Exelon Corporation — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021; filed November 3, 2021. Exelon is a holding company combining competitive generation and energy businesses with six regulated electric and gas utilities. This combined filing also reports separately for subsidiaries; figures below are Exelon consolidated unless noted. Dollar amounts are in millions except per-share data.
Financial results
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Operating revenue | $8,910 | $8,853 | $26,715 | $24,925 |
| Operating income | $1,858 | $769 | $2,104 | $2,554 |
| Net income attributable to common shareholders | $1,203 | $501 | $1,315 | $1,604 |
| Diluted EPS | $1.23 | $0.51 | $1.34 | $1.64 |
| Adjusted operating earnings (non-GAAP) | $1,070 | $1,017 | $1,879 | $2,403 |
| Operating cash flow | Not provided for quarter alone | Not provided for quarter alone | $4,141 | $4,222 |
| Capital expenditures | Not provided for quarter alone | Not provided for quarter alone | $5,970 | $5,606 |
For the nine months, rate-regulated utility revenue rose to $13,336 from $12,643, while competitive businesses revenue increased to $13,250 from $12,348. The reported figures include significant fair-value and other noncash effects; adjusted operating earnings is a management-defined non-GAAP measure.
Balance sheet, debt and liquidity
- At September 30, 2021, cash and cash equivalents were $2,957 and restricted cash was $473; total assets were $132,621 and total equity was $34,259.
- Reported debt comprised $2,667 of short-term borrowings, $3,375 of long-term debt due within one year, $35,269 of long-term debt and $390 of debt to financing trusts.
- Cash, restricted cash and cash equivalents at period end were $3,484 on the cash flow statement basis. Exelon generated $4,141 of operating cash, used $2,211 in investing activities and provided $388 through financing activities during the nine months.
- Exelon reported $10.3 billion of aggregate credit-facility commitments, with $7.7 billion available to support additional commercial paper at quarter-end. Management said cash flow, capital-market access and facilities were expected to provide sufficient liquidity; registrants were in compliance with debt covenants.
- Common dividends paid were $1,121 for the nine months. The quarterly dividend for 2021 was maintained at $0.3825 per share.
Material changes and unusual items
- Comparisons: Q3 common-shareholder net income increased $702 year over year, driven in part by higher mark-to-market gains and the absence of prior-year impairment and retirement charges. Nine-month net income fell $289, primarily reflecting the Texas extreme-weather event, accelerated nuclear depreciation and amortization, impairments and the absence of a prior-year tax settlement.
- Texas winter event: Generation’s Texas plants experienced outages during the February 2021 extreme cold. Exelon estimated a $880 reduction in net income for the first nine months and forecast a full-year 2021 net-income reduction of approximately $670–$820, with expected offsets of $410–$490 from enhanced revenue opportunities, deferred maintenance and cost savings. The final impact remained exposed to customer and counterparty losses, regulatory actions and litigation.
- Nuclear fleet: Following Illinois’s September 2021 Clean Energy Law, Generation reversed its planned early retirements of Byron and Dresden and no longer considered Braidwood or LaSalle at risk for premature retirement. Eligible plants could receive carbon mitigation credit revenue under a five-year program beginning June 2022, subject to procurement and contract outcomes. Generation continued to plan to retire Mystic Units 8 and 9 after their cost-of-service arrangement ends in May 2024.
- One-time costs and impairments: Generation recorded a $350 impairment of its New England asset group in Q2 and a $45 impairment on a wind project in Q3; it also recorded a $140 Albany Green Energy impairment in Q2. The Byron/Dresden retirement reversal led to $94 of Q3 reversals of previously recorded one-time charges, while accelerated depreciation and other retirement-related effects continued to weigh on results.
- Acquisition and divestitures: Generation acquired EDF’s 49.99% CENG interest on August 6 for a net $885 purchase price, funded in part with an approximately $880 term loan. Generation completed the sale of a significant portion of its solar business for $810 gross consideration in March and sold its Albany Green Energy interest for $36 net in June.
- Planned separation: Exelon targeted a tax-free separation of its regulated utilities and Generation in Q1 2022, subject to approvals and other conditions. The IRS issued a private letter ruling and FERC approved the plan; NRC and New York regulatory decisions remained pending. Completion and timing were not assured.
- Regulation and legal matters: Illinois’s Clean Energy Law also changes ComEd’s future rate-setting framework. The SEC investigation into ComEd lobbying matters remained ongoing, and Illinois regulatory proceedings could address recovery of related costs. Generation faced Texas weather-event litigation and disputes; the filing said outcomes could not be predicted. Environmental remediation liabilities for Exelon totaled $474, including $310 related to manufactured-gas-plant sites.
Outlook, risks and management commentary
Management expected resources to be sufficient for operating, financing and capital needs, and projected 2021 capital expenditures of $8,175 for Exelon, including $1,450 for Generation. The filing does not provide a clear consolidated full-year earnings or EPS guidance figure in the supplied text. Key risks include extreme weather and generation outages, commodity and derivative-market volatility, counterparty credit, nuclear decommissioning obligations, regulatory and rate-case outcomes, environmental remediation, and the timing, approvals and terms of the planned separation. Generation’s S&P senior unsecured rating was lowered to BBB- in February after the Texas event; management reported no material resulting effect on financing access or collateral at the reporting date.
Most important facts for investors to verify
- How the Texas event’s estimated $670–$820 full-year net-income impact and $410–$490 expected offsets ultimately reconcile to actual results.
- Whether Illinois carbon mitigation credit contracts are awarded, their economics, and the resulting operating plans and earnings for Byron, Dresden and Braidwood.
- Whether the planned separation receives remaining approvals and closes on the stated timetable and tax-free terms.
- How much reported earnings movement reflects recurring operations versus mark-to-market changes, nuclear decommissioning, impairments and other excluded items.
- Developments in ComEd-related SEC, court and ICC matters, Texas litigation and gas-penalty disputes, and environmental remediation exposures.
- Debt maturities, available credit capacity, potential collateral needs and the effect of any credit-rating changes.