Exelon Announces Third Quarter 2015 Results

Exelon Corporation (NYSE: EXC) announced third quarter 2015 consolidated earnings as follows:

“Our focus on operational performance and strategic investments to grow our business continues to deliver results across all of our businesses,” said Christopher M. Crane, Exelon president and CEO. “Exelon achieved earnings above our guidance range, led by gains at Constellation due to our generation to load matching strategy and improved results at each of our utilities, while also delivering top quartile performance for our customers and communities. Based on our results through September and our outlook for the fourth quarter, we are raising our full-year operating earnings guidance range to $2.40 to $2.60 per share.”

Third Quarter Operating Results

As shown in the table above, Exelon’s Adjusted (non-GAAP) Operating Earnings increased to $0.83 per share in the third quarter of 2015 from $0.78 per share in the third quarter of 2014. Earnings in the third quarter of 2015 primarily reflected the following favorable factors:

• Higher revenue net of purchased power and fuel at Generation as a result of lower cost-to-serve load, the benefit from the Integrys acquisition and increased load served;
• Favorable weather at ComEd and PECO;
• Higher distribution earnings at ComEd and BGE; and
• Lower storm costs at BGE.

These factors were partially offset by:

• Higher contracting costs at Generation primarily due to growth development projects;
• Realized NDT fund losses in 2015 as compared to gains in 2014; and
• Higher interest expense due to higher outstanding debt at Generation and Corporate.

Adjusted (non-GAAP) Operating Earnings for the third quarter of 2015 do not include the following items (after tax) that were included in reported GAAP Net Income:

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

Third Quarter and Recent Highlights

• Pepco Holdings, Inc. (PHI) Merger: On August 12, 2015, the presiding judge in the Circuit Court of Queen Anne's County issued an order denying the motions to stay the Maryland Public Service Commission's order approving the merger. On August 27, 2015, the District of Columbia Public Service Commission (DCPSC) issued an opinion and order denying approval of the merger, asserting that the merger was not in the public's interest. Exelon and PHI filed an Application for Reconsideration with the DCPSC on September 28, 2015. On October 6, 2015, Exelon, PHI, the District of Columbia Government, the Office of People's Counsel, the District of Columbia Water and Sewer Authority, the National Consumer Law Center, National Housing Trust, and the Apartment and Office Building Association of Metropolitan Washington entered into a Nonunanimous Full Settlement Agreement and Stipulation with respect to the merger. Exelon and PHI subsequently filed a motion of joint applicants requesting the DCPSC to reopen the approval application to allow for consideration of the Settlement Agreement and granting additional requested relief. On October 28, 2015, the DCPSC at a public meeting agreed to reopen the approval application to allow for consideration of the Settlement Agreement and set a procedural schedule which would allow for completion of the merger in the first quarter of 2016.
• Deferment of Early Plant Retirements: Exelon and Generation continue to evaluate the current and expected economic value of each of Generation's nuclear plants. On September 10, 2015, after considering the results of the recent PJM capacity auction, Exelon and Generation decided to defer for one year any decisions about the future operations of its Quad Cities and Byron nuclear plants and will offer both plants in the 2019/2020 auction in May 2016. As a result of clearing the other PJM capacity auction in September 2015 for the 2017/2018 transitional capacity auction, Exelon and Generation will continue to operate its Quad Cities nuclear power plant through at least May 2018. The Byron plant is already obligated to operate through May 2019. In addition, on October 29, 2015, Exelon and Generation decided to defer any decision about the future operations of its Clinton nuclear plant for one year and plan to bid the plant into the MISO capacity auction for the 2016/2017 planning year in March 2016. MISO's announcement on October 27, 2015 acknowledging the need for market design changes in southern Illinois was a key factor in Exelon's and Generation's decision to defer for an additional year, among other factors such as positive results from the Illinois Power Agency's capacity procurement for 2016 and the long-term impact of the EPA's Clean Power Plan. The Clinton plant is currently obligated to operate through May 2016. Exelon and Generation have not made any decision regarding potential nuclear plant closures at other sites at this time.
• PECO Electric Distribution Rate Case: On September 10, 2015, PECO filed a Joint Petition for Settlement with the Pennsylvania Public Utilities Commission (PAPUC). The terms of the settlement include an increase of $127 million in annual distribution service revenue. On October 28, 2015, the Administrative Law Judge issued a recommended decision to the PAPUC that the joint settlement be approved. A final ruling from the PAPUC is expected by December 2015, and if approved, the rates will go into effect on January 1, 2016.
• Nuclear Operations: Generation’s nuclear fleet, including its owned output from the Salem Generating Station and 100 percent of the CENG units, produced 45,180 gigawatt-hours (GWh) in the third quarter of 2015, compared with 45,263 GWh in the third quarter of 2014. Excluding Salem, the Exelon-operated nuclear plants at ownership achieved a 95.5 percent capacity factor for the third quarter of 2015, compared with 96.5 percent for the third quarter of 2014. The number of planned refueling outage days totaled 27 in the third quarter of 2015, compared with 18 in the third quarter of 2014. There were 11 non-refueling outage days in the third quarter of 2015, compared with 20 days in the third quarter of 2014.
• Fossil and Renewable Operations: The Dispatch Match rate for Generation’s gas and hydro fleet was 99.0 percent in the third quarter of 2015, compared with 98.8 percent in the third quarter of 2014. Energy Capture for the wind and solar fleet was 94.8 percent in the third quarter of 2015, compared with 94.9 percent in the third quarter of 2014.
• Financing Activities: On October 5, 2015, PECO issued $350 million in aggregate principal amount of its First and Refunding Mortgage Bonds, 3.150% Series due October 15, 2025. The net proceeds from the sale of the bonds will be used 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 September 30, 2015, was 97 percent to 100 percent for 2015, 81 percent to 84 percent for 2016, and 51 percent to 54 percent for 2017. 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 the generation, physical delivery and marketing of power across multiple geographical regions through its customer-facing business, Constellation, which sells electricity and natural gas to both wholesale and retail customers. Generation also sells renewable energy and other energy-related products and services, and engages in natural gas and oil exploration and production activities (Upstream).

Generation's third quarter 2015 GAAP Net Income was $377 million, compared with net income of $771 million in the third quarter of 2014. Adjusted (non-GAAP) Operating Earnings for the third quarter of 2015 and 2014 do not include various items (after tax) that were included in reported GAAP Net Income:

Generation’s Adjusted (non-GAAP) Operating Earnings in the third quarter of 2015 increased $66 million compared with the same quarter in 2014. This increase primarily reflected higher revenue net of purchased power and fuel as a result of lower cost-to-serve load, and the benefit from the Integrys acquisition. These increases were partially offset by increased contracting expenses due to growth development opportunities and realized NDT fund losses in 2015 as compared to gains in 2014.

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

ComEd's third quarter 2015 GAAP Net Income was $149 million, compared with net income of $126 million in the third quarter of 2014. Adjusted (non-GAAP) Operating Earnings for the third quarter of 2015 do not include merger and integration costs that were included in reported GAAP Net Income:

ComEd’s Adjusted (non-GAAP) Operating Earnings in the third quarter of 2015 increased $25 million from the same quarter in 2014 primarily as a result of favorable weather and increased electric distribution earnings reflecting the impacts of increased capital investment, which was offset by lower allowed electric distribution return on common equity due to a decrease in treasury rates.

For the third quarter of 2015, heating degree-days in the ComEd service territory were down 50.5 percent relative to the same period in 2014 and were 53.8 percent below normal. Cooling degree days were up 18.1 percent from prior year and 3.4 percent above normal. Total retail electric deliveries increased 3.4 percent in the third quarter of 2015 compared with the same period in 2014.

Weather-normalized retail electric deliveries decreased 0.5 percent in the third quarter of 2015 compared with the same period in 2014.

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

PECO’s third quarter 2015 GAAP Net Income was $90 million, compared with net income of $81 million in the third quarter of 2014. Adjusted (non-GAAP) Operating Earnings for the third quarter of 2015 do not include merger and integration costs that were included in reported GAAP Net Income:

PECO’s Adjusted (non-GAAP) Operating Earnings in the third quarter of 2015 increased $10 million from the same quarter in 2014 primarily due to favorable weather.

For the third quarter of 2015, there were no heating degree-days in the PECO service territory representing a decrease of 14 days and 38 days relative to the same period in 2014 and normal, respectively. Cooling degree days were up 30.2 percent from the prior year and 27.7 percent above normal. Total retail electric deliveries were up 6.4 percent compared with the third quarter of 2014. Natural gas deliveries (including both retail and transportation components) in the third quarter of 2015 were up 15.1 percent compared with the same period in 2014.

Weather-normalized retail electric and gas deliveries decreased 0.5 percent and increased 9.3 percent, respectively, in the third quarter of 2015 compared with the same period in 2014. The increase in retail gas deliveries was driven primarily by growth in the transportation component during the third quarter of 2015.

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

BGE’s third quarter 2015 GAAP Net Income was $51 million, compared with net income of $46 million in the third quarter of 2014. Adjusted (non-GAAP) Operating Earnings for the third quarter of 2015 do not include merger and integration costs that were included in reported GAAP Net Income:

BGE’s Adjusted (non-GAAP) Operating Earnings in the third quarter of 2015 increased $6 million from the same quarter in 2014, primarily due to increased distribution revenues pursuant to increased rates effective in December 2014 and decreased storm costs. Due to decoupling, BGE's distribution revenues are not affected by actual weather.

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, which include the reconciliation on page 8, 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 October 30, 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 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; (2) Exelon’s Third Quarter 2015 Quarterly Report on Form 10-Q (to be filed on October 30, 2015) 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 19; 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) is the nation’s leading competitive energy provider, with 2014 revenues of approximately $27.4 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 32,000 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 more than 2.5 million residential, public sector and business customers, including more than two-thirds of the Fortune 100. Exelon’s utilities deliver electricity and natural gas to more than 7.8 million customers in central Maryland (BGE), northern Illinois (ComEd) and southeastern Pennsylvania (PECO). Follow Exelon on Twitter @Exelon.

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