Exelon Corporation (NYSE:EXC) announced first quarter 2016
consolidated earnings as follows:
First Quarter
2016
2015
Adjusted (non-GAAP) Operating
Results:
Net Income ($ millions)
$
632
$
615
Diluted Earnings per Share
$
0.68
$
0.71
GAAP Results:
Net Income ($ millions)
$
173
$
693
Diluted Earnings per Share
$
0.19
$
0.80
“We are delighted to have closed the PHI acquisition during the
first quarter, establishing Exelon Utilities as the largest utility
in the U.S. by number of customers and also delivering on our
commitment to increase the earnings mix from regulated and
contracted businesses,” said Christopher M. Crane, Exelon’s
president and CEO. “Unfortunately, we are also announcing
plans to retire the economically challenged Clinton and Quad Cities
nuclear plants in Illinois on June 1, 2017 and June 1, 2018,
respectively, without passage of adequate legislation in the
current spring legislative session and Quad Cities clearing in the
2019-20 RPM capacity auction.”
First Quarter Operating Results
As shown in the table above, Exelon’s adjusted (non-GAAP)
Operating Earnings decreased to $0.68 per share in the first
quarter of 2016 from $0.71 per share in the first quarter of 2015.
Exclusive of $0.03 unfavorable earnings impacts of the PHI
acquisition and other financing arrangements, quarter over quarter
Operating Earnings are essentially flat reflecting:
- Nuclear refueling outage timing, fewer
non-refueling outage days and increased capacity pricing offset by
lower realized energy pricing and increased nuclear decommissioning
amortization expense at Generation; and
- Favorable impacts at the utilities of
regulatory rate increases mostly offset by less favorable
weather.
First quarter 2016 results also include $2 million, net of tax,
of PHI Operating Earnings from March 24, 2016 to March 31,
2016.
Adjusted (non-GAAP) Operating Earnings for the first 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 Adjusted (non-GAAP) Operating
Earnings
$632
$0.68
Mark-to-Market Impact of Economic Hedging
Activities
64 0.07 Unrealized Gains Related to NDT Fund Investments 31 0.03
Amortization of Commodity Contract Intangibles 12 0.01 Merger and
Integration Costs(1) (76) (0.08) Merger Commitments(2) (394) (0.42)
Long-Lived Asset Impairment (71) (0.07) Cost Management Program
(14) (0.02) CENG Non-Controlling Interest (11) (0.01)
Exelon GAAP Net Income
$173
$0.19
(1) Includes a pre-tax charge to GAAP earnings of
approximately $52 million of PHI related merger severance. (2)
Approval of the merger across all regulatory jurisdictions was
conditioned on Exelon and PHI agreeing to certain commitments
pursuant to which Exelon recorded a total pre-tax charge to GAAP
earnings of $508 million.
Adjusted (non-GAAP) Operating Earnings for the first 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
$615 $0.71
Mark-to-Market Impact of Economic Hedging
Activities
100 0.11 Unrealized Gains Related to NDT Fund Investments 24 0.03
Amortization of Commodity Contract Intangibles 24 0.03 Merger and
Integration Costs (21) (0.02) Mark-to-Market Impact of PHI Merger
Related Interest Rate Swap (48) (0.06) Midwest Generation
Bankruptcy Recoveries 6 0.01 CENG Non-Controlling Interest
(7) (0.01)
Exelon GAAP Net Income
$693 $0.80
First Quarter and Recent Highlights
- PHI Acquisition: On
March 23, 2016, Exelon completed the all cash $7 billion
acquisition of PHI. As such, Exelon’s first quarter 2016 earnings
include the consolidated results of PHI for the period March 24,
2016, to March 31, 2016. Approval of the merger across all
jurisdictions was conditioned upon Exelon agreeing to certain
commitments providing direct benefits to customers, for which
Exelon recorded a total pre-tax charge of $508 million (or $394
million after-tax) in the first quarter 2016, which has been
excluded from adjusted (non-GAAP) Operating earnings.
- Early Retirement of Clinton and Quad
Cities Nuclear Facilities: In 2015, Exelon and Generation
deferred retirement decisions on Clinton and Quad Cities until 2016
in order to participate in the 2016-2017 MISO primary reliability
auction and the 2019-2020 PJM capacity auction to be held in April
and May 2016, respectively, as well as to provide Illinois policy
makers with additional time to consider needed reforms and for MISO
to consider market design changes to ensure long-term power system
reliability in southern Illinois. In April 2016, Clinton cleared
the MISO primary reliability auction as a price taker for the
2016-2017 planning year. The resulting capacity price is
insufficient to cover cash operating costs and a risk-adjusted rate
of return to shareholders. The results of the 2019-2020 PJM
capacity auction will be available on May 24, 2016. On May 6, 2016
Exelon and Generation announced intentions to shut down the Clinton
nuclear plant on June 1, 2017 and Quad Cities nuclear plant on June
1, 2018 if Illinois does not pass adequate legislation by May 31,
2016 and if Quad Cities does not clear the 2019-2020 PJM capacity
auction.
- Nuclear Operations: Generation’s
nuclear fleet, including its owned output from the Salem Generating
Station and 100 percent of the CENG units, produced 44,802
gigawatt-hours (GWh) in the first quarter of 2016, compared with
42,657GWh in the first quarter of 2015. Excluding Salem, the
Exelon-operated nuclear plants at ownership achieved a 95.8 percent
capacity factor for the first quarter of 2016, compared with 92.7
percent for the first quarter of 2015. The number of planned
refueling outage days in the first quarter of 2016 totaled 70,
compared with 89 in the first quarter of 2015. There were 10
non-refueling outage days in the first quarter of 2016, compared
with 32 days in the first quarter of 2015.
- Fossil and Renewables
Operations: The Dispatch Match rate for Generation’s gas and
hydro fleet was 93.5 percent in the first quarter of 2016, compared
with 98.0 percent in the first quarter of 2015. The lower
performance in the quarter was primarily due to an unplanned outage
in January at Mystic 8 and 9, in Massachusetts. Energy Capture for
the wind and solar fleet was 96.2 percent in the first quarter of
2016, compared with 95.9 percent in the first quarter of 2015.
- Ginna Nuclear Power Plant
Reliability Support Services Agreement (RSSA): In April 2016,
FERC and NYPSC approved an RSSA under which Ginna would continue to
operate during the RSSA term and, in return, Ginna would be paid
revenues to compensate it for the reliability benefits that it
provides to the transmission grid. Generation will also recognize a
one-time revenue adjustment in April 2016 of approximately $101
million representing the net cumulative previously unrecognized
amount of revenue retroactive from the April 1, 2015 effective date
through March 31, 2016. A 49.99 percent portion of the one-time
adjustment will be removed from Generation’s results by the
non-controlling interest in CENG.
- Pepco Electric Distribution Rate
Case: On April 19, 2016, Pepco filed an application with the
MDPSC requesting an increase of $127 million to its annual service
revenues for electric delivery, based on a requested ROE of 10.6
percent. Any adjustments to rates approved by the MDPSC are
expected to take effect in November 2016.
- ACE Electric Distribution Rate
Case: On March 22, 2016, ACE filed an application with the
NJBPU requesting an increase of $84 million to its annual
service revenues for electric delivery, based on a requested ROE of
10.6 percent. A decision by the NJBPU is expected in the first half
of 2017.
- Financing Activities: On April 7
2016, Exelon issued and sold $1.8 billion aggregate principal
amount of notes consisting of $300 million of 2.450 percent Notes
due in 2021, $750 million of 3.400 percent Notes due in 2026 and
$750 million of 4.450 percent Notes due in 2046. A portion of the
proceeds of the Notes will be used to repay commercial paper issued
by PHI and for general corporate purposes, which may include the
repayment of outstanding indebtedness.
- 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. This strategy has not changed as a result of recent and
pending asset divestitures. The proportion of expected generation
hedged as of March 31, 2016, is 96.0 percent to 99.0 percent
for 2016, 69.0 percent to 72.0 percent for 2017, and 37.0 percent
to 40.0 percent for 2018. Expected generation is the volume of
energy that best represents our financial exposure through owned or
contracted capacity. 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 first quarter 2016 GAAP Net Income was $115 million
compared with $90 million in the first quarter of 2015. Adjusted
(non-GAAP) Operating Earnings for the first quarter of 2016 and
2015 do not include merger and integration costs that were included
in reported GAAP earnings. A reconciliation of Adjusted (non-GAAP)
Operating Earnings to GAAP Net Income is presented in the table
below:
($ millions)
1Q16
1Q15
ComEd Adjusted (non-GAAP) Operating
Earnings
$
110
$
92
Merger and Integration Costs 5 (2 )
ComEd GAAP Net Income
$
115
$
90
ComEd’s Adjusted (non-GAAP) Operating Earnings in the first
quarter of 2016 increased by $18 million from the same quarter in
2015, primarily due to higher electric distribution and
transmission formula rate earnings, partially offset by less
favorable weather.
For the first quarter of 2016, heating degree-days in the ComEd
service territory were down 20.2 percent relative to the same
period in 2015 and were 8.3 percent below normal. Total retail
deliveries decreased by 4.6 percent in the first quarter of 2016
compared with the same period in 2015.
Weather-normalized retail electric deliveries were slightly less
in the first quarter of 2016 compared with the same period in
2015.
PECO consists of electricity transmission and
distribution operations and retail natural gas distribution
operations in Southeastern Pennsylvania.
PECO’s first quarter 2016 GAAP Net Income was $124 million
compared with $139 million in the first quarter of 2015. Adjusted
(non-GAAP) Operating Earnings for the first quarter of 2016 and
2015 do not include certain items (after tax) that were included in
reported GAAP earnings. A reconciliation of Adjusted (non-GAAP)
Operating Earnings to GAAP Net Income is presented in the table
below:
($ millions)
1Q16
1Q15
PECO Adjusted (non-GAAP) Operating
Earnings
$126
$140
Merger and Integration Costs (1) (1) Cost Management Program
(1) —
PECO GAAP Net Income
$124
$139
PECO’s Adjusted (non-GAAP) Operating Earnings in the first
quarter of 2016 decreased $14 million from the same quarter in
2015, primarily due to less favorable weather, partially offset by
increased electric distribution revenue pursuant to the 2015 PAPUC
authorized electric distribution rate increase effective January 1,
2016.
For the first quarter of 2016, heating degree-days in the PECO
service territory were down 27.2 percent relative to the same
period in 2015 and were 13.7 percent below normal. Total retail
electric deliveries were down 8.2 percent compared with the first
quarter of 2015. Natural gas deliveries (including both retail and
transportation segments) in the first quarter of 2016 were down
20.1 percent compared with the same period in 2015.
Weather-normalized retail electric deliveries remained
relatively consistent while gas deliveries increased 4.0 percent in
the first quarter of 2016 compared with the same period in 2015.
The increased gas volumes were driven primarily by moderate
economic conditions and customer growth.
BGE consists of electricity transmission and distribution
operations and retail natural gas distribution operations in
Central Maryland.
BGE’s first quarter 2016 GAAP Net Income was $98 million,
compared with $106 million in the first quarter of 2015. Adjusted
(non-GAAP) Operating Earnings for the first quarter of 2015 do not
include various items (after tax) that were included in reported
GAAP earnings. A reconciliation of Adjusted (non-GAAP) Operating
Earnings to GAAP Net Income is presented in the table below:
($ millions) 1Q16
1Q15
BGE Adjusted (non-GAAP) Operating
Earnings
$100
$107
Merger and Integration Costs (1) (1) Cost Management Program
(1) —
BGE GAAP Net Income
$98
$106
BGE’s Adjusted (non-GAAP) Operating Earnings in the first
quarter of 2016 decreased $7 million from the same quarter in 2015,
primarily due to increased storm costs in BGE's service territory.
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 GAAP Net Loss from March 24-31, 2016 was $309 million.
Adjusted (non-GAAP) Operating Earnings for the successor period do
not include merger and integration costs and merger commitments
that were included in reported GAAP earnings. A reconciliation of
Adjusted (non-GAAP) Operating Earnings to GAAP Net Income is
presented in the table below:
($ millions) March 24-31, 2016
PHI Adjusted (non-GAAP) Operating
Earnings
$2
Merger and Integration Costs (33) Merger Commitments (278)
PHI GAAP Net Loss
$(309)
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, risk management services and natural gas
exploration and production activities.
Generation's first quarter 2016 GAAP Net Income was $310 million
compared with $443 million in the first quarter of 2015. Adjusted
(non-GAAP) Operating Earnings for the first quarter of 2016 and
2015 do not include various items (after tax) that were included in
reported GAAP earnings. A reconciliation of Adjusted (non-GAAP)
Operating Earnings to GAAP Net Income is in the table below:
($ millions)
1Q16
1Q15
Generation Adjusted (non-GAAP)
Operating Earnings
$315
$303
Mark-to-Market Impact of Economic Hedging
Activities
64 100 Unrealized Gains Related to NDT Fund Investments 31 24
Amortization of Commodity Contract Intangibles 12 24 Merger and
Integration Costs (10) (7) Merger Commitments (2) — Midwest
Generation Bankruptcy Recoveries — 6 Long-Lived Asset Impairment
(71) — Reassessment of State Deferred Income Taxes (6) — Cost
Management Program (12) — CENG Non-Controlling Interest (11)
(7)
Generation GAAP Net Income
$310
$443
Generation’s Adjusted (non-GAAP) Operating Earnings in the first
quarter of 2016 increased by $12 million compared with the same
quarter in 2015. This increase primarily reflects nuclear refueling
outage timing, fewer non-refueling outage days, and increased
capacity pricing, partially offset by lower realized energy prices
and increased nuclear decommissioning amortization expense.
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 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 May 6, 2016.
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; 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 (NYSE:EXC), now including
the Pepco Holdings utilities, is the nation’s leading competitive
energy provider, with 2015 revenues of approximately $34.5 billion.
Headquartered in Chicago, Exelon does business in 48 states, the
District of Columbia and Canada. Exelon is one of the largest
competitive U.S. power generators, with more than 32,700 megawatts
of owned 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 million residential, public sector and business
customers, including more than two-thirds of the Fortune 100.
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. Follow Exelon on Twitter @Exelon.
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Exelon CorporationDan Eggers, 312-394-2345Investor RelationsPaul
Adams, 410-470-4167Corporate Communications
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