Exelon Announces Fourth Quarter 2014 Results, Provides 2015 Earnings Expectation

CHICAGO (Feb. 13, 2015) - Exelon Corporation (NYSE: EXC) announced fourth quarter 2014 consolidated earnings as follows:

"Exelon had a strong year, both operationally and financially. We delivered earnings within our guidance range, and our generation fleet and utilities continued to perform at high levels," said Exelon President and CEO Christopher M. Crane. "We made several investments to grow the company, including the proposed merger with Pepco Holdings, Inc. and the acquisition of Integrys Energy Services, and we continue to strengthen our balance sheet for long-term growth."

Fourth Quarter Operating Results

As shown in the table above, Exelon's adjusted (non-GAAP) operating earnings decreased to $0.48 per share in the fourth quarter of 2014 from $0.50 per share in the fourth quarter of 2013. Earnings in the fourth quarter of 2014 primarily reflected the following negative factors:

•   Unfavorable earnings associated with the December 2014 extension of bonus income tax depreciation impact on Generation's domestic production activities deduction and ComEd's distribution and transmission formula earnings, and

•   Unfavorable weather conditions at ComEd and PECO.

These factors were substantially offset by:

•   Higher revenue net of purchased power and fuel at Generation as a result of the cancellation of the Department of Energy spent nuclear fuel disposal fees and the inclusion of Integrys beginning Nov. 1, 2014, and

•   Cost savings from plan design changes for certain Other Post-Employment Benefits (OPEB) plans.

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

2015 Earnings Outlook

Exelon introduced a guidance range for 2015 adjusted (non-GAAP) operating earnings of $2.25 to $2.55 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.

The outlook for 2015 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;

•  Non-cash amortization of intangible assets, net, related to commodity contracts recorded at fair value at merger dates;

•  Other unusual items; and

•  One-time impacts of adopting new accounting standards.

Fourth Quarter and Recent Highlights

•  Pepco Holdings, Inc. Merger: On Nov. 20, 2014, the Federal Energy Regulatory Commission (FERC) approved the proposed merger of Exelon and PHI. In addition, on Nov. 21, 2014, Exelon and PHI each certified that it had substantially complied with the Department of Justice request under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act). Accordingly, the HSR Act waiting period expired on Dec. 22, 2014, and the HSR Act no longer precludes completion of the merger. Although the DOJ allowed the HSR Act waiting period to expire without taking any action with respect to the merger, the DOJ has not advised Exelon or PHI that it has concluded its investigation. On Feb. 11, 2015, the New Jersey Board of Public Utilities (NJBPU) approved the proposed merger of Exelon and PHI. . As part of the approval the NJBPU also approved a settlement agreement, which was previously signed and filed by Exelon, PHI, Atlantic City Electric (ACE), NJBPU staff and the Independent Energy Producers of New Jersey. The merger continues to be conditioned upon approval by the Public Service Commissions of the District of Columbia, Delaware and Maryland.  Exelon and PHI continue to expect the merger to be complete in the second or third quarter of 2015.

•  Asset Divestitures: Exelon closed the following generating asset sales during the quarter:  Fore River (CCGT) in Massachusetts, West Valley (CT) in Utah, and Exelon's ownership interests in Keystone and Conemaugh coal plants in Pennsylvania. The transactions resulted in cumulative pre-tax gains of approximately $83 million. Subsequent to year end, Exelon also closed the sale of Quail Run (CCGT) in Texas. To date, generating asset divestitures have yielded $1.8 billion of pre-tax cash proceeds ($1.4 billion after-tax), which are expected to be used primarily to finance a portion of the acquisition of PHI and for other corporate purposes.

•  Constellation: On Nov. 1, 2014, Exelon Generation acquired the competitive retail electric and natural gas business activities of Integrys Energy Group, Inc. through the purchase of all of the stock of its wholly-owned subsidiary, Integrys Energy Services, Inc. (Integrys) for a purchase price of $332 million. The generation and solar asset businesses of Integrys are excluded from the transaction. Generation recognized a $28 million after-tax bargain-purchase gain.

•  Nuclear Operations: Generation's nuclear fleet, including its owned output from the Salem Generating Station and beginning April 1, 2014, 100 percent of the CENG units, produced 44,533 gigawatt-hours (GWh), of which 8,890 GWh were produced by CENG, in the fourth quarter of 2014, compared with 35,329 GWh in the fourth quarter of 2013. Excluding Salem, the Exelon-operated nuclear plants at ownership achieved a 94.8 percent capacity factor for the fourth quarter of 2014, compared with 92.3 percent for the fourth quarter of 2013. The number of planned refueling outage days totaled 97 in the fourth quarter of 2014, compared with 94 in the fourth quarter of 2013. There were eight non-refueling outage days in the fourth quarter of 2014, compared with 33 days in the fourth quarter of 2013.

•  Fossil and Renewable Operations:  The dispatch match rate for Generation's gas/hydro fleet was 99.1 percent in the fourth quarter of 2014, compared with 99.3 percent in the fourth quarter of 2013.  Energy capture for the wind/solar fleet was 96.4 percent in the fourth quarter of 2014, compared with 94.5 percent in the fourth quarter of 2013.  The increase in energy capture for the fourth quarter of 2014 was due to the implementation of reliability programs that resulted in increased turbine availability.

•  ComEd Distribution Formula Rate Case:  On Dec. 11, 2014, the Illinois Commerce Commission (ICC) issued an order approving ComEd's 2014 annual distribution formula rate update case. The order established the net revenue requirement used to set the rates that took effect in January 2015, with an increase to ComEd's annual delivery services revenue requirement of approximately $232 million. The electric distribution rate increase was set using an allowed return on capital of 7.06 percent (inclusive of an allowed return on common equity of 9.25 percent).

•  BGE Gas and Electric Distribution Rate Case: On Dec. 4, 2014, the Public Utility Law Judge issued a proposed order approving a settlement agreement reached with all parties to BGE's 2014 distribution rate case without modification, which became a final order on Dec. 12, 2014. The final order, effective for services rendered on or after Dec. 15, 2014, established an increase of $22 million in electric base rates and an increase of $38 million in gas base rates.

•  Financing Activities:

â—¦  On Nov. 10, 2014, ComEd issued $250 million aggregate principal amount of its First Mortgage 3.10 percent Bonds, Series 117, due Nov. 1, 2024.

â—¦  On Jan. 13, 2015, Generation issued $750 million in aggregate principal amount of senior notes.  The senior notes carry an annual interest rate of 2.950 percent, payable semi-annually, commencing July 15, 2015, and due Jan. 15, 2020.  The proceeds of the senior notes will be used to redeem  Exelon Corporate's $550 million, 4.550 percent senior notes due June 15, 2015 on Feb. 17, 2015, 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 Dec. 31, 2014, was 93 percent to 96 percent for 2015, 61 percent to 64 percent for 2016, and 31 percent to 34 percent for 2017, which reflects the divestiture impact of Quail Run. 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 and natural gas exploration and production activities.

Generation's fourth quarter 2014 GAAP net loss was $91 million, compared with net income of $269 million in the fourth quarter of 2013. Adjusted (non-GAAP) operating earnings for the fourth quarter of 2014 and 2013 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:

Generation's Adjusted (non-GAAP) Operating Earnings in the fourth quarter of 2014 increased $48 million compared with the same quarter in 2013. This increase primarily reflected higher revenue net of purchase power and fuel at Generation as a result of the cancellation of the Department of Energy spent nuclear fuel disposal fees and the inclusions of Integrys beginning Nov. 1, 2014. These items were partially offset by the impact of the December 2014 extension of bonus income tax depreciation on Generation's domestic production activities deduction.

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

ComEd's fourth quarter 2014 GAAP net income was $73 million, compared with net income of $109 million in the fourth quarter of 2013. Adjusted (non-GAAP) Operating Earnings for the fourth quarter of 2013 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 in the table below:

ComEd's Adjusted (non-GAAP) Operating Earnings in the fourth quarter of 2014 were down $34 million from the same quarter in 2013, primarily due to the impacts of the December 2014 extension of bonus income tax depreciation on distribution and transmission formula earnings and unfavorable weather conditions and volume in ComEd's service territory.

For the fourth quarter of 2014, heating degree-days in the ComEd service territory were down 5.6 percent relative to the same period in 2013 and were 2.4 percent above normal. Meanwhile, cooling degree days were down 88.0 percent relative to the same period in 2013 and were 72.7 percent below normal.  However, cooling degree days typically have a minimal impact to ComEd during the winter months. Total retail electric deliveries decreased 2.7 percent in the fourth quarter of 2014 compared with the same period in 2013.

Weather-normalized retail electric deliveries were down 1.2 percent in the fourth quarter of 2014 relative to 2013.

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

PECO's fourth quarter 2014 GAAP net income was $98 million, compared with $102 million in the fourth quarter of 2013. Adjusted (non-GAAP) Operating Earnings for the fourth quarter of 2014 and 2013 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 in the table below:

PECO's Adjusted (non-GAAP) Operating Earnings in the fourth quarter of 2014 decreased $4 million from the same quarter in 2013, primarily due to unfavorable weather conditions in PECO's service territory during 2014.

For the fourth quarter of 2014, heating degree-days in the PECO service territory were down 5.0 percent relative to the same period in 2013 and were 8.0 percent below normal. Cooling degree-days were down 61.5 percent from prior year, but were 31.6 percent above normal. Total retail electric deliveries were down 3.1 percent compared with the fourth quarter of 2013. Natural gas deliveries (including both retail and transportation segments) were down 2.3 percent compared with the fourth quarter of 2013.

Weather-normalized retail electric deliveries and gas deliveries decreased 1.0 percent and increased 1.9 percent in the fourth quarter of 2014 relative to 2013, respectively. The negative growth in electric sales is primarily driven by the impact of energy efficiency programs.  The positive growth in gas sales is driven largely by the favorable impact of customers converting usage from oil and propane to natural gas.

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

BGE's fourth quarter 2014 GAAP net income was $52 million, compared with $47 million in the fourth quarter of 2013. Adjusted (non-GAAP) Operating Earnings for the fourth quarter of 2014 and 2013 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 in the table below:

BGE's Adjusted (non-GAAP) Operating Earnings in the fourth quarter of 2014 increased $5 million from the same quarter in 2013, primarily due to increased revenue as a result of the December 2013 and 2014 electric and gas distribution rate orders issued by the Maryland Public Service Commission, offset by higher operating and maintenance expense. 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 8 and 9 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 February 13, 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 (to be filed on February 13, 2015) 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 and (2) 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.