EXC Exelon Corp

Earnings Release Highlights

• GAAP Net Income of $0.09 per share and Adjusted Operating Earnings of $0.54 per share for the second quarter of 2017
• Reaffirming full year 2017 Adjusted Operating Earnings guidance of $2.50 to $2.80 per share
• Strong utility performance to the benefit of our customers, with every utility achieving top quartile CAIDI performance as well as BGE and ComEd achieving their best ever SAIFI performance
• Courts grant motions to dismiss legal challenges to the ZEC programs in Illinois and New York, preserving the economic and environmental benefits of this carbon-free generation
• Exelon Nuclear completed six refueling outages with fewer unplanned outage days than a year ago
• Two new combined-cycle gas turbines totaling nearly 2,200 MWs in Texas went into service, on-time and on-budget

Exelon Corporation (NYSE: EXC) today reported its financial results for the second quarter 2017.

“Exelon delivered a strong second quarter for our shareholders and customers as we continued to make gains in reliability, customer service and operational performance across our business,” said Christopher M. Crane, Exelon’s president and CEO. “Exelon can continue to provide reliable and affordable carbon-free power while preserving high-value jobs thanks to the dismissal of challenges to Zero Emissions Credit programs by courts in Illinois and New York, a win for our customers, the economy and the environment. We also were recognized with several leadership awards including being one of only 27 companies in the Billion Dollar Roundtable, recognizing our nearly $2 billion of spending with diverse and minority-owned businesses. We were also named to the Points of Light Civic 50 list of the most community-minded companies, a true credit to our people who give back their time and resources volunteering in the communities where we work and live.”

“Exelon once again delivered strong financial performance with non-GAAP operating earnings of $0.54 per share, which is toward the upper end of our guidance range,” said Jonathan W. Thayer, Exelon’s senior executive vice president and CFO. “Exelon remains on track to meet our full-year guidance of $2.50-2.80 per share as well as our debt reduction targets.”

Second Quarter 2017

Exelon's GAAP Net Income for the second quarter 2017 decreased to $0.09 per share from $0.29 per share in the second quarter of 2016; Adjusted (non-GAAP) Operating Earnings decreased to $0.54 per share in the second quarter of 2017 from $0.65 per share in the second quarter of 2016. For the reconciliations of GAAP to Adjusted (non-GAAP) Operating Earnings, refer to the tables below.

Adjusted (non-GAAP) Operating Earnings in the second quarter of 2017 reflect the conclusion of the Ginna reliability support services agreement, increased nuclear outage days and lower realized energy prices, partially offset by Zero Emission Credit revenue related to the New York Clean Energy Standard and higher utility earnings due to regulatory rate increases.

Operating Company Results1

ComEd

ComEd's second quarter 2017 GAAP Net Income was $118 million compared with $145 million in the second quarter of 2016. ComEd’s Adjusted (non-GAAP) Operating Earnings for the second quarter 2017 were $141 million compared with $146 million in the second quarter of 2016, primarily due to favorable weather conditions in 2016, partially offset by higher electric distribution and transmission formula rate earnings. Pursuant to the Illinois Future Energy Jobs Act, beginning in 2017, customer rates for ComEd are adjusted to eliminate the favorable and unfavorable impacts of weather and customer usage patterns on distribution volumes.

PECO

PECO’s second quarter 2017 GAAP Net Income was $88 million compared with $100 million in the second quarter of 2016. PECO’s Adjusted (non-GAAP) Operating Earnings for the second quarter 2017 were $89 million compared with $101 million in the second quarter of 2016, primarily due to unfavorable weather conditions and volumes.

For the second quarter of 2017, heating degree days were down 29.9 percent relative to the same period in 2016 and were 28.9 percent below normal. Cooling degree days were up 6.1 percent relative to the same period in 2016 and were 19.3 percent above normal. Total retail electric deliveries remained relatively consistent in the second quarter of 2017 compared with the same period in 2016. Natural gas deliveries (including both retail and transportation segments) in the second quarter of 2017 were down 3.0 percent compared with the same period in 2016.

Weather-normalized retail electric deliveries remained relatively consistent, while weather-normalized natural gas deliveries were up 5.3 percent in the second quarter of 2017 compared with the same period in 2016.

BGE

BGE’s second quarter 2017 GAAP Net Income was $45 million compared with $31 million in the second quarter of 2016. BGE’s Adjusted (non-GAAP) Operating Earnings for the second quarter 2017 were $46 million compared with $29 million in the second quarter of 2016, primarily due to the absence of 2016 charges for certain disallowances contained in June and July 2016 rate case orders and the net impact of approved rate increases. Due to revenue decoupling, BGE is not affected by actual weather.

PHI

PHI’s second quarter 2017 GAAP Net Income was $66 million compared with $52 million in the second quarter of 2016. PHI’s Adjusted (non-GAAP) Operating Earnings for the second quarter 2017 were $63 million compared with $53 million in the second quarter of 2016, primarily due to the impact of approved rate increases in 2016 and 2017. Due to decoupling, PHI's revenues related to Pepco and DPL Maryland are not affected by actual weather.

Generation

Generation's second quarter 2017 GAAP Net Loss was $250 million compared with a GAAP Net Loss of $8 million in the second quarter of 2016. Generation’s Adjusted (non-GAAP) Operating Earnings for the second quarter 2017 were $202 million compared with $328 million in the second quarter of 2016, primarily reflecting the conclusion of the Ginna reliability support services agreement, increased nuclear outage days and lower realized energy prices, partially offset by Zero Emission Credit revenue related to the New York Clean Energy Standard.

The proportion of expected generation hedged as of June 30, 2017 was 96.0 percent to 99.0 percent for 2017, 71.0 percent to 74.0 percent for 2018 and 39.0 percent to 42.0 percent for 2019.

________________________

1 Exelon’s five 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; 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; and Generation, which 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.

Second Quarter and Recent Highlights

• Early Retirement of Three Mile Island Facility: On May 30, 2017, Exelon announced it will permanently cease generation operations at Three Mile Island Generating Station (TMI) on or about September 30, 2019. In the second quarter of 2017, Exelon and Generation recognized one-time charges in Operating and maintenance expense of $71 million related to materials and supplies inventory reserve adjustments, employee-related costs and construction work-in-progress (CWIP) impairments, among other items. In addition to these one-time charges, there will be ongoing annual incremental non-cash charges to earnings stemming from shortening the expected economic useful life of TMI primarily related to accelerated depreciation of plant assets (including any asset retirement costs (ARC)), accelerated amortization of nuclear fuel, and additional asset retirement obligation (ARO) accretion expense associated with the changes in decommissioning timing and cost assumptions. Exelon’s and Generation’s second quarter 2017 results include an incremental $37 million of pre-tax expense for these items. The aforementioned one-time and incremental charges have been excluded from GAAP Net Income to arrive at Adjusted (non-GAAP) Operating Earnings.
• EGTP Assets Held for Sale Agreement: On May 2, 2017, EGTP entered into a consent agreement with its lenders to permit EGTP to draw on its revolving credit facility and initiate an orderly sales process to sell the assets of its wholly-owned subsidiaries, the proceeds from which will first be used to pay the administrative costs of the sale, the normal and ordinary costs of operating the plants and repayment of the secured debt of EGTP, including the revolving credit facility. As a result, in the second quarter, Exelon and Generation classified certain EGTP assets and liabilities as held for sale at their respective fair values less costs to sell. At June 30, 2017, a $418 million pre-tax impairment loss was recorded within Operating and maintenance expense on Exelon's and Generation's Consolidated Statements of Operations and Comprehensive Income.
• District of Columbia Power Line Undergrounding Initiative: The District of Columbia government enacted on an emergency basis (effective May 17, 2017) and thereafter on a permanent basis (effective July 11, 2017) legislation to amend the Electric Company Infrastructure Improvement Financing Act of 2014 (as amended) (the Infrastructure Improvement Financing Act) to authorize the District of Columbia Power Line Undergrounding (DC PLUG) initiative, a projected six year, $500 million project to place underground some of the District of Columbia’s most outage-prone power lines with $250 million of the project costs funded by Pepco and $250 million funded by the District of Columbia. The $250 million of project costs funded by Pepco will be recovered from Pepco's customers in the District of Columbia. Pepco will earn a return on these project costs. The $250 million of project costs funded by the District of Columbia will come from two sources. Project costs of $187.5 million will be funded through a charge assessed on Pepco by the District of Columbia; Pepco will recover this charge from customers. The remaining costs up to $62.5 million are to be funded by the existing capital projects program of the District Department of Transportation (DDOT). Pepco will not recover or earn a return on the cost of these assets.
• Like Kind Exchange: In the third quarter 2016, the United States Tax Court rejected Exelon’s like-kind exchange position and ruled that Exelon was not entitled to defer the gain on the transaction. Exelon expects to timely appeal this decision to the U.S. Court of Appeals for the Seventh Circuit in the second half of 2017. In June of 2017, the IRS finalized its computation of tax, penalties and interest owed by Exelon pursuant to the Tax Court’s decision. As a result of the IRS’s finalization of its computation in the second quarter 2017, Exelon recorded a benefit to earnings of approximately $26 million, consisting of an income tax benefit of $50 million and a reduction of penalties of $2 million, partially offset by after-tax interest expense of $26 million, while ComEd recorded a charge to earnings of approximately $23 million, consisting of income tax expense of $15 million and after-tax interest expense of $8 million. No recovery will be sought from ComEd customers for any interest, penalty or additional income tax payment amounts resulting from the like-kind exchange tax position.
• DPL Delaware Electric and Natural Gas Distribution Rates Case: On March 8, 2017, DPL entered into a settlement agreement with the Division of the Public Advocate, Delaware Electric Users Group and the DPSC Staff in its electric distribution rate proceeding, which provides for an increase in DPL annual electric distribution rates of $31.5 million based on an ROE of 9.7 percent and compared to the $32.1 million increase previously put into effect. On May 23, 2017, the DPSC issued an order approving the settlement agreement, with the new rates effective June 1, 2017. Pursuant to the settlement agreement, no refund of any pre-settlement interim rates put into effect is required.On April 6, 2017, DPL entered into a settlement agreement with the Division of the Public Advocate and the DPSC Staff in its natural gas distribution rate proceeding, which provides for an increase in DPL annual natural gas distribution rates of $4.9 million based on an ROE of 9.7 percent. On June 6, 2017, the DPSC issued an order approving the settlement agreement, with the new rates effective July 1, 2017. Pursuant to the settlement agreement, a rate refund plus interest of approximately $5 million will be issued to customers beginning in August 2017 for which a regulatory liability has been recorded as of June 30, 2017.

• DPL Maryland Electric Distribution Rates: On July 14, 2017, DPL filed an application with the MDPSC to increase its annual electric distribution base rates by $27 million based on a requested ROE of 10.1 percent. DPL expects a decision on the matter in the first quarter of 2018. DPL cannot predict how much of the requested increase the MDPSC will approve.
• Pepco District of Columbia Electric Distribution Rate Case: On July 25, 2017, the DCPSC issued an order granting Pepco an increase to its annual electric distribution base rates of $36.9 million effective Aug. 15, 2017, based on an ROE of 9.5 percent. In its decision, the DCPSC ordered that the $25.6 million customer rate credit created as a result of the Exelon and PHI merger will be provided primarily to residential customers and some small commercial customers until that amount has been exhausted, which is expected to be approximately two years. Additionally, the Commission is holding approximately $6 million to $7 million of the customer rate credit for use toward a possible new class of customers for certain senior citizens and disabled persons. The DCPSC also held that Pepco's bill stabilization adjustment, which decouples distribution revenues from utility customers from the amount of electricity delivered, will continue to be in place and that no refund of previously collected funds is required.
• Nuclear Operations: Generation’s nuclear fleet, including its owned output from the Salem Generating Station and 100 percent of the CENG units, produced 44,065 gigawatt-hours (GWhs) in the second quarter of 2017, compared with 42,453 GWhs in the second quarter of 2016. Excluding Salem, the Exelon-operated nuclear plants at ownership achieved a 90.9 percent capacity factor for the second quarter of 2017, compared with 92.3 percent for the second quarter of 2016. The number of planned refueling outage days in the second quarter of 2017 totaled 125, compared with 87 in the second quarter of 2016. There were 12 non-refueling outage days in the second quarter of 2017, compared with 21 days in the second quarter of 2016.
• Fossil and Renewables Operations: The dispatch match rate for Generation’s gas and hydro fleet was 99.0 percent in the second quarter of 2017, compared with 97.4 percent in the second quarter of 2016. Energy capture for the wind and solar fleet was 95.5 percent in the second quarter of 2017, equal to the performance in the second quarter of 2016.
• Financing Activities:
  • On April 3, 2017, Exelon completed the remarketing of $1.15 billion aggregate principal amount of its 2.500 percent Junior Subordinated Notes due 2024, originally issued as components of its equity units issued in June 2014, issuing $1.15 billion aggregate principal amount of 3.497 percent Junior Subordinated Notes due in 2022. Exelon conducted the remarketing on behalf of the holders of equity units and did not directly receive any proceeds therefrom. Instead, Exelon received $1.15 billion on June 1, 2017 upon settlement of the forward equity purchase contract and issued approximately 33 million shares of common stock from treasury stock at the time of settlement.
  • On May 22, 2017, Pepco issued $200 million aggregate principal amount of its 4.150 percent First Mortgage Bonds due in 2043. The proceeds from the sale of the First Mortgage Bonds were used to repay outstanding commercial paper and for general corporate purposes.

GAAP/Adjusted (non-GAAP) Operating Earnings Reconciliation

Adjusted (non-GAAP) Operating Earnings for the second quarter of 2017 do not include the following items (after tax) that were included in reported GAAP Earnings (Loss):

(in millions)  

ExelonEarnings perDilutedShare

 

Exelon

 

ComEd

 

PECO

 

BGE

 

PHI

 

Generation

2017 GAAP Earnings (Loss)

 

$

0.09

 

$

80

 

$

118

 

$

88

 

$

45

 

$

66

 

$

(250

)

Mark-to-Market Impact of Economic Hedging Activities (net of taxes of $72 and $71, respectively) 0.12 113 — — — — 114 Unrealized Gains Related to NDT Fund Investments (net of taxes of $20) (0.05 ) (45 ) — — — — (45 ) Amortization of Commodity Contract Intangibles (net of taxes of $8) 0.01 12 — — — — 12 Merger and Integration Costs (net of taxes of $9, $1 and $7, respectively) 0.01 15

—

—

— 1 12 Merger Commitments (net of taxes of $3) — — —

 

— — (4 ) — Long-Lived Asset Impairments (net of taxes of $172 and $171, respectively) 0.29 268 — — — — 269 Plant Retirements and Divestitures (net of taxes of $42) 0.07 66 — — — — 66 Cost Management Program (net of taxes of $4, $1, $1 and $3 respectively) 0.01 6 — 1 1 — 4 Like-Kind Exchange Tax Position (net of taxes of $66 and $9, respectively) (0.03 ) (26 ) 23 — — — — CENG Noncontrolling Interest (net of taxes of $5)     0.02       20       —     —     —     —       20  

2017 Adjusted (non-GAAP) Operating Earnings

 

$

0.54

   

$

509

   

$

141

 

$

89

 

$

46

 

$

63

   

$

202

 

Adjusted (non-GAAP) Operating Earnings for the second quarter of 2016 do not include the following items (after tax) that were included in reported GAAP Earnings (Loss):

(in millions)  

ExelonEarnings perDilutedShare

 

Exelon

 

ComEd

 

PECO

 

BGE

 

PHI

 

Generation

2016 GAAP Earnings (Loss)

 

$

0.29

 

$

267

 

$

145

 

$

100

 

$

31

 

$

52

 

$

(8

)

Mark-to-Market Impact of Economic Hedging Activities (net of taxes of $120 and $119, respectively) 0.20 185 — — — — 185 Unrealized Gains Related to NDT Fund Investments (net of taxes of $29) (0.03 ) (27 ) — — — — (27 ) Amortization of Commodity Contract Intangibles (net of taxes of $4) 0.01 8 — — — — 8 Merger and Integrations Costs (net of taxes of $0, $0, $2 and $2, respectively) — 1 1 — (3 ) — 3 Merger Commitments (entire amount represents tax expense) — 1 — — — 1 — Long-Lived Asset Impairments (net of taxes of $14) 0.02 22 — — — — 22 Plant Retirements and Divestitures (net of taxes of $85) 0.14 133 — — — — 133 Cost Management Program (net of taxes of $3, $0, $0 and $2, respectively) 0.01 6 — 1 1 — 4 CENG Noncontrolling Interest (net of taxes of $1)     0.01       8       —     —     —       —     8  

2016 Adjusted (non-GAAP) Operating Earnings

 

$

0.65

   

$

604

   

$

146

 

$

101

 

$

29

   

$

53

 

$

328

 

Note:

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 ranged from 39 percent to 41 percent. Under IRS regulations, NDT fund investment returns are taxed at differing rates for investments in qualified vs. non-qualified funds. The tax rates applied to unrealized gains and losses related to NDT Fund investments were 31.4 percent and 47.5 percent for the three and six months ended June 30, 2017, respectively, and 51.6 percent and 52.5 percent for the three and six months ended June 30, 2016, respectively.

Webcast Information

Exelon will discuss second quarter 2017 earnings in a one-hour conference call scheduled for today at 10 a.m. Central Time (11 a.m. Eastern Time). The webcast and associated materials can be accessed at www.exeloncorp.com/investor-relations.

About Exelon

Exelon Corporation (NYSE: EXC) is a Fortune 100 energy company with the largest number of utility customers in the U.S. Exelon does business in 48 states, the District of Columbia and Canada and had 2016 revenue of $31.4 billion. Exelon’s six utilities deliver electricity and natural gas to approximately 10 million customers in Delaware, the District of Columbia, Illinois, Maryland, New Jersey and Pennsylvania through its Atlantic City Electric, BGE, ComEd, Delmarva Power, PECO and Pepco subsidiaries. Exelon is one of the largest competitive U.S. power generators, with more than 33,300 megawatts of nuclear, gas, wind, solar and hydroelectric generating 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 2.2 million residential, public sector and business customers, including more than two-thirds of the Fortune 100. Follow Exelon on Twitter @Exelon.

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 Aug. 2, 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, 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' 2016 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 24, Commitments and Contingencies; (2) the Registrants' Second Quarter 2017 Quarterly Report on Form 10-Q (to be filed on August 2, 2017) 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, Commitments and Contingencies; 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.

EXELON CORPORATION

GAAP Consolidated Statements of Operations and

Adjusted (non-GAAP) Operating Earnings Reconciling Adjustments

(unaudited)

(in millions, except per share data)

    Three Months Ended June 30, 2017     Three Months Ended June 30, 2016   GAAP (a)  

Non-GAAP

Adjustments

GAAP (a)  

Non-GAAP

Adjustments

Operating revenues $ 7,623 $ 158 (b),(d) $ 6,910 $ 626 (b),(d),(e) Operating expenses Purchased power and fuel 3,086 (48 ) (b),(d) 2,454 300 (b),(d),(h) Operating and maintenance 2,971 (524 )

(e),(f),(g),

(h),(i)

2,505 (172 )

(e),(g),(h),

(i)

Depreciation and amortization 915 (35 ) (h) 941 (114 ) (h) Taxes other than income 420   394   Total operating expenses 7,392 6,294 Gain on sales of assets 1   31   Operating income 232   647   Other income and (deductions) Interest expense, net (436 ) 63 (g),(j) (376 ) Other, net 205   (66 ) (c),(j) 144   (89 ) (c),(h) Total other income and (deductions) (231 ) (232 ) Income before income taxes 1 415 Income taxes (72 ) 353

(b),(c),(d),

(e),(f),(g),

(h),(i),(j)

102 194

(b),(c),(d),

(e),(f),(g),

(h),(i)

Equity in losses of unconsolidated affiliates (9 ) (7 ) Net income 64 306 Net income (loss) attributable to noncontrolling interests and preference stock dividends (16 ) (20 ) (k) 39   (8 ) (k) Net income attributable to common shareholders $ 80   $ 267   Effective tax rate(l) (7,200.0 )% 24.6 % Earnings per average common share Basic $ 0.09 $ 0.29 Diluted $ 0.09   $ 0.29   Average common shares outstanding Basic 934 924 Diluted 936 926 Effect of adjustments on earnings per average diluted common share recorded in accordance with GAAP: Mark-to-market impact of economic hedging activities (b) $ 0.12 $ 0.20 Unrealized gains related to NDT fund investments (c) (0.05 ) (0.03 ) Amortization of commodity contract intangibles (d) 0.01 0.01 Merger and integration costs (e) 0.01 — Merger commitments (f) — — Long-lived asset impairments (g) 0.29 0.02 Plant retirements and divestitures (h) 0.07 0.14 Cost management program (i) 0.01 0.01 Like-kind exchange tax position (j) (0.03 ) — CENG noncontrolling interest (k) 0.02   0.01   Total adjustments $ 0.45   $ 0.36   (a)   Results reported in accordance with accounting principles generally accepted in the United States (GAAP). (b) Adjustment to exclude the mark-to-market impact of Exelon’s economic hedging activities, net of intercompany eliminations. (c) Adjustment to exclude the unrealized gains and losses on NDT fund investments to the extent not offset by contractual accounting as described in the notes to the consolidated financial statements. (d) Adjustment to exclude the non-cash amortization of intangible assets, net, primarily related to commodity contracts recorded at fair value related to the Integrys acquisition in 2016, and in 2017, the ConEdison Solutions and FitzPatrick acquisitions. (e) Adjustment to exclude certain costs associated with mergers and acquisitions, including, if and when applicable, professional fees, employee-related expenses and integration activities related to the PHI acquisition in 2016, partially offset in 2016 at BGE and PHI by the anticipated recovery of previously incurred PHI acquisition costs, and in 2017, the PHI and FitzPatrick acquisitions. (f) Adjustment to exclude costs incurred as part of the settlement orders approving the PHI acquisition. (g) Adjustment to exclude charges to earnings related to the impairment of certain wind projects at Generation in 2016, and in 2017, impairments as a result of the ExGen Texas Power, LLC assets held for sale. (h) Adjustment to exclude accelerated depreciation and amortization expenses, increases to materials and supplies inventory reserves, charges for severance reserves and construction work in progress impairments associated with Generation's previous decision to early retire the Clinton and Quad Cities nuclear facilities in 2016, and Generation's decision to early retire the Three Mile Island nuclear facility in 2017, partially offset in 2016 by a gain associated with Generation’s sale of the New Boston generating site. (i) Adjustment to exclude reorganization costs, and in 2016 severance costs, related to a cost management program. (j) Adjustment to excluded income tax, penalties and interest expenses in the second quarter of 2017 as a result of the finalization of the IRS tax computation related to Exelon’s like-kind exchange tax position. (k) Adjustment to eliminate from Generation’s results of the noncontrolling interest related to CENG exclusion items, primarily related to the impact of unrealized gains and losses on NDT fund investments and mark-to-market activity. (l) The effective tax rate related to Adjusted (non-GAAP) Operating Earnings is 36.8% and 31.6% for the three months ended June 30, 2017 and June 30, 2016, respectively. The effective tax rate for the three months ended June 30, 2017 is disproportionately impacted due to the decline in pre-tax GAAP earnings and changes in other reconciling items.

EXELON CORPORATION

GAAP Consolidated Statements of Operations and

Adjusted (non-GAAP) Operating Earnings Reconciling Adjustments

(unaudited)

(in millions, except per share data)

    Six Months Ended June 30, 2017     Six Months Ended June 30, 2016   GAAP (a)  

Non-GAAP

Adjustments

GAAP (a)  

Non-GAAP

Adjustments

Operating revenues $ 16,381 $ 116 (b),(d) $ 14,485 $ 534 (b),(d),(e) Operating expenses Purchased power and fuel 6,985 (141 ) (b),(d),(h) 5,708 338 (b),(d),(h) Operating and maintenance 5,431 (572 ) (e),(f),(g),(h),(j) 5,341 (932 ) (e),(f),(g),(h),(j) Depreciation and amortization 1,811 (37 ) (d),(h) 1,626 (114 ) (h) Taxes other than income 857   720   (1 ) (j) Total operating expenses 15,084 13,395 Gain on sales of assets 5 (1 ) (h) 40 Bargain purchase gain 226   (226 ) (l) —   Operating income 1,528   1,130   Other income and (deductions) Interest expense, net (809 ) 59 (g),(k),(m) (663 ) Other, net 488   (274 ) (c),(m) 258   (155 ) (c),(h) Total other income and (deductions) (321 ) (405 ) Income before income taxes 1,207 725 Income taxes 143 441

(b),(c),(d),

(e),(f),(g),

(h),(i),(j),

(k),(m)

285 311

(b),(c),(d),

(e),(f),(g),

(h),(j)

Equity in losses of unconsolidated affiliates (18 ) (10 ) Net income 1,046 430 Net loss attributable to noncontrolling interests and preference stock dividends (30 ) (55 ) (n) (10 ) (18 ) (n) Net income attributable to common shareholders $ 1,076   $ 440   Effective tax rate(o) 11.8 % 39.3 % Earnings per average common share Basic $ 1.16 $ 0.48 Diluted $ 1.15   $ 0.48   Average common shares outstanding Basic 931 923 Diluted 932 926 Effect of adjustments on earnings per average diluted common share recorded in accordance with GAAP: Mark-to-market impact of economic hedging activities (b) $ 0.15 $ 0.12 Unrealized gains related to NDT fund investments (c) (0.15 ) (0.07 ) Amortization of commodity contract intangibles (d) 0.02 — Merger and integration costs (e) 0.04 0.09 Merger commitments (f) (0.15 ) 0.43 Long-lived asset impairments (g) 0.29 0.10 Plant retirements and divestitures (h) 0.07 0.14 Reassessment of state deferred income taxes (i) (0.02 ) — Cost management program (j) 0.01 0.02 Tax settlements (k) (0.01 ) — Bargain purchase gain (l) (0.24 ) — Like-kind exchange tax position (m) (0.03 ) — CENG noncontrolling interest (n) 0.06   0.02   Total adjustments $ 0.04   $ 0.85   As a result of the PHI acquisition completion on March 23, 2016, the table includes financial results for PHI beginning on March 24, 2016 to June 30, 2017. Therefore, the results of operations from 2017 and 2016 are not comparable for Exelon. The explanations below identify any other significant or unusual items affecting the results of operations.   (a)   Results reported in accordance with accounting principles generally accepted in the United States (GAAP). (b) Adjustment to exclude the mark-to-market impact of Exelon’s economic hedging activities, net of intercompany eliminations. (c) Adjustment to exclude the unrealized gains and losses on NDT fund investments to the extent not offset by contractual accounting as described in the notes to the consolidated financial statements. (d) Adjustment to exclude the non-cash amortization of intangible assets, net, primarily related to commodity contracts recorded at fair value related to the Integrys acquisition in 2016, and in 2017, the ConEdison Solutions and FitzPatrick acquisitions. (e) Adjustment to exclude certain costs associated with mergers and acquisitions, including, if and when applicable, professional fees, employee-related expenses and integration activities related to the PHI acquisition in 2016, partially offset in 2016 at ComEd, BGE and PHI by the anticipated recovery of previously incurred PHI acquisition costs, and in 2017, the PHI and FitzPatrick acquisitions, partially offset in 2017 at PHI by the anticipated recovery of previously incurred PHI acquisition costs. (f) Adjustment to exclude in 2016 costs incurred as part of the settlement orders approving the PHI acquisition, and in 2017, a decrease in reserves for uncertain tax positions related to the deductibility of certain merger commitments associated with the 2012 CEG and 2016 PHI acquisitions. (g) Adjustment to exclude charges to earnings related to the impairment of upstream assets and certain wind projects at Generation in 2016, and in 2017, impairments as a result of the ExGen Texas Power, LLC assets held for sale. (h) Adjustment to exclude accelerated depreciation and amortization expenses, increases to materials and supplies inventory reserves, charges for severance reserves and construction work in progress impairments associated with Generation's previous decision to early retire the Clinton and Quad Cities nuclear facilities in 2016, and Generation's decision to early retire the Three Mile Island nuclear facility in 2017, partially offset in 2016 by a gain associated with Generation’s sale of the New Boston generating site. (i) Adjustment to exclude the non-cash impact of the remeasurement of state deferred income taxes, primarily as a result of changes in forecasted apportionment related to the PHI acquisition in 2016, and in 2017, a change in the statutory tax rate. (j) Adjustment to exclude reorganization costs, and in 2016 severance costs, related to a cost management program (k) Adjustment to exclude benefits related to the favorable settlement in 2017 of certain income tax positions related to PHI's unregulated business interests (l) Adjustment to exclude the excess of the fair value of assets and liabilities acquired over the purchase price for the FitzPatrick acquisition. (m) Adjustment to exclude income tax, penalties and interest expenses in the second quarter of 2017 as a result of the finalization of the IRS tax computation related to Exelon’s like-kind exchange tax position. (n) Adjustment to exclude from Generation’s results of the noncontrolling interest related to CENG exclusion items, primarily related to the impact of unrealized gains and losses on NDT fund investments and mark-to-market activity (o) The effective tax rate related to Adjusted (non-GAAP) Operating Earnings is 35.8% and 32.9% for the six months ended June 30, 2017 and June 30, 2016, respectively.

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Exelon CorporationDan EggersInvestor Relations312-394-2345orPaul AdamsCorporate Communications410-470-4167