Hello, and welcome to Exelon's Third Quarter Earnings Call. My name is Justin and I will be your event specialist today. All lines have been placed on mute to prevent any background noise. Please note that today's webcast is being recorded. During the presentation, we'll have a question-and-answer session. [Operator Instructions]. [Operator Instructions] Finally, should you intend to call systems as a best practice, we suggest you first refresh your browser. If that does not resolve the issue, please click on the help option, in the upper right-hand corner of your screen, for online troubleshooting. It is now my pleasure to turn today's program, over to Emily Duncan, Vice President of Investor Relations. The floor is yours.

Thank you, Justin. Good morning, everyone, and thank you for joining our third quarter 2021, 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 this presentation, all of which can be found in the Investor Relations section of Exelon's website. The earnings release and other matters which we discussed 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 other factors, including uncertainties surrounding the planned separation 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 will now turn the call over to Chris Crane, Exelon's CEO.

Thanks, Emily. And good morning, everybody. Emily, thank you for putting a hedge on everything we're about to say. We had a good quarter financially and operationally and head several very positive developments during the quarter. I'm starting on Slide 5, we earned $1.23 per share on a GAAP basis and $1.09 on a non-GAAP basis. And Joe will get into those details. Illinois passed, at the last minute, a landmark clean energy legislation, which makes the state a national leader in clean energy. Illinois will achieve 100% carbon-free by 2045 by preserving and adding tens -- preserving the plants and adding tens of thousands of jobs. And we thank Kathleen Barone and her team and many others for the work they've done. As a result, we have reversed the retirement decision on Byron and Dresden. Our Illinois plants will continue to provide good paying jobs, economic support to the communities, and 0 carbon energy to the citizens of Illinois. We've begun to fill the 650 vacant positions and we'll be investing more than $300 million in our plants over the next 5 years to catch up on what we've pulled back from -- during the unknown period. The legislation also includes the provision that would transition into this out of the formula rates, into a new multi-year performance-based rate framework. In August, we completed the PUCT transaction and acquired EDF's portion of the CNG nuclear plants, adding 17 terawatts to our own 0, admitting nuclear generation. We did receive a grant from the U.S. Department of Energy to explore the potential benefits of on-site hydrogen production. And our Nine Mile Point in New York. And we continue to believe that there is a very strong future for Hydrogen. Hydrogen will be key in helping the nation address the climate…

Thank you, Chris. And good morning, everyone. Today I will cover our third quarter results, our quarterly financial updates and our hedge disclosures. I will also provide an update on our full-year 2021 guidance. Turning to Slide 8 first, we earned a $1.09 per share on a non-GAAP basis for the quarter. Exelon Utilities delivered a combined $0.66 per share net of holding Company expenses; and this was primarily driven by above-normal summer weather in our non decoupled jurisdictions, along with strong operational performance and the impacts of distribution rate cases. ExGen earned $0.44 per share in the third quarter. Generation and Constellation both performed well during the quarter. We continue to make progress on levers we identified to mitigate the Texas loss, and we expect it will take the full year to realize all of the savings. Realized gains in our decommissioning trust funds partially offset the unrealized losses from our Constellation technology venture investments, which are mark-to-market in every quarter until realized. At our holding Company, we benefited from expected income tax favorability in the third quarter. And as a reminder, our holding Company incurred $0.12 per share drag in the first quarter, associated with how consolidated full-year tax expenses are booked due to the impact of the losses incurred at ExGen and Texas. The remainder of the first quarter drag is expected to reverse in the fourth quarter, and is not expected to impact our full year results. Turning to guidance, we are narrowing our 2021 EPS guidance range to $2.70 to $2.90 per share, from $2.60 to $3 per share previously. Our updated guidance considers reversal of the retirements of the Byron and Dresden nuclear stations, as well as execution of the EDF put, and our continued additional disciplined approach to cost management. We are delivering…

Thanks, Joe. Turning to Slide 14, I'll close on our ongoing priorities and commitments. As we've said in the past and will continue, we will meet or exceed our financial commitments, delivering earnings with our guidance range and maintaining a strong Balance Sheet. And that goes for both companies as we split, there's a commitment on both sides to do that. We'll complete the preparations to separate the businesses including the organization, the cost structure for each Company that will set each Company up for long-term success at a strong investment grade. At Exelon Utilities, we are prudently and efficiently deploying $6.6 billion of capital to benefit our customers and help meet the needs of our jurisdictions Energy policy goals. We are working with our regulators to ensure timely recovery of these investments, as Joe discussed in his talking points. We continue to advocate for clean energy and climate policies with the new administration and Congress, In our states to put the country on the path to meeting the carbon and air pollution reduction goals. There's more here than just carbon. We have a city in Chicago that is the 3rd highest with lung disease, and it's not only carbon, it's the fumes from the industrial sources, and we need to do our part to help lower that. We're partnering and supporting our customers in the communities that we serve. So with that, I thank you for your time today, and I'll open up the call, to questions.

Thank you. [ Operator Instructions] Our first question comes from Stephen Byrd, from Morgan Stanley. Your line is now open.

Good morning. Thanks so much for the thorough update.

Thanks, Steve.

I wanted to step back and talk about federal legislation broadly, and discuss the impacts, less on nuclear, I think you all have been very clear on that side. I'm thinking more about everything from tax policy to support for transmission. Just curious at a high level, what are you thinking in terms about the potential impacts to your business if this legislation were to pass?

I'll let Kathleen Barron speak to it. We think there's a lot of positives that can be put in play here. I don't think we're looking for any handouts. We'd rather make the investments ourselves. And between Kathleen and Calvin Butler, we'll -- they'll ham and egg it.

And Joe may want to jump in on the tax question, but good morning, Stephen. As you pointed out, I think we're very heartened by the support for the nuclear stations and the recognition that their continued operation is essential to meeting the climate goals. But the bill goes way beyond nuclear as you pointed out, in terms of the extensive support for electric vehicles both personal vehicles and electric buses and transit transmission, as you pointed out, and then significant funding on resiliency for hardening and weatherization, all of which we think are essential for the communities that we service as Chris pointed out. The transmission program, that's always been a challenging issue, as you know, given that it's not just about funding, but it's also about citing. And so we do expect that to continue to be a challenging area, but obviously essentially to the Clean Energy build-out. So I'll stop there, let Cal jump in or Joe, as I said, on tax.

Good morning, Steve. And I will just add a couple of things to piggyback off what Kathleen said. If you think about some of the specifics that the federal government is looking to partner with the states, think about the $7.5 billion they've earmarked for a charging infrastructure. $5 billion going toward zero emission and clean buses, port electrification. When you think about port electrification, for our city of Baltimore and Philadelphia, what that would mean for them, and not even talking about the different grants that they're proposing where utilities could partner to do different things in creative. And all this is good for the customers. If those -- that -- those monies are coming directly to the state and there's a partnership, we will continue to invest on reliability and resiliency and then take these moments. It keeps the customer build down. And that is a concern of ours, just to keep affordability at the forefront of everything we do. So that's that partnership and how we see it playing out. Joe?

And I will pick up, Stephen, on the tax question and we're studying the potential implications across our business. And as you know, we obviously a very large capital plans at our utilities for the benefit of the cost -- our customers. And they also helped drive the local economies and help meet the climate and clean energy goals of our communities. Many of the goals -- of those same goals are shared by this build back better plan, which I think is driving the tax question. And you've heard others in the industry say the minimum tax could increase customer bills and potentially impact investment of the capital that we deploy. We are communicating with policymakers about that fact and the impacts it may have on the capital planning process, and we're continuing to work through that.

Very helpful, thank you. And then maybe just -- separately, just thinking about the utility business. You already have excellent growth, so I suppose this question is going to come across as somewhat greedy, but I am thinking about other areas of upside potential there. I was just curious, maybe for Calvin and Chris. As we think about categories of growth upside beyond, the excellent base plan that is, resulting in above average growth. What are some of the categories of, additional upside as we think about, the utilities growth prospects going forward?

I'll just start off and then [indiscernible] to Calvin. There are many case studies being done on voltage requirements -- on dual flow voltage requirements. What do we use to harden ourselves from an internet exposure which would be our own wires, our own fiber but -- Cal?

Chris, you captured it. It really goes around building the reliability and the resiliency of our system. And I think as we lay out our multi-year plans and across our jurisdictions, it's understanding and really diving in, Stephen, in terms of what the customers want in our jurisdictions, but the hardening and the resiliency of our system is coming in the forefront. In addition to fighting climate change, that's a big part of what we're doing in along with the security-related issues, as Chris has outlined. So those are opportunities in the areas, but it's that partnership and really understanding what the jurisdictions are wanting.

Thank you very much. Go ahead.

We can't run a system on the distribution side any longer at a 4,160-voltage level, we have to get up to 138, and that's going to take a significant investment to do that. And that's to support the distributed Generation. So there's a lot more work to be done.

Thank you very much.

Thank you. And our next question comes from Steve Fleishman from Wolfe Research. Your line is now open.

Hi, good morning.

Hi, Steve.

Hi. So I guess 2 questions. First, on the Build Back Better [indiscernible] Bill. Just thoughts on the likelihood that that passes. And if some reason it does not, how do you feel about opportunities to address nuclear PTCs and other bills if we somehow got there?

Well, Kathleen is earning her paycheck to ensure that it gets done. So I'll let her answer the question.

Good morning, Steve.

Kathleen, make it to -- make it 2 for 2.

Thanks, Steve. I think we're still feeling very confident about the Democrats ability to get both infrastructure and build back better across the finish line. They're -- as you know, a strong proposal put out by the president that had support last week around a top line number that the group has apparently coalesced around. They have continued to work to flesh out the meat on the bones, so that they can move this package quickly and [indiscernible] has assured that he thinks that is doable, indeed, even signing an agreement with the Senate Majority Leader that it's possible this could get done by Thanksgiving. So I think there's a broad consensus that action is needed. And in particular, on the clean energy tax package, that there's sufficient support for the provisions that we'll get the country to a place where it can come close to meeting the 2030 Carbon reduction goals. If for some reason that does not occur, as you know, there's regularly action at the end of the year on a bipartisan basis to look at tax extenders. And we're again hopeful given the amount of support that we've seen for support for the existing fleet, that the nuclear provisioning could be considered as part of an end-of-the-year bipartisan package, if the democrat BBB bill doesn't get across the finish line.

Okay. My other question related to that is, I know there's a ton of detail of this, but just high level. How does the PTC interact with your existing state commitments for the different units, or subsidies or laws. Also you’re hedging and retail and all that, as well.

I want to start new.

Yes, I'll start off and pass it to Jim on the hedging question. But the short answer is that under the nuclear PTC as drafted, revenues from a state program are not, included at the state program would adjust, or reflect the existence of the federal support. almost all of our programs have some explicit reference to the fact that if there is subsequent federal support after the state program takes effect, that it will be reflected in the state calculation of the support under the program. So there clearly will need to be further proceedings to evaluate and have the state adjudicate how that federal support will be reflected, but assuming that the PTC passes, we would expect each of the states to take a look at that and for it to be reflected in the level of the states' supports. Jim?

Yeah. And Steve, I think on the hedging the best -- the details of the implementation [Indiscernible] really matter. But for now, I think the right way to think about it, is this effectively will serve as a hedge for a significant portion of our generation. If you take our nuclear fleet and we kind of reconcile what the PTC program will do. And then kind of reflect what Kathleen just said about its impact on the state programs, the net result is you have a pretty highly hedged portfolio with the PTC. We'll get into the details about them, The exact settlement of it and exactly how it -- the implementation plan will be settled all the way through the prices all the way through to the spot market. The best way I think on the retail business for us is we'll be able to still win our customer business. We'll have a portfolio that's a little bit more hedged to begin with. We'll have purchases in the market to help us where we need to go make additional purchase to help us serve the load portfolio that will continue to serve.

Great. Thank you.

And thank you. And our next question comes from Julien Dumoulin-Smith from Bank of America. Your line is now open.

Hey. Good morning, team. Congrats on the continued progress across all your various efforts here. So kudos to Kathleen and team. But perhaps -- just to focus on one of the other topical issues of late. Uranium prices have been seeing a pretty sharp uptake of late. I suspect it's not too subsidiary and for you all, but I just want to make sure I understand how you all are thinking about that impact things sort of longer-term hedging and procurement activities. And ultimately impact back to the core business.

I think we're very well hedged through this period and it's not like we haven't seen it before, but I'll let Bryan Hanson, our head of the Generating Company -- Operations of the Generating Company, answer that.

Thanks, Chris. Good morning, Julien. We think today's market fundamentals are much improved from the last uranium bull market that we saw 2008-2010 period. Demand is lower, primary mining supply has increased and utility inventories are higher. We at Exelon, we hedge with a diverse portfolio of fuel contracts that include varying pricing mechanisms, or varying horizons with a diverse group of qualified and reliable suppliers. And we maintain a strategic inventory, both to ensure security of supply for our reactors, and to provide flexibility and purchase timing in the event of a market disruption like we're seeing today. We even maintain or keep our uranium inventory in different material states, such as yellow cake gore uranium hexafluoride gas. So we think we're well hedged and well ready for this current bull market. We're looking in the forward part of the LRP for any opportunities and they're all well within our expectations that we see today.

That would be [Indiscernible]

UFS 6. Very good, Chris.

There we go, excellent. Thank you guys for affirming that, appreciate it. And then, I just -- on the Hydrogen side, I heard the comment about partnering with Nel here, scaling into operate commercial opportunities to the extent available in '22. Can you talk a little bit more about what that opportunity means for you all? I mean, is this just about having a firm uptake or is this about having some portion of the economics over time? And I know it's early days, but I'm just curious to hear, at least it's the best to understand what that opportunity may be, especially considering the credits at hand here as well.

Yeah. I don't think we're ready to give a full business model on it right now. I think we've got a good partnership with the DOE. Exelon, like other utility companies, sees a great use for hydrogen if it's mixing it with natural gas to cut down the carbon loads or other ways. There's -- our strategy organization is still looking at the transportation methodology and they're doing some metallurgical research with other labs to make sure that we -- if we were replacing natural gas pipelines with hydrogen pipelines, that the embrittlement problem doesn't become severe. So what we need to do first, is predict or perfect an efficient technology, using our heat and steam to develop the Hydrogen. Then from there, continue to work with other stakeholders on, where we put the Hydrogen. Does it go in a mixed form with natural gas at first? Does it become, what was thought about ten years ago, the hydrogen economy? I don't think we're there yet. I think there is a lot of work to be done before we get there, but just having the grants and working with the labs and the government to start using a nuclear plant for something more than electricity because you've got all that waste, heat, and steam that can be redirected into the development of very efficient hydrogen, and then continue to move on from there.

Got it. Just to clarify this, I imagine you wouldn't touch on the subject of capital allocation given the rise in commodity prices here. And when still stated equity needs. Still too early, right?

Yes. Too early

Fair enough. We will leave it there. Thank you, guys. Best of luck here.

Alright. Thanks.

Thank you. And our next question comes from Shar Pourreza from Guggenheim Partners. Your line is now open.

Hey guys, good morning.

Morning.

Joe, can you just maybe further unpack, I guess the level of details and additional disclosures around the retail business that you plan to talk about at the Analyst Day, now that it's obviously a lot more in focus? And then the interim, maybe just further elaborate in how we should think about Nigro? Think about the prompt year, and year to hedge profiles just given the lack of disclosures and significant moves in the curves. I mean, appear didn't, obviously, take as much advantage as expected, so maybe just a better sense here would help, even if it's directionally.

Yeah, let me answer the first question, Shar, and good morning. And then I'll turn over the hedge question to Jim McHugh. As I've said previously, as we get closer to actual separation date, we plan to have an Analyst Day for both companies where we'll update all of the financial variables so you have a complete picture of both companies and you'll get insight into -- on the Exelon side, all the things that we normally provide including earnings trajectories and rate-based growth and so on. And on the Constellation side, we'll give you the details with the updated hedge disclosures and all the other associated information that allows you to do your modeling. But that's not going to happen obviously until we get much more certainty and much closer to the actual execution of separation itself. And with that, Jim, I'll let you answer the question.

Sure, I'll talk about hedging. The outer years where we have less hedge -- we've always talked about our ratable hedge program. We're still following that. We're not deviating a large deal from what we've historically talked about. I think the change for 2022 has to be in relation to what we saw develop over the course of this quarter with the legislation. We had assets that we had previously said we're going to retire. And then the legislation passed and we un -retired. And what that effectively meant for 2022 is that Before the contract goes into effect, it created a position that added extra generationally through our portfolio that we've been able to since then hedge but beyond -- then beyond May or June when the contract starts, effectively those megawatts are hedged through the CMC contracts. So the 2022 is just a little bit in a different beginning of the year, end of your story because effectively the contracts are providing the hedge in the long run. We hedged the length that got added back to the book, largely speaking, in the beginning of the year, during this price action that we saw this quarter. So that's been a generally good development. And then, in the outer years, we would still -- other than the contracted assets, we would still be following along our rateables hedge programs. So there's the further out in time you go, the more open position areas as we've always had historically.

Got it. That's actually pretty interesting points. Thank you for that. And then just lastly. I know you guys are still working through the details, but can we just touch on maybe just how you're thinking about the SpinCo capital allocation. Just even briefly, right? I mean, your IPP peers have been very specific. Is this something we should -- we could see from Constellation? Just maybe some high-level thoughts on how you and the board are thinking about approaching growth versus returning capital to shareholders.

You know what? We're going through that modeling right now. As Joe Dominguez takes over a d he puts his financial team together, they will be evaluating the best use of capital and what the opportunities are. Having a good investment-grade gives us a little bit more opportunity. And maybe what would -- somebody would call our peers, that we don't think that they are our peers because of the hedge portion of the nuclear plants. But they will continue to evaluate that in the best way to create shareholder value, and Joe Dominguez you want to add any more?

I don't think I really can add at this point. We're looking at it pretty carefully. As Chris said, we think we have, some unique opportunities in this business, around co-location of assets, Hydrogen, and other things. That will depend on how the legislation plays out, and we've covered that. I think we'll have a lot more to say on that on-Analyst Day, but at this point, we're really just studying options. Pretty excited about the opportunities in front of us.

One thing I can say is, I don't see him building a new nuclear plant anytime soon.

Thank you for clarifying that Chris. Appreciate it guys, and congrats.

And thank you. And our next question comes from Jeremy Tonet from JPMorgan. Your line is now open.

Hi, good morning. It's actually Ryan on for Jeremy. Just had one on the regulated business and kind of [Indiscernible] understanding it's still early days, but the changes are the framework at Illinois and ComEd and how you thinking at this stage about those 2 different options that multi-year plan versus the traditional rate-making and how that might impact growth of customer bill impacts as we approach that date?

Hey, Ryan, this is Calvin Butler. First and foremost, the team is really looking through and analyzing all the metrics. And as you know, we're operating with the formula rate through the end of '22 and we'll make that, decide on early midyear what that looks like going forward. But we're really making that determination now. We have not decided yet whether it's going to be a four-year multiyear plan, forward-looking test year. We're doing that analysis now.

Okay. Understood. And then just maybe just one on ExGen, and I know you guys are going to be very successful in achieving on the assets laid out beginning of the year on the offset, [Indiscernible] kind of storm. And just thinking through, maybe you can provide more color on what those assets have been and any kind of incremental thoughts on relative sustainability, going into future years?

Bryan, you want to talk about what you're doing?

Yeah, on the nuclear side where a lot of the offsets came from, in our capital allocation, our capital maintenance, many of those items were big, major transformer improvements, changes, change-outs. We've just simply moved those on a year or 2. We bundled them the way we did because it streamlined our efficiencies and use of craft resources. We're able to skip a year or 2 on those, no challenges to reliability from that standpoint. And a number of the other modifications included just a material condition. Improvements were always kept in the plan, but some of the digital upgrades that we had planned for those years, we've moved those out of a couple of years and reassessing the economic viability of some of those improvements.

Would you just bring them back Colorado bend from hardening for the lessons learned.

Yeah, in the Texas assets, we have done all the work that's required that address the known issues and the acute issues from Winter Storm Uri. We're finishing up at Colorado Ben, which is done. Our plant by Houston will follow -- we finished that work-up a couple of weeks ago, as well as a number of enhancements we made just to protect ourselves against a sustained cold weather event again in Texas. Temporary improvements that we've made looking for, again, what's the long-term market signals for those plants.

Got it. I appreciate the color. I'll leave it there. Thank you.

And thank you. And I would now like to turn the call back to President and CEO, Chris Crane, for closing remarks.

Thank you for joining the call today. As you know, we're working hard to run the business at best-in-class levels and taking steps to step up to item strong in?2? companies, strong independent companies. And we look forward to seeing you at EEI, I think next week. It's coming quick. And with that, we'll close the call out and tell everybody to be safe.

Thanks to all participants for joining us today. This concludes our presentation; you may now disconnect. Have a great day.