) announced second-quarter 2013 operating earnings of 53 cents
per share, down from the year-ago figure of 61 cents. The results
also missed the Zacks Consensus Estimate by a penny. However, it
was within the earnings guidance range.
The results excluded unrealized losses related to nuclear of 3
cents, constellation merger and integration costs of 2 cents,
amortization of commodity contract intangibles of 13 cents and
long-lived asset impairment charges of 8 cents. It also excluded
mark-to-market impact of economic hedging activities of 30 cents.
Including these charges and gains, GAAP loss per share reported
by the company was 57 cents versus 33 cents in the year-ago
The results reflect lower energy margins at Generation, higher
operating and maintenance expenses, higher depreciation and
amortization expense and the impact of unfavorable weather at
ComEd. However, these negatives were partially offset by merger
synergies, favorable income taxes and increased distribution
revenues at ComEd.
Exelon's total operating revenue for second-quarter 2013 was
$5,882 million, reflecting year-over-year decline of 7.8%. The
reported quarterly revenues were below the Zacks Consensus
Estimate of $6,223 million.
During the quarter, total operating expenses declined 7.0% year
over year to $4,972 million, mainly due to decreases in purchase
power and fuel expense. However, decline in operating expenses
could not offset the decline in revenue, resulting in an
operating income of $910 million, down 12% year over year.
This segment generated net income of $273 million, down 32% year
over year. Excluding Salem and the units owned by Constellation
Energy Nuclear Group (CENG), the Exelon-operated nuclear plants
achieved a 92.8% capacity factor, compared with 93.4% in the
Commonwealth Edison Company (ComEd):
The segment's net income was $96 million, up from $42 million in
the year-ago period.
PECO Energy Company (PECO):
The segment's net income declined to $74 million from $81 million
reported in the year-ago period, due to higher operating and
maintenance expense partially offset by favorable income taxes.
BaltimoreGas and Electric (BGE):
The segment generated net income of $23 million, up from $14
million in the year-ago quarter driven by higher electric and gas
The company ended the quarter with cash and cash equivalents of
$956 million, down from $1,411 million at the end of 2012.
Long-term debt as of Jun 30, 2013 totaled $16,121 million, down
from $17,190 million as of Dec 31, 2012.
Exelon's hedging program involves the hedging of commodity risks
for expected generation, typically on a ratable basis over a
three-year period. The proportion of expected generation hedged
as of Jun 30, 2013, is 96%-99% for 2013, 78%-81% for 2014, and
41%- 44% for 2015.
The company is about to take a strategic step after its merger
with Constellation in Mar 2012. Over the next nine months, three
commercial nuclear power plants operated by the Constellation
Energy Nuclear Group (CENG) in New York and Maryland will be
operationally integrated into the Exelon Generation nuclear
CENG was formed as a joint venture between Constellation Energy
and EDF in 2009 to hold and oversee operations of the three
Constellation nuclear plants. As per the terms of the agreement,
the CENG plant operating licenses will be transferred to Exelon.
CENG will remain a legal entity governed by a board of directors
that comprise five EDF and five Exelon board members. Exelon will
continue to own 50.01% stake in CENG, and EDF will own 49.99%.
The application for transfer of operating licenses from CENG to
Exelon will be submitted to the NRC very soon. Exelon will lend
$400 million to CENG to support a special dividend to EDF, and
EDF will retain an option to sell its CENG stake to Exelon at
fair market value between 2016 and 2022.
Exelon maintained its guidance in the range of $2.35-$2.65 per
share for 2013.
Both the parameters failed to meet the Zacks Consensus Estimate.
However, going forward, company's solid utility operations and
the initiatives taken to increase production through renewable
sources will act as tailwinds for the company. However, we prefer
to remain on the sidelines based on the company's second-quarter
performance, increased regulatory landscape and pending rate
cases. Exelon Corp. presently carries a Zacks Rank #3 (Hold).
However, stocks to look out for in the sector are
), all of which have a Zacks Rank #2 (Buy).
EXELON CORP (EXC): Free Stock Analysis Report
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