Exelon Corporation (EXC) 2024 Q2 Earnings Call Summary

Optimistic Highlights

• Solid Second Quarter Performance: Exelon reported solid earnings and operational performance for the second quarter, with adjusted operating earnings of $0.47 per share, above expectations due to favorable weather and timing of spend.
• Investment and Growth: The company is on track with its investment plan, aiming to invest $34.5 billion to grow rate base at 7.5%, targeting annualized earnings growth of 5% to 7%.
• Regulatory Progress: Exelon has made significant progress on the regulatory front, particularly with the revised Grid Plan process in Illinois, and has reached agreements with key parties like the City of Chicago and the Building Owners and Management Association.
• Operational Excellence: The company achieved top quartile or top decile reliability performance across its operations, despite facing severe storm activity.
• Customer Satisfaction and Safety: Customer satisfaction scores remained consistent, with improvements in safety performance across several utilities.

Pessimistic Highlights

• Higher Interest Expense: The company faced a $0.03 per share increase in interest expense due to higher levels of debt at increased interest rates.
• Challenges in Rate Case Outcomes: While optimistic about the clarity that upcoming rate case outcomes will bring, there is an underlying concern about achieving fair and balanced results that allow for necessary investments.

Company Outlook

• 2024 Earnings Guidance: Exelon reaffirms its full-year operating earnings guidance of $2.40 to $2.50 per share for 2024, with a long-term annualized operating earnings per share growth range of 5% to 7% through 2027.
• Regulatory Developments: The company is encouraged by the support for ComEd's revised grid plan and is on track with rate cases in Pennsylvania and DC, awaiting final decisions.
• Investment in Grid and Load Growth: Exelon is positioned to support jurisdictions to meet load growth demands equitably, with significant opportunities in data center projects and infrastructure demand.

Q & A Highlights

• Q: What conversations are you having with state policymakers on solving resource adequacy issues post-PJM capacity auction results? (Shar Pourreza, Guggenheim Partners)

  A: Exelon and stakeholders have been signaling concerns about resource adequacy, with policy driving a turnover in the generation stack. The company is engaged in regular meetings and is focused on reliability and resilience, including addressing price pressures through infrastructure investments. (Calvin Butler)

• Q: Are you seeing any evidence of pushback or incremental signs of support from key states for attracting data centers? (David Arcaro, Morgan Stanley)

  A: Exelon sees a lot of momentum and support from states for data centers, with legislation passed to provide tax benefits. The company is actively engaged in attracting data center projects across its jurisdictions. (Calvin Butler, Gil Quiniones, and other CEOs)

• Q: Could you talk about the agreements with some parties in the Illinois grid plan and the difference between commission and staff views? (Steve Fleishman, Wolfe)

  A: The agreements signify progress towards compliance and policy issues cited by the commission. Exelon has engaged with staff and stakeholders to ensure the grid plan meets the commission's expectations and policy requirements. (Calvin Butler, Gil Quiniones)

• Q: On the FERC ISA proceeding and co-location issue, how do you want FERC to resolve the broader issue? (Steve Fleishman, Wolfe)

  A: Exelon's protest to the Talent ISA is about ensuring users of the grid pay their fair share, focusing on rate design and policy to support investment and affordability. The company is open to working with anyone on these issues. (Calvin Butler, Colette Honorable)

• Q: Given the low ROE from the last rate case in Illinois, will most of your investment be focused on transmission? (Anthony Crowdell, Mizuho)

  A: The investment is a mix of distribution and transmission, with more transmission to accommodate high-density load. Despite the low ROE, Exelon has an obligation to serve new customers and manage investments for the benefit of all. (Jeanne Jones)