EXC - Earnings call transcript Q4 2017

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Operator

Good morning. My name is Sarah, and I will be your conference operator today. At this time, I would like to welcome everyone to the 2017 Q4 Earnings Conference Call. [Operator Instructions]. Thank you. Mr. President Relations, Vice your may Senior conference. Eggers, of you Investor begin Dan

Daniel Eggers

to Exelon's the equivalent turn and forecasts to measures risks for of and material in expectations. that today's our our from measures. from call with Good members today's available the Exelon's thank I'll factors Investor and GAAP of management's non-GAAP other factors and Affairs remarks. earnings the filings in are They're discussed can everyone, refer refer between contain call, our subject Crane, you, to Exelon's measures. be call. we your now both to Government will also questions earnings during and may assumptions Please and Please the The morning, reconciliations Thank Sarah. prepared and who Regulatory Jack Officer; and to includes team of Executive Chris statements and discussions based Exelon's XXXX other in and by Relations Thayer, joined forward-looking management operating Today's Vice which our conference non-GAAP answer earnings Chief uncertainties. and forward-looking We website. contained which results Exelon's Executive are this discuss Financial release and statements Chris our for appendix earnings differ following senior to fourth results over presentation during presentation earnings Policy. you the Dominguez, comments adjusted call. of of and found on estimates risk made be today Leading differ the and Officer; Exelon's to Public factors call X-K could this Chief Actual CEO. Crane, other that the information nearest release SEC today's various our section cause projections, President Joe matters, the issued quarter references release joining and morning along presentation, for other and President

Christopher Crane

and today. morning for good and us you thank to joining Dan, Thanks, everybody

Let of voice who our my for me same recovering There's speakers some cold. are start by from in place. apologizing a the first other is

to a much year through without for the too we'll major Exelon, great over performance clearly try of talk like months. business was our a to accomplishments moment XXXX and distraction. it make I'd and So about our past XX some to take

the updated builds of growth board policy, goals our dividend through recently our rate growth growth 'XX previous X% targets developments with operation. utility mix particularly of positive faster We significant solidly dividend First details, the since comfortable in will and earnings within shift operating per discipline $X.XX foremost, and changes. but ZEC contracts. XXXX $X.XX pleased of Last the as range the $X.XX guidance per of timing I'm cost GAAP walk It from note delivered share utility through I'd that from Exelon we Jack XXXX. for report in We're from annual XXXX through It earnings, to dividend the shared business earnings that from share better FERC-related growth earnings and to related the absorbed competitive XXXX week, of the X.X% $X.XX to PHI providing accounting on Illinois keeps the multiyear saw absorbed performance offering are visibility. approved 'XX. our our increasing completed rate, plan for XXXX, acquisition, XXXX. light

year-end Jack to identified I'm be in dividend reform spend but share proud we of total have per more positive other run competitively, dividend tax while since XXXX. reduction savings of are the nuclear of useful our our our our Tax capital inherent lower Our in faster plan expiration at and our and Allows most preserved higher provide our of is for discuss contributed us. will cost year as the benefit ZEC lower we bills. through customer approximately benefit with premier utility scores. all total, our our XXXX lives a and OEM customers flows allocation ability our plants of commitments. will extended significant cost forecast meeting success EPS our of programs for capital times. we in updated invested Operationally, area we able this million well in in $XXX business. rate Illinois clearly each XXX% infrastructure and with New technology passed and $X.X ExGen York all grow outages lower experience, see our executed throughout and That a new discipline, rate in shortly, tax shareholders our $X.XX of each are from to for At valuable utilities, to capital policy. satisfaction and will billion initiatives confident customer fewer the XXXX. that financial expensing, to rate we consistent a

busy on regulatory the cases transmission receiving grid $XXX multiple and utilities of future and the the national X recognition a investment with In million satisfaction. rate customer XXXX, completing total approximately exceptional fair Timely outcomes us increases. in and and experience. service fact, best helped X we're to and operational improved achieved in regulatory front, and revenue performance, record in fund our also on for better metrics, Meeting customer received our distribution the

and our also well hours, carbon-free pleased and of demonstrating fleet very tell reliable as power. generation CCGTs spell I'm well. that performed December into service highly a fleet megawatt record-setting of once turbine Texas. The again value source and during Exelon, northeast, January liquid for cold Our you in a the a the nuclear fleet produced to in generation we million year brought performed XXX

programs environmental several in the regulatory most economic in the the New implemented stations front, ZEC and of Illinois policy they On preserving reliability our provide. and York benefits at-risk nuclear were of

our these in employees. communities will customers, Pennsylvania defend work our We and our programs as and benefit programs continue to Jersey similar we on New to

and power the need recognition price new proposal also and the resiliency additional which our more to of we order serve can't billion utility concerns. the a We will diverse step with that suppliers. and urge an more building FERC of about resiliency a the adopt PJM's billion Being were tenant that and to roundtable effort first an in of in that important later responsibility this some commitment reflects bases community the is order We to spend that prior recognizes the that call. successes and this is FERC's Joe realize discuss around FERC we award $X resiliency this companies what believe time saw named take in this of part January, address successes for Exelon been in we will system, on comprehensive to noting adopt addressing our can year about the of we our detail XXXX, Dominguez year central corporate will our formation above -- we've years. $X resolve. solution we communities able an talk without and In years' Tier We do supporting active X to without to strong minority-owned talk improving recognitions. power

Companies. to X diversity and its of In for Veteran-Friendly the Veterans Exelon XX List companies of addition, named Magazine Best U.S. named top Best of DiversityInc us

D.C. announced Chicago. bring progress activities, XX, center of over in center XXXX. were our in in lot in a Civic in also a volunteering Exelon job XXX,XXX Washington, $XX after the to named records out made singled we value companies modeled training will areas XXXX. by Life new a new leader. than communities [indiscernible] hours operate committing list to that We the set of We We utility and great operating field and community-minded employees in sector Foundation, and million giving as its in more

model is X, add of on Exelon's the management we'll Turning that operations. our to you Slide impact show utility

the seen across the with for Utilities Constellation of the paying legacy to utilities. our back our off. benefit work are hard or operations Exelon our of material employees Looking The the we've improvement clearly merger PHI, and merger scale since in

first reliability, customer Our our of safety success across quartile key operate at utilities and levels service. primarily

Pepco in not decile our of levels BGE, across on service does central being XXXX extremely utility at well best these in in story day ComEd to and this performance the However, was remains ranked of for top rank many professionalism. tell of this best and measures. customer employee in strive the had with and many, on-record among in did our who XXXX. professionals front levels ComEd utilities performance Kudos we business and XX BGE of and for PHI electric the the satisfaction CAIDI and strong large to hard performance the the customer Customer SAIFI satisfaction. utilities whole best our to top on And our Power's the highest on performance many provide service XX utilities performance utility region work every customers. nationally J.D. earned In East study, was and the among in the service and BGE

X. Slide to Turning

We also Constellation. had in year Generation strong another and

average Our top-tier -- assets X past perform capacity In continue rate XX.X% had XX% nuclear a record refueling days. utilization, to marking hours. combined XX of FitzPatrick over the We of of the levels. for of years. billion nuclear factor had of X at a we XX megawatt we utilization XXXX, an XXX outages duration the addition plant fleet with high With generated in

speak XX power to C&I side, more customer XX% been contract more months than On has average remain the our duration of Constellation average. deep our customer of and customer of These that renewables, business. years, on Constellation metrics than the statistics a strong. operating X bedrock relationship terms

operating with turn see walk management to stable further of support the is our numbers. I'd C&I some aggressive margins. helping over to continue our and margins And now Jack to to to cost like unit through it We customers

Jonathan Thayer

our today annual XXXX morning, financial Chris, you, guidance everyone. good update through on and remarks results, focus XXXX earnings will exposures. My and Thank

Slide year operationally as financially to company. and a had the X, Turning stated, strong across we Chris

as full per timing from results, our For non-GAAP pleased the FAS our XXX We're impact guidance within asset ZEC of as were signed this comfortably share related $X.XX our the income range. FERC-regulated for year operating Illinois assets. considering were December the with drag $X.XX contracts in and well a unexpected our taxes $X.XX rather full XXXX, January than to particularly impairment from year earnings our adjusted they

to XXX in quarter, Utilities storm expense share, softness the market optimization earlier and the company O&M FAS quarter. favorable in which expectations relative impairment. efforts as plan was per benefiting experienced offset our were by earned performed we share. the fourth For line from cost $X.XX offset $X.XX less our mostly EPS Generation with per expenses, our some lower holding

we revenue cost-optimization benefit ZEC capital as growth of impact improvement operating utility ZEC up share. our than in New York of X, per tax rate growth adjusted in primarily lower and tax increase payments, Slide driven providing is The XXXX is the $X.XX as the from year-over-year which recognition by to prices. due the the we to efforts, of Generation of deploy full earnings PHI's recognition drag reform; the $X.XX well And Exelon Turning to and XXXX earned rate; as base to year Illinois are offset Illinois; XXXX earnings continued lower customers reflects full guidance by energy partially year $X.XX now higher in ROEs.

We distribution more utility $X CapEx plan first next and for the be per our covers $XX ensure our to our drivers can efficient XX, range X detail experience. share. More electricity XXXX. outlook years transmission in billion now in invest by found to to earnings XXXX forward $X.XX that Slide quarter into more the appendix, utilities rolled expect We reliable, Slide XX. over customer and be year-over-year of for starting and resilient gas the improves rate which on of base, to On operating the the company we on

safe, with advantage accelerate we X-year you is last capital at replacement year payment and of which program results we opportunities further programs our resiliency, our as a the up us This and in take across BGE to plan shared annual rate. run a with $X improve reliability from provide capital Our and PECO allows to gas what billion all utilities service. with customers of reliable

and budget tax relative We X.X% base compared base. last now increase by $X.X at impacts rate rate project reform. in of X.X% reflects the growth the which expanded to update, our the to will expectations. CapEx to previous of billion reform Tax annual approximately Turning XXXX,

more XX. For capital detailed by we your and Slide convenience, of provided rate base utility on a in the individual analysis beginning outlooks appendix,

have capital. approximately mechanisms, capital billion will the our continue of or projected to base Equally XX% work we $XX.X Of Turning visibility of base shows to not are that systems XXXX, do trailing timely improving strength rate investments implement or under supporting make XX. also deploying Slide over jurisdictions return rates revenue ROEs projected is covered blended in our rate and XX% is with mechanisms from we base efficiency aligning decoupled either volumes types recovery. of formula -- growth energy and on rate these important transmission our Where note our ambitious I earned to to earn ability enact with the fair in stakeholders is a a that earnings for additional XX tools. and of and our space. XX-month goals distribution utilities. would Slide

Our to earned utilities returns to operational in Chris already discussed. continue strong delivering the year for execute, robust the addition performance,

see a had of and the borrowed on utility we Exelon Over by O&M, legacy gains as regulatory our out impairment earned are although PHI FAS overall cases impairment meet FAS XXX a storm XXX and ROEs legacy by will expense the performance the at earned sustaining each Atlantic Pepco further XXXX. core resolved rate is PHI's the Delmarva utilities XX.X% I a at earning XXXX. year, and the offset at remained The Exelon be group, to that in improved City XX efforts quarter asset focus past strong of We're utility. the throughout partially of Improving growth pending expect cost flat by strong to improvements favorable points basis utilities Electric, helped encouraged XXXX, targets. point the PHI ROEs as earnings at and fourth should our about

earn to utilities to XXXX. expect XX% our We ROEs X% across in

the in call, earnings this and filed year an of structure, in recovered implementing received Since plus authorizing quarters the over Maryland our assets cases respectively. time. order front. third of the rate the expected we've electric we the and XX, Slide revenue million. Pepco orders with this rate the Since last being increase of to busy XXX% of the Columbia our ComEd on regulatory Turning $XX formula for remain District first year, fourth with XX%

since filed made we case and million Later drag the April. is plan uplift for XXXX of of expense less cases, reform pending shield. meter smart increased orders tax and XXXX company which an the be with in from at update been their tax standard the by rate details a last rate lower these have spring, XX XX from ComEd our in recently bands across file we're In both cases tax in have performance to and reliability, base schedules that Maryland formula at through time rate The to can EPS and utilities outlook Pepco rate provides where found recovery jurisdictions. provides multiple capital an mostly offset X first increased. rate PECO couple we'll years, this on rate to Slide Slide in higher of X% in on and X% the Compared BGE to Combined, EPS More for year, EPS, $XXX improve growth. the addition XX on years at other on XXXX. our forecast holding continue in Delmarva our in investments to to cases update first utility for a we have appendix. expected years revenues, asking file the we from reflect

base us growth, should As than to planned, strong collected the that previously to a margins, depreciation previous ExGen, being XXXX, gross in on in disclosures decision in to our XXXX, into recovery toward timely update this provides on back margin should XX, benefit reform Slide path compared $X.XX uplift Overall, is O&M for factored relative retire and from our leading combination our previous bridges EPS period, we of start all policy. quarter. the XXXX and earlier EPS $X.XX Slide Creek, to detailed rate out more year to growth. now point sustain look in of Oyster expectations. and XX change tax expense, see our I the and provide $X.XX for with tax gross the the of net we regulatory we utility our leave half a

Now turning margin to our gross updates.

margin last gross is to disclosure. our total XXXX Our relative flat

operations. by Creek we million, resource previously portfolio a our the serves bridging Generating Creek. of we've the let the lower contribution to paper Texas strengthening gross out offset gross in Total in to West The inclusion last quarter, Station. X,XXX since Oyster partially driven of two, it now of margins, the not compared in retail of prices, by higher primarily gross EGTP context Handley reduction by cost-effective an megawatt NiHub XXXX to gross me spreads our the disclosures. is Total XXXX additional ERCOT's that from XXXX Constellation Oyster to million million bought few XXXX by Since related Hub with offset $XXX $XX power up margin Handley, margin retirement in and open early is to As $XXX help margin, spark already as bucketed is the changes primarily and One, TMI. disclosed the disclosures retirement be announced Generation

its We expense and EPS-accretive closure is net have some O&M so us. offset depreciation to

behind hedges. XX% we capacity XXXX Secondly, ratable comfortable to when XX% cross-commodity and the our previously to the we largely behind see the program robust when opportunity capacity We disclosed PJM $XXX changes. hedging XXXX million in decrease ended reflects perspective for as of ZEC at From formation we considering being and hedging option. a role-off fundamentals look XX% in 'XX approximately X% the line to prices quarter, and market price from in remain more and PJM ratable open which XXXX particularly

million $XX to Creek. the and XXXX, of third outlook O&M savings expanded XX, with an consistent and of program, closure million XXXX quarter Oyster respectively, our included is earlier-than-planned Slide $XXX earnings That disclosures. in $XXX call additional expense O&M the due to Turning plus our cost-reduction million

CapEx. to Turning

spend to decline. capital continue baseline fuel liquid projections Our

investments prior made the benefits proactive we focus closing of investment on plants. from base a fleet across years. Our CapEx uneconomic any Further priorities, in impact

nuclear of excess [indiscernible] take markets fuel in fuel falling Our during processing well-supply we expenditures as are advantage capacity.

we We continue vulnerable market the produce and run always which more needs these from the look we'll lives fleet we and ongoing New of seems which York while of Illinois ways think of premium have a to flat. in efficient programs slow makes an highest combination value plants, on maintaining safety most continue more compelling cost-effectively cost to reliability. case long-term and and useful assets our run for organization, for capital a reduce still extended The our the the assets, to ZEC to

Turning We're XX. to forward cash through to for free cover XXXX Slide the rolling flow outlook XXXX. ExGen

We cumulative outlook. $XXX X-year cash free million higher be which expect the flow than previous $X.X to our billion, is

fund reform. Our CapEx price the the year-end, outlined of margin quarter cost Creek, dividend billion growth, updated closure the of approximately equity the to Oyster utilities. account than takes nuclear by Medway base final funding. in for dividend external forwards Constellation forecast projects primarily plant dividend free at of we covered a generation. plan will $XXX from X-year flow that benefit between Constellation, plan million forecast free the growth to call, XX% earlier impact the flow not New and payments planned approximately our the ExGen, capital, current at needs the $XXX our need and capital TMI to our cash business, use to We're for considering the which cited third million free the updating England with billion strong Texas total With support cash of CCGTs. of gross We'll faster this fund $XXX into invest power is $X.X to in the outsized comfortable less funding use are in outlook and cash We're We ExGen utilities in cuts of the some particularly million around of we solar the and without ExGen's of generation. growth tax $X.X how closure also and flow inject

debt We'll billion that. company be will spread at debt-to-EBITDA ExGen $X.X $X.X to which to Xx billion of leverage Finally, to we and commitment. manage between plan and ExGen continue our between retire holding

with in but want X, from already we we we've our of XX, X-K few to impact January details. reform are additional on that Exelon Turning a Slide offer from tax the you beneficiary and highlight to shared clear reform tax

expense pass partially base. to deferred higher meaningful jurisdictions, our expect will reflecting the across tax We're customers by offset much lower to benefit rate reform. savings We of the income through different our so recoveries from of and the tax liabilities, refund thrilled impacts customers tax the utility that regulatory

tax of uplift a Our increased XXXX; will XX% reform, expense. rate, the less a expect share utilities Generation will while $X.XX create from shield from the base, for holding billion lower XXXX EPS our earnings effective company $X guidance is benefit XXXX tax tax by interest up we will per rate to benefit rate inclusive earnings. tax an and

be very to can modest you cash tax XXXX, expect by through payer see year. rates cash the We a and tax

with expect more lower rate XXX% consolidated which largely stronger We expect flow a increased will expensing tax the utilities tax of capital, remain of equity result additional it's than rate and cover free a as we much the the reform. base with ExGen, needs associated the cash unchanged will of and from metrics XXX --

utility a a agency financial of recycle side, distinct some that additional On ExGen frequently significant with debt, the above the reform we business utilities company outer free company to made the flexibility. years modest tax impact XXXX, our with network our flows. thresholds. rating see overall over provides erosion in advantage remain do or Our the competitive more meaningful ability positive impact in all with We case provides has that Generation although cash at the in to

tax reforms. no Our being metrics are due that other to for additional to credit to equity and external need are positive utilities relative pressured the examples uplift

XX, debt previous remain strong downgrade slide, for this we sheet ahead thresholds. corporate Slide of to in the rating. a credit on targets hit to but Turning the our we balance I committed investment-grade our FFO maintaining well to remain and comfortably in above

debt at a levels. to in debt-to-EBITDA total We'll X.Xx only sheet basis, balance Xx continue our in well On we're ahead expect a XXXX. Xx to perspective. be manage debt-to-EBITDA recourse ExGen our of time from ExGen, we at the over debt-to-EBITDA targets to Looking and debt-to-EBITDA

Genco. us So holding at set look and both to for company our reduction debt

to payout portion of funding process. Slide if Slide annually we X% our to us Chris expense. the to amount dividend as over more to on confidence by a dividend, let's the earlier, based and through increase earnings, dividend the dividend based regulatory per the from the the our XX represent of the capital increase utility very growth we're of growing that ExGen. And business turn I majority We're shareholders XX, earnings to depending assume a the will it's at basis. free thought the payout On to through more excited supporting in competitive our be I through small Turning on has gave EPS Chris comfortably positive EPS XX% peers, XXXX. with initiatives. we the business our portion call returning the growth rate approach, a policy X.X% output are on growth. to shows keep ratio, decided on rate of the to covered to Joe teens are to so growing the year, hypothetical on walk board the the want ExGen's talk dividend cash dividend and to now, company the the being is this spoke earnings holding now consider which their residual dividend latest our mentioned XX% financial ExGen about through funded growing financial -- you a is committing that flow utilities, to at Dominguez payout with we walk to dividend. less ratio XXXX XX% ratio to When X% by the substantially on then of for the dividend around utility, guidance be our $X.XX take year, and moment have of a utility The this utilities space is and policy developments comfortable piece

Joseph Dominguez

and State, to Jack, XX RTO that morning, XX changes customers X we last see FERC momentum and cover Since and resources Thanks, I'll the policy levels. and environment numbers to materials. value that everyone. of benefit good emission The call, at for Slides the earnings our continue positive levels. will increase our

on ensuring we said that remain on areas, Chris call, resilient resources compensated focused are the As three first, fairly.

third, On a new the within price preserving formation and in on policy within like recognitions, walk to resilience, flaws and ZEC Exelon's initiatives expanding FERC Consistent the each initiated Second a and the generation issued resilience dating gas as resiliency provide our has include identified a urge XX issues concerns the and talked unit the in reliability programs traditional examine the order energy FERC scope that's of we system in urged these. energy particular, January its report about than FERC, and state-sponsored as caused noted through with PJM that state that we've in infrastructure FERC resilient transmission programs. and and performance be and umbrella spotted; elect nuclear the addressing the X number. of the of I'll around and the response directed DOE with natural filings the the In proceedings, to report RTOs and immediately days. to by [indiscernible]. commission grid should RTOs include order on loss does, to any the consider failure. recommended changes at centered we toward risk electric cash whatever calls, earlier the broader

a PJM opportunity of make calendar Based FERC's that tracking PJM time, the this Energy court reforms PJM's before within continue The gives including of the address for order Committee We comments, earlier. will testimony expect its year. PJM solutions, in upon medium the formation course had can expect Chris price reforms that strong proceedings formation clearly those the a ago, reforms. resilience [indiscernible] filings. some as push U.S. week we including the price implement to near-term indicated the Senate take will solutions it and to said

pursuing docket; In a filing terms of two, at and the be XXX FERC-directed pathways One, see followed simultaneously. In will [indiscernible] on formation In and two PJM's next work action, be through conclude process to give to are price next going coupled the committee filings us implemented docket resilience XXXX. in liaison underway, lot the achieving chairman's the PJM there's third continues week. to more continue to us, that price that meantime, ahead filing enhanced engage due by-product market a is as of has that the with PJM a of stakeholders alternative PJM reforms urgent and its changes proposal. stakeholder process summary, us by to already to in with PJM, commitment steps, stakeholder confidence more PJM that continues the for a we quarter. the focus its formation call address existing refine a limited for and scheduled to said, process process. successful that are is as in commission's for With of resilience it

our next Cities the already with efforts procurement an value York in completion state state Clinton. policies and that resources, that the ZEC we and Illinois, process nuclear Turning noted in the of slide in Quad month X concerning Jack emission New outgoing to milestone reached last important

New and precedent lowest I'll New state most in in that that now X we'll [indiscernible] is programs and with The closing. Now our resources Jersey we and in Federal confident policy emission both up under been filed about the reliable because at for talk running. fully appeals legitimate market. We and successfully established Jersey New has the Illinois in the courts Illinois consideration and York they defend these are courts preserve York customers state programs and remain New cost

XXXX. Jersey As bill many were support know, X it of in the through committees New the nuclear had late Legislature unanimous in provisions. of made you Votes in the

on a indicated new governor-elect Since work report early then Murphy we've we legislation. turn was a comprehensive continued all to let big with that, and hope to action And desire at with over our it However, floor and vote for legislative package, had not December, that I in more held. stakeholders XXXX. because back I for partners Chris. PSEG can making me progress are

Christopher Crane

Thanks, Joe.

Turning to XX. the Slide

to an behind updated shareholders. have which value numbers the strategy some we highlights have -- We and our commitment of our our updated proposition,

utilities forward, X.X% group growth XXXX. targeting growth above our rate year another trajectory. to continue Rolling and through will to base We growing X% on at X% focus EPS

over free to the needs pay these ExGen X company, of next incremental growth the a part years at and continue cash holding fund one We flow faster ExGen rate. dividend from and debt to our utilities, use down the at equity

our the to will We and value for New and Illinois. Jersey focus New Generation done on with in our for optimizing York fair ZECs we have in seeking continue Pennsylvania, carbon-free by ExGen as fleet business compensation

GMI through XXXX; price of will Constellation. value plans at We PJM and to in in at of plants, closing accelerate GEN selling our FERC; and our to to pursue uneconomic now resiliency it early assets maximizing strategy continue Creek Oyster including XXXX adoption of load formation make an debt-reduction in retirement matching initiatives where sense

investment-grade our credit sustain X% to now dividend metrics, continue strong We growing and through XXXX. consistently at

Slide However, turning key some to areas with XX, focus XXXX. for want you I leave to

experience customer plan Generation grid will and We at reliably improving continue margins. to deliver we and At utilities, discipline in to utilities, retail and $X.X fleet our the fair to business our on modernizing focusing of billion the our customers. invest operational businesses, capital our capture same to benefit our safely all running across excellence

as leave Pennsylvania. participation we we grow rate New pay of and only the We focus on couple in formation will of ago we initiatives cases In Pay our very our targeted and file with UN to building expansion of value York achieving to discussed will our of signing ROE X% on ZECs for will a total to nuclear including we'll broader rolled take price plants working attributes to campaign HeForShe the with and environmental execute last with the a time. initiative families in the being Pledge. defend policies in Financially, stakeholders in issues at energy our a company previously dividend We'll we which strategy the Jersey more on resiliency robust. underpinning our out and we payment the The start Illinois fair work courts New year's at distribution continue X% changes FERC, will to responsibility across the proposition establish and finally, work Presidents our is PJM Equal years continue proving goal in through XX% corporate announced X initiatives, as gender XXXX, in establish cost-management the parity to the will utility will the on annually, XXXX. of Generation, continue the

and well are prospects We the positioned beyond. and additional confident upside about capture in XXXX feel to for Exelon

peers. terms your and the We still our With in Operator, stock the of relative stock many support open is remain Exelon. up to optimize committed our the and questions. outperformance, we undervalued now recent to value of believe with business successes we've ongoing it in for our had compared particular, can and in absolute earning we years

Operator

[Operator Instructions].

Our first Greg the line ISI. Evercore question comes with of from

Gregory Gordon

I of definitely On valuation, questions. couple the you agree. Chris, stock A and

so correct? Just just rollout clear, at we items? margin comp lower these disclosure, as with sort to are associated Is to of from is be earnings-accretive, the be X when gross we the the should XXXX negative that TMI think the of shutdown -- the about earnings the other that, on clear look year-over-year actually to falling

Christopher Crane

The EPS TMI, Greg, is it accretive.

Gregory Gordon

net So revenues. that of QX factor million price of with a also capacity by up impact to we cost-cutting call, have XX now was be from $XXX on then, sort the you and come will in But a have right? the that energy a... Page There to offset

Jonathan Thayer

correct. That's

O&M So there's the a that expenses appendix. breakout we detailed of in full

well see as beyond as You'll in 'XX TMI. from the impact as and both well as 'XX Oyster

Gregory Gordon

plan now. some you on you maturities Great. retiring said, also And impairment

debt, that the revolver Should that down $XXX Looking or million Holdco capacity think about we Holdco, maturity see $XXX a in in there's there billion timing? XX, million other XXXX, Page at maturity schedule maturity billion in -- XXXX. $X.X that debt bring can as Or callable the of that's on interim? the you the $XXX is I

Jonathan Thayer

apologize turning slides. those I I'm

the company in company and holding heavily So 'XX of terms to holding in tilt 'XX. more maturities, expect should you towards us

'XX in get ExGen up see then down the us will -- paper also XXX-day pull you'll as maturities have some we see retires in that and 'XX well. work we retire us You the as curve

Gregory Gordon

Okay.

and, X Joe and So Joe is for have I expectation Dominguez, X Joe you PJM. Nigro. can't Dominguez your for clearly, speak it for

soon completed to to go go process? at call to it get viable the in may fact, would process us in process Or FERC the too the probably -- tariff? viable kind this So is done the it in they legally place is through record that get resiliency is is in your the Or a actually legally through at 'XX? expectation liaison have stakeholder enhanced enhanced process end to liaison -- proceedings stakeholder it sort has change its the possibility for of to that call then that? PJM to And of that the the alternative, of

Joseph Dominguez

Yes.

yes. And second Let me question first. answer simply say just the

doesn't believe in think for at they that that at they pathway issue the to supplement they've the repeatedly that in give utilize enhanced come flaws. point they when so. parallel FERC stakeholder I us could my of formation have And and that the price the do March, process alternative expect do then they're clearly, continue identified. conclude to and is resolve it's different expectation do have their parties next exactly open Liaison that PJM will the they later, going order obviously, in it step a already Committee direction going it to And formation PJM in to here issues sufficient they Very that, is to order walk bring tariffs have the I process in urge them same. the days in same many record to process. if that for response, said as in Greg, time, to we stakeholder that believe to expectation that they and with my to this And is other down significant work. continues to XX proceeding, that the it's any the have price going But their to is forums, but that to some PJM XXX may time. record

Gregory Gordon

There And significant change the days then the came out option in and Nigro, Joe for into capacity ComEd. next auction ago. for several initial FERC a capacity parameters was

from your price some incumbent disadvantage give us color perhaps, Can outcomes. on investors generation vis-à-vis there? capacity concern that your thinking that And would the some you

Joseph Nigro

equal curve analyzing as shifting the the well, impact We're into you both into the and could things it on see increase expected. in increase we to may like and into expected slightly increase in an than PJM There and this. ComEd when have Eastern demand variable that about have the all capability were obviously demand changes of think and what and higher else, the curve. other import we Greg, still, the been everyone

to for think big that it's I come always behavior going said end years. the of does. bidding the what's at thing we've to just The it down day, and

lot of including here, bidding behavior imports, So play variables won't a to those there's changes I matter. -- the but the in

Joseph Dominguez

auctions. in. It's Joe over moved Dominguez, around has That can if I few chime the sequel just last

already the So we're the go, gigawatt way year now. was ago, A we limit. going options to transmission of X.X that gigawatts other in had two X

the separately we've seen work with [indiscernible] these numbers. zone toward higher So

Operator

Merrill America And Bank next Lynch. Dumoulin from of of Julien the of your line comes question

Julien Dumoulin

broader I done Texas to Curious your well there wanted desire cycles. a here? as to that is of the the Obviously, ExGen desired about the of strategically thought around hold on some to kind we you looking the Generation to of to thoughts read commentary still follow that. for around the Can up into a just wanted combined Or kind Handley. Constellation little bit on to elaborate back side. more process on on you

Christopher Crane

Texas. for highly CCGTs the factors as capacity they Their rates have, for assets, past, been Those very book good have the discussed some in load very in that the heat Texas. ramping, that practical. and our they're we the we've in are are of The efficient match highest on capabilities,

part of their we'll efficiency So benefits to operate as and fleet this reap to the be that the Texas. able of in we continue in book manage

those on they're of at all an valuable not. assets fleet said previous annual in more but the review always, we assets our than of look As basis, the

Julien Dumoulin

the on that ROE and those respect peer you a I with a maybe nuclear But us on assets Oyster you if how from thing Obviously, the of region can Right. little little comment of the current. on know region? you Jersey sense in secondly, bit then New And the on profitability, on to your curious perspective. can latest that the the commented profitability reflects Just bit Creek of comments a give and development units legislation. an in

Christopher Crane

that The site-specific. losses with a the But in in reliability the simply was tightened have years in was that had location. be we're vast prudent. retirement investments without area in, of decision wish implementing ability that an career. has to to sustained most their our rest program would Creek not and in pursue have at another made, over us, are that into transition employee fleet grow at we we're continue market the and Oyster that that Knowing to the The to asset, can those that year retire, allows that comfortable running the system not we financially importantly, for

do. right employee-wise, thing So to

for the allowing in year. forward, economic-wise, losses make for to people transition. Moving another continuing And sense no

So it decision. an was easy

agenda. supporting other as market. co-owner discussed, have And assets in part been of the and The our why the openly on challenges happen we're pursuing that that that's legislative

Operator

with from comes question next Morgan Stephen Stanley. your of And line the

Stephen Byrd

side trends hit Any sense the the wanted on business? just seeing retail environment Just for on retail the of to get business and business. that in you're your competitive the overall,

Joseph Dominguez

a about I'll Joe. its bit briefly talk that. Steven,

to business snap You business largest see on and in late to competitive market customer-facing current behavior. see -- our Jack and January, strategy those on snap competitive. us generation the cold prepared comments X talk in industry to our his as And we on It's well. remains best is December, The recently too to any still the cold the impact, Slide still comments. early load the if serve or metrics and previous if had the early continues what the have and

a to the commitments certain away one from all What which we is As we've competitors, we and for chase price pricing from that to pitched we not products the have. full requirements is, back selling just think to One one in and said we continue volume. interesting, obviously have historically, regions two disciplined of is remain our is we now all large will we've competitors what kind have we're that do customers. And going fair to of seen along, seen as things.

our we've we've customers costs pass that through addition will seen that that, In arrangements our some we to of to contractual honored through competitors bear. try cost our with

we we've say to that market not seen as won't which we'll the seen but have we competitors recent lead some in past, I aspect the competitive in remain disciplined, I may haven't said, change. if from So may outcomes And things or different the seen future.

Stephen Byrd

litigation Very helpful to in the color. over shifting Illinois. just ZEC And

the sort your possibility? decision like should We might your like the sense actually position. continue legal overall of interims sort to of reading that in terms of kick a of FERC And outlook It court chance the over what's back seems the decision FERC? fair a Is to some there's effectively. go that as your

Joseph Dominguez

It's Dominguez. Joe

me Let last address the one.

X or of view were the commissioners they They've that I state what the during confirmation indicated concerning during the think commissioners all programs. all something rather FERC asked hearings their asked as situation X were or -- is impacts new use put address excuse me, where the the FERC any mitigation needed like see to tools hold not but could that market. they claim to did programs these to preemption in a really

U.S. the before send would the Senate, it for expect could in that indicate that mitigate same reason. testimony through urged plaintiffs Illinois court to of So quite to if with tools we And that the matter commissioners would go the would favor in they does of consistent FERC obviously, be feel existing FERC not preemption. and they've that they not way the the new over market the their to

your of tool discretion jurisdiction both court parties to agree the matter allows a think FERC. is the to discretionary send which its argument, you're in question to At the that terms that. this primary of has [Indiscernible] brought In exactly reading this point, I right.

Operator

your comes And question line next Wolfe of Research. the Steve from with

Steven Fleishman

first So level the at be ExGen. may on high

down your at kind then below offset? all XXXX, So gross as it margin line the that have gross of of all paying of Is as they those you hit? the end you'll interest some obviously, stuff closing of and plants, high chunk you're out. So level, margin depreciation say O&M fair numbers to sort the the debt, kind or fall up mitigating

Jonathan Thayer

Slide we at XX, out at the we modeling you so the Steve, ExGen EPS as curve, operating look point, to ExGen's additional to accretive. all depreciation, if retirements the your the And lower profile lower data. being leads the these O&M look provide

quarter see out as better should we So ExGen performance than anticipated and from ERP. last we the look strong

Steven Fleishman

one just the formation frame just enhanced the Okay. clarify time the in on process? that you just changes could liaison that process, price PJM are other at And event in that done then question, through the energy

Christopher Crane

to the PJM's again earlier, said said in its pull So its At that from in QX. input that. want have be But discretion PJM stakeholders. as process proposals ultimately point, way. it's FERC. will point, as refine the filing we position on And a the conclude with along to Greg we'll trigger make this view, in stakeholder at right to all now, when And a usual, to that our is,

Steven Fleishman

depends FERC's And then -- guess, how on long FERC rule, call? takes I that's to

Christopher Crane

see clock That's FERC's XXX the call. This in is a XXX proceeding there's so no mandatory proceedings. like we

Operator

your Credit the of line question comes And from Michael next with Suisse.

Michael Weinstein

is X.X time? is Hey, Is I to reason debt-to-EBITDA. that some below why ExGen Or over come that a increase already considering point? at there the that -- for down mean that, target it something would used is that still you're

Jonathan Thayer

nonrecourse X.Xx debt-to-EBITDA, gross up. or number see that margin down, the gross expectations you the EBITDA business Michael, debt-to-EBITDA expectations for move and as Xx Xx -- So ExGen will for go recourse

to balance bonds we'll ExGen but of holding maturities good down company portion sheet amount to We come, holding we as that retirements the the company as have of will of be around be our they other also strong flexibility of paying our target using focus mature. debt shifting

Michael Weinstein

mean a point? with trying of you're having I that at what's target? the X.X see. to achieve I something purpose Is there ExGen

Jonathan Thayer

IPP from we us I takes from time-to-time a from to semesters pop have, that That peers, risk integrated balance that off maintain I the investment-grade all in we've from differentiation the the agencies. come the strong seen, space. overhang It's positions the of business. our that competitive up strongest think table are should believe, rating that trade an making sheet our among line in peers, that IPP the Xx currently trade these at with in Constellation which Xx assets, we the case we advantage the EBITDA should valuation we we be time, important we as clarified, standpoint, nuclear of believe, to while And over Xx. longevity

accomplish recognizing market the that. but So part it's strategy of now, and to all that not our is certainly

Michael Weinstein

enhanced guys liaison mentioned you that Great the process.

that's that for if you sure? something will PJM Just something that you to that's use? they using simply Or be PJM wondering, is telling expect is

Joseph Dominguez

made that As And here in I point most market and in where forward its significant earlier, price a in is the faster regard. has no issues The historically, announcement work make said formation. major PJM that I'm flaw and it in the lot trying now have to has audiences example. performance being different design PJM of come recent said PJM we has

we stakeholders particular As liaison matters get process committee enhanced on the proposal. agree use supporting where FERC a to to can mechanism

follow PJM its strong to the this connection issue others, I'm point would words Given the of process. of U.S. stakeholder would it, and its and at FERC a making. and the to already our to making expectation is Senate, that it conclusion significance at, filing the looking resilience that to gravity of on the the the issues That's be FERC proceed

Operator

Deutsche And Jonathan Bank. our from with question final comes

Jonathan Arnold

market to you're it's thinking? strategy reflect alluded Strategy-wise, I kind value how along. doing patience the going give Jack, mean, the be to and refresh plan, current both just us can could hard your the you be seems Chris, imagine disconnect. to this to current under What's of level And to a dual on you which see execute of the you've much that that more

Christopher Crane

XXXX dividend XX%, in group. our and the at similar Exelon around roughly growth peg, our for for a we see guidance And -- using around to is our talked With much our the our greater from peg, Street. our utility cheapest results consensus [indiscernible]. the more stock We regulated responsibility XX% is and you our XX% the in, ago optimization take the see stock peers a today's a with discount range road yield look certainty details cost-standpoint versus the while rate, to the complex the why XX%. or roughly we versus EPS, Simplistically, a minute improve and estimates As is X% not the bit running more XX% patience XX%. operations balance years, the EPS, But regulated of X.X reflects dividend the XX% Even you're for on around of we others our XX% and coming multiple X% a to trade But of if high these revenues understand me that's on deliver of this little utility model midpoint about midpoint our comp and XXXX accounting further, XXXX efficient $X.XX I've trades XX% from PE at and which consolidated total to let utility greater suggested. undervalued. around for it's operations similar a on We a to to PE years gen-to-load at we competitive of Constellation, XXXX, took give call, to the X.X% a around that than on utilities, that. match operations. to couple a point. and to business probably go at at X% And world-class the sheet, around

XX% that metrics mechanisms our And volumetric exceeding meeting this conversation, this utilities less covering so our we X%, think utilities which all growth about next strong risk When credit in market have ROE, of business you If our about utilities our $XX X% collective have, but and at XX% is without to additions risk, fund the base expense base, looking T&D more year share regulated of and outside $XX XXXX this a collective agency to per any lower at PE less growth. continue, implies think a our decoupled, the with equity earnings of consensus X%, growth load EPS we fair company to of requirements. XXXX. to from having we using of I our value -- holding our at specifically, expect valuation, X.X% through doing rate and

business EBITDA the valuation, as value it's at really treated of and be the approximately an PE is EBITDA, entirely should multiples to of to with they net leverages the premium utilities Xx share, we below implied estimates, peer respectively, debt. think EBIT at at the but a our $X implied off X to per Xx Xx valuation, which consider you EBITDA low. using X.Xx today, The disconnects, $XX our ExGen too Xx believe and bridge which leaves recourse at in trading $XX I at for looking is based us for and the IPP around especially our the target running when disclosure try about is Street Xx well we to valuation on a

taking provides business margins gen-to-load recent pay discipline on the our we match and others is at-risk north is New north advantage nuclear plants is in again York have around of and in to horizon proving preserved XX% -- a to our months. Our to Constellation FFO debt our going ZEC of as stay programs ratio to going wise planning stay Illinois as XX% most bidding are starting to FFO due of debt in hear

of this see not see. past in we we the lot is than believe reflecting is the visibility billion in years, the where which -- this at We have $X.X Generation enterprise create implied years next XXXXs. for near the share stock represents flow the a value cash with free well business X the value into ExGen done to We the Our shareholders, from assets of more do value operational the outperformed. the price half where over anywhere

on proposition value priorities, focused substantial long-term our term, this are value in believe near We our XXXX will which deliver to business commitments executing investors. and our we

achievable. I the feel about being strongly stock yes, So

Jonathan Arnold

the me. to impatient with sound You too market

Christopher Crane

beyond the that Jersey, formation in the described where see. New even is there of in build lot fact valuation incremental even catalysts just story doesn't that that fact in there price Chris are we in robust the the where Jonathan, facts, currently

So this And long-range the the together Constellation had market we're outlook, is excited for we've the as since now. Exelon. strongest, and right plan is just that it not paying coming about

Jonathan Arnold

so of us? how but you, agree do I give guess, long you with kind What

Christopher Crane

But we're going anywhere. not

Operator

I Crane Chris remarks. closing back for like And it to would at to this any time, over turn

Christopher Crane

are I to here, but Exelon all taken want I a the really get of thank on again you the few in want for years participating dedication. here the employees thank appreciate today. to we Well, and team operating that's a delivering to and for cylinders strategy all

that, with thank it So and you. out I'll close

Operator

for you call. thank please concludes conference this and today's And line. participation, you We ask your your that disconnect

Exelon (EXC) 7 Feb 182017 Q4 Earnings call transcript