Exelon Reports Third Quarter 2020 Results

Earnings Release Highlights

• GAAP Net Income of $0.51 per share and Adjusted (non-GAAP) Operating Earnings of $1.04 per share for the third quarter of 2020
• Raising our guidance range for full year 2020 Adjusted (non-GAAP) Operating Earnings from $2.80 - $3.10 per share to $3.00 - $3.20 per share
• Strong utility reliability and customer operations performance - every utility achieved top quartile in outage frequency & duration, customer satisfaction, abandon rate and gas odor response
• Generation's nuclear fleet ran with a capacity factor of 96.0%
• Pepco filed the second multi-year plan in Maryland; filing proposes flat distribution rates for the first two years
• Conducting a strategic review of our corporate structure to determine how best to create value and position our businesses for success

Exelon Corporation EXC today reported its financial results for the third quarter of 2020.

"Our financial results exceeded expectations, and our utility and generation operational performance remained strong despite the challenges of the pandemic, record heat and extreme storms, including tropical storm Isaias on the East Coast and a hurricane-scale derecho that spawned 13 tornadoes across our ComEd territory in the Midwest," said Christopher M. Crane, president and CEO of Exelon. "We also confronted difficult strategic decisions on specific generation assets during the quarter, including our plans to prematurely retire our Byron and Dresden nuclear stations in Illinois in 2021 due to broken energy policies that don't fairly value clean energy resources. In addition, our gas-fired Mystic plant in Boston will retire in 2024 when its cost of service agreement expires. We expect to finish the year strong as we maintain our focus on safe, reliable operations, reducing costs, supporting clean energy policies and positioning the company for the future."

"Excellent operational performance and our success in managing costs during the pandemic continues to drive strong financial performance, resulting in adjusted (non-GAAP) third-quarter earnings of $1.04 per share, which exceeded our guidance of $0.80 to $0.90 per share," said Joseph Nigro, senior executive vice president and CFO of Exelon. "So far this year, we have invested $4.5 billion at our utilities to improve infrastructure and further increase grid reliability for customers, with more on the way as we move forward with new proposed capital projects across our service territories over the next several years. We are raising our year-end earnings guidance to $3.00 to $3.20 per share from $2.80 to $3.10 per share."

Third Quarter 2020

Exelon's GAAP Net Income for the third quarter of 2020 decreased to $0.51 per share from $0.79 per share in the third quarter of 2019. Adjusted (non-GAAP) Operating Earnings for the third quarter of 2020 increased to $1.04 per share from $0.92 per share in the third quarter of 2019. For the reconciliations of GAAP Net Income to Adjusted (non-GAAP) Operating Earnings, refer to the tables beginning on page 5.

Adjusted (non-GAAP) Operating Earnings in the third quarter of 2020 primarily reflect:

• Higher utility earnings primarily due to regulatory rate increases at BGE and PHI and favorable weather conditions at PECO, partially offset by storm costs related to the August 2020 storm at PECO, net of tax repairs, and at PHI; and
• Higher Generation earnings primarily due to higher capacity revenues and lower operating and maintenance expense, partially offset by a reduction in load due to COVID-19.

Operating Company Results¹

ComEd

ComEd's third quarter of 2020 GAAP Net Income and Adjusted (non-GAAP) Operating Earnings remained relatively consistent with the third quarter of 2019. Due to revenue decoupling, ComEd's distribution earnings are not affected by actual weather or customer usage patterns.

PECO

PECO's third quarter of 2020 GAAP Net Income and Adjusted (non-GAAP) Operating Earnings remained relatively consistent with the third quarter of 2019, primarily due to favorable weather conditions, offset by higher storm costs due to the August 2020 storm net of tax repairs.

BGE

BGE's third quarter of 2020 GAAP Net Income and Adjusted (non-GAAP) Operating Earnings remained relatively consistent with the third quarter of 2019, primarily due to regulatory rate increases, offset by an increase in various expenses. Due to revenue decoupling, BGE's distribution earnings are not affected by actual weather or customer usage patterns.

PHI

PHI's third quarter of 2020 GAAP Net Income increased to $216 million from $189 million in the third quarter of 2019. PHI's Adjusted (non-GAAP) Operating Earnings for the third quarter of 2020 increased to $220 million from $209 million in the third quarter of 2019, primarily due to regulatory rate increases, partially offset by storm costs related to the August 2020 storm. Due to revenue decoupling, PHI's distribution earnings related to Pepco Maryland, DPL Maryland and Pepco District of Columbia are not affected by actual weather or customer usage patterns.

Generation

Generation's third quarter of 2020 GAAP Net Income decreased to $49 million from $257 million in the third quarter of 2019. Generation's Adjusted (non-GAAP) Operating Earnings for the third quarter of 2020 increased to $456 million from $352 million in the third quarter of 2019, primarily due to higher capacity revenues and lower operating and maintenance expense, partially offset by a reduction in load due to COVID-19.

As of Sep. 30, 2020, the percentage of expected generation hedged is 97%-100% and 87%-90% for 2020 and 2021, respectively.

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¹Exelon's five business units include ComEd, which consists of electricity transmission and distribution operations in northern Illinois; PECO, which consists of electricity transmission and distribution operations and retail natural gas distribution operations in southeastern Pennsylvania; BGE, which consists of electricity transmission and distribution operations and retail natural gas distribution operations in central Maryland; PHI, which consists of electricity transmission and distribution operations in the District of Columbia and portions of Maryland, Delaware, and New Jersey and retail natural gas distribution operations in northern Delaware; and Generation, which consists of owned and contracted electric generating facilities and wholesale and retail customer supply of electric and natural gas products and services, including renewable energy products and risk management services.

Recent Developments and Third Quarter Highlights

• COVID-19: Exelon continues to monitor developments related to the global outbreak (pandemic) of the 2019 novel coronavirus (COVID-19) pandemic and has taken proactive measures to protect the health and safety of employees, contractors and customers. As a provider of critical resources, Exelon has robust plans and contingencies in place to ensure business and operational continuity across a wide range of potentially disruptive events, including extensive preparedness for major public health crises. Exelon and its operating companies are working in close coordination with designated state and local emergency preparedness and health officials, and at the federal level through the Electric Subsector Coordinating Council. All Exelon employees have access to up-to-date information and resources and are following Centers for Disease Control guidelines to ensure safety. In addition, Exelon utilities have established incident command centers to address emergent customer and employee needs in real time.
  
  The estimated impact to Generation's Net income as a result of COVID-19 is approximately $45 million and $140 million for the three and nine months ended Sept. 30, 2020, respectively, and primarily reflects the impact of reduction in load, incremental credit loss expense and direct costs related to COVID-19.
  
  The estimated impact to the Utility Registrants' Net income as a result of COVID-19 is approximately $65 million for the nine months ended Sep. 30, 2020, and primarily reflects the impact of reduction in load for the Utility Registrants and direct costs related to COVID-19 primarily for PECO. The estimated net impact to the Utility Registrants' Net income for the three months ended Sep. 30, 2020, is approximately $15 million and primarily reflects the impact of reduction in load offset by the reversal of incremental credit loss expense and direct costs related to COVID-19 recorded in the second quarter of 2020, which were recorded as regulatory assets in the third quarter of 2020.
  
  At Generation and PECO, direct costs related to COVID-19 are excluded from Adjusted (non-GAAP) Operating Earnings.
  
  Generation also expects a reduction in operating revenues in the fourth quarter of 2020 primarily due to expected reduction in electric load.
  
  Exelon identified and is pursuing approximately $250 million in cost savings across its operating companies to offset the expected unfavorable impacts on operating revenues. The cost savings for the year are expected to be higher than originally anticipated.

• Early Retirement of Generation Facilities: In August 2020, Exelon Generation announced that it intends to retire the Byron Generating Station (Byron) in September 2021, Dresden Generating Station (Dresden) in November 2021, and Mystic Units 8 & 9 (Mystic) at the expiration of the cost of service commitment in May 2024. As a result, in the third quarter of 2020, Exelon and Generation recognized a $500 million impairment of the New England asset group and one-time non-cash charges for Byron, Dresden, and Mystic of $260 million related to materials and supplies inventory reserve adjustments, employee-related costs, and construction work-in-progress impairments, among other items. In addition, there will be ongoing annual financial impacts stemming from shortening the expected economic useful lives of these facilities, primarily related to accelerated depreciation of plant assets (including any Asset Retirement Costs (ARC)) and accelerated amortization of nuclear fuel. Exelon's and Generation's third quarter 2020 results include an incremental $180 million of pre-tax expense for these items. These charges are excluded from Adjusted (non-GAAP) Operating Earnings.

• PECO Pennsylvania Natural Gas Distribution Rate Case: On Sep. 30, 2020, PECO filed an application with the Pennsylvania Public Utility Commission (PAPUC) to increase its annual natural gas distribution rates by $69 million, reflecting an ROE of 10.95%. PECO currently expects a decision in the second quarter of 2021 but cannot predict if the PAPUC will approve the application as filed.

• Pepco Maryland Electric Rate Case: On Oct. 26, 2020, Pepco filed an application for a three-year cumulative multi-year plan for April 1, 2021, through March 31, 2024, with the Maryland Public Service Commission (MDPSC) to increase its electric distribution rates by $56 million effective April 1, 2023, and $54 million effective April 1, 2024, to recover capital investments made in 2019 and planned capital investments from 2020 to March 31, 2024, reflecting an ROE of 10.2%. Pepco currently expects a decision in the second quarter of 2021 but cannot predict if the MDPSC will approve the application as filed.

• Nuclear Operations: Generation's nuclear fleet, including its owned output from the Salem Generating Station and 100% of the CENG units, produced 44,884 gigawatt-hours (GWhs) in the third quarter of 2020, compared with 46,215 GWhs in the third quarter of 2019. Excluding Salem, the Exelon-operated nuclear plants at ownership achieved a 96.0% capacity factor for the third quarter of 2020, compared with 95.5% for the third quarter of 2019. The number of planned refueling outage days in the third quarter of 2020 totaled 17, compared with 15 in the third quarter of 2019. There were 4 non-refueling outage days in the third quarter of 2020 and 15 in the third quarter of 2019.

• Fossil and Renewables Operations: The Dispatch Match rate for Generation's fossil and hydro fleet was 98.9% in the third quarter of 2020, compared with 97.5% in the third quarter of 2019. Energy Capture for the wind and solar fleet was 91.9% in the third quarter of 2020, compared with 96.5% in the third quarter of 2019. The lower performance in the quarter was attributed to turbines in outage awaiting parts to perform repairs.

• Financing Activities: On Sep. 23, 2020, Pepco issued $150 million of its First Mortgage Bonds, 3.28% Series due Sept. 23, 2050. Pepco used the proceeds to repay existing indebtedness and for general corporate purposes.

• Review of Corporate Structure: Exelon is currently conducting a strategic review of its corporate structure to determine how to best create value and position its businesses for success. As part of the review, Exelon is considering separating Exelon Generation from Exelon Utilities. As Exelon continues this review, it is focused on creating value and taking into account the interests of all stakeholders – investors, employees, customers and the communities it serves. There can be no assurance that the strategic review will result in any particular action, nor can there be any assurance regarding the timing of any action. Exelon will provide an update on its progress on its next earnings call. Exelon has retained advisors to assist with the review process.

GAAP/Adjusted (non-GAAP) Operating Earnings Reconciliation

Adjusted (non-GAAP) Operating Earnings for the third quarter of 2020 do not include the following items (after tax) that were included in reported GAAP Net Income:

Adjusted (non-GAAP) Operating Earnings for the third quarter of 2019 do not include the following items (after tax) that were included in reported GAAP Net Income:

Note:
Amounts may not sum due to rounding.
Unless otherwise noted, the income tax impact of each reconciling item between GAAP Net Income and Adjusted (non-GAAP) Operating Earnings is based on the marginal statutory federal and state income tax rates for each Registrant, taking into account whether the income or expense item is taxable or deductible, respectively, in whole or in part. For all items except the unrealized gains and losses related to NDT fund investments, the marginal statutory income tax rates for 2020 and 2019 ranged from 26.0% to 29.0%. Under IRS regulations, NDT fund investment returns are taxed at different rates for investments if they are in qualified or non-qualified funds. The effective tax rates for the unrealized gains and losses related to NDT fund investments were 48.3% and 47.1% for the three months ended Sep. 30, 2020 and 2019, respectively.

Webcast Information

Exelon will discuss third quarter 2020 earnings in a conference call scheduled for today at 9 a.m. Central Time (10 a.m. Eastern Time). The webcast and associated materials can be accessed at www.exeloncorp.com/investor-relations.

About Exelon

Exelon Corporation EXC is a Fortune 100 energy company with the largest number of electricity and natural gas customers in the U.S. Exelon does business in 48 states, the District of Columbia, and Canada and had 2019 revenue of $34 billion. Exelon serves approximately 10 million customers in Delaware, the District of Columbia, Illinois, Maryland, New Jersey, and Pennsylvania through its Atlantic City Electric, BGE, ComEd, Delmarva Power, PECO, and Pepco subsidiaries. Exelon is one of the largest competitive U.S. power generators, with more than 31,000 megawatts of nuclear, gas, wind, solar and hydroelectric generating capacity comprising one of the nation's cleanest and lowest-cost power generation fleets. The company's Constellation business unit provides energy products and services to approximately 2 million residential, public sector, and business customers, including three fourths of the Fortune 100. Follow Exelon on Twitter @Exelon.

Non-GAAP Financial Measures

In addition to net income as determined under generally accepted accounting principles in the United States (GAAP), Exelon evaluates its operating performance using the measure of Adjusted (non-GAAP) Operating Earnings because management believes it represents earnings directly related to the ongoing operations of the business. Adjusted (non-GAAP) Operating Earnings exclude certain costs, expenses, gains and losses, and other specified items. This measure is intended to enhance an investor's overall understanding of period over period operating results and provide an indication of Exelon's baseline operating performance excluding items that are considered by management to be not directly related to the ongoing operations of the business. In addition, this measure is among the primary indicators management uses as a basis for evaluating performance, allocating resources, setting incentive compensation targets, and planning and forecasting of future periods. Adjusted (non-GAAP) Operating Earnings is not a presentation defined under GAAP and may not be comparable to other companies' presentation. The Company has provided the non-GAAP financial measure as supplemental information and in addition to the financial measures that are calculated and presented in accordance with GAAP. Adjusted (non-GAAP) Operating Earnings should not be deemed more useful than, a substitute for, or an alternative to the most comparable GAAP Net Income measures provided in this earnings release and attachments. This press release and earnings release attachments provide reconciliations of Adjusted (non-GAAP) Operating Earnings to the most directly comparable financial measures calculated and presented in accordance with GAAP, are posted on Exelon's website: www.exeloncorp.com, and have been furnished to the Securities and Exchange Commission on Form 8-K on Nov. 3, 2020.

Cautionary Statements Regarding Forward-Looking Information

This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties including among others those related to the expected or potential impact of the novel coronavirus (COVID-19) pandemic, and the related responses of various governments and regulatory bodies, our customers, and the company, on our business, financial condition, and results of operations; any such forward-looking statements, whether concerning the COVID-19 pandemic or otherwise, involve risks, assumptions, and uncertainties. Words such as "could," "may," "expects," "anticipates," "will," "targets," "goals," "projects," "intends," "plans," "believes," "seeks," "estimates," "predicts," and variations on such words, and similar expressions that reflect our current views with respect to future events and operational, economic, and financial performance, are intended to identify such forward-looking statements.

The factors that could cause actual results to differ materially from the forward-looking statements made by Exelon Corporation, Exelon Generation Company, LLC, Commonwealth Edison Company, PECO Energy Company, Baltimore Gas and Electric Company, Pepco Holdings LLC, Potomac Electric Power Company, Delmarva Power & Light Company, and Atlantic City Electric Company (Registrants) include those factors discussed herein, as well as the items discussed in (1) the Registrants' 2019 Annual Report on Form 10-K in (a) Part I, ITEM 1A. Risk Factors, (b) Part II, ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, and (c) Part II, ITEM 8. Financial Statements and Supplementary Data: Note 18, Commitments and Contingencies; (2) the Registrants' Third Quarter 2020 Quarterly Report on Form 10-Q (to be filed on Nov. 3, 2020) in (a) Part II, ITEM 1A. Risk Factors, (b) Part I, ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, and (c) Part I, ITEM 1. Financial Statements: Note 14, Commitments and Contingencies; and (3) other factors discussed in filings with the SEC by the Registrants.

Investors are cautioned not to place undue reliance on these forward-looking statements, whether written or oral, which apply only as of the date of this press release. None of the Registrants undertakes any obligation to publicly release any revision to its forward-looking statements to reflect events or circumstances after the date of this press release.

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