Exelon Corporation — Q1 2024 Form 10-Q
Business context and period: Exelon is a regulated electricity transmission and distribution utility holding company, with six operating segments: ComEd, PECO, BGE, Pepco, DPL and ACE. This combined filing covers the quarter ended March 31, 2024; financial comparisons are with the quarter ended March 31, 2023. Amounts below are in millions of dollars unless stated otherwise.
Financial results and position
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Operating revenue | $6,043 | $5,563 | Up 8.6% |
| Operating income | $1,114 | $1,106 | Up 0.7% |
| Net income attributable to common shareholders | $658 | $669 | Down 1.6% |
| Diluted GAAP EPS | $0.66 | $0.67 | Down $0.01 |
| Adjusted operating earnings (non-GAAP) | $685; $0.68 per diluted share | $696; $0.70 per diluted share | Down $11; EPS down $0.02 |
| Operating cash flow | $992 | $484 | Up $508 |
| Capital expenditures | $1,767 | $1,881 | Down $114 |
Operating margin was approximately 18.4%, versus 19.9% a year earlier; net margin was approximately 10.9%, versus 12.0%. Operating cash flow less capital expenditures was negative $775 million, compared with negative $1,397 million in Q1 2023.
At March 31, 2024, total assets were $103.2 billion and shareholders’ equity was $26.1 billion. Balance-sheet debt comprised $2.2 billion of short-term borrowings, $503 million of long-term debt due within one year, $42.3 billion of long-term debt and $390 million of debt to financing trusts. Cash and restricted cash totaled $1.209 billion on the balance sheet; the cash-flow statement total was $1.308 billion including $99 million of long-term restricted cash. Exelon reported $4.0 billion of aggregate credit facilities, with $2.7 billion available to support additional commercial paper, and no outstanding amounts on revolving credit facilities. The company said it was in compliance with debt covenants.
Changes versus the prior comparable period
- Revenue growth was driven substantially by electric revenue and regulatory-required program recoveries. Purchased power expense rose $464 million, including pass-through costs; the filing says certain program costs are recovered through customer rates.
- Net income declined $11 million. Management cited higher interest expense at PECO, PHI and Exelon Corporate; higher storm costs at PECO and BGE; lower ComEd distribution earnings from a lower allowed return on equity and no return on its pension asset; and lower ComEd carrying costs on carbon mitigation credit regulatory assets. These were partly offset by rate increases at BGE and PHI and less unfavorable weather at PECO.
- Results varied by utility: ComEd net income fell $48 million to $193 million and PECO fell $17 million to $149 million; BGE rose $64 million to $264 million; PHI rose $13 million to $168 million; ACE fell $4 million to $29 million.
- Operating cash flow increased, partly reflecting changes in regulatory balances and collateral, as well as working-capital movements. Cash flow remains below capital spending for the quarter.
Outlook, regulation, risks and unusual items
- Capital spending and dividend: Management estimated 2024 capital expenditures of approximately $7.425 billion for Exelon. The board declared a second-quarter dividend of $0.38 per share, consistent with its stated 2024 quarterly dividend policy.
- Management liquidity view: Exelon expects operating cash flows, capital-market access and credit facilities to be sufficient for operating expenses, financing costs and capital requirements. Funding needs include substantial utility investment and debt service.
- Rate proceedings: ComEd’s Illinois multi-year rate plan remains subject to proceedings over its refiled grid plan and requested rate adjustment; a final order was expected by December 2024, with rates anticipated to take effect in 2025. ComEd and PECO also had pending rate requests, and Pepco had pending District of Columbia and Maryland proceedings. Outcomes affect future revenue recovery and allowed returns. The ICC issued a ComEd rehearing order on April 18, 2024, after quarter-end, increasing approved revenue requirements for 2024–2027; the filing says adjustments may follow approval of the refiled grid plan and pending petition.
- ComEd FERC audit: A settlement process was underway over FERC audit findings concerning allocation of overhead costs to capitalized construction. ComEd recorded a regulatory liability for its best estimate of a probable loss, but the final outcome and potential additional losses could not be reasonably estimated and could be material.
- Environmental and legal exposures: Exelon reported $413 million of accrued environmental investigation and remediation liabilities, including $328 million related to manufactured-gas-plant sites. Pepco’s Anacostia River consent decree became effective April 11, 2024 and requires a $47 million payment in four annual installments; additional exposure was considered reasonably possible but not estimable beyond accrued amounts. The filing also describes other environmental remediation and litigation matters.
- Other notable matters: ComEd’s carbon mitigation credit regulatory asset was $405 million at March 31. Exelon had $858 million remaining under its at-the-market equity program and issued no shares under it during Q1. Management cautions that interim results are not necessarily indicative of full-year results. The filing does not provide a clear full-year earnings or EPS guidance figure.
Important facts for investors to verify
- Track the final outcomes and timing of ComEd, PECO and Pepco rate proceedings, including how approved investment and returns translate into customer rates and earnings.
- Monitor the ComEd FERC audit settlement and any losses beyond the liability already recorded.
- Assess whether planned 2024 capital spending can be funded while operating cash flow remains below investment needs, and watch debt issuance, interest expense and liquidity.
- Review the basis and reconciliation of adjusted operating earnings, a non-GAAP measure, against GAAP net income and EPS.
- Follow environmental liabilities and the Anacostia River remediation and payment obligations, including any exposure not currently estimable.