Exelon Corporation — 2021 Form 10-K Summary
Business context and reporting period
For the fiscal year ended December 31, 2021, Exelon operated both regulated electric and gas utilities and competitive power generation and marketing businesses. The combined filing also covers ComEd, PECO, BGE, Pepco Holdings and its utility subsidiaries. The results therefore reflect the pre-separation company. Exelon completed the separation of Generation, now Constellation Energy Corporation, on February 1, 2022.
Key financial results
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Operating revenue | $36.347 billion | $33.039 billion | Up 10.0% |
| Operating income | $2.723 billion | $2.823 billion | Down $100 million |
| Net income attributable to common shareholders | $1.706 billion | $1.963 billion | Down $257 million |
| Diluted earnings per share | $1.74 | $2.01 | Down $0.27 |
| Adjusted operating earnings, non-GAAP | $2.764 billion; $2.82 per diluted share | $3.149 billion; $3.22 per diluted share | Down 12.2% in earnings |
| Cash flow from operations | $3.012 billion | $4.235 billion | Down $1.223 billion |
| Capital expenditures | $7.981 billion | $8.048 billion | Down $67 million |
Operating margin was approximately 7.5%, compared with 8.5% in 2020; net income attributable to common shareholders was approximately 4.7% of revenue, versus 5.9%. Utility earnings increased, including ComEd to $742 million from $438 million, while Generation reported a $205 million loss attributable to membership interest, compared with $589 million of income in 2020.
At year-end, Exelon reported $1.182 billion of cash and $393 million of restricted cash. Balance-sheet short-term borrowings were $3.330 billion, current maturities of long-term debt $3.373 billion, long-term debt $35.324 billion, and debt to financing trusts $390 million. Taken together, these amounts imply approximately $42.4 billion of debt and short-term borrowings. Exelon reported $10.3 billion of aggregate credit commitments, including $6.5 billion available to support additional commercial paper. Management said operating cash flow, capital-market access and credit facilities should provide sufficient liquidity for expected needs.
Material changes and unusual items
- The February 2021 extreme cold weather event and outages at Generation’s Texas plants reduced Exelon’s 2021 net income by an estimated $800 million. Customer and counterparty defaults, recoveries, litigation and related disputes could affect the ultimate impact.
- Generation’s performance was also affected by early-retirement accounting for Byron, Dresden and Mystic. After Illinois enacted its Clean Energy Law, Generation reversed its planned early retirements of Byron and Dresden on September 15, 2021; the plants, along with Braidwood, received contracts to operate through May 31, 2027. Mystic Units 8 and 9 remained scheduled to retire in 2024. Plant-retirement items were a significant adjustment in the non-GAAP earnings reconciliation.
- Generation recorded impairments, including a $350 million pre-tax charge for the New England asset group and a $140 million charge related to the Albany Green Energy biomass facility. It sold a significant portion of its solar business for $810 million and completed the Albany facility sale for $36 million.
- Generation purchased EDF’s 49.99% interest in CENG for a net $885 million, funded in part with an approximately $880 million term loan.
- Utility net income generally rose year over year, supported by rate-base growth, rate-case and multi-year-plan outcomes, and, at some utilities, weather and lower storm costs. Exelon’s overall net income nevertheless declined.
Outlook, risks and contingencies
- Management projected approximately $29 billion of utility infrastructure investment over four years, with an estimated $17 billion increase in rate base by the end of 2025. Estimated 2022 capital expenditures for Exelon, including Generation at the time of the estimate, were $8.6 billion.
- The Utility Registrants set a goal to reduce operations-driven emissions 50% by 2030 from a 2015 baseline and reach net zero operations-driven emissions by 2050. Exelon anticipated approximately $4.8 billion of investment over ten years toward this goal. The filing does not provide a specific earnings forecast.
- Exelon reduced its declared quarterly dividend from $0.3825 per share in 2021 to $0.3375 for 2022.
- ComEd’s July 2020 Deferred Prosecution Agreement included a $200 million payment, paid in November 2020, and ongoing compliance obligations. An SEC investigation into Exelon and ComEd lobbying activities remained open; the company said its outcome could not be predicted. Related litigation and regulatory proceedings were ongoing.
- Texas winter-storm litigation and disputes remained unresolved. Exelon recorded an estimated $17 million obligation for its share of ERCOT market shortfall costs, payable over 83 years, net of legislative solutions; the filing notes continuing uncertainty around proceedings and financial impacts.
- Other key risks include rate-regulatory outcomes and recovery of costs, credit-rating downgrades and collateral demands, extreme weather and climate effects, cybersecurity and physical security, environmental remediation, nuclear decommissioning and spent-fuel obligations, and pension funding. The nuclear decommissioning asset retirement obligation was $12.7 billion at year-end.
PricewaterhouseCoopers issued an unqualified audit opinion on Exelon’s financial statements and concluded internal control over financial reporting was effective. The auditor identified nuclear decommissioning obligations, generation-asset impairment and rate-regulation accounting as critical audit matters.
Important facts for investors to verify
- Review post-separation financial statements and debt allocation: this 10-K combines utility and Generation results before the February 1, 2022 separation.
- Track the final financial consequences of the Texas cold-weather event, including lawsuits, contract disputes, counterparty recoveries and ERCOT assessments.
- Check the status and potential financial or reputational effects of the SEC investigation, ComEd’s DPA obligations, related lawsuits and the ICC proceeding.
- Assess whether utility investment plans receive timely regulatory approval and cost recovery, particularly ComEd’s transition from formula rates and the 2022–2027 nuclear credit contracts.
- Monitor liquidity, refinancing and collateral needs, including the separation-related $1.75 billion cash payment to Generation and the subsequent financing arrangements.
- Evaluate sensitivity of nuclear decommissioning liabilities, pension funding, environmental reserves and generation impairment assumptions to changes in costs, rates, market conditions and operating life.