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Is Exelon on Track to Go from a Hybrid to Regulated Utility?

Vincent Kruger

Exelon Reports 1Q16 Earnings: Will Nuclear Plant Closures Help?

(Continued from Prior Part)

Exelon’s EPS fell

Exelon (EXC) reported earnings of $0.68 per share in 1Q16 compared to earnings of $0.71 per share in 1Q15. Earnings in the quarter were above the midpoint of management’s guidance of $.60–$0.70 per share. The $0.03 fall in earnings was driven by the impact of the Pepco Holdings acquisition and other financing arrangements. Pepco Holdings reported under Exelon this quarter for the first time after completing the merger on March 24, 2016.

Earnings drivers

Exelon’s total operating expenses were 15% lower in 1Q16 due to lower expenses on fuel and purchased power compared to 1Q15. Exelon’s regulated utilities (XLU) reported lower earnings due to milder weather. The weather led to lower electricity usage per customer, which resulted in lower total retail energy sales during the quarter.

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As promised by Exelon’s management in the 4Q15 earnings call, the company is on track to enhance regulated operations. It’s trying to obtain half of its consolidated earnings from regulated investments in order to bring earnings stability and margin improvement. With the Pepco merger, an increased regulated rate base may contribute significantly in the coming quarter. It should be noted that 1Q16 earnings from Pepco are for just an eight-day period from March 24–31, 2016.

Exelon’s peer FirstEnergy (FE) reported better earnings this quarter despite milder weather. FE’s margins improved year-over-year. Public Service Enterprise Group (PEG) reported a 12% fall in earnings due to milder weather. Entergy (ETR) also reported nearly a 20% fall in earnings for 1Q16 compared to 1Q15.

In the next part of the series, we’ll see how Exelon’s segments performed in 1Q16.

Continue to Next Part

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