Earnings Release Highlights
CHICAGO — Exelon Corporation (Nasdaq: EXC) today reported its financial results for the third quarter of 2020.
“Our financial results exceeded expectations, and our utility and generation operational performance remained strong despite the challenges of the pandemic, record heat and extreme storms, including tropical storm Isaias on the East Coast and a hurricane-scale derecho that spawned 13 tornadoes across our ComEd territory in the Midwest,” said Christopher M. Crane, president and CEO of Exelon. “We also confronted difficult strategic decisions on specific generation assets during the quarter, including our plans to prematurely retire our Byron and Dresden nuclear stations in Illinois in 2021 due to broken energy policies that don’t fairly value clean energy resources. In addition, our gas-fired Mystic plant in Boston will retire in 2024 when its cost of service agreement expires. We expect to finish the year strong as we maintain our focus on safe, reliable operations, reducing costs, supporting clean energy policies and positioning the company for the future.”
“Excellent operational performance and our success in managing costs during the pandemic continues to drive strong financial performance, resulting in adjusted (non-GAAP) third-quarter earnings of $1.04 per share, which exceeded our guidance of $0.80 to $0.90 per share,” said Joseph Nigro, senior executive vice president and CFO of Exelon. “So far this year, we have invested $4.5 billion at our utilities to improve infrastructure and further increase grid reliability for customers, with more on the way as we move forward with new proposed capital projects across our service territories over the next several years. We are raising our year-end earnings guidance to $3.00 to $3.20 per share from $2.80 to $3.10 per share.”
Exelon's GAAP Net Income for the third quarter of 2020 decreased to $0.51 per share from $0.79 per share in the third quarter of 2019. Adjusted (non-GAAP) Operating Earnings for the third quarter of 2020 increased to $1.04 per share from $0.92 per share in the third quarter of 2019. For the reconciliations of GAAP Net Income to Adjusted (non-GAAP) Operating Earnings, refer to the tables beginning on page 5.
Adjusted (non-GAAP) Operating Earnings in the third quarter of 2020 primarily reflect:
ComEd
ComEd's third quarter of 2020 GAAP Net Income and Adjusted (non-GAAP) Operating Earnings remained relatively consistent with the third quarter of 2019. Due to revenue decoupling, ComEd's distribution earnings are not affected by actual weather or customer usage patterns.
PECO
PECO’s third quarter of 2020 GAAP Net Income and Adjusted (non-GAAP) Operating Earnings remained relatively consistent with the third quarter of 2019, primarily due to favorable weather conditions, offset by higher storm costs due to the August 2020 storm net of tax repairs.
BGE
BGE’s third quarter of 2020 GAAP Net Income and Adjusted (non-GAAP) Operating Earnings remained relatively consistent with the third quarter of 2019, primarily due to regulatory rate increases, offset by an increase in various expenses. Due to revenue decoupling, BGE's distribution earnings are not affected by actual weather or customer usage patterns.
PHI
PHI’s third quarter of 2020 GAAP Net Income increased to $216 million from $189 million in the third quarter of 2019. PHI’s Adjusted (non-GAAP) Operating Earnings for the third quarter of 2020 increased to $220 million from $209 million in the third quarter of 2019, primarily due to regulatory rate increases, partially offset by storm costs related to the August 2020 storm. Due to revenue decoupling, PHI's distribution earnings related to Pepco Maryland, DPL Maryland, and Pepco District of Columbia are not affected by actual weather or customer usage patterns.
Generation
Generation's third quarter of 2020 GAAP Net Income decreased to $49 million from $257 million in the third quarter of 2019. Generation’s Adjusted (non-GAAP) Operating Earnings for the third quarter of 2020 increased to $456 million from $352 million in the third quarter of 2019, primarily due to higher capacity revenues and lower operating and maintenance expense, partially offset by a reduction in load due to COVID-19.
As of Sept. 30, 2020, the percentage of expected generation hedged is 97%-100% and 87%-90% for 2020 and 2021, respectively.
1Exelon’s four business units include ComEd, which consists of electricity transmission and distribution operations in northern Illinois; PECO, which consists of electricity transmission and distribution operations and retail natural gas distribution operations in southeastern Pennsylvania; BGE, which consists of electricity transmission and distribution operations and retail natural gas distribution operations in central Maryland; and PHI, which 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.
Adjusted (non-GAAP) Operating Earnings for the third quarter of 2020 do not include the following items (after tax) that were included in reported GAAP Net Income:
(in millions) | Exelon
Earnings per
Diluted
Share
| Exelon | ComEd | PECO | BGE | PHI | Generation |
2020 GAAP Net Income (Loss) | $0.51 | $501 | $196 | $138 | $53 | $216 | $49 |
Mark-to-Market Impact of Economic Hedging Activities (net of taxes of $62 and $64, respectively) | (0.19) | (183) | — | — | — | — | (192) |
Unrealized Gains Related to Nuclear Decommissioning Trust (NDT) Fund Investments (net of taxes of $161) | (0.18) | (172) | — | — | — | — | (172) |
Asset Impairments (net of taxes of $126) | 0.38 | 375 | — | — | — | — | 375 |
Plant Retirements and Divestitures (net of taxes of $111) | 0.34 | 329 | — | — | — | — | 329 |
Cost Management Program (net of taxes of $5, $0, $0, $1 and $4, respectively) | 0.02 | 15 | — | 1 | 1 | 1 | 12 |
Change in Environmental Liabilities (net of taxes of $6) | 0.02 | 17 | — | — | — | — | 17 |
COVID-19 Direct Costs (net of taxes of $3, $1, $0, and $2, respectively) | 0.01 | 10 | — | 2 | — | 1 | 7 |
Asset Retirement Obligation (net of taxes of $1) | — | 3 | — | — | — | 3 | — |
Acquisition Related Costs (net of taxes of $1) | — | 2 | — | — | — | — | 2 |
Income Tax-Related Adjustments (entire amount represents tax expense) | 0.06 | 62 | — | — | — | (1) | (28) |
Noncontrolling Interests (net of taxes of $12) | 0.06 | 57 | — | — | — | — | 57 |
2020 Adjusted (non-GAAP) Operating Earnings | $1.04 | $1,017 | $197 | $141 | $54 | $220 | $456 |
Adjusted (non-GAAP) Operating Earnings for the third quarter of 2019 do not include the following items (after tax) that were included in reported GAAP Net Income:
(in millions) | Exelon
Earnings per
Diluted
Share
| Exelon | ComEd | PECO | BGE | PHI | Generation |
2019 GAAP Net Income | $0.79 | $772 | $200 | $140 | $55 | $189 | $257 |
Mark-to-Market Impact of Economic Hedging Activities (net of taxes of $2 and $4, respectively) | — | (2) | — | — | — | — | (10) |
Unrealized Gains Related to NDT Fund Investments (net of taxes of $34) | (0.04) | (39) | — | — | — | — | (39) |
Asset Impairments (net of taxes of $53) | 0.12 | 113 | — | — | — | — | 113 |
Plant Retirements and Divestitures (net of taxes of $40) | 0.12 | 119 | — | — | — | — | 119 |
Cost Management Program (net of taxes of $3, $0, $0, $0 and $3, respectively) | 0.01 | 14 | — | 1 | 1 | 2 | 10 |
Asset Retirement Obligation (net of taxes of $9) | (0.09) | (84) | — | — | — | — | (84) |
Change in Environmental Liabilities (net of taxes of $5, $5 and $0, respectively) | 0.02 | 18 | — | — | — | 17 | 1 |
Income Tax-Related Adjustments (entire amount represents tax expense) | 0.01 | 13 | — | — | — | 1 | 9 |
Noncontrolling Interests (net of taxes of $3) | (0.02) | (24) | — | — | — | — | (24) |
2019 Adjusted (non-GAAP) Operating Earnings | $0.92 | $900 | $200 | $141 | $56 | $209 | $352 |
Note:
Amounts may not sum due to rounding.
Unless otherwise noted, the income tax impact of each reconciling item between GAAP Net Income and Adjusted (non-GAAP) Operating Earnings is based on the marginal statutory federal and state income tax rates for each Registrant, taking into account whether the income or expense item is taxable or deductible, respectively, in whole or in part. For all items except the unrealized gains and losses related to NDT fund investments, the marginal statutory income tax rates for 2020 and 2019 ranged from 26.0% to 29.0%. Under IRS regulations, NDT fund investment returns are taxed at different rates for investments if they are in qualified or non-qualified funds. The effective tax rates for the unrealized gains and losses related to NDT fund investments were 48.3% and 47.1% for the three months ended Sept. 30, 2020 and 2019, respectively.
Webcast Information
Exelon will discuss third quarter 2020 earnings in a conference call scheduled for today at 9 a.m. Central Time (10 a.m. Eastern Time). The webcast and associated materials can be accessed at www.exeloncorp.com/investor-relations.
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 Net Income 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 Nov. 3, 2020.
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 including among others those related to the expected or potential impact of the novel coronavirus (COVID-19) pandemic, and the related responses of various governments and regulatory bodies, our customers, and the company, on our business, financial condition, and results of operations; any such forward-looking statements, whether concerning the COVID-19 pandemic or otherwise, involve risks, assumptions, and uncertainties. Words such as “could,” “may,” “expects,” “anticipates,” “will,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “predicts,” and variations on such words, and similar expressions that reflect our current views with respect to future events and operational, economic, and financial performance, are intended to identify such forward-looking statements.
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, 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) the Registrants' 2019 Annual Report on Form 10-K in (a) Part I, ITEM 1A. Risk Factors, (b) Part II, ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, and (c) Part II, ITEM 8. Financial Statements and Supplementary Data: Note 18, Commitments and Contingencies; (2) the Registrants' Third Quarter 2020 Quarterly Report on Form 10-Q (to be filed on Nov. 3, 2020) in (a) Part II, ITEM 1A. Risk Factors, (b) Part I, ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, and (c) Part I, ITEM 1. Financial Statements: Note 14, Commitments and Contingencies; and (3) other factors discussed in filings with the SEC by the Registrants.
Investors are cautioned not to place undue reliance on these forward-looking statements, whether written or oral, 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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