operating earnings.

Illinois Senate Bill 9: On May 22, 2013, the Illinois General Assembly overrode the governor’s veto of Senate Bill 9, which then became effective immediately. The enacted legislation clarifies that for ComEd’s distribution formula rate structure, a year-end rate base and capital structure should be used, a weighted average cost of capital return should be applied against the reconciliation and a return shall be allowed on the pension asset. These adjustments resulted in an increase in pre-tax earnings of $10 million in the second quarter of 2013. For full year 2013, the expected impact is an increase in pre-tax earnings of approximately $16 million.

BGE Gas and Electric Distribution Rate Case: On May 17, 2013, BGE filed an application with the Maryland Public Service Commission (MDPSC) for increases of $101 million and $30 million to its electric and gas base rates, respectively. The requested rate of return on equity in the application is 10.50 percent for electric and 10.35 percent for gas. The MDPSC will determine any increase in rates after a seven-month proceeding with input from all interested parties. The new electric and gas distribution base rates are expected to take effect in mid December 2013.

Redemption of Junior Subordinated Debentures: On June 15, 2013, Exelon redeemed all of its outstanding Series A Junior Subordinated Debentures at a redemption price equal to 100 percent of the principal amount. The aggregate outstanding principal amount of the Debentures was $450 million and the annual interest rate was 8.625 percent.

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 June 30, 2013, is 96 percent to 99 percent for 2013, 78 percent to 81 percent for 2014, and 41 percent to 44 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.

Second quarter 2013 GAAP net income was $330 million, compared with net income of $166 million in the second quarter of 2012. Adjusted (non-GAAP) operating earnings for the second 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:

($ millions)

2Q13

2Q12

Generation Adjusted (non-GAAP) Operating Earnings

$273

$399

Mark-to-Market Impact of Economic Hedging Activities

263

120

Unrealized Losses Related to NDT Fund Investments

(22)

(19)

Plant Retirements and Divestitures

-

1

Constellation Merger and Integration Costs

(12)

(57)

Amortization of Commodity Contract Intangibles

(115)

(281)

Amortization of the Fair Value of Certain Debt

4

3

Long-Lived Asset Impairment

(61)

-

Generation GAAP Net Income (Loss)

$330

$166

 

Generation’s Adjusted (non-GAAP) Operating Earnings in the second quarter of 2013 decreased $126 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, lower realized market prices, and a reduction in load volumes; and
  • Increased depreciation and amortization expense due to ongoing capital expenditures and the completion of wind and solar facilities placed in service in the second half of 2012 and in 2013.
  • These items were partially offset by favorable O&M expense. primarily driven by merger synergies and favorable income taxes driven by an increase in ITC benefits related to the AVSR solar project.

Generation’s average realized margin on all electric sales, including sales to affiliates and excluding trading activity, was $27.34 per megawatt-hour (MWh) in the second quarter of 2013, compared with $26.15 per MWh in the second quarter of 2012.

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

ComEd recorded GAAP net income of $96 million in the second quarter of 2013, compared with net income of $42 million in the second quarter of 2012. ComEd’s Adjusted (non-GAAP) Operating Earnings in the second quarter of 2013 were up $54 million from the same quarter in 2012, primarily due to the discrete impacts of the 2012 Distribution Formula Rate Order recorded in the second quarter of 2012 and increased distribution revenue due to recovery of increased costs and capital investment pursuant to the formula rate under EIMA.

For the second quarter of 2013, heating degree-days in the ComEd service territory were up 43.0 percent relative to the same period in 2012 and were 1.7 percent above normal. For the second quarter of 2013, cooling degree-days in the ComEd service territory were down 43.3 percent relative to the same period in 2012 and were 10.1 percent above normal. Total retail electric deliveries decreased 3.5 percent quarter over quarter.

Weather-normalized retail electric deliveries increased 1.0 percent in the second quarter of 2013 relative to 2012, reflecting increases in deliveries to small commercial and industrial (C&I) and residential customers offset by a decrease in deliveries to large C&I customers. For ComEd, weather had an unfavorable after-tax effect of $13 million on second quarter 2013 earnings relative to 2012 and a favorable after-tax effect of $1 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 second quarter of 2013 was $72 million, compared with $79 million in the second quarter of 2012. Adjusted (non-GAAP) Operating Earnings for the second 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 is in the table below:

($ millions)

2Q13

2Q12

PECO Adjusted (non-GAAP) Operating Earnings

$74

$81

Constellation Merger and Integration Costs

(2)

(2)

PECO GAAP Net Income (Loss)

$72

$79

PECO’s Adjusted (non-GAAP) Operating Earnings in the second quarter of 2013 decreased $7 million from the same quarter in 2012, primarily due to higher operating and maintenance expense offset by favorable income taxes driven by benefit for the gas property repairs deduction.

For the second quarter of 2013, heating degree-days in the PECO service territory were up 24.9 percent relative to the same period in 2013 and were 9.1 percent below normal. For the second quarter of 2013, cooling degree-days in the PECO service territory were down 2.8 percent relative to the same period in 2012 and were 20.1 percent above normal. Total retail electric deliveries were flat quarter over quarter. On the gas side, deliveries in the second quarter of 2013 were up 6.7 percent from the second quarter of 2012.

Weather-normalized retail electric deliveries increased 0.8 percent in the second quarter of 2013 relative to 2012, reflecting an increase in deliveries to both small and large C&I customers offset by a decrease in deliveries to residential customers. Weather-normalized gas deliveries were up 1.8 percent in the second quarter of 2013. For PECO, weather had no impact on second quarter 2013 earnings relative to 2012 and a favorable after-tax effect of $2 million relative to normal weather.

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

BGE’s GAAP net income in the second quarter of 2013 was $22 million, compared with $13 million in the second quarter of 2012. Adjusted (non-GAAP) Operating Earnings for the second 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 is in the table below:

($ millions)

2Q13

2Q12

BGE Adjusted (non-GAAP) Operating Earnings

$23

$14

Constellation Merger and Integration Costs

(1)

(1)

BGE GAAP Net Income (Loss)

$22

$13

BGE’s Adjusted (non-GAAP) Operating Earnings in the second quarter of 2013 increased $9 million from the same quarter in 2012, primarily due to higher electric and gas distribution rates. Due to revenue decoupling, BGE is not affected by actual weather with the exception of major storms.



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 10 and 11 are posted on Exelon’s Web site (download attachment) and have been furnished to the Securities and Exchange Commission on Form 8-K on July 31, 2013.

Cautionary Statements Rregarding 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; (2) Exelon’s First Quarter 2013 Quarterly Report on Form 10-Q 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 17; and (3) 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 news release. 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

Ravi Ganti Investor Relations
312.394.2348
Paul Adams Exelon Corporate Communications
410.470.4167
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