News Column

Exelon Announces Second Quarter 2014 Results

July 31, 2014

CHICAGO--(BUSINESS WIRE)-- Exelon Corporation (NYSE: EXC) announced second quarter 2014 consolidated earnings as follows:

     
  Second Quarter
    2014   2013
Adjusted (non-GAAP) Operating Results:  
Net Income ($ millions) $440$454
Diluted Earnings per Share   $0.51   $0.53
GAAP Results:
Net Income ($ millions) $522$490
Diluted Earnings per Share   $0.60   $0.57
 


“Exelon achieved earnings above our guidance range this quarter, and all of our businesses continued to deliver strong operating performance,” said Christopher M. Crane, Exelon’s president and CEO. “With our year to date results, we are on track to meet our full-year financial targets and finish 2014 within our guidance range.”

Second Quarter Operating Results

As shown in the table above, Exelon’s adjusted (non-GAAP) operating earnings decreased to $0.51 per share in the second quarter of 2014 from $0.53 per share in the second quarter of 2013. Earnings in the second quarter of 2014 primarily reflected the following negative factors:

  • Lower realized energy prices;
  • Decreased nuclear and fossil output during 2014 primarily due to outage days; and
  • Higher operating and maintenance (O&M) expenses reflecting increased nuclear generating outage days and inflation across all operating companies, offset in part by reduced other postretirement benefit costs.

    These factors were offset by:

  • Increased capacity pricing related to the Reliability Pricing Model (RPM) for the PJM Interconnection, LLC (PJM) market;
  • Increased distribution revenue at BGE, due to the December 2013 rate case order for electric and natural gas, and higher distribution earnings at ComEd due to increased capital investment; and
  • Decreased income tax expense as a result of an increase in Generation’s domestic production activities deduction and PECO’s electric tax repairs deduction.
     

    Adjusted (non-GAAP) Operating Earnings for the second quarter of 2014 do not include the following items (after tax) that were included in reported GAAP earnings:

     

     

     

    (in millions)

     

    (per diluted share)

    Exelon Adjusted (non-GAAP) Operating Earnings

     

    $440

     

    $0.51

    Mark-to-Market Impact of Economic Hedging Activities

    (8)

    (0.01)

    Unrealized Gains Related to Nuclear

    Decommissioning Trust (NDT) Fund Investments

    76

    0.09

    Merger and Integration Costs

    (19)

    (0.02)

    PHI Acquisition Costs

    (12)

    (0.01)

    Amortization of Commodity Contract Intangibles

    (23)

    (0.03)

    Long-Lived Asset Impairment

    (68)

    (0.08)

    Gain on CENG Integration

    159

    0.18

    Non-Controlling Interest

     

    (23)

     

    (0.03)

    Exelon GAAP Net Income

     

    $522

     

    $0.60

     

    Adjusted (non-GAAP) Operating Earnings for the second quarter of 2013 do not include the following items (after tax) that were included in reported GAAP earnings:

       

    (in millions)

     

    (per diluted share)

    Exelon Adjusted (non-GAAP) Operating Earnings

    $454

    $0.53

    Mark-to-Market Impact of Economic Hedging Activities

    253

    0.30

    Unrealized Losses Related to NDT Fund Investments

    (22)

    (0.03)

    Constellation Merger and Integration Costs

    (15)

    (0.02)

    Amortization of Commodity Contract Intangibles

    (115)

    (0.13)

    Amortization of the Fair Value of Certain Debt

    4

    -

    Long-Lived Asset Impairment

     

    (69)

     

    (0.08)

    Exelon GAAP Net Income

     

    $490

     

    $0.57

     


    Second Quarter and Recent Highlights

  • Proposed Merger with Pepco Holdings, Inc.: On April 29, 2014, Exelon and Pepco Holdings, Inc. (PHI) signed an agreement and plan of merger to combine the two companies in an all-cash transaction. The transaction, which is subject to customary closing conditions and regulatory approvals, is expected to be completed in the second or third quarter of 2015.
  • Integration of Constellation Energy Nuclear Group, LLC: On April 1, 2014, Generation and subsidiaries and Constellation Energy Nuclear Group, LLC (CENG) entered into a Nuclear Operating Services Agreement (NOSA) pursuant to which Generation will operate the CENG nuclear generation fleet owned by CENG subsidiaries and provide corporate and administrative services for the remaining life of the CENG nuclear plants as if they were a part of the Generation nuclear fleet. The execution of the NOSA requires Exelon to fully consolidate CENG into Exelon’s financial statements. Upon consolidation, Exelon recorded a pre-tax net gain on integration of CENG of $261 million, which is excluded from second quarter operating earnings.
  • Nuclear Operations: Generation’s nuclear fleet, including its owned output from the Salem Generating Station and beginning April 1, 2014, 100 percent of the CENG units, produced 41,397 gigawatt-hours (GWh), of which 7,546 GWh were produced by CENG, in the second quarter of 2014, compared with 34,601 GWh in the second quarter of 2013. Excluding Salem, the Exelon-operated nuclear plants at ownership achieved a 91.8 percent capacity factor for the second quarter of 2014, compared with 92.8 percent for the second quarter of 2013. The number of planned refueling outage days totaled 108, including 52 CENG planned outage days, in the second quarter of 2014, compared with 47 in the second quarter of 2013. There were 44 non-refueling outage days, including three CENG non-refueling outage days, in the second quarter of 2014, compared with 31 days in the second quarter of 2013.
  • Fossil and Renewables Operations: The Dispatch Match rate for Generation’s gas/hydro fleet was 99.2 percent in the second quarter of 2014, compared with 99.1 percent in the second quarter of 2013. Energy Capture for the wind/solar fleet was 94.7 percent in the second quarter of 2014, compared with 92.4 percent in the second quarter of 2013. Energy Capture in the second quarter of 2014 reflects increased turbine availability. Construction of two 60.0 megawatt (MW) units at the Perryman Generating station in Hartford County, Md., began on July 1, with commercial operation scheduled to begin in 2015.
  • Renewables Projects: The 50.4 MW Beebe 1B project in Gratiot, Mich., and 40.0 MW Fourmile Ridge project in Garrett County, Md., both began construction in the second quarter of 2014, with commercial operation expected by the fourth quarter. The remaining two blocks of the 230 MW Antelope Valley Solar Ranch project in California, Block 1 (28 MW) and Block 2 (20 MW) were officially turned over to Exelon on June 19, 2014.
  • Spent Nuclear Fuel Obligation: In May 2014, the Department of Energy notified Generation that the spent nuclear fuel (SNF) disposal fee would be set to zero effective May 16, 2014. Through the effective date of the fee reduction, Generation incurred SNF disposal fees of $49 million, which includes Generation’s share of Salem and net of co-owner reimbursements (not including such fees incurred by CENG). Until a new fee structure is in effect, Generation will not accrue any further costs related to this fee.
  • BGE Gas and Electric Distribution Rate Case: On July 2, 2014, BGE filed an application with the Maryland Public Service Commission (MDPSC) for increases of $118 million and $68 million to its electric and gas base rates, respectively. The requested rates of return on equity in the application were 10.65 percent for electric and 10.55 percent for gas. The MDPSC will determine any increase in rates after a proceeding with input from all interested parties. The new electric and gas distribution base rates are expected to take effect in late January 2015.
  • Financing Activities:

    In April 2014, concurrently and in connection with entering into the agreement to acquire PHI, Exelon entered into a credit facility to which the lenders committed to provide Exelon a 364-day senior unsecured bridge credit facility of $7.2 billion to support the contemplated transaction and provide flexibility for timing of permanent financing. The bridge credit facility was subsequently reduced to $4.2 billion as a result of the June 2014 equity issuances.

    On June 11, 2014, Exelon executed a $2.0 billion equity offering of 57.5 million shares of common stock in connection with forward sales agreements and $1.2 billion of junior subordinated notes in the form of 23 million equity units.

  • Hedging Update: Exelon’s hedging program involves the hedging of commodity risk for Exelon’s expected generation, typically on a ratable basis over a three-year period. Expected generation represents the amount of energy estimated to be generated or purchased through owned or contracted-for capacity. The proportion of expected generation hedged as of June 30, 2014, was 92 percent to 95 percent for 2014, 75 percent to 78 percent for 2015, and 46 percent to 49 percent for 2016. The primary objective of Exelon’s hedging program is to manage market risks and protect the value of its generation and its investment-grade balance sheet, while preserving its ability to participate in improving long-term market fundamentals.

    Operating Company Results

    Generation 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, risk management services and natural gas exploration and production activities. Beginning April 1, 2014, 100 percent of CENG’s operations are included in Generation’s results in connection with the NOSA referenced in the Second Quarter and Recent Highlights.

    The second quarter 2014 GAAP net income was $340 million, compared with a net income of $330 million in the second quarter of 2013. Adjusted (non-GAAP) operating earnings for the second quarter of 2014 and 2013 do not include various items (after tax) that were included in reported GAAP earnings. A reconciliation of Adjusted (non-GAAP) Operating Earnings to GAAP Net Income is in the table below:

             
    ($ millions)   2Q14   2Q13
    Generation Adjusted (non-GAAP) Operating Earnings   $231   $273
    Mark-to-Market Impact of Economic Hedging Activities (8) 263
    Net Unrealized Gains (Losses)Related to NDT Fund Investments 76 (22)
    Merger and Integration Costs (19) (12)
    Amortization of Commodity Contract Intangibles (23) (115)
    Amortization of Fair Value of Certain Debt - 4
    Long-Lived Asset Impairment (53) (61)
    Gain on CENG Integration 159 -
    Non-Controlling Interest   (23)   -
    Generation GAAP Net Income   $340   $330
     


    Generation’s Adjusted (non-GAAP) Operating Earnings in the second quarter of 2014 decreased $42 million compared with the same quarter in 2013. This decrease primarily reflected:

  • Lower realized energy prices;
  • Higher O&M expenses reflecting increased nuclear generating outage days and inflation, offset in part by reduced OPEB costs; and
  • Decreased nuclear and fossil output during 2014, primarily due to outage days.

    These items were partially offset by favorable capacity pricing related to RPM for the PJM market.

    ComEd consists of electricity transmission and distribution operations in Northern Illinois.

    ComEd recorded GAAP net income of $111 million in the second quarter of 2014, compared with net income of $96 million in the second quarter of 2013.

    ComEd’s Adjusted (non-GAAP) Operating Earnings in the second quarter of 2014 were up $15 million from the same quarter in 2013, primarily reflecting higher distribution formula rate earnings due to increased capital investment.

    For the second quarter of 2014, heating degree-days in the ComEd service territory were down 10.7 percent relative to the same period in 2013 and were 9.2 percent below normal. Meanwhile, cooling degree days were up 7.9 percent relative to the same period in 2013 and were 18.8 percent above normal. Total retail electric deliveries increased 0.4 percent in the second quarter of 2014 compared with the same period in 2013.

    Weather-normalized retail electric deliveries remained flat in the second quarter of 2014 relative to 2013.

    PECO consists of electricity transmission and distribution operations and retail natural gas distribution operations in Southeastern Pennsylvania.

    PECO’s GAAP net income in the second quarter of 2014 was $84 million, compared with $72 million in the second quarter of 2013. Adjusted (non-GAAP) Operating Earnings for the second quarter of 2013 do not include various items (after tax) that were included in reported GAAP earnings. A reconciliation of Adjusted (non-GAAP) Operating Earnings to GAAP Net Income is in the table below:

             
    ($ millions)   2Q14   2Q13
    PECO Adjusted (non-GAAP) Operating Earnings   $84   $74
    Merger and Integration Costs   -   (2)
    PECO GAAP Net Income   $84   $72
     


    PECO’s Adjusted (non-GAAP) Operating Earnings in the second quarter of 2014 increased $10 million from the same quarter in 2013, primarily due to a decreased income tax expense as a result of an increase in the electric tax repairs deduction.

    For the second quarter of 2014, heating degree-days in the PECO service territory were down 6.7 percent relative to the same period in 2013 and were 15.1 percent below normal. Cooling degree-days were down 10.3 percent from prior year, but were 7.8 percent above normal. Total retail electric deliveries were down 1.8 percent compared with the second quarter of 2013. Natural gas deliveries (including both retail and transportation segments) in the second quarter of 2014 were up 4.3 percent compared with the second quarter of 2013.

    Weather-normalized retail electric deliveries and gas deliveries increased 0.2 percent and 1.4 percent in the second quarter of 2014 relative to 2013, respectively. The variances are driven primarily by economic and customer growth (mainly in the residential classes), partially offset by energy efficiency and higher gas rates, respectively.

    BGE consists of electricity transmission and distribution operations and retail natural gas distribution operations in Central Maryland.

    BGE’s GAAP net income in the second quarter of 2014 was $16 million, compared with $22 million in the second quarter of 2013. Adjusted (non-GAAP) Operating Earnings for the second quarter of 2013 do not include various items (after tax) that were included in reported GAAP earnings. A reconciliation of Adjusted (non-GAAP) Operating Earnings to GAAP Net Income is in the table below:

             
    ($ millions)   2Q14   2Q13
    BGE Adjusted (non-GAAP) Operating Earnings   $16   $23
    Merger and Integration Costs   -   (1)
    BGE GAAP Net Income   $16   $22
     


    BGE’s Adjusted (non-GAAP) Operating Earnings in the second quarter of 2014 decreased $7 million from the same quarter in 2013, primarily due to increased operating and maintenance expense, partially offset by increased revenue as a result of the December 2013 electric and gas distribution rate order issued by the MDPSC. Due to revenue decoupling, BGE is not affected by actual weather with the exception of major storms.

    Adjusted (non-GAAP) Operating Earnings

    Adjusted (non-GAAP) operating earnings, which generally exclude significant one-time charges or credits that are not normally associated with ongoing operations, mark-to-market adjustments from economic hedging activities and unrealized gains and losses from NDT fund investments, are provided as a supplement to results reported in accordance with GAAP. Management uses such adjusted (non-GAAP) operating earnings measures internally to evaluate the company’s performance and manage its operations. Reconciliation of GAAP to adjusted (non-GAAP) operating earnings for historical periods is attached. Additional earnings release attachments, which include the reconciliation on page 8 are posted on Exelon’s Web site: www.exeloncorp.com and have been furnished to the Securities and Exchange Commission on Form 8-K on July 31, 2014.

    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. The factors that could cause actual results to differ materially from the forward-looking statements made by Exelon Corporation, Commonwealth Edison Company, PECO Energy Company, Baltimore Gas and Electric Company and Exelon Generation Company, LLC (Registrants) include those factors discussed herein, as well as the items discussed in (1) Exelon’s 2013 Annual Report on Form 10-K in (a) ITEM 1A. Risk Factors, (b) ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and (c) ITEM 8. Financial Statements and Supplementary Data: Note 22; (2) Exelon’s Second Quarter 2014 Quarterly Report on Form 10-Q (to be filed on July 31, 2014) in (a) Part II, Other Information, ITEM 1A. Risk Factors; (b) Part 1, Financial Information, ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations and (c) Part I, Financial Information, ITEM 1. Financial Statements: Note 18; and (3) other factors discussed in filings with the SEC by the Registrants. Readers are cautioned not to place undue reliance on these forward-looking statements, 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.

    Exelon Corporation (NYSE: EXC) is the nation’s leading competitive energy provider, with 2013 revenues of approximately $24.9 billion. Headquartered in Chicago, Exelon has does business in 48 states, the District of Columbia and Canada. Exelon is one of the largest competitive U.S. power generators, with more than 35,000 megawatts of owned 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 100,000 business and public sector customers and approximately 1 million residential customers. Exelon’s utilities deliver electricity and natural gas to more than 7.8 million customers in Central Maryland (BGE), Northern Illinois (ComEd) and Southeastern Pennsylvania (PECO).

    EXELON CORPORATION

    Reconciliation of Adjusted (non-GAAP) Operating Earnings to GAAP Consolidated Statements of Operations

    (unaudited)

    (in millions, except per share data)

         
    Three Months Ended June 30, 2014Three Months Ended June 30, 2013
    AdjustedAdjusted

    GAAP (a)

    AdjustmentsNon-GAAPGAAP (a)AdjustmentsNon-GAAP
     

    Operating revenues

    $ 6,024 $ 170 (b), (c) $ 6,194 $ 6,141 $ (259) (b), (c) $ 5,882

    Operating expenses

    Purchased power and fuel 2,412 108 (b), (c) 2,520 2,419 (9) (b), (c) 2,410
    Operating and maintenance 2,166 (137) (d), (e), (f) 2,029 1,892 (133) (d), (f) 1,759
    Depreciation and amortization 590 - 590 533 (1) (d) 532
    Taxes other than income   288   -   288   271   -   271
    Total operating expenses 5,456 (29) 5,427 5,115 (143) 4,972
     

    Equity in losses of unconsolidated affiliates

    - - - (21) 21 (c) -

    Gain on consolidation of CENG

      261   (261) (g)   -   -   -   -

    Operating income

      829   (62)   767   1,005   (95)   910

    Other income and (deductions)

    Interest expense (238) 8 (e) (230) (252) 4 (i) (248)
     
    Other, net   243   (162) (h)   81   (17)   57 (d), (h), (i)   40
    Total other income and (deductions)   5   (154)   (149)   (269)   61   (208)

    Income before income taxes

    834 (216) 618 736 (34) 702

     

    (b), (c), (d),

    (b), (c), (d),

    (e), (f), (g),

    (f), (h), (i),

    Income taxes

      277   (111) (h), (j)   166   239   2

    (k)

      241

    Net income

    557 (105) 452 497 (36) 461

    Net income attributable to noncontrolling interests and preference stock dividends

      35   (23) (j)   12   7   -   7

    Net income attributable to common shareholders

    $ 522 $ (82) $ 440 $ 490 $ (36) $ 454

    Effective tax rate

    33.2% 26.9% 32.5% 34.3%
     

    Earnings per average common share

    Basic $ 0.61 $ (0.10) $ 0.51 $ 0.57 $ (0.04) $ 0.53
    Diluted $ 0.60 $ (0.09) $ 0.51 $ 0.57 $ (0.04) $ 0.53

    Average common shares outstanding

    Basic 860 860 856 856
    Diluted 864 864 860 860
     

    Effect of adjustments on earnings per average diluted common share recorded in accordance with GAAP:

    Mark-to-market impact of economic hedging activities (b) $ 0.01 $ (0.30)
    Amortization of commodity contract intangibles (c) 0.03 0.13
    Merger and integration costs (d) 0.02 0.02
    PHI acquisition costs (e) 0.01 -
    Long-lived asset impairment (f) 0.08 0.08
    Gain on CENG integration (g) (0.18) -
    Unrealized gains related to NDT fund investments (h) (0.09) 0.03
    Non-controlling interest (j)   0.03   -

    Total adjustments

    $ (0.09) $ (0.04)
     

    For the three months ended June 30, 2014, includes the results of operations of Constellation Energy Nuclear Group, LLC beginning on April 1, 2014, the date the nuclear operating services agreement was executed.

    (a) Results reported in accordance with accounting principles generally accepted in the United States (GAAP).

    (b) Adjustment to exclude the mark-to-market impact of Exelon's economic hedging activities, net of intercompany eliminations.

    (c) Adjustment to exclude the non-cash amortization of intangible assets, net, related to commodity contracts recorded at fair value at the merger date.

    (d) Adjustment to exclude certain costs incurred associated with the Constellation merger and at Generation the Constellation Energy Nuclear Group, LLC (CENG) transaction, including employee-related expenses (e.g. severance, retirement, relocation and retention bonuses), integration initiatives, and certain pre-acquisition contingencies.

    (e) Adjustment to exclude certain costs incurred associated with the Pepco Holdings Inc. acquisition, including professional fees and upfront credit facility fees.

    (f) Adjustment to exclude a 2014 charge to earnings primarily related to the impairment of certain wind generating assets and a 2013 charge to earnings primarily related to the cancellation of previously capitalized nuclear uprate projects.

    (g) Adjustment to exclude the gain recorded upon consolidation of CENG resulting from the difference in the fair value of CENG's net assets and the equity method investment previously recorded on Generation's and Exelon's books and the settlement of pre-existing commitments between Generation and CENG.

    (h) Adjustment to exclude the unrealized gains on NDT fund investments to the extent not offset by contractual accounting as described in the notes to the consolidated financial statements.

    (i) Adjust to exclude the non-cash amortization of certain debt recorded at fair value at the Constellation merger date, which was retired in the second quarter of 2013.

    (j) Adjustment to account for the CENG interest not owned by Generation, where applicable.

    (k) Adjustment to exclude the non-cash impacts of the remeasurement of state deferred income taxes as a result of the merger.

    EXELON CORPORATION

    Reconciliation of Adjusted (non-GAAP) Operating Earnings to GAAP Consolidated Statements of Operations

    (unaudited)

    (in millions, except per share data)

       
    Six Months Ended June 30, 2014Six Months Ended June 30, 2013 (a)
    AdjustedAdjusted
    GAAP (b)AdjustmentsNon-GAAPGAAP (b)AdjustmentsNon-GAAP
     

    Operating revenues

    $ 13,261 $ 1,020 (b), (c), (d) $ 14,281 $ 12,223 $ 552 (c), (d) $ 12,775
     

    Operating expenses

    Purchased power and fuel 6,752 187 (c), (d) 6,939 5,400 244 (c), (d) 5,644
    Operating and maintenance 4,024 (149) (b), (e), (f) 3,875 3,656 (170) (b), (f) 3,486
    Depreciation and amortization 1,154 - 1,154 1,076 (2) (b) 1,074
    Taxes other than income   580   -   580   548   -   548
    Total operating expenses 12,510 38 12,548 10,680 72 10,752

    Equity in earnings (loss) of unconsolidated affiliates

    (20) 12 (b), (c) (8) (30) 39 (c) 9

    Gain on consolidation of CENG

      261   (261) (g)   -   -   -   -

    Operating income

      992   733   1,725   1,513   519   2,032

    Other income and (deductions)

    (b), (j), (f),
    Interest expense (465) 8 (e) (457) (876) 371 (k) (505)
    (b), (h), (k),
    Other, net   348   (205) (h), (i)   143   155   (53) (l)   102
    Total other income and (deductions)   (117)   (197)   (314)   (721)   318   (403)

    Income before income taxes

    875 536 1,411 792 837 1,629

     

    (b), (c), (d),

    (b), (c), (d),

    (e), (f), (j),

    (f), (h), (j),

    Income taxes

      224   201 (g), (h), (i)   425   294   267

    (k), (l)

      561

    Net income

    651 335 986 498 570 1,068

    Net income attributable to noncontrolling interests, preferred security dividends and redemption and preference stock dividends

      39   (23) (m)   16   12   -   12

    Net income attributable to common shareholders

    $ 612 $ 358 $ 970 $ 486 $ 570 $ 1,056

    Effective tax rate

    25.6% 30.1% 37.1% 34.4%

    Earnings per average common share

    Basic $ 0.71 $ 0.42 $ 1.13 $ 0.57 $ 0.67 $ 1.23
    Diluted $ 0.71 $ 0.41 $ 1.12 $ 0.57 $ 0.66 $ 1.23

    Average common shares outstanding

    Basic 860 860 856 856
    Diluted 863 863 859 859

    Effect of adjustments on earnings per average diluted common share recorded in accordance with GAAP:

    Merger and integration costs (b) $ 0.03 $ 0.05
    Amortization of commodity contract intangibles (c) 0.06 0.27
    Mark-to-market impact of economic hedging activities (d) 0.52 (0.02)
    PHI acquisition costs (e) 0.01 -
    Long-lived asset impairment (f) 0.08 0.10
    Gain on CENG integration (g) (0.18) -
    Unrealized gains related to NDT fund investments (h) (0.10) (0.02)
    Tax settlement (i) (0.04) -
    Remeasurement of like-kind exchange tax position (j) - 0.31
    Amortization of the fair value of certain debt (k) - (0.01)
    Plant retirements and divestitures (l) - (0.02)
    Non-controlling interest (m)   0.03   -
    Total adjustments $ 0.41 $ 0.66
    For the six months ended June 30, 2014, includes the results of operations of Constellation Nuclear Energy Group, LLC beginning on April 1, 2014, the date the nuclear operating services agreement was executed.

    (a) Results reported in accordance with GAAP.

    (b) Adjustment to exclude certain costs incurred associated with the Constellation merger and at Generation the Constellation Energy Nuclear Group, LLC (CENG) transaction, including employee-related expenses (e.g. severance, retirement, relocation and retention bonuses), integration initiatives, and certain pre-acquisition contingencies.

    (c) Adjustment to exclude the non-cash amortization of intangible assets, net, related to commodity contracts recorded at fair value at the merger date.

    (d) Adjustment to exclude the mark-to-market impact of Exelon's economic hedging activities, net of intercompany eliminations.

    (e) Adjustment to exclude certain costs incurred associated with the Pepco Holdings Inc. acquisition, including professional fees and upfront credit facility fees.

    (f) Adjustment to exclude a 2014 charge to earnings primarily related to the impairment of certain wind generating assets and a 2013 charge to earnings primarily related to the cancellation of previously capitalized nuclear uprate projects.

    (g) Adjustment to exclude the gain recorded upon consolidation of CENG resulting from the difference in the fair value of CENG's net assets and the equity method investment previously recorded on Generation's and Exelon's books and the settlement of pre-existing commitments between Generation and CENG.

    (h) Adjustment to exclude the unrealized gains on NDT fund investments to the extent not offset by contractual accounting as described in the notes to the consolidated financial statements.

    (i) Adjustment to account for a favorable tax settlement in 2014 of certain income tax positions on Constellation's 2009-2012 tax returns.

    (j) Adjustment to exclude the non-cash impacts of the remeasurement of state deferred income taxes as a result of the merger.

    (k) Adjust to exclude the non-cash amortization of certain debt recorded at fair value at the Constellation merger date, which was retired in the second quarter of 2013.

    (l) Adjustment to exclude the impacts associated with the sale or retirement of generating stations.

    (m) Adjustments to account for the CENG interest not owned by Generation, where applicable.






    Exelon Corporation

    Ravi Ganti, 312-394-2345

    Investor Relations

    or

    Paul Adams, 410-470-4167

    Corporate Communications


    Source: Exelon Corporation


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