Good morning. My name is Lindsey and I will be your conference operator today. At this time I would like to welcome everyone to the 2019 Q1 Exelon Earnings Call. [Operator Instructions] Thank you. Dan Eggers, Senior Vice President, Corporate Finance, you may begin your conference.

Thank you, Lindsey. Good morning everyone and thank you for joining our first quarter 2019 earnings conference call. Leading the call today are: Chris Crane, Exelon's President and Chief Executive Officer; and Joe Nigro, 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 in 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 this call. Please refer 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 the non-GAAP measures and the nearest equivalent GAAP measures. I'll now turn the call over to Chris Crane, Exelon's CEO.

Thanks, Dan, and good morning, everyone, and thank you for joining us today. During the quarter, we achieved success on several key fronts and reached a couple of milestones. First, the U.S. Supreme Court declined to hear the ZEC cases clearing the last legal challenge at the federal level for the Illinois and New York programs. The decision affirms that states have the right to protect their citizens by favoring clean energy and it is a win for the consumers, policymakers and the regulators. Second, we received credit upgrades from both S&P and Fitch. These upgrades recognizes successful execution on our utility-driven growth strategy and reduction in business risk while maintaining strong financial metrics. Third, we reached settlements in New Jersey, on the ACE rate case and the infrastructure investment program. These outcomes reflect the continued positive evolution of our partnership with regulators built on improvement and reliability and customer satisfaction. Finally, turning to slide 5, in March, we celebrated the seventh anniversary of the Constellation merger and the third anniversary of the PHI merger. Each merger has positively contributed to our strategy of increasing our regulated business mix and providing more stable earnings. Before these mergers, Exelon earned a mix of 28% utilities, 72% generation. In 2021, we project that mix will have flopped with nearly 70% earnings coming from the utilities. Through the Constellation merger, we grew our regulated earnings with the addition of BGE and also benefit from the combination of Exelon and Constellation's competitive business creating an industry leader integrated business that supports sufficiently hedging of plans while capturing incremental margins and cash flows. The PHI merger further advanced our strategy to become more regulated, while creating value for customers and communities we serve. We are meeting or exceeding all of our reliability merger commitments and…

Thank you, Chris, and good morning, everyone. Today, I'll cover our first quarter results and quarterly financial updates including trailing 12 months ROEs at the utilities and our hedge disclosures. Starting with slide number 10, we had a strong quarter financially. We earned $0.93 per share on a GAAP basis and $0.87 per share on a non-GAAP basis, which is at the upper end of our guidance range of $0.80 to $0.90 per share. Our performance in the quarter was consistent with our expectations, including a positive $0.01 of net benefit around timing of expenses. Exelon utilities delivered a combined $0.56 per share, net of holding company expenditures. Utility earnings were modestly lower than our plan due to O&M timing at ComEd and PECO, which will reverse itself over the course of the year. Exelon Generation earned $0.30 per share, outperforming plan. This was a result of some realized gains in our nuclear decommissioning trust fund and favorable timing of O&M. We are reaffirming our full year guidance of $3 to $3.30 per share. For the second quarter, we are providing adjusted operating earnings guidance of $0.55 per share to $0.65 per share. On slide 11, we show our quarter-over-quarter walk. The $0.87 per share in the first quarter this year was $0.09 per share lower than the first quarter of 2018. Exelon Utilities less HoldCo earnings were up $0.10 per share compared with last year. This earnings growth is driven primarily by higher rate base, new rates associated with completed rate -- and lower storm costs at PECO and PG&E relative to the first quarter of 2018. Generation earnings were down $0.19 per share compared with last year. The biggest driver was the absence of $0.10 per share of ZEC catch-up payment from 2017 due to the timing of…

Thanks Joe. Turning to slide 17, we remain committed to our strategy and are pleased that our consistent execution is being recognized by the rating agencies and others. I'll close on Exelon's value proposition. We continue to grow our utilities targeting 7.8% rate base growth and between a 6% to 8% earnings growth through 2022. We continue to use free cash from the GenCo to fund incremental equity needs at the utilities, pay down debt, and fund part of our growing dividend. We will continue to optimize the value of our ExGen business by seeking fair compensation for our zero-emitting generation fleet, selling assets where it makes sense to accelerate debt reduction plans and maximizing value through the generation to load matching strategy of Constellation. We will sustain strong investment grade credit metrics and grow our dividend annually at 5% through 2020. The strategy underpinning this value proposition is effective and providing tangible benefits to our stakeholders. We remain committed to optimizing the value of our business and earn -- earnings your ongoing support for Exelon. Operator, we can now turn it over for questions.

Thank you. [Operator Instructions] And our first question comes from the line of Greg Gordon with Evercore ISI. Your line is now open.

Thanks, good morning.

Good morning, Greg.

Two questions. First, can you just give us a little more detail on the status of the bills that relate to energy policy in Illinois? What processes for moving them to vote? And I think you know you intimated that given the pressures on the legislature with regard to other Illinois issues that there might be a chance that this slips from the regular session for the veto session. So, could you just talk through all those issues, please?

Sure. And as you pointed out, there is a lot of activity in the session right now, as the Governor prioritizes all of this his issues, a lot of it's focused on the budget and revenue sources. Those bills are moving and being debated as we discussed. He also has a priority on achieving zero-carbon generation fleet by the 2020-2030 time frame -- to 2030 time frame. So there are numerous energy-related bills to get to that point. Our bill for the FRR, and there's one that's path to 100 and then there's one that's the Clean Jobs Coalition. So we're in the process right now of negotiating with all the bills, so we can come together and provide the legislature with coalition that agrees on many things right now just working through the details. We hope to be done. Meetings are constant. I've met with the leadership of both House and Senate, talking about what we need to do and them showing their support for us going forward. And so we're just going to keep working on it as we always do. If it's not done in the regular session because of the other priorities, we will have it positioned to move through during the veto session, that's the generation bill. The other bill in Illinois that will affect Exelon is the extension of the ComEd formula rate for 10 years, that bill is proceeding. We've been able to work with stakeholders to gain support and recognition as I mentioned, out of the nine past filings that we made with the formula rate; we've had four rate reductions. So it's very balanced for the consumer, it's very balanced for our investment strategy and we are able to do so in a predictable way to serve our customers. So that's Illinois. Pennsylvania

Thank you. Sorry, you might as well cover Pennsylvania too, I interrupted you. I apologize.

I believe that was coming, so I was going to do it. So, Pennsylvania, as you know, we've been working with the other nuclear operators there to create an alliance to continue and allow those assets to compete in with the other non-emitting assets. The bill continues to garner support and we'll continue to work through that. As we've told folks, we need clarity on this by the end of May or we're going to have to make the final steps and shutdown. We won't be able to adequately procure -- design procure and manufacture fuel for continued operations without that certainty and would not want to make that investment without that. So we'll continue working on it and as you can see the Governor has shown recognition that he wants to have a low-carbon future for the state and all recognize that that cannot be done with the current technology without including the existing nuclear assets. So we'll work on that one and combine with the Illinois effort.

Thanks. And one other real quick one for Joe, just looking at slide 19, It looks like the free cash flow profile mainly at the utility portfolio is lower than you projected, lower now for the year than you projected at year-end by $300 million or so. What's the cause of that because you didn't look -- it doesn't look like you've changed your overall guidance for the long-term cash flow profile of the company?

Yeah, Greg, you're correct, the variance versus our Q4 disclosure is $300 million lower. It's being driven by increased working capital to utilities and we're funding that with commercial paper. I think it's important to note though from a GenCo perspective, on a cash flow profile basis, we're still well -- we're in line with the forecast that we've provided you on the fourth quarter call, I mean I think that's an important element.

Okay. Is that working capital increase a permanent structural issue? Or is that related to things like storms or other things that might flip in future years?

Yeah, it’s the latter. It's more than just the ongoing business itself. And we had some favorable weather points in the quarter and we took advantage of that from a work basis perspective.

Okay. Thank you.

Our next question comes from the line of Julien Dumoulin-Smith of Bank of America. Your line is now open.

Hey, good morning, everyone.

Good morning.

So just to follow-up a little bit on Greg's question, can you elaborate a little bit on the scenarios around capacity auction participation, particularly if it happens in August, and I'm thinking that given your commentary in the prepared remarks around the timing of Illinois legislation that it'd be difficult to implement any full FRR or anything else coming out of this Illinois legislation in time for the next upcoming capacity auctions. So I suppose there's a litany of scenarios. How do you think about them, particularly if FERC does indeed act around something else, say a partial FRR, for instance?

So, we've put our input into FERC that we believe it's very inefficient to execute an auction when -- with the previous FERC ruling that for PJM to execute an auction in the August time frame with the previous FERC ruling, we actually need to get guidance from FERC on what the construct should be. So we think it should be an April time frame, but FERC feels -- the PJM feels like they are compelled to run forward and hopefully we'll hear something from FERC to clarify PJM's letter requesting clarification. The most likely scenario for an FRR in Illinois would be the 2023 auction time frame from everything we're looking at. We need to get the legislation passed. We need to have the IPA who we've been working with the Illinois Power Authority be able to build the construct and be able to run it. That estimate is aggressive on our side, but probably about eight months our folks have been in communications with the IP agency how reasonable that is, and so we'll continue to work down that path, but to run an auction is going to be potentially rejected without clarification, does not seem like the most efficient use of all of our resources at this time.

Maybe even if it is delayed into 2020, and that is for the 2022 auction, how do you think about the choices before you?

Kathleen, you want to cover it more? Kathleen Barrón: Sure. Hey Julien, it's Kathleen. As Chris said, we do know that the FRR bill once enacted will take a period of time to implement. The IPA has to write the rules, the ICC has to approve them, then the IPA has to conduct a procurement. And so if the auction is not delayed, there clearly is not enough time for that to occur before the auction if it happens in August. If it happens next April then the bill is enacted this spring, there would be enough time for it to be implemented by, let's say, the auctions delayed to next April. And then the big wildcard is, what if the -- we don't know what FERC is going to do and we don't know when the -- exactly when the coalition, that Chris mentioned, together with the other clean energy package -- packages will come together in Springfield. So we can't really speculate on what would happen, because we have a couple of variables that are just unknown at this time.

All right. Fair enough. And then just to follow up on the business risk improvement in the credits out of the equation. Can you comment a little bit more about where you see that going over time, in terms of added latitude from absolute perspective and just where you would like to see the credit rating over time? Just perhaps following on some of the recent improvements?

Yes, Julien, first of all, we're happy with the upgrades by both S&P and Fitch, and we continue to work to stabilize the earnings and the cash flows of the company. We talk about how we're transitioning the earnings and the cash being driven from the much more regulated outcome, and we're really focused on that and we'll continue to manage accordingly and continue to take -- work closely with the rating agencies.

Okay, great. Thank you all very much.

Our next question comes from the line of Steve Fleishman with Wolfe Research. Your line is now open.

Yes. Hi. Good morning.

Good morning.

So just, I guess, on Pennsylvania, if -- obviously, something needs to get done there by the end of May to save Three Mile Island, but if it doesn't get done by then, does that -- I mean could something come back later on for the other plants? Or is it -- how should we just think about that?

We don't plan on stopping and the coalition doesn't plan on stopping, if the TMI deadline has passed. There are other critical assets in the state that need to be recognized for the governors low carbon future. And so we'll continue to work as hard as we are right now, after the end of May, for the other reactors in the state. So you've got eight other reactors that are very critical that are highly reliable, but their environmental benefits cannot be replaced with technologies available today without any significant cost. So we'll continue to work on it and we believe that we'll end up successful at the end.

Okay. Thank you.

Our next question comes from the line of Stephen Byrd with Morgan Stanley. Your line is now open.

Hi. Good morning.

Good morning.

I wanted to just drill into the Illinois Clean Energy Progress Act a little further. I'm thinking through the procurement process, and I've read through the legislation but I'm trying to understand the procurement process in terms of the clean bundled capacity. Is it possible to talk a little bit more about the generation that would be eligible? The mix of energy that would be procured? I'm thinking about zero carbon versus renewable, just to make sure I understand the nature of the clean bundled capacity that's going to be procured under this legislation, if it passes?

Kathleen, you want to go through that? Kathleen Barrón: Yes. Thank you, Stephen. The way that we have envisioned this is that the State would be able to conduct a clean energy procurement, as you said, and then any zero carbon resources will be allowed to complete to provide that capacity. And as you know, the bill is not specific about the exact timetable or there -- or other details that we believe are important, including how prices will be overseen by the IPA. And the reason for that is that the reason the Future Energy Jobs Act was so successful is, it brought together a number of parties together towards a common future and what's exciting about this is that FRR concept is integral to all the other clean energy bills that are being considered right now, because everyone appreciates that, is that exact authority, letting that IPA conduct a clean energy capacity procurement and then having the ability to set its core towards the zero carbon future will give it more flexibility than it has under current market rules, where every asset gets the same capacity payment, whether it's emitting or non-emitting. So we have left some room to have that discussion among other stakeholders to make sure that we have the right group who are supporting it and, as Chris said at the top of the call between the Clean Jobs Coalition including this in their bill, the consumer advocates see the tremendous benefit associated with this, we think that's a winning combination.

That's extremely helpful. Just as a follow-up there. In terms of the state's overall energy mix in terms of clean energy versus fossil, I know there is an objective to move towards clean energy over time, what would that energy mix broadly look like over time, how should we think about that evolution in the state?

So you're starting off right now with 60% of the generation statewide being zero-carbon emitting, 90% of that statewide is nuclear. The concept that Kathleen talked about is we would, in the ComEd zone, currently we can account for 100% carbon-free, but we would have a transition period where you would have the carbon-free assets bidding in at a greater percentage each year or being taken as a greater percentage each year as you build into 2030 when the procurement would become a 100% carbon-free. And those details, the finite details there will have to be worked out, but that's the concept.

That's super helpful and that's all I had. Thank you.

Sure.

Our next question comes from the line of Jonathan Arnold with Deutsche Bank. Your line is open.

Good morning, guys.

Hey.

Could I just -- just coming back to Illinois and the discussion about timing, if I understand you correctly, the ability to implement the FRR for the next auction, should the next auction happen in April, that would only be the case, if it passes in the spring. Am I right about that?

Yes.

Okay. And so to that, I mean, Chris, what exactly are you saying about the spring session. Are you -- you said you are optimistic in your prepared remarks about this year, and I just wasn't clear in the previous answer if you're saying you think we're more likely in the veto session, or do you think you're still kind of in play for the spring depending on how things go?

We are working with the coalitions as hard as we can to have something presentable to the legislature supports to move in the spring. But what I've cautioned in our road shows and on the calls previously, there is a very aggressive legislative agenda in Illinois this spring, they are talking about a graduated tax legislation that is needed to pass for constitutional amendment under 2020 election, the work on legalization of recreational marijuana, the work on the gambling and the sporting issues to continue to increase revenue. Those are the top three priorities. We come after that. We need to be ready to be able to tell our story, communicate and have that coalition that we're building endorsing where we're heading. But we need to be realistic. We do think if it doesn't happen in the spring, we'll be ready to move it in the -- a veto session in the fall.

Okay, great. So you're not saying it's impossible. You're just making us aware of the priorities and the pullback on the fall.

Right.

Okay. And then just one other thing I wanted to ask on the slide 10, you call out the NDT realized gains was one of the driver in ExGen versus guidance, but it doesn't show up as a factor in the waterfall. So could you -- any chance you guys could quantify that piece and sort of explain that discrepancy there?

Yes. The waterfall you're looking at a year-over-year change and the NDT gains in the each of the years was roughly the same.

Okay.

So there would be no delta on the waterfall.

Got it. Roughly how much, Joe, if you are willing to share?

$0.02 -- its $0.02 a share.

Okay, great. Thank you.

That is all the time we have for questions today. I will now turn the call over to Chris Crane, President and CEO of Exelon, for closing comments.

Thank you all for participating in call today. I think we're off to a very good start for the year. And so with that, we'll close the call out and thanks again.

This concludes today's conference call. You may now disconnect.