Good morning. My name is Josephine, and I will be your conference operator today. At this time, I would like to welcome everyone to the Exelon Corporation 2017 First Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to turn the conference over to Dan Eggers, Senior Vice President of Investor Relations. Please go ahead.

Thank you, Josephine. Good morning, everyone, and thank you for joining our first quarter 2017 earnings conference call. Leading the call today are Chris Crane, Exelon's President and Chief Executive Officer, and Jack Thayer, Exelon's Chief Financial Officer. They're joined by other members of Exelon's senior management team, who will be available to answer your questions following our prepared remarks. We issued our earnings release this morning along with the presentation, both of which can be found on the Investor Relations section of Exelon's website. The earnings release and other matters which we discuss during today's call contain forward-looking statements and estimates that are subject to various risks and uncertainties. Actual results could differ from our forward-looking statements based on factors and assumptions discussed in today's material and comments made during the call. Please refer to today's 8-K and Exelon's other SEC filings for discussions of risk factors and factors that may cause results to differ from management's projections, forecasts, and expectations. Today's presentation also includes references to adjusted operating earnings and other non-GAAP measures. Please refer to the information contained in the appendix of our presentation and our earnings release for reconciliations between non-GAAP measures to the nearest equivalent GAAP measures. We have scheduled 45 minutes for today's call. I'll turn it now over to Chris Crane, Exelon's CEO.

Thanks, Dan, and good morning, and thank you all for joining us. We are off to a great start in 2017. In March, we marked our one year anniversary of the merger between Exelon and Pepco Holdings. Since they closed, PHI has successfully executed on merger commitments achieved synergy savings and made significant progress towards full integration. We also continue to work hard on the regulatory front. Since the beginning of the year PHI closed up the Delmarva Maryland rate case and reached a settlement for our Electric and Gas rate case in Delaware. We are now down to just a Pepco DC cases from our first plant cycle of rate case filings. That said, our regular team is already started the second cycle of rate cases at Pepco Maryland and ACE’s plant. At ExGen we completed the acquisition of FitzPatrick power plant representing the 25th nuclear reactor where we have ownership stake. We welcome the new employees to the Exelon family. We also announced the Exelon Generation renewable joint venture which is allowing us to recycle capital at evaluation meaningfully above the value implied for our ExGen at our current share price. The JV allows us to make even faster progress on our debt reduction goals without diminishing our commitment to renewable power. We continue to focus on the legal challenges to the zero emission credits or ZEC in New York and Illinois we remain confident that our arguments will prevail. We’ll cover these points in more detail on the call, but I wanted to highlight what we have done while staying focused on the day to day operations. As shown on slide 5, on a GAAP basis we’ve earned a $1.07 versus $0.19 a share last year and on an operating basis we earned $0.65 versus $0.68 last…

Thank you Chris, and good morning, everyone. My remarks today will cover our first quarter results, an overview of our current rate cases, an update of our gross margin disclosures and a review of some of the events that occurred this quarter. Turning to slide 8, we had a strong quarter financially and operationally across the company. For the first quarter we delivered adjusted non-GAAP operating earnings of $0.65 per share, at the top of our guidance range of $0.55 to $0.65 per share. This compares to $0.68 per share for the first quarter of 2016. Exelon’s utilities delivered a combined $0.47 per share versus our plant and utility results were impacted by unfavorable weather at PECO and PHI which was more than offset by O&M timing across all the utilities. With 70% of our distribution rate base and decoupled jurisdictions including ComEd starting in 2017, we experienced less volatility on our utility earnings from record warm weather in January and February than if we did not have these programs. To help put this winter in context, this was the first time in 146 years when there was no snow on the ground at Chicago for both January and February. Looking across PJM, January and February was the warmest on record since data started being collected in 1950. Generation had a strong quarter relative to plan earning $0.18 per share. We had good performance from our nuclear assets with better capacity factors than budgeted and our constellation team once again delivered strong results despite weak power prices and low volatility. Turning to slide 9. The $0.65 per share in the first quarter of this year was $0.03 per share lower than the first quarter of 2016. To the positive, we had a full quarter of contribution from PHI relative to…

Thanks, Jack. This brings us to back to our value proposition shown on slide 16 which ain’t familiar. It is unchanged from our last earnings report and we remain committed to these points. We continue to grow their utility rate base at 6.5% annually through 2020 and regulated EPS by 6% to 8% annually through 2020. We continue to use free cash flow generated at ExGen to fund the incremental equity needs of the utilities of $2.5 billion and pay down approximately $3 billion of debt over the next four years at ExGen and the Holding Company. We are focused on optimizing value for ExGen business by seeking fair compensation for our carbon free generation fleet closing uneconomic plans, opportunistically selling assets where it makes sense to accelerate our debt reduction plan and maximizing value through our gentle load matching strategy. We continue to focus on sustaining strong investment grade credit metrics and grow our dividend in a consistent visible manner. Thank you for your interest and we are now ready for questions.

[Operator Instructions] Your first question comes from Greg Gordon with Evercore.

Hello good morning.

Good morning, Greg.

I notice that when you gave the update on your cash flow projections for the balance of the year that it’s several hundred million dollars higher. I don’t remember exactly the slide number. It’s slide 18. It looks like the utilities are the major contributors to that with a modest decline and expected ExGen cash flow, can you give us a little more color on that?

Sure Greg. It is the utilities and some of its energy efficiency timing and some of its just working capital, so we are about I think $200 million roughly higher than our expectation.

Okay. Is that sort of a – is that a sort of a permanent affect in terms of as I think about rolling the balance sheet forward or is that more of a timing issue on when you are going to collect cash flows or spend capital?

The working capital is more of a timing issue, some of the energy efficiency is permanent.

Okay, can you give us the sense of what the split is there?

$100 million energy efficiency, sorry.

Okay. Thank you very much. Second question and maybe it’s not something you are able to really engage with me on the call on, but one of the reasons why I think the stock has underperformed is because people are looking obviously you’ve had a little bit of softness in the 18,19 curves. You already told us that’s bounced a little bit but if people are looking forward to the sort of 2020 role coming this fall and looking at the open theoretically open position and worried about the capacity market print and thinking while 2020 is going to be another down year. So I don’t know if you can comment on how that looks today and also how that dovetails with what you continue to do with vis-à-vis debt reduction at the – at ExGen because while the balance sheet looks like it’s in absolutely great shape today if EBITDA keeps going south, there is sort of a bar keeps going up every year in terms of what you have to do with your cash flow to keep it at that level of leverage.

A couple of thoughts Greg. One, I think it’s probably given the liquidity in the market premature to forecast our 2020 ExGen earnings. But one thing to keep in context, on a recourse basis by 2020 we’ll have $4 billion of debt. That is the most pristine balance sheet I think in this sector. So, from a strength perspective with the balance sheet and the ability to deal with the cyclicality of markets I think we are well positioned. Our fundamental perspective would be that as liquidity returns to the market prices are going up across and our hedging approach and the length that we are carrying relative to ratable is the master of that. So I think it’s meaningfully premature to be trading on 20/20 in 2017.

Fair enough. Thank you guys.

Your next question comes from Jonathan Arnold with Deutsche Bank.

Good morning guys.

Good morning.

Question on, you mentioned I think that you would be bidding the units in the PJM auction and the same I think you said responsible fashion. Can you give us any insight into what you see as different in the PJM auction set up with respect to say the and the QUAD which has the ZEC and Clinton which obviously cleared at a low price in MISO is there anything we should be thinking as we compare those two situations?

Good morning. It’s Joe Nigro. I’ll take that question and answer it and if I’ll start by saying we have a long standing practice of really not discussing our bidding strategy around the capacity auctions where we think it will clear. I think there is one thing that we have to take into account; it’s the timing that you auctioned. The MISO auction was for June of this year through May of next year, and the PJM auction obviously is much further out in the curve. When you think about the operations of the power plant and the fuel loaded in the [Indiscernible] for example, that plant was going to continue to operate during that period. What I’d most say about QUAD cities in the bidding is we are going to continue to remain responsible in the way we bid our capacity reflecting the underlying economics of our plant and that’s consistent with what we’ve done with past options. I think the major question mark with this option continues to be as Chris mentioned bidding behavior from the existing generation as well as the discipline associated with new goals. As it relates to existing facilities we continue to see economically challenged plants that have cleared previous options and in addition to that we see the economics, the new goals being marginal. In your last option we cleared about 27 gig watts of base capacity which was about 16% of the total procurement and it remains to be seen how that 27 gig watts would participate in this auction but the big variables as I mentioned will continue to be the bidding of all the plants and we will remain discipline in that regard with all our facilities.

Okay. Thanks, Joe. And then, could I also ask on that, I guess, topical issue today, but can you quantify to or describe your exposure to Westinghouse as a supplier presumably in the field business primarily and how we should -- is there any concerns you have with regard to the bankruptcy?

It’s something that we follow closely not only as a supplier but for the industry. We have reviewed our positions that we have commercially with them. We’re not concerned at this time, but we’ll continue to watch it closely few fabrication. We continue to see that is an ongoing entity in the services business. We continue to gain support to see that is an ongoing entity. None of us know how it’s going to shake out yet, but we have minimal exposure there.

So, can you give us sort of percentage of the fleet of that service or supply fuel too perhaps?

I can get the number for you. We continue to competitively bid our reactor fuel suppliers between multiple suppliers and we move that around based off of pricing but we are not held hostage to a single entity on fuel fabrication.

All right. Thanks Chris.

Your next question comes from Steve Fleishman with Wolfe Research.

Yes. Hi, good morning. Just wanted to get your thoughts on this DOE review going on baseload generation and maybe we also just have this FERC Conference and how these might tie into kind of state-by-state ZEC process that has occurred so far, we’re trying to be of help this for generation. What could come out of DOE?

Yes. Steve, let me start off and talk a little bit about the Technical Conference over the last couple of days. There were three buckets of issues that I think we got to look at. One is carbon pricing on the market and what FERC could do to facilitate the states who are interested in doing that. The second bucket would be the Mopar issues, that’s PJM Grid 2020 [Indiscernible] ISO put out, and the third bucket are energy reforms. And so I think all three of these things are implied as well in connection with the Secretaries. Now, let me talk about the three. First, we think there was a constructive discussion around having one of the issues that has limited the ability of states to incorporate aggressive pricings between the states and I think there was good discussion around what FERC could do to address that problem. There is I think a plenty of degree to solve Technical Conference, a growing recognition that putting carbon explicitly in the market is something that would address a lot of these issues and there is growing receptivity to that. The issue of the Mopar that's where I think it most directly addresses the state ZEC programs and the REC programs. The New England proposal doesn't deal with existing baseload generation or existing generation of any kind, frankly and that’s consistent with FERC’s President. And so that template wouldn’t have any effect on the state programs. The PJM proposal does however deal with existing resources. And we have not historically supported that proposal. We recognize PJM has made some important changes and those were talked about at the Technical conferences. The issue with the Mopar from our perspective is that it is the distraction from some unfinished work that we believe FERC…

Great. Thank you.

Your next question comes from Julien Dumoulin-Smith with UBS Securities.

Good morning everyone.

Good morning Julien.

So, perhaps just to take it back couple of questions here, can we talk about the non nuclear generation strategy, specifically I wanted to just follow-up little bit on the renewable sell down. First, what's the remaining EBITDA that could be eligible to be sold down if you want to qualify it that way? And then secondly, can you talk about whether or not you would eventually review the mystic sales. Is this something about restructuring the fuel arrangement and a matter of time or is probably something that it’s going to be on the back burner for a little bit? And actually I’ll throw the third question at the same time. With regards to Texas its not be very clear about this deed. The new Texas combined cycle assets or separate discrete process to the extent which that you ultimately divest and/or lose control of the ExGen taxes asset. It’s correct?

That last question is correct. And they’re totally separate and would be operated that way. They are not part of the divestiture process. On the first two questions, Jack.

So Julien, with the JV structure we have the opportunity to sell down further assets, the two that come to mind are our AVSR solar facility which in 29th but that would not occur until 2019, but we’ve got to get through the ITC recovery period for that. And the second assets would be our Albany Green Energy facility, it is wood-burning plant that hasn’t contract to off-takers down in Georgia, that’s coming online this year which could facilitate to drop down end of 2017 more likely 2018 and that’s all contemplated as part of the overall structure with the JV. With respect to the EBITDA I’m not going to drill down into that and with respect to the GDP given the sales process that we’re working with the lenders on, I just don’t think it’s pretty impress to disclose the – and then with respect to Mystic, again, I answer that.

Yes. Would you revisit Mystic, just to follow-up on that one or is that something is off of the table for now?

We’re not going to talk a lot of details, but as we see in asset in that portfolio as a potential to create value and recycled capital we’ll look at them. We will look at it on an annual basis. We have some work to do on that one site, but we’ll continue to evaluate it going forward.

Excellent. Just to understand the JV structure bit further. On the renewable sale why not sell down the whole entity overtime as part of a wider deleveraging, why opt for this sort of JV structure?

We’re still committed to clean portfolio. It’s being in the renewable business is still part of our strategy. At this point maintaining the operational control, that maintenance and other facilities is important for us for our investment. And we’re getting a fair return from those, but at this point we felt that the valuation that we were getting in the market allowed us to recycle the capitals, so we’re not existing the renewable business and we continue to put about 125 million a year into solar at the CNI level or some of our national customers and We’ll continue to look at that portfolio how to best manage those investments going forward.

Excellent. Thank you for the patient.

Your next question comes from Stephen Byrd with Morgan Stanley.

Hi. Good morning.

Hi, Steve.

I wanted to follow-up up on Steve’s question on the department of energy review. In terms of potential agencies or entities involved in your mind is that most likely to be FERC or Federal Legislation, in other words, I guess I'm struggling to figure out how the Department of Energy itself could provide economic support for baseload whether the nuclear, coal or gas. What sort of entities would most likely be involved and I guess I’m thinking if the states are providing value for environmental benefits from ZECs and the ISOs are providing the reliability benefits through capacity performance. What other elements are not being captured? Or what other tools are potential here?

Yes. Let me assume this [Indiscernible] couple of parts to that. First we think the DOE has an important role in setting policy, I think the implementation inform of that policy could in certain instances being new legislation, it could be things that are at the ARC in terms of regulatory burdens on nuclear, but it would involve the commission in that sense, it could involve changes in rules at FERC. But DOE is going to have an important voice in our view and this policy discussion and we’ll set the tone even if you can’t complete all of the objectives. There are certain tools that DOE has Section 202(c) authority under the Federal Power Act as an example allows them to secure resources in the market that are needed. That is a power that has been used sparingly I thing only two times in history, but certainly there is a discussion around the use of it for baseload resources. With regard to attribute payments I think environmental attribute payments I think we’re kind of been to wait and see where the administration goes on carbon, but I think you’re general sentiment is correct that that’s not something we see immediately coming out of the department. But U.S. kind of more fundamental question is, states are covering environmental and PJM is covering the liability. What’s left? Well, I tell you what’s left. What’s left is resiliency which is a little bit of a different concept than reliability. Reliability assumes that pipeline infrastructure and other critical pieces are in place. PJM assumes that and says whether there is some reliability impacts or the reliability expectations could be met. Resiliency looks a little bit deeper at that and understands the impact of pipeline disruptions on natural gas-fired generation and should we start modeling those sorts of things, is there a value there. The other piece is that it’s not currently valued in the market is fuel diversity. As we transition to a market that is made up more and more of just natural gas, we’re exposing our customers to fuel price volatility in the long run. Those things because of the short-term nature of the market are fully considered, but if you look at Secretary Perry’s memo and it gets a second bullet point, second and third bullet points so that memo address those very issues.

That’s very, very helpful to think through. Really appreciate that. And then just I wanted to revisit your nuclear operational capabilities and appetite for growing your ownership of nuclear plants. I mean you acknowledge as a very strong nuclear owner and operator. Under what circumstances would you think about increasing ownership of merchant nuclear generation? What kind of criteria would you think about in terms of your appetite for doing so?

Yes. We have interest in increasing merchant exposure across any technology. What we would look at is only contracted secure revenue streams going forward, it’s pretty clear cut.

That makes sense. But that could include state to state sort to determine payments rather than a classic PPAs, is that fair?

Yes. That is fair.

Okay. That’s all I had. Thank you.

Thanks. It’s time for one more question, operator.

Okay. Your next question comes from Shahriar Pourreza with Guggenheim Partners.

Hey, guys. Good morning.

Good morning.

Just real question on how you sort of thinking about the dividend and you’ve got utility that’d eventually to sell fund, sell fund the dividend and cover the whole co-interest. What data points are you looking at where you could sort of think about revisiting the growth rate. Is sort of clarity around PJM? Is clarity around ZECs? What sort of a data point we should be thinking about?

Yes. We updated our dividend policy. The board updated the dividend policy about a year ago and gave you the clarity through 2018 on annual 2.5% increase of the dividend. As we said at the time we want to give you a longer-term view on dividend policy. What we need to do is execute on our rate cases in our efficiency at the utilities and in costs and operations. And so 2017 is going to be a big year to continue to have that focus. And so as we come through 2000 into 2018 we can have a dialogue with the board looking at we’re achieving or close to achieving the goal towards 2018, 2019 on where we were going financially in our focus and strategy. So next year – this year is a big to perform. Next year is a year where we should be working very hard to give you a longer term view.

Excellent. And then just lastly on retail, just maybe a little bit of an update. I mean, obviously there are some businesses that have changed hands. There some consolidation. There’s some obviously some trends, segment turnings into bit of oligopoly. So I'm curious on just from a generality standpoint what you're seeing as far as the margin environment and that would be helpful?

Good morning. It’s Joe Nigro. I’ll answer the last question first. Our retail margins for C&I origination still remain between that $2 to $4 we talked about well within that payment. The market hasn’t seen volatility and we continue to monitor that. The consolidation overall helps because there is less participants in the marketplace we’ve acquired companies ourselves, obviously all the big entities that have come to this face that hasn’t been there historically. That’s been a positive. We have seen some aggressive bidding behavior by some smaller entities in certain sectors like government, contracting and other things but overall we continue to monitor this very closely and we are comfortable with the projections we have in our margins remain in net $2 to $4 space.

Got it. Terrific. Thanks guys.

Thanks, Pou.

That is all the time we have for questions. I would now like to turn the call back over to Chris Crane for closing remarks.

Thank you. We appreciate your time and interest in Exelon. We really are off to a great start in 2017 and look forward to executing on the commitments we’ve made to you. So appreciate your time today and I’ll end the call.

That does conclude today’s conference call. You may now disconnect your lines.