Exelon (EXC) Q4 FY25 earnings call: guidance and Q&A

How does Exelon achieve near top-end 5-7% EPS growth with 8% rate base growth, considering financing costs?

Jeanne Jones explained that the 7.4% earnings growth and 8% rate base growth since 2021 demonstrate a track record. The tailwind comes from strong earned ROEs and AFUDC associated with growing transmission capital, which helps offset financing costs.

“if you look at kind of the equity needs, that sort of assume an average debt cost, but then I think what you might be missing is the AFUDC associated with transmission capital.”

asked by Nicholas Campanella · answered by Jeanne Jones

What is the regulatory strategy for 2026, specifically regarding rate cases in Pennsylvania and Maryland, and their impact on the 5-7% EPS outlook?

Calvin Butler stated that the company is in constant conversation with stakeholders, focusing on affordability and grid reliability. They are filing in Maryland this year and considering the best approach for Pennsylvania, with updates to follow. Jeanne Jones added that the guidance accommodates various rate case timing scenarios.

“we're looking at what we are going to do in Pennsylvania and what we're going to do in Maryland. I think in our documents, we've already laid out that we're filing in Maryland this year, and we're considering what is the best approach to action in Pennsylvania.”

asked by Nicholas Campanella · answered by Calvin Butler

What is Exelon advocating for regarding PJM supply challenges and the Reliability Backstop Action (RBA) process, and is the September auction timeline still expected?

Colette Honorable stated that Exelon supports the RBA and is focused on engaging with PJM and regulators. They advocate for increased supply to lower customer costs and improve reliability, citing a Charles River Associates study showing potential savings of $9.6 billion to $20 billion. They also focus on extending the price cap and improving reliability.

“utility-generated power could reduce PJM customer costs by between $9.6 billion and $20 billion in the '28/'29 delivery year.”

asked by Nicholas Campanella · answered by Colette Honorable

How are legislative conversations progressing in states like Pennsylvania regarding resource adequacy, and is collaboration with IPPs possible on new generation PPA structures?

Calvin Butler emphasized alignment with Governor Shapiro on affordability and the need for an 'all-of-the-above' approach. He confirmed commitment to engaging with all stakeholders, including IPPs, to find solutions that satisfy everyone. Colette Honorable added that they are active in Pennsylvania, Maryland, Delaware, and New Jersey, bringing solutions like customer relief funds and advocating for utility generation. Jeanne Jones clarified that collaboration with IPPs is possible 'at the right price' to ensure new generation benefits customers.

“At the right price, right? Like I think it's -- we're always going to be our customers' advocate. So I think right now, what's -- the problem, right now, our customers are paying more for less.”

asked by Shar Pourreza · answered by Jeanne Jones

What would it take to achieve a step-function change in the 5-7% EPS growth trajectory, given the evident upside opportunities?

Jeanne Jones stated that the company is already seeing progress, with rate base CAGR increasing from 7.4% to 7.9%. She emphasized that the plan is highly executable and defensible, and while it won't be 'flashy' double-digit growth, it is consistent and reliable.

“Like we're not going to be the flashy, right, it's going to go up double digits, but it's going to -- it's going up and it's highly executable, defensible. And we're not going to give you a number that I can't sit here and say that.”

asked by Shar Pourreza · answered by Jeanne Jones

Why isn't the EPS growth rate higher, given the consistent rate base growth and historical outperformance? Is there conservatism in the guidance?

Jeanne Jones acknowledged striving to exceed expectations but noted increasing financing costs. She highlighted that strong earned ROEs from transmission investments provide confidence. The guidance is designed to be defensible and manageable, accounting for financing costs.

“I mean, I think we're always going to strive to exceed expectations, but I think, again, giving you a number you can count on. I think financing costs are increasing, right? So you've got to account for that.”

asked by Paul Zimbardo · answered by Jeanne Jones

How should investors think about funding incremental capital opportunities, specifically regarding the 40% equity funding policy?

Jeanne Jones confirmed that the 40% equity funding policy will be maintained to preserve the balance sheet cushion. This translates to $3.4 billion over four years, or less than 2% of market cap annually, which is manageable, especially with $700 million already priced in 2025.

“No, it's the 40%. We want to maintain and keep that cushion we've worked so hard to get on the balance sheet. So what that results in is about the $3.4 billion over the 4-year period.”

asked by Paul Zimbardo · answered by Jeanne Jones

With the shift towards more transmission investment, will the 9-10% earned ROE range see an upward movement?

Jeanne Jones stated that the average earned ROE since separation (2022-2025) has been around 9.4%. With the shift towards transmission, she expects that to continue, 'if not slightly better,' though it will take time for larger transmission projects to close.

“our average earned has been somewhere around 9.4%. To your point, as we have been turning the ship towards transmission, I think you can expect that, if not slightly better.”

asked by Steven Fleishman · answered by Jeanne Jones

Will there be a 'lessons learned' report from Maryland, and will BGE file its rate case before that report is issued?

Calvin Butler believes a 'lessons learned' report will be issued in 2026, acknowledging the frustration. Jeanne Jones confirmed that BGE will likely file in the first half of the year, before the report, as rates expire in 2027.

“Yes. We're going to file probably in the first half. And would love to accommodate whatever is in there, but to Calvin's point, we've been transparent with the commission around the fact that the rates expire in '27 and so we have to do something here.”

asked by Steven Fleishman · answered by Calvin Butler