01—Abstract
Summary
Summary of the 10-K filed February 8, 2019. Cited figures are marked; the original filing is the authoritative source.
Exelon Corporation's 2018 10-K filing highlights a company with a diversified energy business, comprising both regulated utility operations across several states and a significant competitive energy generation segment.
The utility segment, encompassing ComEd, PECO, BGE, Pepco, DPL, and ACE, serves millions of customers in densely populated areas. The generation segment, through Exelon Generation Company, LLC (Generation), is one of the largest competitive electricity generators in the U.S., with a substantial nuclear fleet and growing renewable energy assets. The company's financial performance in 2018 reflected a decrease in net income attributable to common shareholders compared to 2017, primarily due to the one-time remeasurement of deferred income taxes in 2017 related to the Tax Cuts and Jobs Act, net unrealized losses on Nuclear Decommissioning Trust (NDT) funds, and accelerated depreciation from early plant retirements.
Financially, Exelon maintained its commitment to shareholder returns with a dividend increase, while continuing significant capital investments in its utility infrastructure aimed at improving reliability and modernization. The company's strategy involves leveraging the stable earnings of its regulated utilities to fund investments and support its competitive generation business. Exelon also focused on cost management initiatives to drive efficiency across its operations.
Key risks and operational factors include managing commodity price volatility in competitive markets, navigating evolving regulatory and legislative environments, and ensuring the safe and reliable operation of its nuclear facilities, including managing decommissioning obligations. The company's operational performance remains strong, particularly its nuclear fleet's high capacity factors, but it faces ongoing challenges related to market pricing and regulatory policy. Exelon's diversified business model, with a strong regulated utility foundation and a competitive generation arm, positions it to adapt to the changing energy landscape.
02—Key points
Key Highlights
- Exelon Corporation operates a diversified energy business with both regulated utility operations (ComEd, PECO, BGE, Pepco, DPL, ACE) and a significant competitive energy generation segment (Generation).
- The company reported a decrease in net income attributable to common shareholders in 2018 compared to 2017, influenced by one-time tax impacts, NDT fund performance, and early plant retirements.
- Exelon Generation is one of the largest competitive electricity generators in the U.S., with a strong focus on nuclear power and growing renewable energy assets.
- The utility segment is undertaking substantial capital investments (approximately $29 billion over five years) in infrastructure improvements, smart grid technology, and system modernization.
- The company reaffirmed its commitment to shareholder returns with a stated dividend increase policy for 2018-2020.
- Cost management initiatives are ongoing, with Exelon announcing further cost savings targets to be achieved by 2021.
- Key risks for the company include commodity price volatility, regulatory changes, and operational risks associated with its nuclear fleet.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 8, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $35.98B$33.56B | +7.2% |
| Operating Expenses | $32.14B$29.62B | +8.5% |
| Operating Income | $3.89B$4.39B | −11.3% |
| Interest Expense | $1.53B$1.52B | +0.3% |
| Net Income | $2.00B$3.78B | −46.9% |
| EPS (Basic) | $2.07$3.99 | −48.1% |
| EPS (Diluted) | $2.07$3.98 | −48.0% |
| Shares Outstanding (Basic) | 967.00M947.00M | +2.1% |
| Shares Outstanding (Diluted) | 969.00M949.00M | +2.1% |
05—Questions
Frequently Asked Questions
What was the primary driver for the decrease in Exelon's net income in 2018 compared to 2017?
The primary drivers for the decrease in Exelon's net income attributable to common shareholders in 2018 compared to 2017 were the one-time remeasurement of deferred income taxes in 2017 due to the Tax Cuts and Jobs Act, net unrealized losses on Nuclear Decommissioning Trust (NDT) funds in 2018 compared to net gains in 2017, lower realized energy prices, accelerated depreciation and amortization due to early retirement decisions for nuclear facilities (Oyster Creek and TMI), and the gain associated with the FitzPatrick acquisition in 2017.
How is Exelon addressing the capital-intensive nature of its utility businesses?
Exelon is making substantial capital investments, projected at approximately $29 billion over the next five years, in its utility infrastructure. These investments are focused on improving reliability, modernizing systems, and integrating smart grid technology, which is expected to drive rate base growth and provide stable returns.
What is Exelon's strategy regarding its generation business?
Exelon's generation strategy focuses on optimizing its generation asset structure and pursuing opportunities that provide stable revenues and load-matching capabilities to reduce earnings volatility. It leverages its generation portfolio, including its nuclear plants, to deliver energy to wholesale and retail customers while employing an integrated hedging strategy to manage commodity price volatility.
Does Exelon Generation Company face any significant risks related to its nuclear facilities?
Yes, Exelon Generation faces several risks related to its nuclear facilities, including operational performance which significantly impacts capacity factors, the duration and impact of refueling outages, nuclear fuel quality, the risk of major incidents, and the substantial financial obligations associated with nuclear decommissioning. The company also faces regulatory risks from the Nuclear Regulatory Commission (NRC) and potential impacts on its nuclear fleet from changes in federal or state energy policy, such as the resolution of the Clean Power Plan and Affordable Clean Energy Rule, and state-level initiatives like Zero Emission Credits (ZECs).
06—Continue