Exelon(EXC) - 2023 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the unaudited consolidated financial statements and management's discussion and analysis for Exelon and its subsidiaries ITEM 1. FINANCIAL STATEMENTS This section presents unaudited consolidated financial statements for Exelon and its subsidiaries, with key financial statements and detailed notes Exelon Corporation Financial Statements Exelon reported increased net income and revenues, with total assets growing and operating cash flow decreasing year-over-year Financial Highlights | (In millions, except per share data) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Total operating revenues | $16,360 | $14,412 | | Operating income | $2,931 | $2,606 | | Net income from continuing operations | $1,711 | $1,622 | | Net income attributable to common shareholders | $1,711 | $1,738 | | Diluted EPS from continuing operations | $1.72 | $1.65 | Balance Sheet Highlights | (In millions) | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $7,519 | $7,336 | | Total Assets | $99,259 | $95,349 | | Total Current Liabilities | $8,800 | $10,611 | | Total Liabilities | $73,789 | $70,605 | | Total Shareholders' Equity | $25,470 | $24,744 | Cash Flow Highlights | (In millions) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash flows provided by operating activities | $3,292 | $4,141 | | Net cash flows used in investing activities | ($5,515) | ($4,986) | | Net cash flows provided by financing activities | $2,080 | $499 | Commonwealth Edison Company Financial Statements ComEd reported increased net income and revenues, with total assets growing and operating cash flow increasing year-over-year Financial Highlights | (In millions) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Total operating revenues | $5,836 | $4,536 | | Operating income | $1,364 | $1,177 | | Net income | $822 | $706 | Balance Sheet Highlights | (In millions) | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Assets | $42,042 | $39,661 | | Total Liabilities | $27,844 | $26,297 | | Total Shareholders' Equity | $14,198 | $13,364 | Cash Flow Highlights | (In millions) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash flows provided by operating activities | $985 | $842 | | Net cash flows used in investing activities | ($1,918) | ($1,780) | | Net cash flows provided by financing activities | $1,073 | $1,042 | PECO Energy Company Financial Statements PECO's net income decreased despite increased revenues, with total assets growing and operating cash flow increasing year-over-year Financial Highlights | (In millions) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Total operating revenues | $2,977 | $2,877 | | Operating income | $541 | $647 | | Net income | $410 | $474 | Balance Sheet Highlights | (In millions) | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Assets | $15,259 | $14,502 | | Total Liabilities | $9,242 | $8,939 | | Total Shareholder's Equity | $6,017 | $5,563 | Cash Flow Highlights | (In millions) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash flows provided by operating activities | $777 | $656 | | Net cash flows used in investing activities | ($1,118) | ($983) | | Net cash flows provided by financing activities | $325 | $386 | Baltimore Gas and Electric Company Financial Statements BGE reported increased net income and revenues, with total assets growing and operating cash flow increasing year-over-year Financial Highlights | (In millions) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Total operating revenues | $2,986 | $2,810 | | Operating income | $483 | $364 | | Net income | $286 | $267 | Balance Sheet Highlights | (In millions) | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Assets | $13,649 | $13,350 | | Total Liabilities | $8,427 | $8,414 | | Total Shareholder's Equity | $5,222 | $4,936 | Cash Flow Highlights | (In millions) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash flows provided by operating activities | $885 | $777 | | Net cash flows used in investing activities | ($980) | ($911) | | Net cash flows provided by financing activities | $44 | $229 | Pepco Holdings LLC Financial Statements PHI's net income decreased despite increased revenues, with total assets growing and operating cash flow decreasing year-over-year Financial Highlights | (In millions) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Total operating revenues | $4,615 | $4,223 | | Operating income | $751 | $688 | | Net income | $490 | $518 | Balance Sheet Highlights | (In millions) | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Assets | $26,656 | $26,082 | | Total Liabilities | $14,871 | $14,852 | | Total Member's Equity | $11,785 | $11,230 | Cash Flow Highlights | (In millions) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash flows provided by operating activities | $919 | $1,082 | | Net cash flows used in investing activities | ($1,502) | ($1,169) | | Net cash flows provided by financing activities | $356 | $327 | Potomac Electric Power Company Financial Statements Pepco reported slightly decreased net income despite increased revenues, with total assets growing and operating cash flow increasing year-over-year Financial Highlights | (In millions) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Total operating revenues | $2,174 | $1,919 | | Operating income | $364 | $331 | | Net income | $249 | $261 | Balance Sheet Highlights | (In millions) | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Assets | $11,061 | $10,657 | | Total Liabilities | $6,922 | $6,875 | | Total Shareholder's Equity | $4,139 | $3,782 | Cash Flow Highlights | (In millions) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash flows provided by operating activities | $533 | $401 | | Net cash flows used in investing activities | ($709) | ($593) | | Net cash flows provided by financing activities | $133 | $222 | Delmarva Power & Light Company Financial Statements DPL reported flat net income despite increased revenues, with total assets growing and operating cash flow decreasing significantly Financial Highlights | (In millions) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Total operating revenues | $1,273 | $1,176 | | Operating income | $194 | $177 | | Net income | $128 | $130 | Balance Sheet Highlights | (In millions) | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Assets | $5,870 | $5,802 | | Total Liabilities | $3,790 | $3,852 | | Total Shareholder's Equity | $2,080 | $1,950 | Cash Flow Highlights | (In millions) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash flows provided by operating activities | $274 | $428 | | Net cash flows used in investing activities | ($426) | ($317) | | Net cash flows provided by financing activities | $6 | $24 | Atlantic City Electric Company Financial Statements ACE reported decreased net income despite increased revenues, with total assets growing and operating cash flow sharply declining Financial Highlights | (In millions) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Total operating revenues | $1,172 | $1,120 | | Operating income | $201 | $173 | | Net income | $122 | $131 | Balance Sheet Highlights | (In millions) | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Assets | $5,155 | $4,979 | | Total Liabilities | $3,326 | $3,226 | | Total Shareholder's Equity | $1,829 | $1,753 | Cash Flow Highlights | (In millions) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash flows provided by operating activities | $102 | $292 | | Net cash flows used in investing activities | ($376) | ($283) | | Net cash flows provided by financing activities | $216 | $74 | Combined Notes to Consolidated Financial Statements This section details accounting policies, regulatory matters, debt, credit agreements, and environmental and legal contingencies - Exelon completed its separation from Constellation (formerly Generation) on February 1, 2022. The results of Constellation are presented as discontinued operations for all periods presented[115][121] - The Registrants are involved in numerous distribution base rate case proceedings and transmission formula rate updates with FERC and state commissions, which are critical to recovering costs and earning returns on investment[135][136][145] - ComEd entered into a Deferred Prosecution Agreement (DPA) with the USAO in July 2020, which concluded in July 2023. A related SEC investigation was settled in September 2023 with Exelon agreeing to a $46.2 million civil penalty[361][362] - The Registrants have accrued $434 million for environmental investigation and remediation liabilities as of September 30, 2023, with a significant portion related to former Manufactured Gas Plant (MGP) sites[349] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's analysis covers financial condition, results of operations, key business drivers, liquidity, and capital expenditure plans Exelon Corporation MD&A Exelon's net income increased due to higher formula rate earnings and favorable rate increases, partially offset by higher expenses and weather Net Income from Continuing Operations | (In millions) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net income from continuing operations | $1,711 | $1,622 | | Variance | | $89 | - Key drivers for the increase in net income include higher electric distribution formula rate earnings at ComEd, favorable rate increases at PECO, BGE, and PHI, and carrying costs on CMC regulatory assets at ComEd[408] - Offsetting factors included higher interest expense at PECO, BGE, PHI, and Exelon Corporate, unfavorable weather at PECO and PHI, and higher storm-related operating expenses[408] Results of Operations By Registrant This section details financial results for each utility registrant, highlighting net income changes driven by various operational factors - ComEd: Net income for the nine months ended Sep 30, 2023, increased by $116 million, primarily due to higher electric distribution formula rate earnings and carrying costs on CMC regulatory assets[443] - PECO: Net income for the nine months ended Sep 30, 2023, decreased by $64 million, driven by higher storm-related operating expenses, depreciation, and interest expense[458] - BGE: Net income for the nine months ended Sep 30, 2023, increased by $19 million, mainly due to favorable impacts from its multi-year rate plans, partially offset by higher storm costs and interest expense[476] - PHI: Consolidated net income for the nine months ended Sep 30, 2023, decreased by $28 million, primarily due to an increase in environmental liabilities at Pepco, higher depreciation, and interest expense across its subsidiaries[493] Liquidity and Capital Resources Registrants maintain liquidity through operating cash flows, capital markets, and credit facilities, with significant capital expenditure plans - The Registrants have access to credit facilities with aggregate bank commitments of $4.0 billion to support liquidity needs[542] Estimated Capital Expenditures | (In millions) | 2023 Estimated Capital Expenditures | | :--- | :--- | | Exelon Total | $7,300 | | ComEd | $2,575 | | PECO | $1,425 | | BGE | $1,350 | | PHI | $1,925 | - Exelon established an At-the-Market (ATM) equity program for up to $1.0 billion in common stock, but has not issued any shares under the program as of September 30, 2023[371][560] - Exelon's estimated annual qualified pension contributions will be $20 million in 2023, reflecting a strategy to achieve 100% funded status over time[564] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Registrants face and manage market risks including commodity price, counterparty credit, and interest rate fluctuations - Primary market risks include commodity price, counterparty credit, and interest rate risk[580] - The company operates primarily under cost-based rate regulation, which limits exposure to market risk effects. Hedging programs are used to reduce energy price volatility, with costs recovered from customers[580] - ComEd's ROE for its electric distribution service through 2023 is directly correlated to yields on U.S. Treasury bonds, creating an electric operating revenues risk that Exelon Corporate may hedge[583] ITEM 4. CONTROLS AND PROCEDURES Management concluded that disclosure controls and procedures were effective as of September 30, 2023, with no material changes to internal controls - As of September 30, 2023, the principal executive and financial officers of each Registrant concluded that their disclosure controls and procedures were effective[588] - There were no changes in internal control over financial reporting during the third quarter of 2023 that materially affected, or are reasonably likely to materially affect, any of the Registrants' internal control over financial reporting[588] PART II. OTHER INFORMATION This section provides additional information including legal proceedings, risk factors, and exhibits ITEM 1. LEGAL PROCEEDINGS This section incorporates by reference material lawsuits and regulatory proceedings from financial statement notes and the 2022 Form 10-K - Information regarding material lawsuits and proceedings is incorporated by reference from Notes 3 and 12 of the financial statements in this report and from the 2022 Form 10-K[590] ITEM 1A. RISK FACTORS The company's risk factors align with the 2022 Form 10-K, with an amendment on the DPA and SEC investigation's reputational impact - The risk factors as of September 30, 2023, are consistent with the 2022 Form 10-K, except for one amended risk factor[591] - The amended risk factor relates to the potential for the past Deferred Prosecution Agreement and the resolved SEC investigation to have a material adverse effect on Exelon's and ComEd's reputation and relationships with legislators, regulators, and customers[592][593] ITEM 5. OTHER INFORMATION There is no other information to report for any of the Registrants under this item for the reporting period - None[594] ITEM 6. EXHIBITS This section lists exhibits filed with the Form 10-Q, including certifications from principal officers and Inline XBRL documents - The report includes certifications filed by the principal executive and financial officers for Exelon Corporation and each of its subsidiary registrants[596][597] - Inline XBRL Instance, Schema, Calculation, Definition, Labels, and Presentation documents are included as exhibits[598]