(EDGAR Online via COMTEX) -- Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Exelon
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Generation and the Utility Registrants have also incurred direct costs related to COVID-19 consisting primarily of costs to acquire personal protective equipment, costs for cleaning supplies and services, and costs to hire healthcare professionals to monitor the health of their employees. At Generation and PECO, such costs are recorded as Operating and maintenance expense and are excluded from Adjusted (non-GAAP) Operating Earnings. At ComEd, BGE, Pepco, DPL, and ACE, such costs are primarily recorded as regulatory assets. See Note 3 - Regulatory Matters of the Combined Notes to Consolidated Financial Statements for additional information.
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Financial Results of Operations
2020 2019 (Unfavorable) Favorable Variance
Exelon $ 1,963 $ 2,936 $ (973)
Generation 589 1,125 (536)
ComEd 438 688 (250)
PECO 447 528 (81)
BGE 349 360 (11)
PHI 495 477 18
Pepco 266 243 23
DPL 125 147 (22)
ACE 112 99 13
Other(a) (355) (242) (113)
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Payments that ComEd made under the Deferred Prosecution Agreement. See Note 19
Lower capacity revenue;
Reduction in load due to COVID-19 at Generation;
Lower realized energy prices;
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Higher storm costs related to the June 2020 and August 2020 storms at PECO, net of tax repairs, and related to the August 2020 storm at DPL;
Unfavorable weather conditions at PECO, DPL Delaware, and ACE; and
A net increase in depreciation and amortization expense due to ongoing capital expenditures at PECO, BGE, Pepco, DPL, and ACE, partially offset at Generation due to the impact of extending the operating license at Peach Bottom.
The decreases were partially offset by;
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The following table provides a reconciliation between Net income attributable to common shareholders as determined in accordance with GAAP and Adjusted (non-GAAP) operating earnings for the year ended December 31, 2020 as compared to 2019:
For the Years Ended December 31,
2020 2019
Earnings per Earnings per
(All amounts in millions after tax) Diluted Share Diluted Share
Net Income Attributable to Common Shareholders $ 1,963 $ 2.01 $ 2,936 $ 3.01
Mark-to-Market Impact of Economic Hedging Activities
(net of taxes of $73 and $66, respectively) (213) (0.22) 197 0.20
Unrealized (Gains) Losses Related to NDT Fund
Investments (net of taxes of $278 and $269,
respectively)(a) (256) (0.26) (299) (0.31)
Asset Impairments (net of taxes of $135 and $56,
respectively)(b) 396 0.41 123 0.13
Plant Retirements and Divestitures (net of taxes of
$244 and $9, respectively)(c) 718 0.74 118 0.12
Cost Management Program (net of taxes of $14 and $17,
respectively)(d) 45 0.05 51 0.05
Litigation Settlement Gain (net of taxes of $7) - - (19) (0.02)
Asset Retirement Obligation (net of taxes of $16 and
$9, respectively)(e) 48 0.05 (84) (0.09)
Change in Environmental Liabilities (net of taxes of
$6 and $8, respectively) 18 0.02 20 0.02
COVID-19 Direct Costs (net of taxes of $19)(f) 50 0.05 - -
Deferred Prosecution Agreement Payments (net of taxes
of $0)(g) 200 0.20 - -
Acquisition Related Costs (net of taxes of $1)(h) 4 - - -
ERP System Implementation Costs (net of taxes of
$1)(i) 3 - - -
Income Tax-Related Adjustments (entire amount
represents tax expense)(j) 71 0.07 5 0.01
Noncontrolling Interests (net of taxes of $19 and $26,
respectively)(k) 103 0.11 90 0.09
Adjusted (non-GAAP) Operating Earnings $ 3,149 $ 3.22 $ 3,139 $ 3.22
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Note:
Amounts may not sum due to rounding.
(a)Reflects the impact of net unrealized gains and losses on Generation's NDT fund investments for Non-Regulatory and Regulatory Agreement Units. The impacts of the Regulatory Agreement Units, including the associated income taxes, are contractually eliminated, resulting in no earnings impact.
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(e)Reflects an adjustment to Generation's nuclear ARO for Non-Regulatory Agreement Units resulting from the annual update.
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Early Retirement of Generation Facilities In August 2020, Generation announced that it intends to retire the Byron Generating Station in September 2021, Dresden Generating Station in November 2021, and Mystic Units 8 and 9 at the expiration of the cost of service commitment in May 2024. As a result, in the third quarter of 2020, Exelon and Generation recognized a $500 million impairment of its New England asset group and one-time non-cash charges for Byron, Dresden, and Mystic related to materials and supplies inventory reserve adjustments, employee-related costs, and construction work-in-progress impairments, among other items. In addition, there will be ongoing annual financial impacts stemming from shortening the expected economic useful lives of these facilities, primarily related to accelerated depreciation of plant assets (including any ARC) and accelerated amortization of nuclear fuel. Such ongoing charges are excluded from Adjusted (non-GAAP) Operating Earnings.
Actual Projected(a)
Income statement expense (pre-tax) 2020 2021 2022 2023 2024
Depreciation and amortization
Accelerated depreciation(b) $ 921 $ 2,070 $ 110 $ 120 $ 50
Accelerated nuclear fuel amortization 60 170 - - -
Operating and maintenance
One-time charges 277 30 10 - 20
Other charges(c) 35 10 10 10 5
Contractual offset(d) (364) (475) - - -
Total $ 929 $ 1,805 $ 130 $ 130 $ 75
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Feb 24, 2021
COMTEX_381667950/2041/2021-02-24T15:20:45
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