EXC - Earnings call transcript Q1 2018

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the 2018 Q1 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Thank you. Mr. President Relations, Vice your may Senior call. Eggers, of you Investor begin Dan

Daniel L. Eggers

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

Christopher M. Crane

Dan, Thanks, for you everyone. today. morning, good and Thank joining us

few steps value since reached last PHI Pepco productive have Pepco important utilities, months our reinforcing call, our a cases. both in rate making and earnings We Maryland settlement had D.C. proposition. At we our in

we reached of these merger that all legacy and in a positive PHI our the With has in This engagement now settlement since these constructive are jurisdictions many reflects in the PHI settlements, not of achieved evolution close states. years. accomplished

that were northeasters Coast and restore faster service on were our quickly. were the for the to constructive three customers do in expenses. days to and scale Jersey able customers March, we were would display we between performance consumer employees' but Our we our and by a have have and capital similar in have majorities to utility. There's The as In program, the legislators with more power encouraged effective plants. compensating New resulted work always our battered partnership state In to rising nuclear in our regulators. was employees satisfaction. system to to hard and energy able New contractors, Jersey work these $XXX New of to generating three April assets were clean efforts are spending our benefits ZEC made earned progress laws improve in reliability our of our XX. safely It'll in we to ROEs, than policy more reflected led New York on East impactful utilities to of tireless is important that about on these and Illinois. Jersey, with the energy developments. million We of These challenging attributes passed Exelon strong return be Thanks Most standalone to storms by fairly particularly March. operating

On last financially. basis, GAAP just versus storm quarter $X.XX $X.XX Finally, $X.XX a while earned overcoming share above to non-GAAP last we a we had operating per share a through earned $X.XX year, our cost a year. $X.XX March. basis, guidance range strong versus the On per we of $X $X.XX midpoint

health slide execute the D.C. At utilities, the with benefits Turning next industry family has we the standard regulators. we and discuss we major is These since the the metrics. X. paying companies. operating note satisfaction key which at that to reliability of customer I record past our a follow excluding scale, across quartile have Pepco improved The reliability, top to years numbers and achieved which (XX:XX:XX) customers efforts, two our in continue recovery strengthening investments of making are practice are and although Exelon in of slide. storms, relationship our in I'll would levels off joining

continue as best make we We to across practices utilities. share gains all

focus customers energy We saving more energy-efficient, and also communities continue becoming to on helping and money.

EPA have and of named all STAR and Delmarva, once five again as that been ComEd, for BGE, companies; our of We PECO, XXXX to ENERGY this doing eligible Partners announce Pepco Year. I'm years the happy

named terawatt designation get priority more companies XX.X%. review our nuclear We've we implemented quarter. Sustained our in for also of a a improvement and identified was areas factor the generation received years partners hours, is number in the highest track. or ExGen, Our first this on always At a with of of XX numbers three being quarter back our Excellence row. to OSHA for capacity Safety those series have and actions recordables

rate perform ramping CCGTs match very pricing. down Texas variability with optimize and XX.X%, dispatch well up Our an economic to to the continue ERCOT hour-by-hour of in

utility our and work a our three consecutive they moment storms as system. battled I'd X. Coast like crews from snow nor'easters These and utilities' winds hard March. blanket with on our in performance East especially Turning outstanding the to that take wet spring highlight the are to slide heavy to high

provided contract utilities. additional of these X.X shared members. our we alone an employees Over workers cumulative with million outages ComEd and and Exelon over span faced contractors customer the storms, X,XXX X,XXX and sister crew

To that context, million expenses. let we're in we story capital $XXX practices, million this and utility approximately with the context, I on With calls. handled as X.X help success operating of able than our power combined of me replaced X,XXX of share more customer trained able to incorporate impacted restoration in you employees are Because the PECO, incurred, utilities crews to to more the workers different the common quickly families. bring work seamlessly Exelon storms and poles put Electric. effort. service three also service the significantly We of Atlantic contractors Each We get impacted from from storm but the assist customers. and BGE Pepco, in and our territories return differently, Delmarva City ComEd, were to to said, last

effort. example and Exelon storms responsive how performance recovery our send allowed quality, how contribute that into the to New directly great this and our up quarter benefits of and run aid service sped more the customers. utilities us these The continue contractors employees businesses scale a to model Our of and cost-effective notably in our scale to we the to and over restoration The higher provide occurred XXX customers. for Jersey

to to operations. to as tax regulators in been Turning distribution million provided but $XXX to we I to customers rate slide from want utility returned have with customers. it impact tax to savings X. pass lower savings the Last corporate our an we of on on these be our call, identified our reform, revisit We've related working over update to

along said from lower that constructive to tax are benefits we've the XX us of to the our with a We meaningful to will these rate allowing income state provide customers. the customers benefit a As regulators timely the million our pass utility in our savings start, fashion. appreciate relationship in

Jersey the market The want progress was ZEC program additional nuclear in path the the New our X, law, in the I to forward significant the the signs at-risk partners leadership go program generating development the New important the BPU for Turning the the spoke Governor in to the bill, value together the and and to working establishing this of ZEC deficiencies review thank at made and its generation leadership, to Senate legislation. Assembly Jersey. pass team for Once applications. to Governor the will at the time, likely will our and the New of plants for as XXXX. that legislation we Jersey is compensation process, the in our There of At a that first establishing slide ZEC implementation most the of recognizes into the PSEG I a fleet quarter we the nuclear in realizing for putting preserve XXX-day emission-free enacting completing start underlying deadline end design. the revenues. program

in New and We useful their York New are Connecticut of interim this and key compensate clean lives program preserving attributes value the energy, need our Illinois long-term generating solutions pleased most to we ZEC fleet. the the We clear a this assets, comprehensive the recognizing for more nuclear still fleet. environmental has see Jersey think joined challenged extending for expanding step to and of but is that

programs not PJM's to formation, in both is collect on remain many as oral our sooner, New work respect on levels. view parties operationally in Government U.S. requested. on is ZEC New Illinois, revenues. will if the existing in price York With soon fast-start appellate the position the the have units current cases formation price. a PJM for the aimed York, the at committed decision the Illinois, to provide they to from confident at the committed Turning items for no legal approval. September, additional judges in prevent rules price and waiting court PJM implement to had FERC FERC to eliminating by fast-start as and both We had case. continue In currently dictate has argument. with some have in FERC's federal to court and oral flaws that gets decision arguments on In requested the the reforms the now process pricing cases formation ZEC rule as we as outstanding ruling the following setting

demand PJM including mark ongoing for related shortage to changes. has and reserve to addition, curves. set formation rules, changes reviews deadlines competitive essential the preserving its now implement price those reserve and pricing PJM in see an In of these as design effective operating to these and efforts stakeholder to We reforms apply

for to just fuel-secure market became the could In to by PJM PJM better capacity dominated vulnerabilities its generation. value called Finally, if supply study white committed of reforms resources. natural its grid fuel yesterday, resilient that paper, arise gas

model to as demand. particularly fuels, implications oil-fired PJM of we plants the have first greater where on meet carbon a seen this urge fossil to reliance pollutant We power air and step electrical positive

less and well. policies to that we Our to study should expect as the so develop will communities consequences customers states lead pollution, not emissions more, us PJM believe

it some of Now, Jack to I'll over walk numbers. the turn to through

Jonathan W. Thayer

and you, good morning, Thank Chris, everyone.

share delivered are D.C., to and treated our like compares which HoldCo, during asset impacting our $X.XX in when average, these be storm Jersey average In we've from quarter rates We Washington of In significant the Exelon a the as above regulatory cases, cost $X.XX major higher just let per our in a per you March's use range Mid-Atlantic winter the Turning incurred pressures With are our costs a first in exceeded reported of share, plan previous costs had budgets. per behind BG&E, slide quarter includes winter years future $X the assumed per XXXX. tracking not major storm-related share which $X.XX in additional per of results years, of XXXX. our that share. be Delaware, at adjusted an historic of financially, major storms BGE XX. utilities This so storms Exelon's $X.XX we of and from not in of the the $X.XX earnings net Better us recovered how have storms, the we storm rates to our deferred first budgets, and remind a storms file costs. quarter strong guidance of reflect had years included the operating will Generation storm $X.XX storm Maryland, we delivering we jurisdictions. me utilities. rate earnings. exceed mechanism New to midpoints is the non-GAAP our costs, absorbs major combined Since when share first thereby will in Pennsylvania, the quarter different adjusted Maryland, in In to these excluding but for future, costs. and left for and storms, offset

in of utilities we historically any to the the at out expenditures, the will come to the quarters. look remainder find additional have and year, storm third offsets to major which mitigate we first have As

their had Generation nuclear our share. storm from year. rate capacity utility Looking balance our good assets strong normal beyond up from would earning of the the had better results expect budgeted. O&M course additional with with some PHI over did of expenses per revenues plan, a $X.XX cases. benefit impacts, quarter on the resolved to We catch factors also than relative performance to associated We

lower spot with and from favorable the earnings $X.XX compared to expect $X.XX guidance expenses year. full-year slide XX, reaffirming share and per We quarter $X.XX We're $X.XX to you also of $X.XX which range share, per to on last second of benefited O&M market operating deliver prices. can in our see

first per uplift, $X.XX source the this we the XXXX of programs, effect during were of slide from the New year quarter capacity in first XXXX. most benefited per which and in the Turning we of earnings the higher quarter first of to XX. New share, of year, of Relative of Illinois from the first revenues Illinois the the XXXX, to quarter, compared representing in per $X.XX including regions. and to Fitzpatrick, acquisition contributions share Mid-Atlantic per England, than Midwest, last realized ZECs which share were full The was higher ZEC the $X.XX quarter also ZEC XXXX. the true-up quarter the York significant up Generation not added first and pricing $X.XX recognized share quarter with in Generation as the

transmission increased at As a rate storm BG&E, increases whole, favorable transmission offset PHI distribution partially by by electric the cost, utilities revenue revenues was base were and rate impacted largely ComEd, increased at higher at and to due higher at PECO. weather which

compared for last quarter trailing ROEs quarter, modestly returns are that targeted the storm XXXX a ROEs basis. overall diligent X% earned major dampen to on months reduced expenses ROEs storm midpoint to beyond. earned basis, points discussed utility businesses slipped from The On overall the our biggest drag the near a from underpin our ROEs from for our effects XX XX came that XX. our slide We to basis but XX% by costs. earned total of the earlier. I our expenses total, in storms managing to Moving trailing target last increased the and XX-month operating remain in In

Turning the earned second utilities, quarter's Maryland adjust lift and when should for even XXXX. of fourth point settlements earned the for start PHI said, ROEs from That basis the ROEs have to XXX levels room the FAS we XX improvement, the to Pepco of Pepco's still at drag recently absolute filed write-off. D.C. the Pepco in half

budgeted, We over and O&M which remainder the in earned help timing to issues, experienced should higher quarter due is than also and first to ROEs. the reverse year of the lift

earned cases. in for range. our deferred fund this at for ROE still earned a to the issue XXXX is of in the creates X% The timing primarily equity look We to and the already is to rate tax of XX% expect year utility, reflected due higher we equity ROEs is be captured rest positive ROE solidly is in to earnings also XXXX outlook. in impact earnings, the but timing our As overall ROEs the returns XXXX reform headwinds to injections before tax

than incurred parties XX, in that relief procedural place decreases million, We're would rates for legislation. Maryland respectively. Pepco of a decreases tax settling in also effect million physical recent a the April scheduled adjustments strong I includes most supporting reform we for cost to with April constructive for the out both million an interveners X, rate reform ComEd February July by we case months increase, settlement revenue were million Maryland tax schedule our by in $XX effective is to litigated. supporting with system decrease quarter. with benefits of costs filed million Turning had On slide June we for update rates. tax proposed $XX PECO's the if The Pepco the the storm Delmarva, tax The by on an agreements PECO both from and closed our $XX.X rate its customers, formula at Pepco rate XX, security the immediately. to that The reach strengthening the and XXXX XX. $XX constructive requested adjustment reached first tax note benefits pleased five-year and recent regulatory primarily recent at and benefits been with revenue filing for cases reform $XX.X include credit ICC resiliency On for in net distribution that and provide cybersecurity. in had three reliability Pepco first have have providing on that the and performance, a is average The a customers forecasted the D.C. quarter. a $XX forecasted December focused filed million the XX, Maryland, developments, resulting jurisdictions increase with legislation. is we bill should in tax return being also to the On where with happy decrease years, Starting X $XX.X million distribution settlements key while March base X resolved annual case earlier D.C. filing fully driven completion investments seeking to providing and a we've

outstanding details found XX Finally, Delaware Delmarva in on cases for be quarters, and cases the can we and their at completion in slides through third rate the and schedules gas have the are appendix. in electric XX that More on respectively. fourth scheduled

our we of are highlight our on to budget, go I'd investments invested to projects XX. would utilities our we Today, $X.X customers. these to two the projects. track benefiting customers useful update the be and Considering number Turning into first to regular the specific thought appreciate our on slide are how capital billion that communities. budget like overall projects In more of capital meet billion to at $X.X significant the quarter, of and benefit a

This kV critical will by reliability XXX of Transmission The miles entails to conductor new well $XX structural Delmarva DPL's the replacing the XXX and project is for eliminating potential XX The as Creek the improve approximately kV wiring. optical failure as Cedar first line network to million is the region transmission poles line. Rebuild. outages due ground of in and Milford transmission for

adding by second support The data in I'd reliability project Grove. is to projected quarter and is The primarily for over Village of project total movement our like substation new last future in highlight The margin expected third ComEd's centers greenfield buckets, year will margin by some XX Elk which service saw ExGen, line in $XX unchanged be million update. to transmission the update within additional of from the our Elk substation Grove XXX from megawatts XXXX. capacity. gross provides each area in new gross growth, Slide load but the is

open by spark up our XXXX, offset ERCOT was margin million, gross due For spreads, primarily $XXX strengthening to hedges.

In execute had Business. both approximately look Power was remain We years, XXXX in a open also XX% strengthening on spreads, ERCOT cross-commodity quarter We to million respectively. and hedges. $XXX we in $XXX Business able to execution offset X% to ended hedges. spark program and are hedging fundamentals. in We comfortable behind of the being Power gross creating our XXXX our and ratable $XX market gross more million XXXX, XXXX XXXX by when increased at New considering of when strong and million by also margin X% were $XX in X% ratable to behind relative XXXX quarter open flat million New last margins disclosure. our also which We

and investment-grade XX, rating. our committed a slide balance strong credit to to we Turning sheet remain maintaining

forecasting ExGen's below XXXX, which at are X.X leverage target. well to recourse debt are debt-to-EBITDA. times, be of X.X basis, target long-term we a On is is our year-end times X below our times debt-to-EBITDA We at which

to X look balance times sheet now at debt We to call us to our reduction level, will turn I'll both GenCo. on at to time focus over manage back for ExGen and debt-to-EBITDA HoldCo so the the continue Chris.

Christopher M. Crane

Thanks, Jack.

first programs in we the slide Turning strong. on scale financial the very rate our XX, PHI, be ZEC of it'd and our quarter. of case benefits strategy committed remain to or footing to our firmly the progress see Whether New settlements storm establishing restoration the Jersey, is in

Here our value proposition. again is

to growing on base focus targeting to utilities our continue rate X% XXXX. X.X% EPS and through X% will growth We growth

use needs faster incremental the ExGen free ExGen four the pay and next HoldCo years utilities, part to flow and the fund cash continue fund dividend to a debt We at growth from equity at rate. down over

fleet the and focus to on for at optimizing for York. We and in seeking New done initiatives as adoption PJM carbon-free And fair resiliency continue New with Pennsylvania we in this Jersey, of business benefit. formation by will value ExGen have our price FERC ZECs Illinois also generation compensation in

We maximize close to value uneconomic and match assets through plans sell sense plants, reduction makes continue debt our it accelerate the strategy. gen-to-load where to

XXXX. We continue up at investment-grade to consistently operator, can for we metrics open and now that, sustain strong credit dividend With our through X% questions. grow it

Operator

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

Greg Gordon

storms Thanks. Great a quarter got all Good morning. considering few questions. had. you I've the

Christopher M. Crane

Sure.

Greg Gordon

some little the first is I gross when takes Mid-Atlantic's you looking margins show gross slide, better, at lot and a and are that puts at But better. and is, prior your the see Hub's a comment from quarter's that spreads did to sparks the around-the-clock The current giving gross spot the in pricing? down, us a are open looking theoretical margin you to sort expected had you assuming holdback total you you in sort NI same. margin, there, you just with margin there deck can ERCOT the that run-up into of your is are mark, into you pricing summer given are spot roll ERCOT volatility some or forwards expected naked current (XX:XX:XX) all regard total roll us of rolling gross And spark down of uncertainty thinking a the how about sort the

Joseph Nigro

of expected ERCOT lot just the us, Greg. as you've Hey, Generation morning. there not for is it's good volatility in It's Joe as summer. simple And as Greg. this output. Good It's Nigro. a mentioned, question, And selling a

have know, book big of we you load business. a As very

to at lower the the you $XXX there we position different made. higher to simply hedges take margin the prices, have tune And to gross book set disclosure up the here, that try When we've are given we account outcomes, into mark-to-market open the lot million well. value mark-to-marketing of we're that we nets sales be So, at and gain $XX in open a under of that our look those obviously Offsetting the the as the and/or a move accordingly. prices it the that and And book, been look it about portfolio to on if had of calculation, was of of fully-opened our million. a book. a and the uptick in strong large is about scenarios

a margin the given holdback, for expected, As any of overall that's of over expect. billion we holdback do that would the total be in $X and relatively we small would – some the gross of that outcomes uncertainty

Greg Gordon

Okay, questions a I've for you. got Jack, great. couple Thanks.

CapEx. it's even improved the the investments the the of disclosure, overall a know quarter it's small at slightly where regulated synopsis? you capital actually what flow last cash, like bit, being compare since are up those like higher I a but free still of a it that are uses sources that to? little net-net looks investments utility directed looks profile year give to after Looking a slide cash into I expected Is but And projected end expenditures – fair increase, and the the

Jonathan W. Thayer

there. To strong. your quite the I were of the overall investments It investment. that Chris fair to related flow CapEx point, that company storm in the CapEx profile storm, utilities you really the increase looks the in made the why that's about a cash think during significant so and is the synopsis is Mid-Atlantic see talked

Greg Gordon

to rate guys ROE and deck, is expense actually put you because question deck the for sensitivity like in you at every up instance about goes, XX-year XXXX. year-end, last it here points my each $X.XX rates. and pension QX in looks related since put where is ComEd in to And the basis looking me back at the interest to sensitivities Great. least this EPS XX points for had basis didn't it And interest you XX

where were fair So, as say these ahead much a of you beginning still that you is as $X.XX sensitivities in because might XXXX it of at would this hold be mean year? to that the

Jonathan W. Thayer

as I as the rates interest think do benefit of you little utilities rates we other interest from also the types of formula our high, because the in $X.XX pension they liability. the but rate And sounds to increase, a hold. because significant of relative And rising the liabilities Illinois, shrink. but know,

as This no seem is question. costs revenues rising helping little EPS, does well bit $X.XX environment aggressive. a and our our So, as but

Greg Gordon

That's you, Thank Jack. I've got. all Okay.

Operator

from Arnold our with question of And next comes Bank. Jonathan line the Deutsche

Jonathan Arnold

Good morning, guys.

Just hoping to just now. on follow-up the ERCOT comment

I could a difficult sort we think value, offset that XXXX gross million. million And $XX numbers margin. roughly with the I if some sort of say comment? a you XXXX is that heard down Was (XX:XX:XX) $XXX sort the And to it hedging so, on get sense of those. of to you XXXX finding and sparks hedge the because gave, unpack little then,

Joseph Nigro

magnitude that seen we of XXXX, price Jonathan, think could in haven't we the similarly dollars change Yeah. in XXXX. The relation saw because but comment I made not to you in was absolute

Jonathan Arnold

Yeah.

Joseph Nigro

that drop prices. had XXXX XXXX, pickup had But a in you given and and a margin gross and in lower obviously similarly, we've XXXX in we at mark-to-market sold in open XXXX,

greatly the just on absolute the be to back-end XXXX, prices the nearly as of great. as Given haven't value and in dollars XXXX that those going moved market isn't

I market the margins other is reserve think appreciably though, move retirements. you've the so, element, where the of the rightfully this are given and seen pretty announcements front-end in and

volatility extreme this depending wind on well some and weather as expect performance. unit that could you will our dependent summer think and obviously I performance as be

it have it that's that position well. back And moved. in power carrying a see unreasonable be price only long our see it if some the on and see that think just of XXXX could opened you we're as still is because hasn't in of not we other a as from quite think XXXX, to expected, appreciation volatility the XXXX bit element, of XXXX disclosures, you would in we I wouldn't though, and XXXX

Jonathan Arnold

But you down. Joe. can effective gave number look first just spark quarter is you you, the Thank versus you – Sure. when price energy year-end, realized

goes indicator is think remind because works just us up of that how margin's that down. the So, I the somehow message sort so

Joseph Nigro

Midwest Yeah. base regions, And ERCOT. the the it's Mid-Atlantic, I'll the different calculation slightly call in versus load the for and

give rate we're out ERCOT, spark heat to set What to to that to using from our the is Houston a know, got amount. Channel, laid you formula the view is take add way to price. more It's you Ship the by As dollar is of gas machines. add value. we relevant subtract reference that's and we And back And variable then mark-to-market O&M is our it which here. trying multiply spread price simple. do We think the a or very about a some

effective it see if the And mark-to-market the at a We've zero. you to in the seen calculated a same on to have a megawatt need price, so to dollars ERCOT or look XXXX, then, that a sold. you of it hour. a price volumes out-years of the positive to sold in we in per back of got volume could realized now small that's outcome that XXXX energy we dollars negative megawatt when We've bring reference the It in just in spark. happens XXXX, past unit actually and next mark-to-market by go it's with basis very bucket unit we dollars per large divide a loss to hour. So, positive

Jonathan Arnold

the is is higher, expected your But that net-net correct? margin

Joseph Nigro

Yes.

each in in expected position market higher and in going is open those we're carrying Our ERCOT the is that higher. margin given year years an all

on some in keep the Greg, on the the the from margin as offset, of mentioned question first the the rest Now, of to bottom-line balanced. gross portfolio that changes we was with

Jonathan Arnold

you. one other Thank then, just little And Yeah. issue.

were there in low we tax and both PECO So, charges that noticed the PHI quarter. at particularly

be on So, thinking push as through the there? year? sort was there going unusual something we of those should What we

Jonathan W. Thayer

and it's tax where is repairs. it's think I specific PECO,

So, true in tax the storms up shows is and we benefits the for the capital jurisdictions. repairs later that as invest same in certainly PHI

Jonathan Arnold

be effect is a what one-off? year, So, should really continued or would – see we QX through Jack, the just it like

Jonathan W. Thayer

It's a QX.

Jonathan Arnold

Okay.

Jonathan W. Thayer

And in or activity depending storm what on QX. see QX we

Jonathan Arnold

Yeah.

very much, Okay. guys. Thank you

Jonathan W. Thayer

Sure.

Operator

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

Steve Fleishman

interested of businesses you How Yeah. in the curious are Hi. I'm that lot just expanding a on these market like days. there's retail through retail might looks be acquisition?

Joseph Nigro

at looking We're all. Joe. in of first opportunities morning, always good the whatever exist in – marketplace. always we're It's interested Steve,

shareholders of fits for near-term know, trying past continue line are To we're you Integrys market we'll change that to the do the in to the bring expect been that some accretive we recent can going continue As for that. and that and we with our think have that in to add at aggressive value and we to Con extent will to when be the look the you has to we'll with we and hunt acquiring that. proposition and a example, given our would companies something here both bottom Ed, retailers and them. with continue we're some of now doing to our hands There customers, on be history

Steve Fleishman

both? to on a guess continued mix are, or you see that price open staying versus is prices. the is due of of more then upside – them I just And in market Okay. reforms power better expecting comment of your it much that prices power without view just the How kind potential

Joseph Nigro

of mix a both. It's

stay And number look perspective to at changes into Generation we where I working Midwest I think heat composition and and a think look from you that and PJM account. some the about the it to are, here were in portfolio, of lens, still that, we in take themselves two at then, driven about, you history reward. where at and we the that. talking at obviously, addition prices is, look on very examples, the we we example, stack. when Exelon and that. whole And power have We Joe and to had years gas a $X.XX picture risk to by ago are and at though. think the closely, of folks When tied I very had my is that's curve now to power easy of the see back rate of from some you like, transmission reforms that about almost and And for prices go upside stack the our gas the in $XX. prices

lower You curves than higher power $X.XX that that, have are gas and prices were. $X.XX where you they at than or see

of regulatory becomes the just and on you that when question the horizon. reforms So of fundamentals are it some market then a obviously reward out of risk itself overlay the the

Steve Fleishman

you. Thank Okay.

Operator

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

Julien Dumoulin-Smith

Good Hey. morning.

Jonathan W. Thayer

morning. Good

Julien Dumoulin-Smith

Hey.

question talk margins adamant you're just peers a your Steve's bit you about on on seeing have up been follow there. seeing Obviously, out of and little retail in really what to Can opportunity perhaps, So, expanding bit. a some there? little of late an

would months. seen dynamics recent have curious the in in to you be different markets Just hear variety your assessment. guys latest of I retail a know

leave there. I'll it So,

Joseph Nigro

I polar what tied know our as understanding would competitors have they're speak load guess, obviously, reacting achieving. market. well portfolio. is, retail What actually of we good an and I in It's our very really can't perspective, what Joe. business. across auctions, as I wholesale I to It's to think saying, they're my how tell business closely, Yeah. Generation when you are morning. the our of we Julien, the think about independent serving we

the side. to and in during volatility got an first that England We've the expectations think, quarter, I line see. all, volumes they and We're are on for comfortable what comfortable you disclosure, overall. in New I the remain and our good we're especially some with the behavior retail remain projections PJM margins margins we've competitive been of change tell and historically will with of was C&I our those, our – margins. expectation have with seen in

PJM fully evaluating our a from calculated Some with last some some we've on price when charges in remain spend folks, approach. time disciplined using move both they're that our analytically And We products, contracts to from get basis, to and and in we late as strategy, think, I We're And tell we pricing think I polar prices. know, year, And and wholesale that the the quite early retail frankly, first you attributable matching we're non-energy and certain saw on of to seen decisions lot hurt you now. we'll quarter, will our fixed Eastern a some how a with as auction our we we markets. year I were the of volumes. to of offer a in into competitors a have low inform product volatility development in to from you and had the in comfortable And data where volumetric to continue data away generation those December perspective. are going in directly and load had higher January, success. business. it's last well challenges and perspective March some side

what's we're very we're it the volumes. disclosure, competitive with to margins is continue in we'll work marketplace. And with a and reflected comfortable So, the overall, and comfortable hard, the and

Julien Dumoulin-Smith

in get they specific to lot of right keep would you it different plant And if select you the need then your if or units, Mystic out if one units and A to of follow-up them you would just England. as actually New to wanted up here, on but now, playing or dynamics retire otherwise? seem asset RMR an with will, all at look actually don't around here picked clear

Joseph Nigro

think right? we've we Well, the I very Marine announced I the been Terminal. clear, of acquisition mean

New rectify Marine out that ISO one recently that been to units mean, Everett to the don't and the the there clear have study closely the capacity future. Terminal going five We've also Mystic driving England put obligation see terminal. to that working being for of we're reason into try asset. reliability others acquisition future, a needed into the that's in an themselves are of for absent reforms, to the We I the that. were these very the towards that we're And we saying honor. assets very And we ensure part profitability market being that

to into all capacity market, the in in to the to with assets that economic manage done future. think to and we take these and capacity make reforms in look other going looking together, same So, more commitment very England. New we've do the I and to We'll we future, right a how we're this areas the thing the prudent going honor we're for PJM to the as putting approach get

Julien Dumoulin-Smith

it to of All clear, right? needs

Joseph Dominguez

Julien, Mystic, have waiver wrong. in units this not to successful that to a clear And Actually, the will is of offer on to no. ISO the last we Dominguez. to by That's cost filing night filed absent service Joe fact, they We rate don't this clear. participate.

in future participate not auctions. will We capacity

Julien Dumoulin-Smith

Excellent. Thank you.

Operator

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

Stephen Byrd

morning. Good Hi.

Christopher M. Crane

Steve. Hey,

Stephen Byrd

earnings? leverage as inorganic you wanted touch additional I ways I earnings continue doing on thinking I'm different you're credit cetera, capacity. metrics, level do you a in towards certainly to targeted mix with about what to a the earnings your profile that regulated might at terms risk organically, also if towards that to guess I thinking as but more rating about high And et well. of that your and is, guess talk increasingly shift Could I'm in you a pivot mean of what terms regulated different more agencies,

Jonathan W. Thayer

you conservative it's and think I sheet balance Stephen, with approach been incredibly we've worked So, in well agencies. that taking know, with I think our the

does regulated think, well the the contribution, quite the at now, the X earnings positions of target we're company which As the I mix we married do risk get more below That with company as profile. well. debt-to-EBITDA certainly the shifts GenCo, times

holding the company at level spoken about in have, the that. the We agencies, us continue pursue upgrading past, S&P, and particularly with we to will

strengthens. I shifts think occurs, mix the case our As

taking. So, we're approach kind conservative that's the of

Stephen Byrd

of gears how PJM about about do PJM resiliency, how that prepared Procedurally, sort mentioned to from your had that more of you terms in Chris, And take just you white know it how do us think fuel thinking a shifting remarks then, bit process on a the point more on fuel process Understood. view? anything security. that work, paper, approach we tell PJM. could might there in might But unfold? and I analytics of can quite at thoughts time to of that is

Joseph Dominguez

important in million the this that hours, in these you identified model think duration. what environmental about is is a parameters, it and a and back And in Secretary in we'd resilience this addition issue. of PJM was the Chris Perry the perspective, and modeling be service outcome filing environmentalists carbon resilience problem air And at kept that keeping things grounds, want Yet, into too for oil-fired fuel disastrous, inputs to we've burned in call mix. a where are particular, It's like panned on, a the mentioned number New seen start of how of the and they or England course, analytics, that XX We ISO is for last changes. to white fuel oil we have no they as the constraints to England, on lights Joe, analyses let units. proposal parties see indicating in markets. observation. market interesting. it's security process succeeded the disappointing those widely New and by for that while that in England, where know, saw paper, that turning them me it with that with X off the Mystic from last to just impacts an there Stephen, England this indicating the of PJM gas the associated Monday of What resilience top natural to would New emissions. understand runs retain fall with and white frankly, we really New barrels pipeline a we to conventional that the get pollutant those was pollution, XXX paper the running on to on to the going unavailability year Yes. require problem may outcome system stakeholder a capacity resilience From the lower in of our

PJM's into to So, going have well analysis. get until market. environmental we're we a as think that those externalities incorporated, needs complete not to incorporated be we And

New system the England, secure of do to they they, fuel require So, positive the that how how step gas think they're forward. to to significant look will right, this preserve resources. that like very a on number at constraints as we long. and of going fuel carefully again, we them a for too, And they if We're find see have unavailability model that this to going intend situation,

market. for going impacts. then this it expectations actions be And that make results federal need another be create to communities to to we of look incentives take other going could be Marcellus issue that up storage, down. for emissions could and environmental on at those to gas going but need resolution In obviously Now, we're in emissions actions is our the in mix plants it and be could XXXX, in state coal plants to the of correct terms sure that any of plants, and meeting Shale's continue and customers flaws indeed, nuclear

Christopher M. Crane

to I just thing. follow one want it clear. want to make up I on

basis. ensure limit keep What threat either redundancy gas gas plants system design environmental basis gas so or and lines country, the the on the the anti-gas. in not as in consumers minus the system major low-cost loss said power our electric that designs have with we at the in need the the concept the is N of up attributes. design the that think We system the are the Joe to a is from really But country the X benefited to plentiful dependency gas. can capacity the we on the on we across in look We for system getting what system flows coordinates transmission a along

a So, that combined system we don't properly. design basis would electric gas coordination. worked be needs the system We have that to to have And don't the and threat affect electric-day a out. gas-

Stephen Byrd

But a seems your point analysis while. you take analysis, color. the it's like much I in. I parameters That to Very could appreciate get thoughtful that the set. response. so it the about important as process what for could mean, result said, Thanks

Christopher M. Crane

Sure.

Operator

Mehta from our the with Praful And comes of Citigroup. line final question

Praful Mehta

guys. much. Hi, so Thanks

Christopher M. Crane

Hi.

Praful Mehta

that price as are for that impact you net there against So, remind just zero-emission does a asset of quick the assets? your formation well? that receiving credits? question out what us the that on Is price formation. how for And any out net Could you is see

Joseph Dominguez

in. modeled. two relaxation has for and And we the really what as initiative different PJM jump of is grouping baseload modeled units, $X.XX the energy fast-start about initiatives, I'll have has talked a PJM So, markets. full to a impact (XX:XX:XX) What

that. We from different published any or discussed haven't numbers

again change. are program, unaffected in is York, that ZEC In which terms in would MISO, of that presently units be which the change. that have in how it program we by interfaces Clinton, remember with New the by that unaffected the ZEC

up an plants in would market to Cities. the that ZEC result go be as only changes, we'd participating. about energy presently potentially are carbon So, prices yes, talking the with energy the of there is Quad unit And being offset dynamic policy be either a market, the changes, payment as

Praful Mehta

to That's as New And well? apply Okay. helpful. that'll Jersey

Joseph Dominguez

In the to the reasons, for New for the make all is customers. these the potentially Jersey, other different. if The the have years mechanism future look at also adjustments. prices preserve recover BPU in will states in But is and going zero-emission program resources of pricing be to key

Praful Mehta

already plan connecting allocation, the different potentially dividend. does in upside the which from a covenant? debt you as allocated And price laid zero-emission kind the kind capital into helpful. all with If (XX:XX:XX) well, mentioned you criteria your have Got come that just plan in and quickly of you. Pennsylvania if from allocates right? reduction That's incremental you've you've see out formation get the it capital do of capital, through, all Where to do

Christopher M. Crane

Yeah.

have capital today. good We resources

O&M satisfaction maintain on capital we'll can by consumer going on the We We have by and install keep focused the to the reliability, $X. is consumers. customer we reliability good our And worth on a and service, be $X path, that's sources system. sensitivity what reducing of to impact and on have of have make capital continue very the investments for impact so we to on customer strong same that rates excessive to but

our forward. be will we So as that go approach

Praful Mehta

a Thanks guys. lot, Thanks. you. Got

Operator

remarks. to like I turn to Chris call for now over would Crane closing the

Christopher M. Crane

a through the the thank you anticipate continue always any everybody valuation good questions. the won't to done and available ensure quarter. opinion on deliver The want wear my We of groups We've that's for strong again stock. details the operating I had want all you by our balance a of We're a I So, Dan. and first sheet with that call that work to being XXXX. proposition. the we maintain attending value out going for good further

We following execute quarters in improvement to year. that improvement some see the we have more as and but had we on expect

thank that, very much. you with So,

Operator

you call. your Ladies and We participation. gentlemen, this concludes today's for thank conference

You may now disconnect.

Exelon (EXC) 2 May 182018 Q1 Earnings call transcript