Exelon Announces Fourth Quarter 2016 Results, Provides 2017 Earnings Expectation

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

“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:

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:

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:

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:

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:

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:

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:

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 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 32,700 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 2.5 million residential, public sector and business
customers, including more than two-thirds of the Fortune 100. Follow
Exelon on Twitter @Exelon.

View source version on businesswire.com: http://www.businesswire.com/news/home/20170208005432/en/

News by QuoteMedia

www.quotemedia.com