Q4 2016 Real-Time Call Brief

Highlights

Our 2016 GAAP earnings at a $1.22 and our non-GAAP earnings were $2.68, landing near the top of our original guidance range of $2.40 to $2.70.

We have implemented a dividend growth strategy of 2.5% annually through 2018.

In March, we closed on the acquisition of PHI adding $8.3 billion to our utility rate base and creating a significant geographic footprint covering the Mid-Atlantic region.

We deployed $5.2 billion of CapEx at the utilities growing the rate base by $2 billion.

We've completed 9 transmission and distribution rate cases providing revenue increases of $397 million.

None of these accomplishments would be possible without the remarkable 34,000 employees that work hard everyday to keep the power and gas flowing.

Our workers donated over 170,000 hours to local non profits and Exelon donated $46 million both of which were the most ever for Exelon.

Being a good citizen also means supporting our local businesses.

In 2016 our spend with female minority owned business reached $1.9 billion, over 200% since 2011 and it represents almost 20% of our source-able spending.

Our nuclear fleet had its highest ever capacity factor at 94.6 versus the industry average of 90.4 which allowed us to produce an additional 7 terawatt hours more and approximately $275 million of revenue.

We also had the shortest average refueling duration ever just over 22 days versus the industry average of 37 days.

Our customer renewal rate was 77% for electric and 91% for gas.

Our new business win rate was at 28% last year and our C&I market share grew to 25%.

For the full year we delivered adjusted non-GAAP operating earnings of $2.68 per share, near the top end of our original guidance range of $2.40 to $2.70 per share.

We expect to deliver full year 2017 adjusted operating earnings of $2.50 to $2.80 per share, with the first quarter in the range of $0.55 to $0.65 per share.

We will invest more than $20 billion into our utilities to benefit our customers over the next four years.

We now project great rate growth of 6.5% through 2020.

Of the $9 billion of rate base growth expected through 2020, approximately 75% is covered under either formula rates or other similar types of mechanisms.

I should also note that following the passage of the Illinois Legislation, more than 70% of our rate base is decoupled.

Legacy Exelon utilities had a strong 2016 earning 10.5% as a group helped by favorable weather and lowered than normal storm activity.

On a weather normalized basis the earned returns or ROEs would be closer to 10.1%.

Since our last update we have completed two of the pending rate cases.

The Maryland case was decided in November and we received $52.5 million revenue increase.

In addition the ComEd annual formula rate filing was settled in December with an increase of $127 million related to approximately $2.4 billion in capital investments made in 2015.

Those investments which include $663 million for smart regulated work as our strength in modernized electric system.

We still have 4 pending rate and combined we're asking for $216 million in revenues which reflect recovery on multiple years of smart meter and other capital investments.

With a higher 2017 starting points, we now project strong 6% to 8% utility EPS growth through 2020.

Total gross margin increased by $650 million, $1.05 billion, and $1.1 billion in 2016, 2018, and 2019 respectively.

Almost all the gross margin changes relate to the fleet update with changes in power prices adding $50 million in 2018 and costing us $50 million in 2019.

On our last earnings call we announced we were reducing O&M by $100 million in in 2018 and a $125 million in 2019, adding to the $400 million as savings we're already taken out of the business.

ExGen will generate nearly $7 billion of free cash flow through 2020.

We will use ExGen's free cash flow to fund utility investment and pay down over $3 billion of debt through 2020.

We are forecasting to be at 3.3 times debt-to-EBITDA at ExGen by the end of 2017 and have a clear path to our long-term target of 3 times debt-to-EBITDA.

From a recourse perspective, we're already below the 3 times debt-to-EBITDA level at 2.7 times.

We expect to grow the rate base at 2.5% annually through 2020.

That's 6.5% annually through 2020 which converts to EPS growth of our 2017 midpoint of 6% to 8% a year.

ExGen is expected to generate nearly $7 billion of free cash flow through 2020.

We will use this free cash flow primarily to invest in utilities, pay down over $3 billion of debt over the next years.