Q4 2024 Exelon Corp Earnings Call
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Michelle: Hello, and welcome to Exelon fourth quarter earnings call. My name is Michelle and I will be your event specialist today.
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Speaker Change: It's now my pleasure to turn today's program over to Andrew planned Vice President of Investor Relations.
Speaker Change: Or is your words.
Speaker Change: Thank you Michelle and good morning, everyone. Thank you for joining us for our 2020 for fourth quarter earnings call, leading the call today are Calvin Butler Excellence, President and Chief Executive Officer, and Jim Jones Excellence, Chief Financial Officer. Other members of Exelon Senior management team are also with US today and they will be available to answer your questions. Following our per.
Repaired remarks, today's presentation, along with our earnings release and other financial information can be found in the Investor Relations section of Exelon to web site.
Speaker Change: I'd also like to remind you that today's presentation and the associated earnings release materials contain forward looking statements, which are subject to risks and uncertainties. You can find the cautionary statements on these risks on slide two of today's presentation or in our SEC filings. In addition, today's presentation includes references to adjusted operating earnings and other non-GAAP measures.
Speaker Change: Reconciliations between these measures and the nearest equivalent GAAP measures can be found in the appendix of our presentation and in our earnings release. It is now my pleasure to turn the call over to Calvin Butler, Exxon's, President and CEO.
Calvin Butler: Thank you Andrew and good morning, everyone. We're pleased to have you with us for our fourth quarter earnings call closing out another successful year for Exelon.
Calvin Butler: We're entering our 25th year as a company since the historic merger of Commonwealth Edison and Philadelphia Electric company at 2000 fly Eagles fly.
Calvin Butler: The industry and the company has seen a tremendous amount of change during that time not unlike the year's over a century plus that shape <unk> since their origins and 18 81.
Calvin Butler: But some threat in Delaware, we run through that history.
Calvin Butler: Most importantly, our commitment to excellence and service to our customers.
Calvin Butler: That commitment inspired Samuel pencil in Chicago.
Calvin Butler: <unk> made electricity more accessible to all customers and it continues to inspire us today, which shows in the results, we're reporting and where our focus will be in the years ahead.
Calvin Butler: It was another year of excellent operating performance all four of Exelon utilities achieved top quartile for reliability with three of our utilities ranking in the top five among our peer benchmark and all four utilities performing in the top eight.
Calvin Butler: It was also another year of excellent financial performance, we reported GAAP earnings for 2024, or $2 45 per share and adjusted operating earnings of $2 50 per share, making it our third straight year as a pure T&D company of meeting the midpoint or better of guidance.
Calvin Butler: In fact, when you look back at the earnings path, we laid out when announcing our separation and our Q4 2021 earnings call.
Calvin Butler: Mid point of our 2024 guidance was $2 50.
Calvin Butler: When you think of all the change Exelon has managed during that time separating the company generationally high inflation and interest rates transitioning to the new comment rate structure. It is remarkable to think that we maintained our trajectory.
Calvin Butler: That is true we are a company that our customers employees policymakers and investors count on to deliver.
Calvin Butler: On the regulatory front, we successfully closed out a very busy year for rate cases.
Calvin Butler: As we will discuss further this puts us on very strong footing to serve our customers and focus on expanding ways to support the energy transformation in the years ahead.
Calvin Butler: These include ensuring our jurisdictions can continue to participate in the siding and the exciting growth of artificial intelligence powered by data centers that can foster economic development.
Calvin Butler: And as Jim will discuss there are other significant potential transmission opportunities as well such as the MISO tranche. Two one work that are not currently in our guidance, but which will require an additional $10 billion to $15 billion of investment to serve our customers in the coming five to 10 years.
Calvin Butler: Those opportunities illustrate why our updated four year plan continues to reflect the steady investment growth that you should expect from a company that serves more customers than any other in the U S and some of the most critical regions for the economy.
Calvin Butler: We now expect to invest $38 billion from 2025 to 2028 to support customer needs. No single project will be more than 3% of that plan and of that $3 5 billion of capital growth more than 80% is attributable to transmission.
Calvin Butler: This type of investment ensures that our utilities remain a key engine of our jurisdictions economies.
Calvin Butler: Not only do our investments create good local jobs and estimated 70000, plus and not only do they ensure that spending stays local with more than $4 billion of our supplier spent sourced from our jurisdictions. Most importantly, it ensures reliability, which when the economy increasingly.
Calvin Butler: Comps onyx on access to reliable resilient power can really multiply the power of our impact.
Calvin Butler: The growth in our high density low pipeline by over two five times in the last year is evidence of that comment alone 115 major projects, bringing in an estimated $17 billion of projected capital investments from other companies and creating over 1000 <unk>.
Calvin Butler: <unk> in northern Illinois.
Calvin Butler: And with this development comes increased load and we're seeing one or 2% load growth over a four year period, allowing us to distribute the cost of the grid over more usage.
Calvin Butler: To fund these investments in a disciplined manner, we are maintaining a balanced funding strategy financing the growth with 40% equity and building on a solid trajectory to sustaining and improving our credit metrics over the plan.
Calvin Butler: This commitment to balance sheet strength as evidenced by an upgrade to <unk> credit rating by S&P last week with continued returns on equity in the 9% to 10% range, we expect annualized earnings growth of 5% to 7% through 2028 with the expectation of being at the midpoint or better of that.
Calvin Butler: Range for.
Calvin Butler: For 2025, we're initiating operating earnings guidance of $2 64 to $2 74 per share.
Calvin Butler: And we are increasing our dividend to $1 60 per share keeping our payout ratio in line with the 60% we have communicated as part of our capital allocation policy.
Calvin Butler: The top line results make it clear 2024, it was a successful year.
Calvin Butler: Slide five more extensively highlights all of the ways in which our execution set us up for continued service to our customers communities and stakeholders checking all the boxes that we laid out this time last year.
Calvin Butler: For instance, we invested seven 5 billion of capital executing within 1%, 1% of our guidance EBIT with substantial reductions that comment as we work to gain approval of our re filed grid plan.
Calvin Butler: Regarding nine 1% return on equity despite a large portion of our rate base awaiting updated rate recovery and significant storm and weather headwinds we executed on our financing plan and continued to see strong investment grade credit ratings at our agencies carrying that into the S&P upgrade this.
Calvin Butler: Year.
Speaker Change: You'll hear more from gene our organization remain laser focused on cost.
Speaker Change: Having identified dozens of initiatives that support $100 million, our sustainable savings and many more that we continue to pursue with our dedicated team.
Speaker Change: It's a key contributor to our year over year growth in O&M of just at 4%.
Speaker Change: But beyond managing our costs affordability remains a top priority into 2025, and our customers' anchor our focus as we engage with policymakers.
Speaker Change: I'll return to this topic in my closing remarks.
Speaker Change: I am so proud of all that our 20000 employees were able to accomplish this year and I. Thank them for their commitment no matter the circumstances.
Speaker Change: And that starts with job one safely keeping the lights on and the gas flowing which I'll cover on the next slide.
Speaker Change: As I mentioned it was another top decile year for comment and Pepco holdings from an outage frequency and outage duration perspective.
Speaker Change: And BJ and Pico also attained top quartile. This was no small feat and particularly at comet, which face an unprecedented set of storms in July that produced 43 tornadoes more than that regency's in an entire year, while also receiving the reliability.
Speaker Change: One award for outstanding performance in the Midwest on the gas side, our hard working employees at BJ Pico and Pepco Holdings also delivered.
Speaker Change: Outperformance across the board for the entirety of 2024.
Speaker Change: Fourth year in a row that all three have achieved top decile.
Speaker Change: This sustained operational excellence is where our investments translate to real customer value importantly.
Speaker Change: Importantly, our employees achieved these results with a strong focus on safety ending the year with top core top performance on serious injury incident rate now.
Speaker Change: Now any safety incident is one too many so we continue to build out our observational tools and procedures to improve.
Lastly, our customer satisfaction scores remained consistent with the levels seen throughout the third quarter with Comed and <unk> in the first quartile and BJ and Pepco holdings and the second quartile.
With the onset of our first colder than normal winter and a number of years and higher energy supply costs, we recognize that affordability remains a critical aspect of the customer experience.
Speaker Change: Further improved performance at BJ and Pepco holdings, they are expanding efforts to enhance customer support and partnership with our communities.
Speaker Change: BJ and Pepco holdings are waiving late payment fees in the winter months, and suspending nonpayment disconnections in February including extending the length of payment arrangements where needed.
Speaker Change: We are also continuing to focus on empowering our customers to access digital tools and strategies to conserve energy during high usage months.
Speaker Change: Now we took similar actions during the pandemic our customers can count on us to proactively take measures when needed to balance affordability, while ensuring a safe reliable resilient grid, which is critical to our communities and our economy.
Speaker Change: We look forward to continuing to collaborate with our stakeholders to expand our solution set for customers.
Speaker Change: Now I'll turn the call to Jim to recap, our 2024 financial performance and provide provide details on our updated long term plan Jim. Thank you, Kevin and good morning, everyone I want to shout out our people in place and I'll email fans as well and I'll just say goodbye.
Speaker Change: But with that being said today I'll cover our fourth quarter and full year results key regulatory developments and updates to our financial disclosures, including 2025 guidance.
Speaker Change: Starting on slide seven as Kelvin noted, we delivered strong financial results for the third year in a row, earning $2 45 per share on a GAAP basis and $2.50 per share on a non-GAAP basis.
Speaker Change: Results that are at the top end of our guidance range and result in 6% growth at the midpoint of our guidance range for 2023 for.
Speaker Change: For the quarter Exxon earned 64 per share on a GAAP and non-GAAP basis.
Speaker Change: Full year earnings benefited from comments rehearing order we received in April we also manage costs across the platform well as we offset another year of mild winter weather and higher storm activity, while ensuring we could accommodate a range of outcomes with significant regulatory activity in the fourth quarter.
Speaker Change: Quarter to date and year to date drivers relative to prior year can be found on appendix slides 35 and 36.
Speaker Change: Turning to our outlook for 2025 on slide eight we are initiating operating earnings guidance of $2 64 to $2 74 per share.
Speaker Change: With new rates in effect across nearly all of our jurisdictions further and continued investment for our customers 2025 earnings growth relative to the midpoint of our 2020 for estimated guidance range is in line with previous disclosures.
Speaker Change: As we look ahead to the first quarter, we expect the relative EPS contribution to full year earnings to be higher than historical patterns at approximately 33% of the midpoint of our projected full year earnings guidance range.
Speaker Change: This accounts for the cold start to the year new rates in effect anticipated shaping up cost and commented revenue timing and assumes normal weather and storm conditions for the balance of the quarter.
Speaker Change: Turning to slide nine as Kelvin mentioned, we successfully closed out a busy regulatory calendar in 2020 for reaching final resolution on key rate cases that provide supportive cost recovery for the next several years.
Speaker Change: Starting with Pepco on November 26th the D. C. Public Service Commission issued a final order on Pepco climate ready pathway DC multiyear plan, providing for $123 4 million incremental revenue requirement and a nine 5% ROE through 2026.
Speaker Change: Advancing the shared interest in supporting the district energy goals.
Speaker Change: As part of the order the commission initiated a lessons learned process to evaluate the learnings from DC has experienced multiyear plans thus far.
Speaker Change: The Formula is the adoption of regulations for alternative forms of ratemaking. We are looking forward to participating in the process and what your final worker report for the first phase is due by the end of 2025.
Speaker Change: Moving onto Pico, the Pennsylvania Public utility Commission approved the joint petition for settlement and Peco's electric and gas rate cases on December 12.
Speaker Change: We have settlements allow for 354 million electric revenue requirement increase excluding a onetime credit of 64 1 million in 2025 and $78 million gas revenue requirement increase in 2025, providing the funding necessary to further enhance reliability enable cleaner energy options and improve the level of service customers have come to expect.
Speaker Change: Last on December 19th the Illinois, Commerce Commission approved comments re filed grid plan and rate plan adjustments, providing recovery for our level of investment that will allow us to serve customers safely and reliably while making progress on the goals of seizure.
Speaker Change: Relative to 2023 rates in effect. The final order provides for an approximate revenue requirement increase of $1 billion from 2024 through 2027 inclusive of the increases that were approved in the December 2023 order.
Speaker Change: As a reminder, the construct allows for the recovery of prudently incurred investment expenses of up to 105% of the approved revenue requirement with certain investment in categories, such as storms in new business recoverable independent of the 105% threshold.
Speaker Change: With these final orders close to 90% of our rate base has established rate mechanisms in place through 2026, or 2027, allowing us to focus on plan execution and the strategic engagement necessary to support growing electrification needs and promote expansion of reliable generation in our states.
Speaker Change: There are currently two Pepco holdings base rate cases open Delmarva power filed its gas distribution base rate case in the third quarter seeking to recover it continued reliability investments, including pipeline integrity management aging pipe upgrades and upgrades to its LNG plant with the expectation of implementing interim rates on April.
Speaker Change: <unk> 20th subject to refund.
Speaker Change: Atlantic City Electric also filed its base distribution rate case on November 21, seeking recovery for a great improvement and modernization work supporting New Jersey's energy Master plan and the clean Energy Act Ace has requested an increase of $108 $9 million with the expectation of implementing interim rates on August 21 subject to refund.
Speaker Change: Finally in Maryland, we continue to work to close out open reconciliations from our first BJ and Pepco, Maryland, multi year plans and we remain engaged in the lessons learned process for multi year plan as we approach our next rate case filings in Maryland.
Speaker Change: Final rates in December we continue to advocate for multiyear plans of the appropriate rate structure to direct the increasing investment needed to support a reliable 20, <unk> century grid, while offering specific options to address stakeholder feedback on ways to improve upon the first set of multi year plans.
Speaker Change: Moving to slide 10, we provide our updated utility capex and rate base outlook through 2028.
Speaker Change: <unk> found approximately $9 1 billion in 2025, and it totaled $38 billion over the next four years, an increase of $3 5 billion from the prior four year planning period, which reflects greater investments to support our jurisdictions and updates to align with recently approved rate cases and jurisdictional priorities.
The overall increase over 80% is attributable to incremental transmission capital.
Speaker Change: Such investment is driven by the structural trends that underpin the energy transformation in our jurisdictions increased demand for high voltage investments to support high density load growth and expanding and modernizing generation supply stock and the reliability and resiliency needs of great customers.
Speaker Change: Over $1 billion of that transmission increase is projected at kind of where we see continued commitments from data centers and other high density load customers and interest continues to grow in our other jurisdictions as well.
Speaker Change: Serving this new business will also require additional investment in the distribution network.
Speaker Change: The balance of the additional transmission relates to continued capacity expansion across our platform, including an additional year of investment in our two largest transmission projects.
Speaker Change: <unk> supporting the retirement of the brand insurance coal plant and the other at the Tri County line to address reliability needs due to low growth in the region.
Speaker Change: As a reminder, the <unk> project is expected to go into service in 2028, while the Tri County will go into service at various points in 2029 and 2030.
Speaker Change: As we continue to allocate relatively more spend to longer data transmission projects are annualized rate base growth of seven 4% over the next four years remains fairly consistent plan ever plan with the projected addition of nearly 20 billion from 2024 to 2028.
Speaker Change: As the next slide shows we feel confident about our ability to continue making the necessary investments to ensure our regions can meet their economic and energy goals, which rely more than ever on a safe secure and resilient grid.
Speaker Change: As Youll see on slide 11, Exxon has an unmatched platform to meet the clear need for transmission investment.
Speaker Change: The proliferation of high density load increasingly volatile weather and a growing and changing generation stack all point to at least.
Speaker Change: We serve more customers than anyone else and we are one of the largest investors in transmission among our peers.
Speaker Change: With the award winning reliability, our utilities are uniquely positioned to capitalize on the transmission opportunities beyond our existing 11000 plus miles today.
Speaker Change: Beyond the $12 6 billion transmission capital in our plan, we estimate 10% to $15 billion of transmission opportunity within our footprint in the next five to 10 years. This.
Speaker Change: This includes over $1 billion of additional investment to support new high density load, which is in our pipeline, but not yet in our guidance due to its earlier stages of design and planning or estimated online dates.
Speaker Change: This upside also includes investments to address teams between PJM and other regions such as the work associated with MISO tranche 2.1.
Speaker Change: Which we are optimistic will result in at least $1 billion of spend in our comment service territory through PJM supplemental planning process.
Speaker Change: Our involvement in those projects also creates opportunity to be a part of the competitive processes for the $6 billion of bark MISO estimates it will get out and we continue to see more of a need than ever for new generation, particularly to ensure our states can meet their policy goals.
Speaker Change: <unk> interconnections are needed to deliver that power and our customers no matter, where it's situated or how it's generated in fact, achieving C. Just falls in the growing economic development in Illinois will likely require significant transmission investment.
Speaker Change: All of this we're a complements the continued need for reliability and resilience and document and our existing infrastructure to modernize aging lines ensure better security and harden critical infrastructure.
Speaker Change: In 2019, PJM found that two thirds of the transmission system and its footprint, where over 40 years old with one third exceeding 50 years and some lower voltage transmission assets nearing 90 years. It is clear that there is no shortage of need to invest to serve our customers and communities well beyond our four year plan.
Speaker Change: Some of the best run utilities in the country, we are well positioned to execute these opportunities, while prioritizing reliability resiliency and affordability.
Speaker Change: Moving to slide 12, our dedication to operational excellence encompasses our commitment to customer affordability and ensuring we deliver above average value at below average rates.
Our ability to play $38 billion of capital for the benefit of our customers over the next four years is only possible with a rigorous focus on cost management and delivering value for those investments.
Speaker Change: This focus is saving our customers approximately $550 million in O&M annually relative to what it would have been growing at a standard inflation level over the last decade.
Speaker Change: And we feel confident we can continue to keep our expense growth. Similarly limited over our planning horizon with an institutionalized team and culture committed to delivering value even when our jurisdictions looked to expand ways in which we can support them.
Speaker Change: We have mentioned we have taken advantage of our exclusive focus on energy delivery to standardize and streamline our organizational structure and operations through 2024. This has resulted in approximately $100 million and executed sustainable savings initiatives with line of sight to many more opportunities to ensure we can keep raising the bar for the value we provide our customers.
Speaker Change: Operating as one Exxon has helped to identify unique and impactful opportunities like our cross company project to identify best practices amongst our frontline distribution employees.
Speaker Change: This disciplined further enhances the value of our investments, which have improved reliability by 35% since 2016.
But you mean, achieving some of the best reliability metrics in the industry, while also maintaining bill metrics that our 19% to 21% below U S. Averages makes it clear we are delivering above average performance below average rates.
Speaker Change: Turning to slide 13, with $38 billion of projected capital spend driving seven 4% rate base growth, along with earning ROE of 9% to 10%. We are projecting compounded annual earnings growth of 5% to 7% from our 2024 guidance midpoint of $2 45 per share.
Speaker Change: Maintaining our commitment to transparency, we have provided assumptions associated with our expected annual growth in earnings through 2028, an appendix slide 18.
Speaker Change: As you can see on the slide after 2024, we expect to deliver each year within the 5% to 7% range keeping us on track to deliver at midpoint or better of our 5% to 7% annualized growth rate from 2025 to 2028.
Speaker Change: We also continue to project, an approximate 60% dividend payout of operating earnings with the dividend now projected to grow in the lower end of our long term earnings target as we retain more of our capital to invest more efficiently for our customers.
Speaker Change: For 2025, we anticipate paying out a dividend of $1 60 per share representing five 2% growth over last year.
Speaker Change: Finally, I will conclude with a review of our balance sheet and financing expectations on slide 14 maintained.
Speaker Change: Maintaining a strong balance sheet continues to be core to our strategy and we closed out another year with average credit metrics comfortably exceeding our downgrade threshold of 12% at Moody's and S&P.
Speaker Change: We were pleased to receive an upgrade from S&P last week, which takes exxon's corporate credit rating up to Triple B plus from Triple B, we have updated our slides to reflect this improvement along with a revised downgrade threshold of 13% at S&P that is reflective of the higher credit ratings.
Speaker Change: With most of the investment plans and recovery mechanisms established over the next two to three years and our balance funding strategy in place, we anticipate our metrics approaching 14% by the end of our forecast demonstrating our commitment to maintaining a strong balance sheet.
Speaker Change: As a reminder, we continue to advocate for a language that incorporates repairs for calculating the corporate alternative minimum tax and the final treasury regulations.
Speaker Change: So our plan incorporates the assumption that the final regulations will not allow for repairs.
Speaker Change: If implemented in a way that mitigates the cash impact we would expect an increase of approximately 50 basis points to our consolidated metrics on average over the plan.
Speaker Change: From a financing perspective, we expect the 38 billion capital plan to be supported by $20 billion of internally generated cash flow 12 billion of debt at the utilities and 3 billion of debt at the holding company with the balance funded with a modest amount of equity specifically.
Speaker Change: Specifically, we expect 40% of our incremental capital will be funded with equity, bringing our total equity needs to $2 8 billion over the four year plan, implying approximately $700 million of equity per year.
Speaker Change: Our financial plan has also been designed to accommodate the use of other fixed income securities that receive equity credit in place of senior debt at our holding company and.
Speaker Change: In addition to other credit supported internal levers. These instruments provide a more efficient means of building additional financial flexibility, while ensuring we deliver at the midpoint or better of our 5% to 7% annualized earning growth rate range through 2028.
Speaker Change: I want to close by radio reiterating our confidence not only in the plan, we have laid out but in the broader opportunity we have to deliver value for our customers and our shareholders not just now but in the decades to come.
Calvin Butler: I'll now turn the call back to Calvin for his closing remarks. Thank you Jamie I'll review, our focus areas in 2025 before stepping back and reminding you what makes exelon unique as a key partner in our jurisdictions as an employer and as an investment as I mentioned when I started the call. This business has always been about our customers.
Calvin Butler: It was when Rembrandt appeal with the first gasoline up in the streets of Baltimore and 18, 16, ultimately incorporating what became Vijay our nation's first gas company.
Calvin Butler: And it was when Exelon was form 25 years ago, creating the foundation for the network of wires and pipes that now delivers energy to more than $10 7 million customers today.
So you can expect us to continue to focus on an equitable and balanced energy transition.
Calvin Butler: For the first time in decades, we have an opportunity to serve a growing loan base from which we have already seen our jurisdictions compete successfully but the magnitude of load growth. We're seeing requires us to think differently about our approach to energy supply.
Over a period of limited load growth competitive markets have been able to save customers billions of dollars annually, while delivering adequate supply.
Calvin Butler: However, it's clear as we faced rapid and significant load growth, we need enhanced solutions at PJM and we also need other approaches complementary to PJM that can meet those evolving customer needs.
Calvin Butler: As cost effectively as possible.
Calvin Butler: We have been actively working with stakeholders on solutions to the higher energy supply prices that they face and slide 21 in the appendix outlines our positions and priorities as we work this actively with policymakers at the federal RTL and state levels.
Calvin Butler: Indeed, we are consulting with stakeholders on no less than 45 bills across our jurisdictions that impacts supply or demand side solutions in some way.
Calvin Butler: Regardless, it's clear that states are and should be proactively involved in supply solutions that complement the markets not to mentioned pursuing policies that enable more demand side solutions. There's no single answer to meeting the levels of load growth that are anticipated, but instead, a variety of solutions across regulated and.
Calvin Butler: Merchant participants if necessary, we're committed to working collaboratively to support policies that ensure energy security as quickly and cost effectively as possible.
Calvin Butler: And in the meantime, we remain highly focused on all the other ways in which we support customer affordability areas in which we have and will continue to excel. This includes continued vigilance on cost with our size scale and culture, keeping cost growth well below inflation.
Calvin Butler: <unk> Energy Star award, winning efficiency programs, which saved customers an estimated $18 per month in 2024 third.
Calvin Butler: Third our Roes are robust efforts to connect distributed resources, allowing customers the opportunity to generate their own power and save money from four two gigawatts of generation and finally, our innovative tools and processes to connect customers to low income energy assistance, which totaled five.
Calvin Butler: $500 million in 2024.
Calvin Butler: These efforts only increase the value of our product, which we are delivering at top quartile or better levels in which we can only achieve with an employee base that can count on us to engage them develop them and send them home safely.
And doing all of this right we will execute on our financial plan deployed $9 $1 billion. This year to support our customers that will earn a consolidated 90, 10% operating return on equity from fair rate case outcomes that aligns with our stakeholders on how we invest customer dollars.
Calvin Butler: Dollars, which flow right back into their communities to drive increased economic opportunity.
Calvin Butler: We expect to deliver on our operating earnings guidance of $2 64 to $2 74 per share as always with the goal of being at the midpoint and better.
Calvin Butler: And lastly, we will execute on the financing plan that we laid out allowing us to maintain a strong balance sheet and support the grid, our customers expect and deserve.
Calvin Butler: These priorities are aligned with the pillars of our value proposition on slide 16, which we use as our north star is to ensure that the entire Exelon organization is working together to create value for customers employees and shareholders.
Calvin Butler: You can see we already lead the industry in so many ways across these areas whether it's the number of customer served the award winning and innovative services. We provide them are the consistent top quartile reliability or the innumerable recognitions, we received as an employer of choice.
Calvin Butler: And we are a company that does what it says consistently delivering against our financial commitments in a manner that flex strong alignment between our customers policymakers and shareholders on the value created by our investments.
Calvin Butler: With these investments delivering 5% to 7% annualized growth and a dividend yield of around 4%. We offer an extremely attractive risk adjusted return of 9% to 11%, which translates to consistent growth long term value.
Michelle: Michelle we can now open it up for questions.
Michelle: Thank you if you would like to ask a question. Please press star one one on your telephone keypad.
Speaker Change: And our first question comes from drew Gish Chopra with Evercore. Your line is open.
Michelle: Digestion.
Kelvin Goldberg: Good morning, Good morning, Kelvin Goldberg Goldberg.
Michelle: Hey, listen.
Michelle: Just.
Michelle: The other couple of questions.
Just in Maryland.
Michelle: Little bit more color there.
Speaker Change: What are you expecting out of the reconciliation decision how is that going to impact you can do it.
Michelle: These filings and then <unk>.
Michelle: Since Youre planning to one we're doing a lot of questions.
Michelle: Oh, that's just a little bit more color as to how you're thinking about Maryland.
Speaker Change: Yeah, absolutely we drew so let me let me first take it and then I'll also offered up to Mike or Jim if they have any color to add let me be very clear that we believe the process is moving forward at a decent pace, what's been very evident is that.
Speaker Change: We've shared with the commission and all stakeholders that we do believe that the costs that were incurred were prudent.
Speaker Change: And we have provided evidence and supporting that effort and if you even look at what others have come forward and say I don't think theres anyone questioning both cost of what's been incurred now we're just moving forward in the process and the evidence redone and letting it play out but it has been a very collaborative process to date, Mike anything.
Speaker Change: It either.
Speaker Change: I would just say that we firmly believe that we've offered a structure that gives predictability for customers helps us lower cost for customers and gives a good solid financial returns for our shareholders.
Speaker Change: Yeah, and I'll just address you know on the on the reconciliation the procedural schedule. It takes us probably first half of this year. So in the first quarter or second quarter, we expect an outcome there as Kelvin mentioned.
Speaker Change: Yep.
Speaker Change: All prudent reasonable cost you know when we had first initial rounds of testimony.
Proposals from staff and others were in line with prior reconciliations.
Speaker Change: And and and and much of that reconciliation was actual structural issues things that we saw in the first two are reconciliation. So continue to move that forward and then on the lessons learned I think I'm, just reiterating what what making Calvin side, but also the multiyear plans what we what we highlighted from our perspective is.
Speaker Change: You know multi year plans have provided strong alignment with state policy and alignment of what we're investing while also keeping our distribution rates in the first quartile. So it's been a good mechanism in terms of delivering but also keeping the distribution rates competitive and.
Speaker Change: And multiyear plans are not unique to Maryland, two thirds of jurisdictions use them or some similar type of sharing.
Speaker Change: Sherri mechanism, we like the three year timeframe, but are flexible on that and.
Speaker Change: And I think there's a lot to be thought about historic test years honestly, creating more work and being less effective on the cost control and that's the piece that I think is so important right now as you think about affordability as you think about delivering value for the customers. When you have a forward looking plan the ability to lock in long term contracts the ability.
Speaker Change: To align your workforce the ability to plan ahead is what allows a company like Exxon to deliver that O&M growth rate of two to two 5% in a period of rising inflation. So we.
Speaker Change: We think these these these types of mechanisms provide a lot of benefits, which is why we continue to highlight and that lessons learned.
Speaker Change: We also expect the lessons learned to can be completed in the first half of this year and then you would kind of have that clarity moving forward for our next rate filings.
Speaker Change: That's very helpful.
Speaker Change: Look for those data points and the core stuff. Thank you.
Speaker Change: There's a lot of focus also on the duopoly with Port maybe just update us when you what are your latest thoughts there.
Speaker Change: Or any discussions with stakeholders and.
Speaker Change: And what to expect.
Davidson: The 24th of February 2000, Davidson of Cogent.
Speaker Change: Absolutely I have Colette honorable who's our chief legal officer are here with US if you would like to thank you and thank you for the question as you may be aware on the we are still awaiting a decision and to your point. We are we continue to talk with a number of stakeholders, including <unk>.
Speaker Change: J M has signed forward looking solutions that work well for our customers and for investors.
Speaker Change: And we are awaiting a decision in the two O fab docket and and we hope to get a good result, we have been a leader on these issues and bringing issues around resource adequacy and energy security to the forefront. We appreciate the leadership from our state from our.
Speaker Change: Governors and we appreciate the way that P. J and has been leaning in with a number of.
Speaker Change: Oppose halting reforms and if I might mention for your edification, we received word from circa two.
Speaker Change: <unk> for reform efforts, one relating to shovel ready projects. That's in that <unk>, 25, 712, really making sure that.
Speaker Change: Hi checks that are shovel ready I'm moving to the forefront we were very supportive of that reform and then N E. R 25 778.
Speaker Change: Surplus interconnection service package, which really helps to ensure that it's easier to add more generation to existing sites for generators.
Speaker Change: What's approved as well so we are seeing park being helpful. Here, we're going to continue to lean in and lead and we're hopeful about a packet of herself and that he'll fast and are also at the same time continuing to work to engage with.
Speaker Change: With stakeholders. These customized at presenting act if you heard from Calvin and gene with unprecedented.
Speaker Change: Load growth needs and that creates unprecedented opportunity. So we'll continue to work with all and soft in a way that meets the needs of our customers to focus on energy security and affordability, while protecting the interests of investors.
Speaker Change: Got it thank you.
Speaker Change: Thanks, so much I appreciate the time.
Speaker Change: Thank you.
Speaker Change: And our next question comes from Nicholas Campanella with Barclays. Your line is open.
Speaker Change: Good morning, good morning.
Hope everyone's doing well so.
Speaker Change: Hey, just one quick clarification.
Speaker Change: 18, just when we think about the growth into 'twenty seven is that just year over year off prior year 26 midpoint is that the way to think about that you can comment on that.
Speaker Change: Yeah, Yeah, that's the way to think about it and we just we tried to give you a kind of a year over year. We always go back to the midpoint of guidance. So if you're if you're thinking about this slide in totality right. This is really about how do you grow how does that sound grow from 2020 for a midpoint of $2 45 through 2028 on a year.
Speaker Change: By year basis, such that we get to that midpoint or better of the 5% to 7%.
Speaker Change: Over that four year period.
Speaker Change: Thank you very much.
Speaker Change: And then I know legislation has been kind of a priority in Maryland from stakeholders.
Speaker Change: I was wondering if you can kind of comment on what you would kind of expect there but also just.
Speaker Change: What's your expectations in Pennsylvania, as it relates to solving for a generation and rate based solution or some type of other capacity arrangement with the state that could alleviate the congestion there. Thank you.
Speaker Change: Yeah, no problem the Guy will start off and then I have with me our cream Kusama who's the CEO of <unk> and of course, we have a deep velasquez with us as well who's the CEO of Pico that can add on but let me just share with you as I said in my wish Jamie we have over 45 bills that were actively working across all of our jurisdictions.
Speaker Change: All with the focus on ensuring affordability energy security and.
Speaker Change: Adequate generation I mean, that's the resource adequacy in those lines is first and foremost.
Speaker Change: Having said that several pieces of legislation proposals changes to regulatory and cleaning processes, including implementation implementing distributed distribution planning.
Speaker Change: Expedited review of certain clean energy generation, and creating a new integrated resource planning office.
Speaker Change: And by our footprint, we're looking at best practices that are being suggested in one jurisdiction and how do we employ that our share that information with our other jurisdictions. So I'm going to stop there and let corrine talk about what's happening in Maryland, where I think there's over 20 bills to date that you're tracking there is Calvin and thank you and good morning, everyone I would just echo what Calvin said.
Speaker Change: Right now in Annapolis here in Maryland, there's a lot of attention being made on how do we deal with the resource adequacy issue energy security issue here in Maryland, as a reminder, Maryland currently imports about 40% of its power from out of state that is something that the legislation the governor and many others are very focused on trying to see what we can do.
Speaker Change: To incent generation to be built in the state.
Speaker Change: The approach that's being taken as more of an all of the above approach, they're looking at various different fuel types various different ways to incent to try to get generation built here in the next few years. So that we can increase the amount of interstate capacity as BJ and Pepco holdings.
Speaker Change: Involved in all of those discussions were very supportive we agree with the states that we need to build more in state generation to relieve some of the pressures that we have on the supply side of the bill. So again, that's something that we're looking at tracking closely and working closely with all stakeholders and Nick you also asked about Pennsylvania, and I know, there's two active bills.
Speaker Change: Currently addressing the resource adequacy issue and Dave will ask Luis do you want to share your thoughts.
Dave: Yes. This is Dave good morning, everybody.
Speaker Change: Like other states like Maryland has been very active you'd seen that do.
Do you see yourself technical conferences on this issue as you know Governor Shapiro has been very active in working with PJM to address this issue.
Speaker Change: All the companies in Pennsylvania, as well has been active in trying to work with all the stakeholders to come up with I'll say alternatives, if necessary to the PJM capacity markets to ensure that.
Speaker Change: We continue to have adequate generation and.
Speaker Change: Some of the things that have been mentioned do include longer term contracts. They include utility build.
Speaker Change: Some of those things will require legislation.
And I think it'll be inactive session legislatively around those issues as well as.
Both in the house and Senate lawmakers are concerned about some of the same issues.
Speaker Change: Got it so more to come there really.
Speaker Change: Really appreciate it thank you.
Speaker Change: No problem. Thank you.
Speaker Change: And our next question comes from Julien Dumoulin Smith with Jefferies. Your line is open.
Speaker Change: Yes.
Speaker Change: Hey, good morning, guys.
Speaker Change: I appreciate it.
Speaker Change: I appreciate it Joe birds.
Speaker Change: Just coming back a couple of different things here real quickly.
Speaker Change: Absolutely.
Speaker Change: Hey, just with respect to the <unk>.
Speaker Change: I guess just trying to get at this a second ago about the prospects, but just to say it is supposed to be how do you think about settlement abilities. Here I mean, I know, there's a few different dockets you different.
Speaker Change: But with respect to you Jim policy and co location.
Speaker Change: The ability to settle that up.
Speaker Change: Kind of sidestep, maybe a more protracted effort considering all.
Speaker Change: All this discussion about power and then related up I'll turn it around the same time tied to data centers. How do you think about these deposits here in as much as that seems like a wider industry trend. It certainly is an offset to rate base growth and certainly could accelerate through the course of this year. So is there any kind of heuristic you'd offer as you continue to see some developments on data centers and how much that could.
Speaker Change: Sort of a netting effect to near your readiness if you will.
Speaker Change: Thank you Julian let me, let me make sure I captured the essence of the two part question one was talking about settlements as it relates to the activity that may be going on at the FERC level and so forth and the second was really focusing in on deposits that customers are giving around data center growth and if Jim that spur additional development in.
Speaker Change: Growth moving forward on the first piece, let me just share in dental alternatives. The gene is that.
We always are looking out for the best interest of our customers and having active discussions with all parties involved. We are we are never going to be believe that we always are sitting back and can't come to some type of resolution and keep moving here for it but we have some tenants that were holding onto because you have to route affordability.
Speaker Change: Or are customers and that the grid is being shared by everyone. So everyone should bear some of those costs. So having said that I'm going to turn it to Jim to give you any additional insight yeah I think on the first one Julian I would just you know like you used the word settlement of use but I think of it more as like do we partner with stakeholders absolutely. So all you know the two fives.
Speaker Change: We're about seeking clarity in a point, where there was differing views on network load and other things and so getting them to if I filed where it's about getting clarity Wow. While this concept is is just fast rate and so do we want to work with with stakeholders and I'm thinking about what what is the right tear off whether it's the state or federal level.
Speaker Change: Sure, but the two or five around seeking clarity and getting certainty. So that if someone was looking for certainty today. That's the fastest path right. While that is being discussed at PJM or with our states as it relates to large load.
Speaker Change: And then on the deposit yeah. Its we are seeing meaningful deposits come in as we see meaningful load growth you look at Con Ed for example, and our drivers tables, you can see large a large consumer.
Speaker Change: C&I classes growing 4% weather normal year over year, it's real right and so as that load comes into the service territory driving up capital investment, but also we get those deposits.
Speaker Change: I talked to our other customers to make sure that the load shows up when you look at 'twenty four rate base, just to give you a sort of size or impact our 2020 for rate base was around 400 million lower so relative to our Alaska exposure. The large majority of that was deposits and so to your point it does reduce rate base, but that but its all in.
Speaker Change: Good thing right. It's good for our customers that we're protecting them with the deposit and it's a signal that there's more investment that we need to do to accommodate this new load, which is really exciting right. We also added a disclosure in the back that shows our historical load, while while gross with growing our net load was declining due to energy efficiency and solar.
Speaker Change: Now things and in Boston and now you look forward our growth on that load is growing somewhere between one to cheaper science. So exciting development in terms of economic development, but the deposit side, that's how they show up and that's kind of the order of magnitude. We saw in 'twenty four as an example, and Julien if I can add something to gene we shared with you on our last call that we don't even put anything into.
Speaker Change: Our LR pure our forecast until certain actions are taken by these developers one we look at the purchase of real estate to we look at Hey are you putting in skin in the game in terms of developing plans or three putting down a deposit and then and only then do you see us actively start integrating this into our plan and that's why you see.
Speaker Change: The load growth that we projected to you that we've done are shown on the slides really adding up because once they put those takes them actual actionable steps we've been included into our plan.
Right. They basically said for as much as you might see an acceleration in these deposits through the course of this year and some of the load materializes.
Speaker Change: May very well see a corresponding increase or even net increase.
Speaker Change: Great.
Speaker Change: Absolutely.
Speaker Change: Subsequently incorporated in your forecast there is no net decline here you actually include the future capex opportunities in parallel those deposits. So you shouldn't necessarily see this as being any kind of production through the course here you haven't gotten ahead of yourself and including that load.
Speaker Change: It'll happen in parallel mhm.
Speaker Change: Excellent.
Speaker Change: Does it speak to any greater confidence of these airports materializing I know that there haven't been any kind of flashy.
Speaker Change: Data Center press release shall we say, but these deposits, presumably bode well and favorably for ongoing activities here should we expect any kind of more explicit disclosures.
Speaker Change: Work, our way through the course of this year, especially given some of these as you say proof.
Speaker Change: Fruitful.
Speaker Change: Yeah.
Speaker Change: Yeah, we do have one five where we try to put you know kind of a recent win so slide 19.
Speaker Change: The appendix, where you can see some of the recently announced data center projects that you know typically the operating company or the or the company does do a press release on them, but we tried to give you. Some insight here you can see we have over 200 online data centers today, I talked about kind of that year over year growth, but if you look at the chart on that slide in the top left you can also see.
Speaker Change: Just in the last couple of years, when you got a 24% CAGR.
Speaker Change: CAGR over the last couple of years in terms of megawatts online. So it's real in terms of the number of data centers online and her territories. It's real when you look at the load year over year on a weather normal basis.
Speaker Change: And it's real when you look at the pipeline that we see growing and as Kelvin mentioned, it's a pipeline that we only talk about you know ones that are what we would consult call greater than 80% probable because of the financial commitments that they've made so it's an exciting time I think it's and we see this trend continuing.
Speaker Change: But I think we're gonna be prudent about it and always focus on affordability and an end and think about our other 10 and a half million customers do and that's where it's something like the deposits you know shows up and and our activity at first because we think about just and equitable transition to this.
Speaker Change: Load growth as well.
Speaker Change: Thank you guys very much.
Speaker Change: Thank you Sir.
Speaker Change: And our next question will come from Steve Fleishman with Wolfe Your line is open.
Steve Fleishman: Hey, Steve Hey, Thanks, Hi, good morning.
Speaker Change: So just.
Speaker Change: Just maybe following up on that last topic, a little bit.
Speaker Change: I guess, specifically you could this is a topic in the Illinois grid plan.
Speaker Change: Large loads could you give us.
Speaker Change: They kind of pulled out the capital for that but youre expecting can you give us maybe some.
Speaker Change: And so what you have for the Illinois large loads in the capital plan.
Speaker Change: And then related.
Speaker Change: I'll go with that firsthand.
Speaker Change: Oh sure. Okay. So yeah. So on the grid plan all all distribution.
Speaker Change: And what we had there was about 400, a little over $400 million of capital that was.
Not approved but but in a bit in the remarks undergrad plan and you know they commented right that that this can be fully reconciled all through the through the annual reconciliation shouldn't should comment is forecast to be cracked, which we believe it is and so so that that's sort of the magnitude.
Speaker Change: On the distribution side and then when you look at on the transmission side combat was off about $1 billion plan over plan on the transmission side relative to and it's really driven by this high density load in the megawatts that we see coming online in the service territory.
Speaker Change: And is there a way to a related to that is there a way to.
Speaker Change: Take some of the data center.
Speaker Change: Gigawatt data that you're giving them.
Speaker Change: Tie it into some level of capex per gigawatt or I.
Speaker Change: No. That's everything is different but just is there some yeah.
Speaker Change: Yes, it's to your point because every project is different and of course, we always try to do it in the most efficient way. So we work with our customers to say how much do you need where do we have capacity.
Speaker Change: And so there could be very minimal minimal investment need as we work to sort of find those sweet spots for our customers. When we think about our entire customer base.
Speaker Change: And then you know theres, others that depending on their ramp and how much they need and where they want to be located there there could be and you know capital investment needed. So hard to do a rule of thumb I would say again is that sort of the kind of always coming back to just the percentage of transmission as we think about the four year plan and how that shows up.
Speaker Change: And again, you know $3 5 billion for for this four year period, 80% of that is transmission really driven by these high density load centers coming in and the economic development, we're seeing across the territory.
Speaker Change: Okay. One last question just the.
Speaker Change: The new for sure Christie was quoted last week thing.
Speaker Change: You would have more clarity on their policy.
Speaker Change: The colocation in the near future or do you.
Speaker Change: Do you think.
Speaker Change: That will be in your 205 case or.
Speaker Change: One of the several cases is more likely for them to have.
Speaker Change: Alrighty.
Speaker Change: Yes, Steve to your point I think clarity is the key word there and what we're driving for and seeking and Collette and her team are working regularly with FERC and others. So collect would you like to elaborate thank you good morning, Steve.
Speaker Change: We too are interested in this clarity. So we're pleased to see that chairman now and you know a month plus in the role.
Speaker Change: Focusing on this look the great news is that we are all focused on this issue. We all recognize the time, we're in and we all want to be prepared to meet.
Speaker Change: The demands of our customers and the needs of all of our customers as quickly as we can so as we mentioned earlier the decision on the two effects could be any time, but by February 24th so it could be as soon as that.
Speaker Change: And there could be.
Speaker Change: Some decision on any of the other pending back and we're looking forward to getting that clarity and more importantly, you can count on us to continue engaging its just an exciting time at.
Speaker Change: And we look forward to supporting our customers all of them are contained in the future.
Speaker Change: Great. Thank you very much.
Steve Fleishman: Thank you Steve.
Speaker Change: And our last question will come from Shar <unk> with Guggenheim Partners. Your line is open.
Shar <unk>: Hey, guys good morning.
Kelvin Goldberg: Good morning Kelvin.
Shar <unk>: Just real quick.
Shar <unk>: Hey, Jim just real quick I know.
Shar <unk>: On this morning, but just a question on the <unk> CMC and the status of it is there is any sort of progress of.
Shar <unk>: Conversations with IPA and other stakeholders on managing that roll off anything we should be watching I guess in the car.
Shar <unk>: Coming months from the public side that could indicate progress legislative solution is the governor involved et cetera. Thanks.
Shar <unk>: Jim Please yeah, I think you know, Illinois, just like all of our other states as they think about energy security.
Shar <unk>: You know the CMT is a unique thing for sure right and they go through 27, which is actually quite nice when you think about the next capacity auction being coming in prior to that.
Shar <unk>: But you know the CMC, they're not a perfect hedge either right there more so on the energy side and less on the capacity. So our customers in com that are already seeing some of that capacity increase during this time period, but.
Shar <unk>: But I guess you know from our perspective, we look at it no different than.
Shar <unk>: Any of our states and how we're leaning into the energy legislation to provide solutions.
Illinois is unique in that they have the IPA and so they'll they'll do their thing and they'll think about how they want to procure them, but we'll be there to help support from a customer lens perspective in and do all you know everything we can to ensure that you know what we're looking for what our customers need it.
Shar <unk>: Is definitely you know the reliable generation, but stable and predictable energy and capacity prices that that that allow them to.
Shar <unk>: To you know to get to run their businesses and meet their home and family needs. So I guess, we just you know, Illinois is no different than the other states that we're working with we've got to find a solution that PJM on the capacity market I call I talked about that we're very supportive of some of the solutions that they provided and pleased to see that PRC is already approved.
Shar <unk>: Couple of them.
But we're also supporting our states, Illinois included that are looking at a variety of options that could be you know I'm looking at capacity obligations for a large load it could be looking at state procurements that could be looking at them you know state integrated resource plans. So a lot of options on the table, but what we're most pleased about is those options are being considered.
Shar <unk>: Entered in states are moving with a sense of urgency and so Illinois no different than the other states focused on us.
Speaker Change: Got it and then just lastly, you guys. Thanks for putting me in is we haven't had an update on artificial island discussions with <unk> have you done any work on bill impact of artificial island with behind the meter for Atlantic City electric customers and if it's a side of the meter deal or quasi front of the meter deal.
Speaker Change: Should we think about how quickly a D C can connect to that system.
Speaker Change: Yeah, I would say, we Havent you know I think in our two <unk>. We had some examples of what the impact could be in terms of our cost allocation and so I would just point to that but at the end of the day I'll just reiterate we're not against co location. We are what we have always said is that the principles are we believe it's not workload and that.
Speaker Change: And at the right cost allocation should be in place so.
Speaker Change: I'm not against it it's not something that you know as long as its network load and we have the right cost allocation.
Speaker Change: Yeah, it's bringing you know some economic development to our service territory. So it's always something we're supportive of.
Speaker Change: Got it so I guess the question is this can you connect the D C pretty quickly on the Atlantic City Electric system is there any speed to market issues as Youre open capacity, there or do they have to sit on a long interconnection queue. Thanks.
Speaker Change: Yeah, I would say I mean, specifically it really depends upon what they want to locate there I think for all of our for all of our connections wherever they were talking whether its artificial island or anything what our system. We certainly look for where there's capacity we look for their ramp up.
Speaker Change: We look to make sure that we do all our studies has accelerated as possible to make sure that we understand the effects I would say in most I'll say more general in almost all of our discussions with our different customers that are coming to look to extend it says we're almost always able to find a way that meets their their tire needs again, a lot of it gets into how much.
Speaker Change: How quickly once they want to ramp up and we're finding ways to work creatively with him and accommodate that.
Speaker Change: Fantastic. Thank you guys. So much congrats Calvin and gene on the results very good results.
Speaker Change: Thank you sure.
Speaker Change: At this time I would now like to turn the call back to Calvin Butler for closing remarks.
Calvin Butler: Thank you all again for your steady supportive Exelon I think shark captured him when he congratulated gene and I. Let me just congratulate the 20000 plus exelon employees because of all the hard work you put in 2024 was a successful year. We are very excited about the year ahead, which brings unprecedented opportunity for us.
Calvin Butler: To continue to lead this energy transformation with our jurisdictions and continue to provide long term value for all stakeholders. We look forward to engaging with you in the months ahead and Michelle that concludes our call.
Calvin Butler: Thanks to all of our participants for joining US today. This concludes our presentation. You may now disconnect have a good day.
Calvin Butler: [music].
Calvin Butler: Okay.
Calvin Butler: Okay.
Calvin Butler: [music].
Calvin Butler: Okay.
Calvin Butler: Okay.
Calvin Butler: [music].
Calvin Butler: Mhm.
Calvin Butler: [music].
Calvin Butler: Yeah.