10-QPeriod: Q2 FY2019

EXELON CORP Quarterly Report for Q2 Ended Jun 30, 2019

Filed August 1, 2019For Securities:EXC

Summary

Exelon Corporation reported lower net income attributable to common shareholders for the second quarter of 2019 compared to the same period in the prior year, primarily due to lower realized energy prices and increased mark-to-market losses. However, for the first six months of 2019, net income attributable to common shareholders increased, driven by higher net unrealized and realized gains on Nuclear Decommissioning Trust (NDT) funds, decreased accelerated depreciation and amortization related to early plant retirements, a benefit from the remeasurement of the Three Mile Island Asset Retirement Obligation, and lower mark-to-market losses. The company's utilities saw positive impacts from regulatory rate increases across several jurisdictions, contributing to the improved six-month performance. Operationally, the company continues to manage its fuel procurement and hedging strategies to mitigate commodity price risk. The sale of the Oyster Creek nuclear facility was completed in July 2019, with an immaterial expected loss. The company is also navigating various regulatory proceedings and legislative proposals impacting clean energy and nuclear plant compensation, which could affect future financial performance. Despite some regional economic headwinds and early plant retirement impacts, Exelon's diversified business model and ongoing capital investments in its utility segments are expected to support long-term performance.

Financial Highlights

50 data points
Beta

Revenue

$7.69B

Net Income

$484.00M

6.3% Net Margin

EPS (Diluted)

$0.50

Total Assets

$121.60B

Cash & Equivalents

$735.00M

Free Cash Flow

$152.00M

Financial Statements
Beta
Revenue$7.69B
Operating Expenses$6.88B
Operating Income$841.00M
Interest Expense$403.00M
Net Income$484.00M
EPS (Basic)$0.50
EPS (Diluted)$0.50
Shares Outstanding (Basic)972.00M
Shares Outstanding (Diluted)974.00M

Key Highlights

  • 1Net income attributable to common shareholders decreased by $55 million to $484 million ($0.50 per diluted share) for the three months ended June 30, 2019, compared to $539 million ($0.56 per diluted share) for the same period in 2018.
  • 2Net income attributable to common shareholders increased by $266 million to $1.391 billion ($1.43 per diluted share) for the six months ended June 30, 2019, compared to $1.125 billion ($1.16 per diluted share) for the same period in 2018.
  • 3Adjusted operating earnings (non-GAAP) for the three months ended June 30, 2019, were $583 million ($0.60 per diluted share), compared to $686 million ($0.71 per diluted share) in the prior year.
  • 4Adjusted operating earnings (non-GAAP) for the six months ended June 30, 2019, were $1.429 billion ($1.47 per diluted share), compared to $1.611 billion ($1.66 per diluted share) in the prior year.
  • 5Total operating revenues decreased to $7.689 billion for the three months ended June 30, 2019, from $8.076 billion in the prior year.
  • 6Total operating revenues decreased to $17.166 billion for the six months ended June 30, 2019, from $17.769 billion in the prior year.
  • 7Capital expenditures for the six months ended June 30, 2019, were $3.572 billion, a decrease from $3.807 billion in the same period of 2018.

Frequently Asked Questions

Net income attributable to common shareholders decreased by $55 million in the second quarter of 2019 compared to the same period in 2018. This was primarily due to lower realized energy prices and increased mark-to-market losses. These negative impacts were partially offset by higher net unrealized and realized gains on NDT Funds, decreased accelerated depreciation and amortization from early plant retirements, improved ZEC (Zero Emission Credit) revenue in New York and the approval of the New Jersey ZEC Program, and regulatory rate increases at several utility subsidiaries.

Adjusted operating earnings are presented to provide a view of ongoing operational performance, excluding certain items. For the three months ended June 30, 2019, adjusted operating earnings were $583 million ($0.60 per diluted share), compared to GAAP net income attributable to common shareholders of $484 million ($0.50 per diluted share). For the six months ended June 30, 2019, adjusted operating earnings were $1.429 billion ($1.47 per diluted share), compared to GAAP net income of $1.391 billion ($1.43 per diluted share). Key adjustments included the impact of mark-to-market activities on economic hedging, NDT fund investments, merger and integration costs, plant retirements and divestitures, and noncontrolling interests.

Net income attributable to common shareholders increased by $266 million for the first six months of 2019 compared to the same period in 2018. This improvement was driven by higher net unrealized and realized gains on NDT funds, reduced accelerated depreciation and amortization from early plant retirements (like Oyster Creek), a benefit from the remeasurement of the Three Mile Island Asset Retirement Obligation, decreased mark-to-market losses, regulatory rate increases across several utility subsidiaries (PECO, BGE, Pepco, DPL, and ACE), and lower storm costs at PECO and BGE. These positive factors were partially offset by lower realized energy prices and the absence of certain Illinois ZEC revenues recognized in early 2018, though this was partly mitigated by increased New York ZEC prices and the New Jersey ZEC Program approval.

Yes, Exelon is actively involved in several regulatory and legislative matters. Key developments include ongoing base rate case proceedings for its utility subsidiaries (ComEd, Pepco, BGE), transmission formula rate updates, and discussions around clean energy legislation in Illinois, Pennsylvania, and at the federal level concerning nuclear power. Specifically, the company is monitoring the impact of ZEC (Zero Emission Credit) programs in Illinois and New Jersey, which are crucial for the economic viability of its nuclear plants. Additionally, legislative proposals like the 'Clean Energy Progress Act' in Illinois and the 'Keep Powering Pennsylvania Act' aim to support clean energy resources, including nuclear power, but their outcomes and financial impacts remain uncertain.

Exelon, primarily through its Generation segment, hedges its commodity price risk on a ratable basis over three-year periods using a combination of derivative and non-derivative contracts, including swaps, futures, and forwards. As of June 30, 2019, a significant portion of its expected generation was hedged for 2019 and 2020 across its key operating regions (Mid-Atlantic, Midwest, New York, ERCOT). The company is proactive in using these hedging strategies to mitigate the financial impact of market price volatility. Utility subsidiaries, on the other hand, recover their procurement costs from customers through regulatory mechanisms, which minimizes direct earnings impact from commodity price fluctuations.