Sign In

Exelon Announces Fourth Quarter 2016 Results, Provides 2017 Earnings Expectation

 

CHICAGO — Exelon Corporation (NYSE: EXC) announced fourth quarter 2016 consolidated earnings as follows:

2016
(Full Year)
2015
(Full Year)
2016
(Fourth Quarter)
2015
(Fourth Quarter)
GAAP Results:
Net Income ($ millions)$1,134$2,269$204$309
Diluted Earnings per Share$1.22$2.54$0.22$0.33
Adjusted (non-GAAP) Operating Results:
Net Income ($ millions)$2,488$2,227$410$347
Diluted Earnings per Share$2.68$2.49$0.44$0.38

“2016 was a monumental year for Exelon. We made great progress in the ongoing transformation of our company, with a focus on meeting our commitments to stakeholders via the PHI merger and the creation of the ZEC programs in both New York and Illinois that compensate our nuclear plants for their carbon-free attributes,” said Christopher M. Crane, Exelon President and CEO. “In addition, each of our operating companies turned in best-ever performance in a range of key metrics, which would not have been possible without the remarkable contributions of our 34,000 employees that work hard every day to keep the power and gas flowing for our customers.”

Fourth Quarter Operating Results

Exelon’s GAAP Net Income decreased to $0.22 per share in the fourth quarter of 2016 from $0.33 per share in the fourth quarter of 2015. Exelon's Adjusted (non-GAAP) Operating Earnings increased to $0.44 per share in the fourth quarter of 2016 from $0.38 per share in the fourth quarter of 2015.

Fourth quarter 2016 operating results include $0.05 per share of Pepco Holdings, LLC (PHI) Adjusted (non-GAAP) Operating Earnings, which was partially offset by incremental debt and equity costs incurred in connection with the merger. Adjusted (non-GAAP) Operating Earnings in the fourth quarter of 2016 also reflect the following favorable factors:
  • Favorable impacts of decreased nuclear outage days at Generation;
  • Favorable weather conditions at ComEd and PECO; and
  • Higher utility earnings due to regulatory rate increases.
These factors were partially offset by:
  • Lower capacity prices at Generation;
  • Lower realized energy prices at Generation; and
  • Increased depreciation and amortization expenses, primarily from an increase in capital expenditures across the operating companies.
Adjusted (non-GAAP) Operating Earnings for the fourth quarter of 2016 do not include the following items (after-tax) that were included in reported GAAP Net Income:


(in millions)(per diluted share)
Exelon GAAP Net Income $204 $0.22
Mark-to-Market Impact of Economic Hedging Activities(44)(0.05)
Unrealized Losses Related to Nuclear Decommissioning Trust (NDT) Fund Investments90.01
Amortization of Commodity Contract Intangibles260.03
Merger and Integration Costs230.02
Reassessment of State Deferred Income Taxes100.01
Asset Retirement Obligation(75)(0.08)
Merger Commitments380.04
Plant Retirements and Divestitures(1)940.10
Cost Management Program80.01
Curtailment of Generation Growth and Development Activities570.06
Long-Lived Asset Impairments(1)
CENG Noncontrolling Interest610.07
Exelon Adjusted (non-GAAP) Operating Earnings $410 $0.44

(1) Includes after-tax $154 million of incremental accelerated depreciation from June 2, 2016 through December 6, 2016, pursuant to the second quarter decision to early retire the Clinton and Quad Cities nuclear generating facilities, which decision was reversed in December 2016.

Adjusted (non-GAAP) Operating Earnings for the fourth 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 GAAP Net Income $309$0.33
Unrealized Gains Related to NDT Fund Investments(51)(0.05)
Amortization of Commodity Contract Intangibles100.01
Merger and Integration Costs90.01
Long-Lived Asset Impairments60.01
Reassessment of State Deferred Income Taxes410.05
Reduction in State Income Tax Reserve(10)(0.01)
PHI Merger Related Redeemable Debt Exchange130.01
CENG Noncontrolling Interest200.02
Exelon Adjusted (non-GAAP) Operating Earnings$347$0.38

2017 Earnings Outlook

Exelon introduced a guidance range for 2017 Adjusted (non-GAAP) Operating Earnings of $2.50 to $2.80 per share.  Operating Earnings guidance is based on the assumption of normal weather, which is determined based on historical average heating and cooling degree days for a 30-year period in the respective utilities' service territories, except at PHI, where a 20-year period is used.

The outlook for 2017 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;
  • Certain costs incurred related to the PHI acquisition and pending acquisition of the James A. FitzPatrick Nuclear Power Plant;
  • Certain costs incurred to achieve cost management program savings;
  • Other unusual items; and
  • One-time impacts of adopting new accounting standards.
Fourth Quarter and Recent Highlights

  • Reversal of Decision to Early Retire Clinton and Quad Cities Nuclear Facilities: On Dec. 7, 2016, the Future Energy Jobs Act was signed into law by the Governor of Illinois and included a Zero Emission Standard (ZES) providing compensation in the form of a Zero Emission Credit (ZEC). The Illinois ZES will have a 10-year duration extending from June 1, 2017, through May 31, 2027. With the passage of the Illinois ZES, Generation has reversed its decision to permanently cease generation operations at the Clinton and Quad Cities nuclear generating plants, subject to prevailing over any potential administrative or legal challenges. Pursuant to this development, in December 2016 Exelon and Generation reversed approximately $120 million of the one-time charges initially recorded in June 2016 associated with the early retirements, primarily for employee-related costs and a materials and supplies inventory reserve adjustment, and adjusted the expected economic useful life for both facilities to 2027 for Clinton, commensurate with the end of the Illinois ZES, and to 2032 for Quad Cities, the end of its operating license.
  • Nuclear Operations: Generation’s nuclear fleet, including its owned output from the Salem Generating Station and 100 percent of the Constellation Energy Group (CENG) units, produced 44,834 gigawatt-hours (GWh) in the fourth quarter of 2016, compared with 43,832 GWh in the fourth quarter of 2015. Excluding Salem, the Exelon-operated nuclear plants at ownership achieved a 94.2 percent capacity factor for the fourth quarter of 2016, compared with 93.3 percent for the fourth quarter of 2015. The number of planned refueling outage days totaled 71 in the fourth quarter of 2016, compared with 103 in the fourth quarter of 2015. There were 32 non-refueling outage days in the fourth quarter of 2016, compared with 21 days in the fourth quarter of 2015.
  • Fossil and Renewable Operations:  The Dispatch Match rate for Generation’s gas and hydro fleet was 99.7 percent in the fourth quarter of 2016, compared with 97.3 percent in the fourth quarter of 2015. Energy Capture for the wind and solar fleet was 95.7 percent in the fourth quarter of 2016, compared with 95.3 percent in the fourth quarter of 2015.
  • ComEd Electric Distribution Rate Case: On Dec. 6, 2016, the Illinois Commerce Commission issued its final order approving ComEd's 2016 annual distribution formula rate update. The final order resulted in an increase to the revenue requirement of $127 million. The increase was set using an allowed return on capital of 6.69 percent (inclusive of an allowed ROE of 8.64 percent for 2016 less a reliability performance metric penalty of 5 basis points for the 2015 reconciliation). The rates took effect in January 2017.
  • Pepco Maryland Electric Distribution Rate Case: On Nov. 15, 2016, the Maryland Public Service Commission approved an electric rate increase of $53 million based on an allowed ROE of 9.55 percent. The approved electric delivery rates became effective for services rendered on or after Nov. 15, 2016.
  • Settlement of Baltimore City Conduit Fee Dispute: On Nov. 30, 2016, the Baltimore City Board of Estimates approved a favorable settlement agreement entered into between BGE and the City of Baltimore to resolve certain disputes and pending litigation related to BGE's use of the city-owned underground conduit system, resulting in a credit to expense in the fourth quarter.
  • Financing Activities: On Dec. 12, 2016, DPL issued $175 million aggregate principal amount of its 4.15 percent First Mortgage Bonds, due May 15, 2045. The proceeds of the sale of the bonds were used by DPL to refinance maturing mortgage bonds, repay commercial paper 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 generating facilities 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 Dec. 31, 2016, was 91 percent to 94 percent for 2017, 56 percent to 59 percent for 2018, and 28 percent to 31 percent for 2019. 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

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

ComEd's fourth quarter 2016 GAAP Net Income was $80 million, compared with net income of $87 million in the fourth quarter of 2015. Adjusted (non-GAAP) Operating Earnings for the fourth quarter of 2016 do not include merger and integration costs that were included in reported GAAP earnings. A reconciliation of Adjusted (non-GAAP) Operating Earnings to GAAP Net Income is presented in the table below:

($ millions)4Q164Q15
ComEd GAAP Net Income$80$87
Merger and Integration Costs1
ComEd Adjusted (non-GAAP) Operating Earnings$81$87

ComEd’s Adjusted (non-GAAP) Operating Earnings in the fourth quarter of 2016 decreased $6 million compared with the same quarter in 2015, primarily due to the impacts of certain one-time ordered and proposed adjustments to ComEd's 2015 and 2016 electric distribution formula revenues.

For the fourth quarter of 2016, heating degree-days in the ComEd service territory were up 18.6 percent relative to the same period in 2015 and 11.2 percent below normal. Total retail electric deliveries increased 3.3 percent in the fourth quarter of 2016 compared with the same period in 2015.

Weather-normalized retail electric deliveries remained relatively consistent in the fourth quarter of 2016 relative to 2015.

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

PECO’s fourth quarter 2016 GAAP Net Income was $92 million, compared with $79 million in the fourth quarter of 2015. Adjusted (non-GAAP) Operating Earnings for the fourth quarter of 2016 do not include merger and integration costs and cost management program costs that were included in reported GAAP earnings. A reconciliation of GAAP Net Income to Adjusted (non-GAAP) Operating Earnings is presented in the table below:

($ millions)4Q164Q15
PECO GAAP Net Income$92$79
Merger and Integration Costs1
Cost Management Program1
PECO Adjusted (non-GAAP) Operating Earnings$94$79

PECO’s Adjusted (non-GAAP) Operating Earnings in the fourth quarter of 2016 increased $15 million from the same quarter in 2015, primarily due to favorable weather and increased electric distribution revenue pursuant to increased rates effective January 2016, partially offset by an increase in uncollectible accounts expense. 

For the fourth quarter of 2016, heating degree-days in the PECO service territory were up 45.3 percent relative to the same period in 2015 and were 12.7 percent below normal. Cooling degree-days were up 100.0 percent from prior year and 82.6 percent above normal. Total retail electric deliveries were up 4.6 percent compared with the fourth quarter of 2015. Natural gas deliveries (including both retail and transportation components) in the fourth quarter of 2016 were up 26.1 percent compared with the same period in 2015.

Weather-normalized retail electric deliveries decreased 1.3 percent in the fourth quarter of 2016 compared with the same period in 2015, while gas deliveries remained relatively consistent. 

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

BGE’s fourth quarter 2016 GAAP Net Income was $103 million, compared with $74 million in the fourth quarter of 2015. Adjusted (non-GAAP) Operating Earnings for the fourth quarter of 2016 do not include merger and integration costs and cost management program costs that were included in reported GAAP earnings. A reconciliation of GAAP Net Income to Adjusted (non-GAAP) Operating Earnings is presented in the table below:

($ millions)4Q164Q15
BGE GAAP Net Income$103$74
Merger and Integration Costs1
Cost Management Program1
BGE Adjusted (non-GAAP) Operating Earnings$105$74


BGE’s Adjusted (non-GAAP) Operating Earnings in the fourth quarter of 2016 increased $31 million from the same quarter in 2015, primarily due to increased distribution revenue pursuant to increased rates effective June 2016, decreased uncollectible accounts expense and the settlement of the Baltimore City conduit fee dispute, partially offset by increased amortization due to the initiation of cost recovery of the AMI programs. Due to revenue decoupling, BGE is not affected by actual weather with the exception of major storms.

PHI consists of electricity transmission and distribution operations in the District of Columbia and portions of Maryland, Delaware, and New Jersey and retail natural gas distribution operations in northern Delaware.

PHI’s fourth quarter 2016 GAAP Net Income was $30 million. Adjusted (non-GAAP) Operating Earnings for the fourth quarter of 2016 do not include merger and integration costs and merger commitments that were included in reported GAAP Net Income. A reconciliation of GAAP Net Income to Adjusted (non-GAAP) Operating Earnings is presented in the table below:

($ millions)4Q16
PHI GAAP Net Income$30
Merger and Integration Costs4
Merger Commitments8
PHI Adjusted (non-GAAP) Operating Earnings$42

PHI's Adjusted (non-GAAP) Operating Earnings in the fourth quarter of 2016 includes the impact from approved rate case orders in 2016.

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 and risk management services.

Generation's fourth quarter 2016 GAAP Net Loss was $41 million, compared with Net Income of $154 million in the fourth quarter of 2015. Adjusted (non-GAAP) Operating Earnings for the fourth quarter of 2016 and 2015 do not include various items (after- tax) that were included in reported GAAP earnings. A reconciliation of GAAP Net (Loss) Income to Adjusted (non-GAAP) Operating Earnings is presented in the table below:

($ millions)4Q164Q15
Generation GAAP Net (Loss) Income$(41)$154
Mark-to-Market Impact of Economic Hedging Activities(44)
Unrealized Losses (Gains) Related to NDT Fund Investments9(51)
Amortization of Commodity Contract Intangibles2610
Merger and Integration Costs152
Reassessment of State Deferred Income Taxes1411
Asset Retirement Obligation(75)
Merger Commitments40
Plant Retirements and Divestitures(1)94
Cost Management Program6
Curtailment of Generation Growth and Development Activities57
Long-Lived Asset Impairments6
Reduction in State Income Tax Reserve(10)
CENG Noncontrolling Interest6120
Generation Adjusted (non-GAAP) Operating Earnings$162$142

(1) Includes after-tax $154 million of incremental accelerated depreciation from June 2, 2016 through December 6, 2016, pursuant to the second quarter decision to early retire the Clinton and Quad Cities nuclear generating facilities, which decision was reversed in December 2016.

Generation’s Adjusted (non-GAAP) Operating Earnings in the fourth quarter of 2016 increased $20 million compared with the same quarter in 2015, primarily due to decreased nuclear outage days, the impacts of Generation's gas portfolio, the impact of the Ginna Reliability Support Services Agreement and the inclusion of ConEdison Solutions results in 2016, partially offset by lower realized energy prices, decreased capacity prices and increased depreciation expense.

Non-GAAP Financial Measures

In addition to net income as determined under generally accepted accounting principles in the United States (GAAP), Exelon evaluates its operating performance using the measure of Adjusted (non-GAAP) Operating Earnings because management believes it represents earnings directly related to the ongoing operations of the business.  Adjusted (non-GAAP) Operating Earnings exclude certain costs, expenses, gains and losses and other specified items.  This measure is intended to enhance an investor’s overall understanding of period over period operating results and provide an indication of Exelon’s baseline operating performance excluding items that are considered by management to be not directly related to the ongoing operations of the business.  In addition, this measure is among the primary indicators management uses as a basis for evaluating performance, allocating resources, setting incentive compensation targets and planning and forecasting of future periods.  Adjusted (non-GAAP) Operating Earnings is not a presentation defined under GAAP and may not be comparable to other companies’ presentation. The Company has provided the non-GAAP financial measure as supplemental information and in addition to the financial measures that are calculated and presented in accordance with GAAP. Adjusted (non-GAAP) Operating Earnings should not be deemed more useful than, a substitute for, or an alternative to the most comparable GAAP measures provided in this earnings release and attachments.  This press release and earnings release attachments provide reconciliations of adjusted (non-GAAP) Operating Earnings to the most directly comparable financial measures calculated and presented in accordance with GAAP, are posted on Exelon’s website: www.exeloncorp.com, and have been furnished to the Securities and Exchange Commission on Form 8-K on February 8, 2017.

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, Exelon Generation Company, LLC, Commonwealth Edison Company, PECO Energy Company, Baltimore Gas and Electric Company,  Pepco Holdings LLC (PHI), Potomac Electric Power Company, Delmarva Power & Light Company, and Atlantic City Electric Company (Registrants) include those factors discussed herein, as well as the items discussed in (1)  Exelon’s 2015 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 23; (2) PHI’s 2015 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 16; (3) Exelon’s Third Quarter 2016 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 18 and (4) 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.





 

 

 

Exelon Statement on Secretary of Energy's Proposal to Support U.S. Baseload Generating Facilitieshttp://www.exeloncorp.com/newsroom/exelon-statement-on-secretary-of-energys-proposal-to-support-u-s-baseload-generating-facilitiesExelon Statement on Secretary of Energy's Proposal to Support U.S. Baseload Generating Facilities9/29/2017 6:00:00 PM
Exelon Corporation Declares Dividendhttp://www.exeloncorp.com/newsroom/exelon-corporation-declares-dividend-(4)Exelon Corporation Declares Dividend9/25/2017 2:00:00 PM
Exelon Reports Second Quarter 2017 Resultshttp://www.exeloncorp.com/newsroom/exelon-reports-second-quarter-2017-resultsExelon Reports Second Quarter 2017 Results8/2/2017 10:00:00 AM
Exelon's BGE Announces Redemption of Trust Preferred Securitieshttp://www.exeloncorp.com/newsroom/Pages/Exelon-BGE-Announces-Redemption-of-Trust-Preferred-Securities.aspxExelon's BGE Announces Redemption of Trust Preferred Securities8/1/2017 8:00:00 PM

Share