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Exelon Announces Second Quarter 2015 Results

Company reports earnings above guidance range

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CHICAGO (Jul. 29, 2015) - Exelon Corporation (NYSE: EXC) announced second quarter 2015 consolidated earnings as follows:

 

Second Quarter

2015

2014

Adjusted (non-GAAP) Operating Results:

Net Income ($ millions)

$508

$440

Diluted Earnings per Share

$0.59

$0.51

GAAP Results:

Net Income ($ millions)

$638

$522

Diluted Earnings per Share

$0.74

$0.60

"All of our businesses continue to deliver best in class operations, benefiting our
customers and shareholders,"  said Christopher M. Crane, Exelon's president and CEO.  "Exelon achieved earnings above our guidance range this quarter led by strong financial
performance at Constellation. Based on our results through June, we are narrowing our full-year operating earnings guidance to $2.35 to $2.55 per share."

Second Quarter Operating Results

As shown in the table above, Exelon's Adjusted (non-GAAP) Operating Earnings increased to $0.59 per share in the second quarter of 2015 from $0.51 per share in the second quarter of 2014. Earnings in the second quarter of 2015 primarily reflected the following favorable factors:

•  Higher revenue net of purchased power and fuel at Generation as a result of a reduction in the number of nuclear outage days, favorability from portfolio management optimization activities, the Integrys acquisition, and the cancellation of the Department of Energy spent nuclear fuel disposal fees;

•  Higher realized NDT fund investment gains at Generation;

•  Lower uncollectible accounts expense at BGE.

These factors were partially offset by:

•  Higher storm costs at PECO;

•  Unfavorable weather at ComEd;

•  Higher interest expense due to higher outstanding debt; and

•  Higher income tax expenses due to decreased domestic production activities deduction at Generation and decreased electric tax repair deductions at PECO.

Adjusted (non-GAAP) Operating Earnings for the second quarter of 2015 do not include the following items (after tax) that were included in reported GAAP Net Income:
 

(in millions)

(per diluted share)

Exelon Adjusted (non-GAAP) Operating Earnings

$508

$0.59

Mark-to-Market Impact of Economic Hedging Activities

143

0.16

Unrealized Losses Related to NDT Fund Investments

 (56)

 (0.06)

Amortization of Commodity Contract Intangibles

(9)(0.01)

Merger and Integration Costs

(18)

(0.02)

Mark-to-Market Impact of PHI Merger Related Interest Rate Swaps

71

0.08

Long-Lived Asset Impairment

(15)

(0.02)

CENG Non-Controlling Interest140.02

Exelon GAAP Net Income

$638

$0.74

Adjusted (non-GAAP) Operating Earnings for the second quarter of 2014 do not include the following items (after tax) that were included in reported GAAP Net Income:

(in millions)

(per diluted share)

Exelon Adjusted (non-GAAP) Operating Earnings

$440

$0.51

Mark-to-Market Impact of Economic Hedging Activities

(8)

(0.01)

Unrealized Gains Related to NDT Fund Investments

76

0.09

Amortization of Commodity Contract Intangibles

(23)

(0.03)

Merger and Integration Costs

(31)

(0.03)

Long-Lived Asset Impairments

(68)

(0.08)

Gain on CENG Integration1590.18
CENG Non-Controlling Interest(23)(0.03)

Exelon GAAP Net Income

$522

$0.60

 Second Quarter and Recent Highlights

•  Pepco Holdings, Inc. Merger: On May 15, 2015, the Maryland Public Service Commission (MDPSC) approved the merger after modifying a number of the conditions in the settlements, including provisions for rate credits, funding for energy efficiency programs, establishing a green sustainability fund, renewable generation development, ring-fencing, financial reporting conditions and increased penalties related to reliability commitments. On May 18, 2015, Exelon and PHI accepted and committed to fulfill the conditions. On June 2, 2015, the Delaware Public Service Commission (DPSC) issued an order approving the merger between Exelon and PHI. On June 11, 2015, the Maryland Office of People's Counsel (OPC), the Sierra Club, and the Chesapeake Climate Action Network filed their Petitions for Judicial Review of the MDPSC's approval of the merger with the Circuit Court for Queen Anne's County. On July 1, 2015, Public Citizen, Inc. filed its Petition for Judicial Review with the Circuit Court for Queen Anne's County. On July 10, 2015, Exelon and PHI filed responses to the Petitions for Review. On July 21, 2015, the OPC filed a motion to stay the MDPSC order approving the merger and to set a schedule for discovery and presentation of new evidence.  Exelon and PHI intend to vigorously oppose the motion. The merger continues to be conditioned upon approval by the Public Service Commission of the District of Columbia.  Exelon and PHI expect the merger to be completed in the third quarter of 2015.

•  Nuclear Operations: Generation's nuclear fleet, including its owned output from the Salem Generating Station and 100 percent of the CENG units, produced 43,805 gigawatt-hours (GWh) in the second quarter of 2015, compared with 41,397 GWh in the second quarter of 2014. Excluding Salem, the Exelon-operated nuclear plants at ownership achieved a 93.1 percent capacity factor for the second quarter of 2015, compared with 91.8 percent for the second quarter of 2014. The number of planned refueling outage days totaled 71 in the second quarter of 2015, compared with 108 in the second quarter of 2014. There were 18 non-refueling outage days in the second quarter of 2015, compared with 44 days in the second quarter of 2014.

•  Fossil and Renewable Operations: The Dispatch Match rate for Generation's gas and hydro fleet was 99.2 percent in the second quarter of 2015, compared with 99.2 percent in the second quarter of 2014. Energy Capture for the wind and solar fleet was 96.1 percent in the second quarter of 2015, compared with 94.7 percent in the second quarter of 2014. Energy Capture performance improvement was attributed to enhancing reliability, quality assurance, and quality control programs.

 Financing Activities:
â—¦  On June 1, 2015, Generation completed remarketing of $435 million in aggregate principal amount of its tax-exempt pollution control revenue bonds. The net proceeds of the sale of the bonds will be used for general corporate purposes.

â—¦  On June 11, 2015, Exelon issued $4.2 billion in aggregate principal amount of Senior Notes, consisting of $550 million of 1.550% Notes due 2017, $900 million of 2.850% Notes due 2020, $1.25 billion of 3.950% Notes due 2025, $500 million of 4.950% Notes due 2035 and $1.0 billion of 5.100% Notes due 2045. The net proceeds of the issuance will be used to finance a portion of the pending acquisition of PHI and related costs and expenses and for general corporate purposes.

â—¦  On July 14, 2015, Exelon completed the settlement of its June 2014 equity offering through the issuance of 57.5 million shares of Exelon common stock. Exelon received net cash proceeds of $1.87 billion, which was calculated based on a forward price of $32.48 per share as specified in the forward sale agreements.  Exelon will use the net proceeds to fund the pending acquisition of PHI and related costs and expenses and for general corporate purposes.

•  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 is the volume of energy that best represents our commodity position in energy markets from owned or contracted for capacity based upon a simulated dispatch model that makes assumptions regarding future market conditions, which are calibrated to market quotes for power, fuel, load following products, and options. The proportion of expected generation hedged as of June 30, 2015, was 98 percent to 101 percent for 2015, 77 percent to 80 percent for 2016, and 46 percent to 49 percent for 2017. 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 the generation, physical delivery and marketing of power across multiple geographical regions through its customer-facing business, Constellation, which sells electricity and natural gas to both wholesale and retail customers.  Generation also sells renewable energy and other energy-related products and services, and engages in natural gas and oil exploration and production activities (Upstream).

Generation's second quarter 2015 GAAP Net Income was $398 million, compared with net income of $340 million in the second quarter of 2014. Adjusted (non-GAAP) Operating Earnings for the second quarter of 2015 and 2014 do not include various items (after tax) that were included in reported GAAP Net Income: 

($ millions)

2Q15

2Q14

Generation Adjusted (non-GAAP) Operating Earnings

$309

$231

Mark-to-Market Impact of Economic Hedging Activities

145

(8)

Unrealized Gains Related to NDT Fund Investments

(56)

76

Amortization of Commodity Contract Intangibles

(9)

(23)

Merger and Integration Costs

(5)

(19)

Long-Lived Asset Impairments

--

(53)

Gain on CENG Integration

-

159

CENG Non-Controlling Interest

14

(23)

Generation GAAP Net Income (Loss)

$398

$340

Generation's Adjusted (non-GAAP) Operating Earnings in the second quarter of 2015 increased $78 million compared with the same quarter in 2014. This increase primarily reflected higher revenue net of purchased power and fuel as a result of a reduction in the number of nuclear outage days, favorability from portfolio management optimization activities, the Integrys acquisition, and the cancellation of the DOE spent nuclear fuel disposal fee; as well as higher realized NDT fund gains. These increases were partially offset by increased interest and income tax expenses.

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

ComEd's second quarter 2015 GAAP Net Income was $99 million, compared with net income of $111 million  in the second quarter of 2014.  Adjusted (non-GAAP) Operating Earnings for the second quarter of 2015 do not include merger and integration costs that were included in reported GAAP Net Income:

($ millions)

2Q15

2Q14

ComEd Adjusted (non-GAAP) Operating Earnings

$101

$111

Merger and Integration Costs

(2)

-

ComEd GAAP Net Income

$99

$111

ComEd's Adjusted (non-GAAP) Operating Earnings in the second quarter of 2015 decreased $10 million from the same quarter in 2014 primarily as a result of unfavorable weather offset by increased electric distribution earnings, reflecting the impacts of increased capital investment, partially offset by lower allowed return on common equity due to a decrease in treasury rates.

For the second quarter of 2015, heating degree-days in the ComEd service territory were down 1.3 percent relative to the same period in 2014 and were 10.3 percent below normal. Cooling degree days were down 34.0 percent from prior year and 21.6 percent below normal. Total retail electric deliveries decreased 3.8 percent in the second quarter of 2015 compared with the same period in 2014.

Weather-normalized retail electric deliveries decreased 1.2 percent in the second quarter of 2015 compared with the same period in 2014.

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

PECO's  second quarter 2015 GAAP Net Income was $70 million, compared with net income of $84 million in the second quarter of 2014. Adjusted (non-GAAP) Operating Earnings for the second quarter of 2015 do not include merger and integration costs that were included in reported GAAP Net Income:

($ millions)

2Q15

2Q14

PECO Adjusted (non-GAAP) Operating Earnings

$71

$84

Merger and Integration Costs

(1)

-

PECO GAAP Net Income

$70

$84

PECO's Adjusted (non-GAAP) Operating Earnings in the second quarter of 2015 decreased $13 million from the same quarter in 2014 primarily due to increased storm costs.

For the second quarter of 2015, heating degree-days in the PECO service territory were down 16.0 percent relative to the same period in 2014 and were 29.2 percent below normal. Cooling degree days were up 36.8 percent from the prior year and 47.4 percent above normal. Total retail electric deliveries were up 2.7 percent compared with the second quarter of 2014.

Natural gas deliveries (including both retail and transportation segments) in the second quarter of 2015 were down 5.7 percent compared with the same period in 2014.

Weather-normalized retail electric and gas deliveries decreased 0.7 percent and increased 1.6 percent, respectively, in the second quarter of 2015 compared with the same period in 2014.

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

BGE's second quarter 2015 GAAP Net Income was $44 million, compared with net income of $16 million in the second quarter of 2014. Adjusted (non-GAAP) Operating Earnings for the second quarter of 2015 do not include merger and integration costs that were included in reported GAAP Net Income:

($ millions)

2Q15

2Q14

BGE Adjusted (non-GAAP) Operating Earnings

$45

$16

Merger and Integration Costs

(1)

-

BGE GAAP Net Income

$44

$16

BGE's Adjusted (non-GAAP) Operating Earnings in the second quarter of 2015 increased $29 million from the same quarter in 2014, primarily due to decreased uncollectible accounts expense and increased distribution revenues pursuant to increased rates effective in December 2014. Due to decoupling, BGE's distribution revenues are not affected by actual weather.

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 Net Income to adjusted (non-GAAP) operating earnings for historical periods is attached. Additional earnings release attachments, which include the reconciliation on page 8, are posted on Exelon's Web site: www.exeloncorp.com and have been furnished to the Securities and Exchange Commission on Form 8-K on July 29, 2015.

Cautionary Statements Regarding Forward-Looking Information
This press 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 2014 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 22; (2) Exelon's Second Quarter 2015 Quarterly Report on Form 10-Q (to be filed on July 29, 2015) 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 19; 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 press 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 press release.

 

 

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