Exelon Announces First Quarter 2015 Results
CHICAGO--(BUSINESS WIRE)-- Exelon Corporation (NYSE: EXC) announced first quarter 2015 consolidated earnings as follows:
|
First Quarter |
||||
|
2015 |
2014 |
|||
| Adjusted (non-GAAP) Operating Results: | ||||
| Net Income ($ millions) | $615 | $530 | ||
| Diluted Earnings per Share | $0.71 | $0.62 | ||
| GAAP Results: | ||||
| Net Income ($ millions) | $693 | $90 | ||
| Diluted Earnings per Share | $0.80 | $0.10 | ||
“Exelon achieved earnings above our guidance range this quarter, with strong performance at both our utilities and Constellation,” said Christopher M. Crane, Exelon’s president and CEO. “We continue to advocate strongly for policies and regulations that will bring additional value to our customers, communities and shareholders.”
First Quarter Operating Results
As shown in the table above, Exelon’s Adjusted (non-GAAP) Operating Earnings increased to $0.71 per share in the first quarter of 2015 from $0.62 per share in the first quarter of 2014. Earnings in the first quarter of 2015 primarily reflected the following favorable factors:
- Lower storm costs at PECO;
- Higher revenue net of purchased power and fuel at Generation as a result of the lower costs to serve load, the Integrys acquisition, and the cancellation of the Department of Energy spent nuclear fuel disposal fees;
- Favorable weather and volume at PECO; and
- Higher distribution revenue pursuant to increased rates effective in December 2014 at BGE.
These factors were partially offset by:
- Higher operating and maintenance expenses for contracting and inflation, offset in part by cost savings from plan design changes for certain Other Post-Employment Benefits plans;
- Lower realized energy prices at Generation;
- Higher interest expense due to higher outstanding debt;
- Unfavorable weather and volume at ComEd; and
- Losses on the termination of interest rate swaps.
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 Swaps |
(48) | (0.06) | ||
| Midwest Generation Bankruptcy Recoveries | 6 | 0.01 | ||
| CENG Non-Controlling Interest | (7) | (0.01) | ||
|
Exelon GAAP Net Income |
$693 |
$0.80 |
Adjusted (non-GAAP) Operating Earnings for the first quarter of 2014 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 |
$530 |
$0.62 |
||
|
Mark-to-Market Impact of Economic Hedging Activities |
(443) | (0.52) | ||
| Unrealized Gains Related to NDT Fund Investments | 8 | 0.01 | ||
| Amortization of Commodity Contract Intangibles | (31) | (0.04) | ||
| Merger and Integration Costs | (9) | (0.01) | ||
| Tax Settlements | 35 | 0.04 | ||
|
Exelon GAAP Net Income |
$90 |
$0.10 |
First Quarter and Recent Highlights
- Pepco Holdings, Inc. Merger: On February 11, 2015, the New Jersey Board of Public Utilities (NJBPU) approved the proposed merger and the previously filed settlement signed and filed by Exelon, PHI, Atlantic City Electric (ACE), NJBPU staff, and the Independent Energy Coalition. On February 13, 2015, Exelon and PHI announced that they had reached a settlement agreement in the proceeding before the Delaware Public Service Commission (DPSC) to review the proposed merger. The settlement, which was amended on April 7, 2015 and is subject to the approval of the DPSC, was signed and filed by Exelon, PHI, Delmarva Power & Light Company (DPL), the PSC staff, the Delaware Public Advocate, the Delaware Department of Natural Resources and Environment Control, the Delaware Sustainable Energy Utility, the Mid-Atlantic Renewable Energy Coalition and the Clean Air Council. Additionally, on March 17, 2015, Exelon and PHI announced that they had reached a settlement agreement with Montgomery and Prince George’s Counties in the proceeding before the Maryland Public Service Commission (MPSC) to review the proposed merger. The settlement, which is subject to the approval of the MPSC, was signed and filed by Exelon, PHI, Montgomery County, Prince George’s County, the National Consumer Law Center, National Housing Trust, Maryland Affordable Housing Coalition, the Housing Association of Nonprofit Developers and a consortium of nine recreational trail advocacy organizations led by the Mid-Atlantic Off-Road Enthusiasts. The merger continues to be conditioned upon approval by the public service commissions of the District of Columbia, Delaware and Maryland. Exelon and PHI continue to expect the merger to be completed late in the second or third quarter of 2015.
- Nuclear Operations: Generation’s nuclear fleet, including its owned output from the Salem Generating Station and beginning April 1, 2014, 100 percent of the CENG units, produced 42,657 gigawatt-hours (GWh), of which 7,796 GWh were produced by CENG, in the first quarter of 2015, compared with 35,261 GWh in the first quarter of 2014. Excluding Salem, the Exelon-operated nuclear plants at ownership achieved a 92.7 percent capacity factor for the first quarter of 2015, compared with 94.1 percent for the first quarter of 2014. The number of planned refueling outage days totaled 89, of which 41 were related to CENG, in the first quarter of 2015, compared with 52 in the first quarter of 2014. There were 32 non-refueling outage days, of which five were related to CENG, in the first quarter of 2015, compared with 20 days in the first quarter of 2014.
- Low Carbon Portfolio Legislation: In March 2015, the Low Carbon Portfolio Standard (LCPS) legislation was introduced in the Illinois General Assembly. The legislation would require ComEd and Ameren to purchase low carbon energy credits to match 70 percent of the electricity used on the distribution system. The LCPS is a technology-neutral solution, so all generators of zero or low carbon energy would be able to compete in the procurement process, including wind, solar, hydro, clean coal and nuclear. Costs associated with purchasing the low carbon energy credits would be collected from customers. If passed by the General Assembly, the legislation would be presented to the governor, who would have 60 days to decide on the bill.
- Fossil and Renewable Operations: The dispatch match rate for Generation’s fossil/hydro fleet was 98.0 percent in the first quarter of 2015, compared with 92.9 percent in the first quarter of 2014. The performance in 2014 was impacted by equipment issues in January. Energy capture for the wind/solar fleet was 95.9 percent in the first quarter of 2015, compared with 94.7 percent in the first quarter of 2014.
- PECO Electric Distribution Rate Case: On March 27, 2015, PECO filed a petition with the PAPUC requesting an increase of $190 million to its annual service revenues for electric delivery, which would reflect a 4.4 percent increase of total Pennsylvania jurisdictional operating revenues. The requested rate of return on common equity is 10.95 percent. The results of the rate case are expected to be known in the fourth quarter of 2015. The new electric delivery rates would take effect no later than January 1, 2016.
- Financing Activities: On March 2, 2015, ComEd issued $400 million aggregate principal amount of its First Mortgage 3.70 percent Bonds, Series 118, due March 1, 2045.
- 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 March 31, 2015, was 94 percent to 97 percent for 2015, 67 percent to 70 percent for 2016, and 37 percent to 40 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 first quarter 2015 GAAP Net Income was $443 million, compared with a net loss of $(185) million in the first quarter of 2014. Adjusted (non-GAAP) Operating Earnings for the first quarter of 2015 and 2014 do not include various items (after tax) that were included in reported GAAP Net Income:
| ($ millions) | 1Q15 | 1Q14 | ||
|
Generation Adjusted (non-GAAP) Operating Earnings |
$303 |
$258 |
||
| Mark-to-Market Impact of Economic Hedging Activities | 100 | (446) | ||
| Unrealized Gains Related to NDT Fund Investments | 24 | 8 | ||
| Amortization of Commodity Contract Intangibles | 24 | (31) | ||
| Merger and Integration Costs | (7) | (9) | ||
| Midwest Generation Bankruptcy Recoveries | 6 | — | ||
| Tax Settlements | — | 35 | ||
| CENG Non-Controlling Interest | (7) | — | ||
|
Generation GAAP Net Income (Loss) |
$443 |
$(185) |
Generation’s Adjusted (non-GAAP) Operating Earnings in the first quarter of 2015 increased $45 million compared with the same quarter in 2014. This increase primarily reflected higher revenue net of purchased power and fuel at Generation as a result of lower cost to serve load, the Integrys acquisition, and the cancellation of the DOE spent nuclear fuel disposal fees, offset by lower realized energy prices. The increase was partially offset by higher operating and maintenance expenses reflecting increased inflation, offset in part by reduced other postretirement benefit costs, and increased interest expense.
ComEd consists of electricity transmission and distribution operations in Northern Illinois.
ComEd's first quarter 2015 GAAP Net Income was $90 million, compared with net income of $98 million in the first quarter of 2014. Adjusted (non-GAAP) Operating Earnings for the first quarter of 2015 do not include merger and integration costs that were included in reported GAAP Net Income:
| ($ millions) | 1Q15 | 1Q14 | ||
|
ComEd Adjusted (non-GAAP) Operating Earnings |
$92 |
$98 |
||
| Merger and Integration Costs | (2) | — | ||
|
ComEd GAAP Net Income |
$90 |
$98 |
ComEd’s Adjusted (non-GAAP) Operating Earnings in the first quarter of 2015 decreased $6 million from the same quarter in 2014 primarily as a result of unfavorable weather and volume in the first quarter of 2015. Electric distribution earnings were flat, reflecting the impacts of increased capital investment, offset by lower allowed return on common equity due to a decrease in treasury rates.
For the first quarter of 2015, heating degree-days in the ComEd service territory were down 6.2 percent relative to the same period in 2014 and were 14.8 percent above normal. Total retail electric deliveries decreased 3.5 percent in the first quarter of 2015 compared with the same period in 2014.
Weather-normalized retail electric deliveries decreased 1.9 percent in the first 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 first quarter 2015 GAAP Net Income was $139 million, compared with net income of $89 million in the first quarter of 2014. Adjusted (non-GAAP) Operating Earnings for the first quarter of 2015 do not include merger and integration costs that were included in reported GAAP Net Income:
| ($ millions) | 1Q15 | 1Q14 | ||
|
PECO Adjusted (non-GAAP) Operating Earnings |
$140 |
$89 |
||
| Merger and Integration Costs | (1) | — | ||
|
PECO GAAP Net Income |
$139 |
$89 |
PECO’s Adjusted (non-GAAP) Operating Earnings in the first quarter of 2015 increased $51 million from the same quarter in 2014 primarily due to decreased storm costs and favorable weather and volume.
For the first quarter of 2015, heating degree-days in the PECO service territory were up 3.2 percent relative to the same period in 2014 and were 18.4 percent above normal. Total retail electric deliveries were up 1.5 percent compared with the first quarter of 2014. Natural gas deliveries (including both retail and transportation segments) in the first quarter of 2015 were up 4.9 percent compared with the same period in 2014.
Weather-normalized retail electric and gas deliveries increased 0.4 percent and 2.0 percent, respectively, in the first quarter of 2015 compared with the same period in 2014. The increased gas volumes were driven primarily by moderate economic and customer growth.
BGE consists of electricity transmission and distribution operations and retail natural gas distribution operations in Central Maryland.
BGE’s first quarter 2015 GAAP Net Income was $106 million, compared with net income of $85 million in the first quarter of 2014. Adjusted (non-GAAP) Operating Earnings for the first quarter of 2015 do not include merger and integration costs that were included in reported GAAP Net Income:
| ($ millions) | 1Q15 | 1Q14 | ||
|
BGE Adjusted (non-GAAP) Operating Earnings |
$107 |
$85 |
||
| Merger and Integration Costs | (1) | — | ||
|
BGE GAAP Net Income |
$106 |
$85 |
BGE’s Adjusted (non-GAAP) Operating Earnings in the first quarter of 2015 increased $22 million from the same quarter in 2014, primarily due to increased distribution revenues pursuant to increased rates effective in December 2014. 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 April 29, 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 First Quarter 2015 Quarterly Report on Form 10-Q (to be filed on April 29, 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 17; 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.
| EXELON CORPORATION | ||||||||||||||||||||||||||||
| Reconciliation of Adjusted (non-GAAP) Operating Earnings to | ||||||||||||||||||||||||||||
| GAAP Consolidated Statements of Operations | ||||||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||||
| (in millions, except per share data) | ||||||||||||||||||||||||||||
| Three Months Ended March 31, 2015 | Three Months Ended March 31, 2014 | |||||||||||||||||||||||||||
| Adjusted | Adjusted | |||||||||||||||||||||||||||
| GAAP (a) | Adjustments | Non-GAAP | GAAP (a) | Adjustments | Non-GAAP | |||||||||||||||||||||||
| Operating revenues | $ | 8,830 | $ | (194 | ) | (b),(c) | $ | 8,636 | $ | 7,237 | $ | 850 | (b),(c),(d) | $ | 8,087 | |||||||||||||
| Operating expenses | ||||||||||||||||||||||||||||
| Purchased power and fuel | 4,470 | 7 | (b),(c) | 4,477 | 4,340 | 81 | (b),(c) | 4,421 | ||||||||||||||||||||
| Operating and maintenance | 2,081 | (12 | ) | (d),(e) | 2,069 | 1,858 | (14 | ) | (d) | 1,844 | ||||||||||||||||||
| Depreciation and amortization | 610 | — | 610 | 564 | — | 564 | ||||||||||||||||||||||
| Taxes other than income | 304 | — | 304 | 293 | — | 293 | ||||||||||||||||||||||
| Total operating expenses | 7,465 | (5 | ) | 7,460 | 7,055 | 67 | 7,122 | |||||||||||||||||||||
| Equity in earnings (loss) of unconsolidated affiliates | — | — | — | (19 | ) | 12 | (c),(d) | (7 | ) | |||||||||||||||||||
| Gain on sales of assets | 1 | — | 1 | 5 | — | 5 | ||||||||||||||||||||||
| Operating income | 1,366 | (189 | ) | 1,177 | 168 | 795 | 963 | |||||||||||||||||||||
| Other income and (deductions) | ||||||||||||||||||||||||||||
| Interest expense, net | (345 | ) | 89 | (d),(f) | (256 | ) | (227 | ) | — | (227 | ) | |||||||||||||||||
| Other, net | 80 | (49 | ) | (g) | 31 | 98 | (42 | ) | (g),(i) | 56 | ||||||||||||||||||
| Total other income and (deductions) | (265 | ) | 40 | (225 | ) | (129 | ) | (42 | ) | (171 | ) | |||||||||||||||||
| Income before income taxes | 1,101 | (149 | ) | 952 | 39 | 753 | 792 | |||||||||||||||||||||
| Income taxes | 363 | (64 | ) |
(b),(c),(d),(e),(f),(g) |
299 | (54 | ) | 313 | (b),(c),(d),(g),(i) | 259 | ||||||||||||||||||
| Net income | 738 | (85 | ) | 653 | 93 | 440 | 533 | |||||||||||||||||||||
| Net income attributable to noncontrolling interests, preferred security dividends and redemption and preference stock dividends | 45 | (7 | ) | (h) | 38 | 3 | — | 3 | ||||||||||||||||||||
| Net income attributable to common shareholders | $ | 693 | $ | (78 | ) | $ | 615 | $ | 90 | $ | 440 | $ | 530 | |||||||||||||||
| Effective tax rate | 33.0 | % | 31.4 | % | (138.5 | )% | 32.7 | % | ||||||||||||||||||||
| Earnings per average common share | ||||||||||||||||||||||||||||
| Basic | $ | 0.80 | $ | (0.09 | ) | $ | 0.71 | $ | 0.10 | $ | 0.52 | $ | 0.62 | |||||||||||||||
| Diluted | $ | 0.80 | $ | (0.09 | ) | $ | 0.71 | $ | 0.10 | $ | 0.52 | $ | 0.62 | |||||||||||||||
| Average common shares outstanding | ||||||||||||||||||||||||||||
| Basic | 862 | 862 | 858 | 858 | ||||||||||||||||||||||||
| Diluted | 867 | 867 | 861 | 861 | ||||||||||||||||||||||||
| Effect of adjustments on earnings per average diluted common share recorded in accordance with GAAP: | ||||||||||||||||||||||||||||
| Mark-to-market impact of economic hedging activities (b) | $ | (0.11 | ) | $ | 0.52 | |||||||||||||||||||||||
| Amortization of commodity contract intangibles (c) | (0.03 | ) | 0.04 | |||||||||||||||||||||||||
| Merger and integration costs (d) | 0.02 | 0.01 | ||||||||||||||||||||||||||
|
Midwest Generation bankruptcy recoveries (e) |
(0.01 | ) | — | |||||||||||||||||||||||||
|
Mark-to-market impact of PHI merger related interest rate swaps (f) |
0.06 | — | ||||||||||||||||||||||||||
| Unrealized gains related to NDT fund investments (g) | (0.03 | ) | (0.01 | ) | ||||||||||||||||||||||||
| CENG Non-controlling interest (h) | 0.01 | — | ||||||||||||||||||||||||||
| Tax settlement (i) | — | (0.04 | ) | |||||||||||||||||||||||||
| Total adjustments | $ | (0.09 | ) | $ | 0.52 | |||||||||||||||||||||||
Note: For the three months ended March 31, 2015, includes the results of operations of Constellation Energy Nuclear Group, LLC due to the execution of the nuclear operating services agreement on April 1, 2014.
| (a) | Results reported in accordance with GAAP. | |
| (b) | Adjustment to exclude the mark-to-market impact of Exelon’s economic hedging activities, net of intercompany eliminations. | |
| (c) | Adjustment to exclude the non-cash amortization of intangible assets, net, related to commodity contracts recorded at fair value, if and when applicable, related to the Constellation merger and the Integrys acquisition. | |
| (d) | Adjustment to exclude certain costs associated with the Constellation merger, pending PHI acquisition, and at Generation, the CENG integration and Integrys acquisition, including, if and when applicable, professional fees, employee-related expenses, integration activities, upfront credit facilities fees, merger commitments, and certain pre-acquisition contingencies. | |
| (e) | Adjustment to reflect a benefit related to the favorable settlement of a long-term railcar lease agreement pursuant to the Midwest Generation bankruptcy. | |
| (f) | Adjustment to exclude the mark-to-market impact of Exelon Corporate's forward-starting interest rate swaps related to anticipated financing for the pending PHI acquisition. | |
| (g) | Adjustment to exclude the unrealized gains on NDT fund investments to the extent not offset by contractual accounting as described in the notes to the consolidated financial statements. | |
| (h) | Adjustment to account for Generation's non-controlling interest related to CENG exclusion items, primarily related to the impact of unrealized gains and losses on NDT fund investments. | |
| (i) | Adjustment to reflect a benefit related to favorable settlements in 2014 of certain income tax positions on Constellation’s 2009-2012 tax returns. |
Exelon Corporation
Francis Idehen
Investor Relations
312-394-3967
or
Paul
Adams
Corporate Communications
410-470-4167
Source: Exelon Corporation