Exelon Corporation

Hello, and welcome to Exelon's fourth quarter earnings call. My name is Gigi, and I'll 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. You can ask questions by pressing star 11 on your telephone keypad. If you would like to view the presentation in a full screen view, click the Full Screen button by hovering your computer mouse cursor over the PowerPoint screen. Press the Escape key on your keyboard to return to your original view. And finally, should you need technical assistance, 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 Andy Plenge, Vice President of Investor Relations. The floor is yours.

Thank you, Gigi. Good morning, everyone, and thank you for joining our fourth quarter 2022 earnings conference call. Leading the call today are Calvin Butler, Exelon's President and Chief Executive Officer, and Jean Jones, 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 a presentation, all of which can be found in the investor relations section of Exelon's website. The earnings release and other matters, which we will 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 to today's 8K and Exelon's other SEC filings for discussions of risk factors and other 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 in our earnings release for reconciliations between the non-GAAP measures and the nearest equivalent GAAP measures. We've scheduled 60 minutes for today's call. I'll now turn the call over to Calvin Butler, Exelon's President and CEO.

Thank you, Andy, and good morning, everyone. I'm excited to be with you for my first earnings call as CEO of Exelon, and one that concludes a very successful year for us. When I first joined ComEd in 2008, it was one of two utilities, along with Pico, under the Exelon umbrella. We recognized that we had an opportunity to take advantage of the power of the Exelon platform in a meaningful way. The company was already known for building world-class operations in the generation business, commonly known as our management model. Over the course of the next 14 years, we applied the same principles of best practice, sharing and accountability through performance measurement to our energy delivery business. We were building a standard of excellence to deliver improvements in reliability, safety, customer satisfaction, and value. I was fortunate and privileged to be part of guiding this evolution, first as the lead to ensure the Constellation merger crossed the finish line in 2012, then in my role as CEO of BGE, and eventually as CEO of Exelon Utilities and COO of Exelon. In those positions, the leadership teams and I were able to challenge our talented employees to take our utilities to the next level. We sustained and expanded our operational excellence. improved customer satisfaction, enhanced team diversity, and improved earned ROEs from mid-single digits to our 9% to 10% target, first at BGE and then at PHI. And as you'll hear today, 2022 gave us a chance to showcase what we've built, an ability to execute, push continuous improvement, and achieve a balanced outcome for our customers and investors. But as proud as I am about what our team has built, I'm more excited about what lies ahead. And I want to lay out our vision of who we are and what supports our value proposition. Exelon is the premier T&D company in the industry. Our platform is stable with sound fundamentals, both operationally and financially. This platform positions us to support our jurisdictions through the multi-decade energy transition that is just starting. We can do it in a manner that supports affordability and equity while driving consistent, stable growth for our shareholders, the type of performance that is a hallmark of a top-tier utility. What makes our platform unique? Well, we have an extremely diversified investment plan in size, scope, and location. We have no generation. We have worked with our jurisdictions to operate under forward-looking rate mechanisms that provide value for our customers and predictable results for our investors. And almost three-quarters of our revenues are decoupled. This leads to a very compelling risk-adjusted total return of 9% to 11% built on the foundation of an unmatched platform, operational excellence, and strong partnerships with our jurisdictions and communities. The Exelon team has proven it's ready to meet the challenge of leading the nation in its energy transformation, powering a cleaner and brighter future for our customers and our communities, while creating value for our shareholders. I'll now turn to slide five and talk about our key messages for this call. I will start by recapping the strong performance in 2022. We executed right in line with our expectations, reporting operating earnings results of $2.27 per share. That exceeds the midpoint of guidance by two cents and represents 8.1% growth off of the 2021 guidance midpoint. We also had best on record operating performance at three of our four utilities. As for our rate case activity, we had four constructive distribution rate case outcomes, including two gas cases and two electric cases. We'll look to continue this progress in 2023 with several important rate cases this year. In January, ComEd filed with the Illinois Commerce Commission its first multi-year rate plan and grid plans under the framework established by the Climate and Equitable Jobs Act. The filing follows 15 stakeholder workshops reaching more than 1,000 attendees as well as 45 stakeholder presentations. As Illinois progresses towards its decarbonization goals, ComEd is starting from an industry-leading position of strength. In fact, in 2022, ComEd was recognized with the Outstanding System Resiliency Award for U.S. Utilities by PA Consulting while also maintaining an average bill that is lower than those in 47 of the 50 states. Beyond the rate case, ComEd and the City of Chicago announced a proposed Chicago Franchise Agreement and a Related Energy and Equity Agreement. These agreements grant ComEd the right to continue providing electric utility services using public waste within Chicago and create a new nonprofit entity to advance energy and energy equity related projects. These agreements build upon the century long partnership we have had with the city and demonstrates our alignment around key energy and sustainability goals. Pending approval by the city and Exelon board ComEd continues to operate in the city under the prior franchise agreement. And later this month, BGE will be filing its second multi-year plan for its electric and gas businesses, with Pepco DC and Pepco Maryland following later in the first half of the year. Like Illinois, Maryland's Climate Solutions Now Act has set aggressive climate and decarbonization targets, creating an environment where utility action and investment is a key priority and for which multiyear plan frameworks are particularly well suited. Jean will cover the rate cases and other regulatory activity in more detail shortly. As for our projected outlook, we have rolled forward our disclosures after adding a year to our guidance window. we are reaffirming our 2021 to 2025 target of 6% to 8% annualized earnings growth, with the expectation that we will reach midpoint or better of that compounded annual growth rate. We are also initiating an identical target for 2022 through 2026, where we expect to deliver 6% to 8% annualized earnings growth over the four-year horizon, with the same expectation that we will reach midpoint or better of that compounded annual growth rate by 2026. This is driven by the almost 8% rate-based growth from 2022 through 2026, underpinned by deploying $31 billion of capital over 2023 to 2026. That's over $2 billion more than the prior four-year period. As we balance the required progress on the energy transition with customer affordability, we continue to challenge ourselves to deliver maximum customer value at the lowest cost possible. We continue to expect some variability in our growth rate from year to year due to our regulatory calendar, but we have maintained the transparency provided in the third quarter around our path to achieving our TAGR commitment. For 2023, we are initiating our projected operating earnings guidance at $2.30 to $2.42 per share, with the midpoint that implies 5% growth off the midpoint of our 2022 guidance. Being slightly below the annualized earnings growth range is in line with the direction we provided on our third quarter call, but we do expect 2023 to be the exception. All other years are expected to grow within the range of 6% to 8%. if not above it. We remain confident in the earnings power of our business. We expect an annualized dividend of $1.44 per share in 2023, reflecting approximately 7% growth off of our $1.35 dividend per share in 2022. Gene will cover more of the specifics of our financial outlook. Moving to slide six, I want to spend a moment recognizing last year's accomplishments. demonstrating the type of stable, predictable performance that our customers and shareholders expect us to deliver. First, we completed the separation from Constellation, which by any measure was a success, and executed in less than a year after our board's decision to proceed. We did not miss a beat operationally despite this separation. We invested more capital for the benefit of our customers than ever, while achieving the highest ROE since 2019. We were able to attract and retain a talented and diverse workforce in a difficult labor market, a testament to our culture of engaged and purpose-driven employees. And we didn't lose sight of the importance of supporting our communities through more than just the investments we're making in them. Our employees volunteered more than 126,000 hours and connected our customers to almost $600 million of energy assistance, an increase of over $100 million from 2021. We continue to build upon our history of workforce development, launching the Atlantic City Infrastructure Academy in the fall and graduating our first group of 26 students this month with the skills needed to succeed in careers in the energy industry. We achieved our highest percentage spend ever, 39%, or $2.8 billion of total spend with diverse suppliers. We gave $22 million to support schools and students in our markets. These programs include Learning Energy Basics in middle schools and our Exelon Foundation STEM Academy that inspires high school girls to pursue careers in the energy field. And we are doing our part to create a cleaner and brighter future for our customers, making good progress on our path to clean with 112 miles of gas pipe main replacements and 12% of our vehicle fleet now electrified. These are just a few examples of the type of work we do that has led to us being named to the Dow Jones Sustainability Index for 17 years running. Last, We delivered on our earnings commitment for the year. Ultimately, 2022 was about establishing and beginning to prove out the value proposition the new Exelon offers, and our team executed well. Before I turn it over to Gene, I will review our operating performance for 2022 on slide seven, which ended as strongly as it began. I'll start with reliability. We were top decile in outage frequency performance at three of our four utilities, and we were top quartile for outage duration across all utilities. Achieving performance like this requires sustained focus and effort across our business. First and foremost, it requires our team showing up 24-7, no matter the time or the conditions. For instance, Winter Storm Elliott struck our BGE service territory on December 23rd, taking out power to 112,000 customers. Our dedicated team completed over 1,500 repair jobs in sub-zero temperatures and at times to bring just one or two customers back online to restore power completely without any injuries. And it wasn't just our BGE team. The power of the platform showed up in force. with ComEd, PECO, and PHI supporting the restoration efforts. On behalf of the entire leadership team, we want to thank all of our employees on the front lines of storm duty for their dedication. We would not have this track record of excellence without their commitment. Operational excellence also requires smart and prudent investment that's compensated fairly, built around alignment with our jurisdictions on shared goals and priorities. Last year, we invested $7.2 billion of capital, earning that 9.4% ROE I mentioned. The ability to execute on this level of investment with the confidence that we're aligned with our jurisdictions is a key element of our success. We need to perform every day to maintain that trust. On safety, ComMed continues to maintain top quartile performance while we work to get our other three utilities up to our standards. Our efforts to reduce serious injuries have been successful, but we are also focused on implementing safety best practices at our utilities to avoid other incidents that have driven OSHA underperformance in 2022. For the year, BGE, ConMed, and PECO sustained top quartile customer satisfaction performance. This reflects our continued investment in technology to create a better customer experience, our top total reliability, and our commitment to an affordable energy transition. And finally, gas odor response continues to be in the top decile across all three utilities, including with BGE completing the year with its best on record performance. We continue to accelerate the modernization and safety enhancements of the gas system, while working with our customers and communities to live and work safely with gas. I will now ask Jean to review our financial update. Jean?