Executive Summary / Key Takeaways

• Exelon Corporation ($EXC) is strategically positioned as a pure-play regulated transmission and distribution (T&D) utility, driving substantial capital investment into grid modernization and expansion to meet unprecedented demand growth, particularly from data centers.
• The company projects a robust $38 billion capital expenditure plan from 2025-2028, with over 80% allocated to transmission, underpinning a 7.4% annualized rate base growth and a reaffirmed 5-7% operating earnings growth through 2028.
• Operational excellence is a core competitive advantage, with Exelon's utilities consistently achieving top-tier reliability rankings and delivering services at below-average rates, supported by advanced grid technologies and disciplined cost management.
• Exelon is actively shaping the regulatory landscape through multi-year rate plans and innovative solutions like Transmission Security Agreements (TSAs) to ensure fair cost recovery, protect existing customers, and facilitate new load interconnections.
• Despite significant capital needs, a balanced financing strategy, including a recent S&P credit rating upgrade to BBB+ and proactive equity financing, reinforces a strong balance sheet and commitment to shareholder returns, with a 2025 dividend of $1.60 per share.

Exelon's Strategic Power Play: A Regulated Utility's Growth Story

Exelon Corporation, celebrating its 25th anniversary in 2025, has evolved into a focused utility services holding company, primarily engaged in energy transmission and distribution across six regulated segments: ComEd, PECO, BGE, Pepco, DPL, and ACE. This strategic clarity emerged following the 2022 divestiture of its power generation business, Constellation Energy Corp. (CEG), allowing Exelon to concentrate on its core T&D operations. This historical trajectory has profoundly shaped its current strategy, emphasizing grid modernization, energy security, and customer-centric service within its regulated footprint.

The company operates in a dynamic industry landscape characterized by surging electricity demand, particularly from the artificial intelligence (AI) driven data center boom, and the imperative for enhanced resource adequacy. Exelon's proactive engagement in regulatory and legislative processes, such as the Illinois Clean and Equitable Grid Affordability Act and Maryland's Next Generation Energy Act, underscores its commitment to shaping policies that support its investment strategy and benefit customers. Exelon's foundational strengths lie in its extensive geographic reach, serving over 10.7 million customers, and its consistent operational excellence, which positions it favorably against competitors.

Technological Edge: Powering a Modern Grid

Exelon's competitive differentiation is rooted in its advanced grid management and customer service technologies, which translate directly into superior operational performance and customer value. The company leverages sophisticated smart grid technologies and Advanced Metering Infrastructure (AMI) to enhance reliability and efficiency. For instance, ComEd's "Pole Top Health AI program" exemplifies the application of artificial intelligence to proactively manage infrastructure, contributing to reduced outages.

These technological advancements yield tangible benefits. Exelon's four utility operating companies consistently rank among the best in the industry for reliability, with ComEd achieving the number one spot in the U.S. for low frequency and duration of outages. ComEd's energy efficiency program, a direct outcome of technological innovation and customer engagement, has saved customers over $12 billion on energy bills since 2008, exceeding 2024 goals by saving 13 million MWhs of electricity. Furthermore, the company's Beneficial Electrification (BE) Plans, such as ComEd's second approved plan investing $168 million over three years starting in 2026, are crucial for advancing electric vehicle (EV) adoption and reducing emissions. These technological capabilities are not merely operational enhancements; they form a critical component of Exelon's competitive moat, driving efficiency, improving service quality, and supporting long-term growth by enabling the integration of new energy solutions and managing complex grid demands.

Operational Excellence and Competitive Standing

Exelon's commitment to operational excellence is a cornerstone of its investment thesis. Its utility operating companies consistently achieve top-tier reliability, with four ranking 1, 2, 4, and 7 among peers in 2025, an improvement from the prior year. This performance is particularly notable given the challenges of "unprecedented" severe weather events, such as 43 tornadoes in ComEd's service territory in July 2024 and a major storm hitting PECO in June 2025. Exelon's gas operations also delivered top decile performance across the board for 2024, marking the fourth consecutive year.

In the competitive landscape, Exelon stands out for its diversified energy portfolio and regulatory focus. Compared to peers like Duke Energy (DUK), Southern Company (SO), NextEra Energy (NEE), and Dominion Energy (D), Exelon's operational diversity and reliability provide a strong competitive advantage. While NextEra Energy leads in renewable energy innovation, Exelon's balanced approach, including its nuclear expertise (prior to divestiture, but influencing its T&D strategy for diverse energy sources), ensures consistent base-load power. Exelon's market positioning as a full-service provider, coupled with its ability to deliver services at rates 19% to 21% below U.S. averages, allows it to effectively compete and capture market share. The company's customer-centric approach, including a $50 million Customer Relief Fund in summer 2025 and waived late payment fees, further strengthens its standing by fostering strong customer relationships.

Financial Performance and Health

Exelon's financial performance in 2025 demonstrates solid execution against its strategic objectives. For the nine months ended September 30, 2025, Exelon reported Net Income attributable to common shareholders of $2,174 million, a significant increase from $1,813 million in the same period of 2024. This growth was primarily driven by favorable impacts of new rates across its jurisdictions, effective cost management, and higher returns on regulatory assets. Consolidated operating revenues for the nine months ended September 30, 2025, reached $18,846 million, up from $17,557 million in 2024.

Segment-wise, ComEd's net income rose to $903 million (from $823 million), PECO's surged to $652 million (from $356 million), BGE's increased to $398 million (from $353 million), and PHI's (including Pepco, DPL, ACE) grew to $628 million (from $603 million). These improvements reflect the successful implementation of new distribution and transmission rates, favorable weather conditions in some territories, and lower storm-related costs.

Exelon's TTM financial ratios indicate a Gross Profit Margin of 42.48%, Operating Profit Margin of 20.81%, and Net Profit Margin of 11.60%, demonstrating efficient operations. The EBITDA Margin stands at 36.78%, reflecting strong operational profitability.

Exelon maintains a robust liquidity position, supported by internally generated cash flows and access to capital markets. For the nine months ended September 30, 2025, cash flows from operating activities were $5,010 million. While the company's Free Cash Flow per share for the TTM period is negative at -$1.58, this reflects substantial capital investments rather than operational weakness. Exelon has access to $4 billion in aggregate credit facilities, with $3.40 billion available as of September 30, 2025. The company successfully issued $2 billion in long-term debt in 2025 and completed 60% of its $700 million annualized equity needs for 2025 through its At-the-Market (ATM) program, demonstrating a disciplined financing strategy. The company's commitment to financial strength was recognized with an S&P credit rating upgrade to BBB+ in early 2025.

Strategic Initiatives and Future Outlook

Exelon's future is defined by its ambitious $38 billion capital expenditure plan for 2025-2028, a $3.5 billion increase from the prior four-year period. Over 80% of this investment is earmarked for transmission projects, driven by the "unprecedented levels of growth" from high-density loads like data centers. The company's large load pipeline exceeds 19 gigawatts, with an additional 27 gigawatts in various study stages, signaling significant future investment opportunities. Exelon is implementing innovative Transmission Security Agreements (TSAs) to manage these large loads, ensuring existing customers are protected while facilitating new interconnections. The company is also well-positioned for over $1 billion in transmission work related to MISO Tranche 2.1 projects in ComEd's service territory.

The regulatory environment remains a key strategic focus. Exelon actively engages in rate cases, with recent approvals in PECO (electric and gas revenue increases of $354 million and $78 million, respectively) and Pepco DC ($123.4 million incremental revenue requirement with a 9.5% ROE through 2026). Pending cases include DPL's gas distribution rate case (order expected Q1 2026) and ACE's electric rate case (order expected by end of 2025). Exelon also advocates for PJM market reforms and state-level solutions to address resource adequacy, including utility-owned generation, to complement competitive markets and provide "control, certainty and cost benefits" for customers.

Exelon reaffirms its 2025 operating earnings guidance of $2.64 to $2.74 per share and an annualized operating earnings growth rate of 5% to 7% through 2028, with a goal of achieving the midpoint or better. This outlook is supported by new rates in effect, disciplined cost management (achieving $100 million in sustainable savings in 2024), and a balanced financing plan. The company's dividend policy targets approximately 60% payout of operating earnings, with a 2025 quarterly dividend of $0.40 per share ($1.60 annualized), reflecting a commitment to shareholder returns while retaining capital for growth.

Risks and Challenges

Despite a strong outlook, Exelon faces several risks. Environmental remediation liabilities, particularly for former manufactured gas plant (MGP) sites, represent ongoing costs, with ComEd's remediation expected through at least 2033 and PECO's through 2030. Legal and regulatory matters, such as the deferred prosecution agreement (DPA) and related derivative lawsuits, while largely resolved, highlight the potential for reputational and financial impacts. The Maryland Sales and Use Tax refund claim, totaling an estimated $100 million, remains subject to review by the Maryland Supreme Court, introducing uncertainty.

Furthermore, the impact of the Corporate Alternative Minimum Tax (CAMT) and the allocation of tax benefits related to Net Operating Loss Carryforwards (NOLC) present potential financial statement implications, with regulatory liability reductions of $1.20 billion to $1.70 billion pending IRS Private Letter Rulings (PLRs). While Exelon actively mitigates commodity price risk through derivative instruments, the broader industry challenge of resource adequacy and the need for timely regulatory approvals for new transmission projects could impact the pace of its capital deployment and earnings growth.

Conclusion

Exelon Corporation stands as a compelling investment in the evolving utility landscape, driven by its strategic focus on regulated transmission and distribution, operational excellence, and a robust capital investment plan. The company's ability to consistently deliver top-tier reliability at below-average rates, coupled with its proactive engagement in regulatory processes and technological advancements in grid management, underpins a strong competitive position. The surging demand from data centers and the broader energy transition present significant growth opportunities, which Exelon is actively addressing through its $38 billion capital plan and innovative solutions like Transmission Security Agreements.

With a reaffirmed 5-7% annualized operating earnings growth through 2028 and a disciplined financing strategy, Exelon is poised to generate consistent long-term value for shareholders. While regulatory uncertainties and environmental liabilities present ongoing considerations, the company's proven track record of execution and commitment to customer affordability and energy security solidify its investment thesis. Exelon's leadership in grid modernization and its strategic response to industry trends position it as a resilient and growth-oriented utility, capable of powering the future while delivering reliable returns.