Good morning, ladies and gentlemen. Welcome to Exelon 2018 Third Quarter Earnings Conference Call. My name is Jerome and I will be facilitating the audio portion of today's interactive broadcast. All lines have been place on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] At this time, I'd like turn the show over to Mr. Dan Eggers, Senior Vice President, Corporate Finance. The floor is yours.

Thank you, Jerome. Good morning everyone, and thank you for joining our third quarter 2018 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 the presentation, both of which can be found in the Investor Relations section on Exelon's Web site. The earnings release and other matters which we'll 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 8-K and Exelon's other SEC filings for discussions of risk factors and factors that may cause results to differ from management's projections, forecast and expectations. Today's presentation also 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. We scheduled 45 minutes for today's call. I'll now turn the call over to Chris Crane, Exelon's CEO.

Thanks, Dan, and good morning everyone. Thank you for joining us. Flipping to slide five, we delivered another strong quarter with earnings again at the upper-end of our range, which allows us to raise the lower end of our full year guidance. The utilities performed well with strong earned ROEs and largely first quartile operations. As we stated previously, the Federal Courts of Appeal in Illinois and New York strongly affirm the legality of the ZEC. And our focus on cost continues identifying an additional $200 million in gross savings, which are $150 million of that will flow to the bottom line, bringing our six-year total savings to more than $900 million. Combined, this performance demonstrates our growing value. For the quarter, on a GAAP basis, we are at $0.76 per share versus $0.85 per share last year. On a non-GAAP operating basis, we are at $0.80 per share, and again above the midpoint of our $0.80 to $0.90 range guidance that was provided. Turning to slide six, our utilities continue to perform at higher levels across key customer satisfaction and operating metrics. The investments we are making in technology and infrastructure continue to improve reliability, which leads to greater customer satisfaction, and ultimately supporting strong relations with our regulators and our legislators. PECO and BG improved their JV power residential gas and electric scores over the last year with PECO receiving its highest ranking ever, placing second in the residential electric survey. Our customer service metrics is strong. BGE and ComEd are in the top decile for customer satisfaction, and PHI is in top decile for its service levels. Each of our utilities achieved top quartile reliability performance in SAIFI, or outage duration in CAIDI, which is -- the outage frequency is SAIFI, and CAIDI which is outage duration.…

Thank you, Chris, and good morning everyone. Turning to slide eight, we had another strong quarter financially delivering adjusted non-GAAP operating earnings of $0.88 per share, which is at the upper end of our guidance range of $0.80 to $0.90 per share. Exelon's utilities less Holding Company expenses earned a combined $0.55 per share. Compared to our plan, we benefited from reduced storm activity and favorable weather in our 00:10:17 non-decoupled jurisdiction including PECO, Atlantic City Electric and Delmarva Delaware. Generation earned $0.33 per share in the third quarter which was slightly behind our plan. The third quarter was impacted by lot of realized lower realized ERCOT prices versus the end of the second quarter, lower-than-expected generation performance with the unplanned outages that ERCOT CCGT as just discussed as well as one at [indiscernible] in addition to higher allocated transition costs. These were partially offset by realized gains from our nuclear decommissioning trust fund. On slide nine, we show our quarter-over-quarter walk. The $0.88 per share in the third quarter this year was $0.03 per share higher than the third quarter of 2017. Overall the utility earnings were collectively up $0.07 per share compared with last year driven primarily by higher rate base, new rates associated with completely rate cases, and favorable weather. Generation earnings were down $0.03 per share compared with last year driven largely by the absence of EGTP gross margins from the deconsolidation in the fourth quarter of 2017, and higher planned nuclear outage days, partially offset by contribution from a full quarter of Illinois ZEC revenues and savings from tax reform. Turning to slide 10, we are raising the lower end of our 2018 EPS guidance range from $2.90 to $3.20 per share to $3.05 to $3.20 per share. We are pleased with the strong operational…

Thanks, Joe. Turning to slide 17, as we have shown you, we have a strong quarter financially and operationally. We continue to get stronger on both fronts. This is due to the hard work and dedication of all of our employees every day. We also had important wins and of course to preserve the ZEC programs, and are finding ways to operate more efficiently providing incremental cost savings as discussed. Our value proposition remains unchanged. We're focused on growing our utilities starting at 6% to 8% EPS growth through 2021. We continue to use free cash flow from the GenCo up on the incremental equity needs at the utilities, pay down debt over the next four years at the GenCo and HoldCo and funds part of the faster dividend growth rate. We will stay focused on optimizing value at the ExGen by seeking fair compensation for our carbon free generation fleet, supporting proper price formation in PJM and resiliency efforts at FERC, and supporting capacity market reforms that will allow states to continue to protect citizens from carbon in air pollution, while benefiting from regional markets. We will close uneconomic and sell assets were it does not make sense to accelerate our debt reduction plans, and maximize value to generation to the load matching strategies We continue to sustain strong investment-grade credit metrics and grow our dividend consistently at 5% through 2020. Operator, now we can take it -- open to the call up for questions. Thank you.

[Operator Instructions] Your first question comes from the line of Greg Gordon from Evercore. Greg, your line is now open.

Thanks. Good morning guys, couple of questions.

Good morning.

First, on the quarter, everything seems really good on the utility side and the underlying operations at the GenCo look decent too, but it was a little squishy around some of those operational issues. Can you just talk us through that and get us comfortable that they're sort of temporal and not structural?

Are you talking about the operational issues around the GenCo in the power…

Yes, and Texas, the interruption in Massachusetts, the higher FDR costs. I just want to make sure we can be comfortable that they're not going to sort of run out into the future and impact your ability to get your numbers?

Let me start out with the Texas assets. So, I'll let Joe fill in on the rest of it. Those GE 7HA.200, these were the first serial numbers one and two. We were aware as GE was that there was some difficulty with the first stage blades. We had approximated a run period that we could operate the assets before putting in the fix. The fix was already underway and then designed. GE did give us very strong warranties on those assets, and responded very well on the first failure on the one CT at Colorado Bend. We proactively shut the other three CTs down, replace them with the new design, had them back up and running, and as I said, we expect -- we're in the roll out phase now and the start-up phase of the fourth unit, and we feel confident in the design. GE has put us in inspection program together, that will be borescoping after so many hours of operation. They've responded well, the solid engineering confirmed by independent assessments, so we feel that that is behind us. And we'll be able to continue those assets to operate at incredibly high capacity factors and efficiencies going forward. On the FDRs and the other issues, I'll let Joe cover it.

Yes. So Greg, I think first thing is as Chris mentioned the generation issues drove some of the underperformance at Exgen. In addition to that when you looked at how prices in Texas, at the end of June and where they realized for the quarter, there was an impact with the difference there. As you know, the spot market prices were lower than when we walked into the quarter. On the transmission side, the costs were associated with orders for 494 at FERC, and that had a negative impact. So from our lens when you talk about the generation performance both at Mystic and at Ercot, those are one-time occurrences similarly on the transmission side. The favorability was driven on the realized liquid decommissioning trust gains. So I think when you look at it from our lens, you see these one-time items that are driving the overall results.

Great. Thanks. And one follow-up on Exgen and then one more if you let me, looking at the cost cuts, it's really quite an impressive, incremental change, you've got the costs declining from $4.65 billion to $4.175 billion in 2020 and a little bit more in 2021, $450 million savings, but that gross margins declined by $700 million. And so, skeptical investors look at this and say, "Well, you guys are doing Yeoman's job here, right-sizing the cost structure, but earnings aren't getting better." I would argue that cost cuts are permanent than -- and these back-wardated [ph] power prices are hopefully temporary, but can you give us some confidence that there's positive operating leverage here as we move through time and that these lower commodity prices and capacity prices are not structural?

We talked about this before that we've lacked liquidity in the out years. It's a softer market. Our fundamentals still tell us that this back-wardated curve is not what we'll see as the prompt years come in. And so, we're managing the book in that manner maintaining as much margin open and using cross commodity hedges to be able to manage that. We will constantly look at driving efficiencies. You can't have a company and operate with any aspect or entity within the company being inefficient. So, driving efficiencies has multiple benefits, but one of them is a reduction in expense, and we'll continue to focus on that as we serve the customer. As far as the market issues, Jim or Joe, do you want to cover any more on that?

Yes. I think the only one I would add about the backwardation of the curve is, with the next couple of years showing 25 and 24 deal like in liquidity we're seeing net retirements of new builds over the next year between 20 and 23 that would lead us to believe that backwardation won't really subside. We've seen stock prices and I have even in some of the lowest delivered fuel price years cleared north of $26, $27. So you know the backwardation to your point is seems temporal great.

Okay. And then final question is you know given that the balance sheet is so strong and that the rating agencies are finally coming around to considering higher credit ratings how much balance sheet capacity does that create and/or does it give you more latitude to have a more aggressive risk management policy and take hedge less and take more of your power into the spot and therefore try to get those better prices?

Greg, it's Joe. The short answer is with that balance sheet capacity we can't be more aggressive. And as I mentioned in my remarks when you look at how far behind we are a ratable plan and when you overlay the fact that we're using gas as a proxy for power we are carrying a very long opening power position in 2019 and 2020, and when we're able to do that think given the strength of the balance sheet that we have. We continue to challenge ourselves in this regard as well. And as Jim mentioned on our use of power, we're going to continue to be constructive in the way we manage the portfolio relative to what we think fair value is in the out years and that leverage on the balance sheet allows us to do that.

Thank you, guys.

Thanks, Greg.

Thank you, Greg. Your next question comes from the line of Julien Dumoulin-Smith from Bank of America. Julien, your line is now open.

Hey, good morning, everyone.

Good morning. How are you doing?

Good, excellent. So I wanted to follow a little bit up on the utility activities, obviously good progress of THI, and again but I wanted to elaborate a little bit further on this. Obviously the cost reductions of say $50ish million accrued in the utilities. How does that play out in terms of again increasing your ROE, right, I gather the bulk of that would be moving back to customers over time, although clearly you're under earning relative to authorized level still. And then in tandem with that question if you could elaborate a little more on the sort of initial utility CapEx planning, certainly there is growing discussion of legislation in Illinois as well as a litany of other smaller programs. I think you've already alluded to a little bit elsewhere across your utility system?

Yes, I'll let Anne take that.

Sure. Good morning, Julien. Yes, so a couple of responses to your questions. As we think about moving forward, obviously we're going to blend $50 million into the LRP over time, and it's not sitting with there right now, but we'll look at that as we do the next LRP iteration. And certainly our focus on O&M is to be flat-to-declining at the utilities and that that's the goal as we move forward to manage that side of the equation. As we think about what we're doing on ROEs and sort of developing that at the PHI utilities and the other utilities, you know the first thing we're doing is to looking at how -- we're filing annually how do we reduce lag? What are the ways is we file it annually, we've got to stay our provision at DPL until 2020, but with the rest of the utilities we'll be filing annually. We're looking at other mechanisms to reduce lag riders. We've got the stride rider in Maryland, disk rider in Delaware and the IIT rider in New Jersey that we're looking to place about $358 million of capital investment in right now Interim rates at New Jersey is helping us to close that lag gap, and we're looking at multiyear rate plan in DC. We've been invited to make that filing, and we'll be doing that shortly. So we've just got an outright provision at PECO authority for the commission to look at that. So that's something we'll be looking at going forward. So those are all the ways we're looking to close in on that ROE number. Obviously, we're looking at lags are biggest sort of currency allowed GAAP that also looking at other disallowances too, but really trying to take enough on the lag. So that's…

Got it. A quick clarification as a follow up here in PJM, I know I appreciate your comments at the outside. Just timing related, how do you see this going down with respect to a, getting an approval out of FERC, but then b, actually implementing the MOPR just real quickly if you can? Kathleen Barrón: Hi, Julien, it's Kathleen. I can take that question. As you know, the five comments are going into FERC on November 6 with the expectation that the commission would address the paper hearing sometime in the January timeframe. I think the commission is well aware that the market is looking for guidance. As Chris said on what the rules are going to be going forward and importantly the states need to know what changes they need to make to their clean energy policies to accommodate the new rules coming out of FERC. So we will look to them to provide that guidance in the January timeframe. As you know, we have to leave the auction until August to give states sometime to react, not just your question was specific to MOPR, but important for us is the ability of states to carve out the [indiscernible] they wish to support and to procure them directly to state led procurement that is going to be an important change that we're looking for FERC to make in the next order based on the record in front of them as overwhelming amount of support from all supporters of the stakeholder community and the states. To put that change into the tariff and to give states options going forward to continue to support the clean generation that will help them achieve their carbon reduction goals.

So you don't see an issue with respect to getting clarity out of the states sometime? Kathleen Barrón: Obviously the states have different structures that will need to examine and obviously the states have different structures, that they'll need to examine and some may be able to use existing structure, some may need to adopt new structures, including through legislation. So there will be a in the states where there is a need for legislation a premium on moving quickly. Now that being said, I think it's also incumbent our effort to take that into account and to make sure that they have adequate time before the rules change in the tariff.

Great. Thank you.

Thank you, Julien. Your next question comes from the line of Steve Fleishman from Wolfe Research. Steve your line is now open.

Thank you. I will actually just ask one question. The PGM from a standpoint of not obviously you have different stakeholders in relative here your states customers, investors et cetera. Just from an investor standpoint and not everyone else, do you see the changes as proposed or as you would like to see them being kind of good for shareholders, neutral how should we think of it, just from an investor standpoint?

No, we definitely see this as a positive to create clarity and a more rewarding market going forward. We've lacked the clarity, we've [indiscernible] the times on programs, I think this is where we'll be able to create clarity, capital allotment will allocation will be much clear on what we're - where we'll be putting capital, what units will be operating, and what units won't be operating. So, but we see this as definitely a benefit to the markets which will be a benefit to the consumer, which will be a benefit to the shareholder.

Okay. Thank you.

Thank you, Steve. Your next question comes from the line of Michael Weinstein from Credit Suisse. Michael, your line is now open.

Hi, guys. Thanks for taking my questions.

Hey, Michael.

Hey, two quick questions. The first one is do you think that the uncertainty surrounding FERC and surrounding new rules for capacity and energy taking also some uncertainty is delaying a new build or new start construction plans, if this is going to have an effect on tightening the market going over the next year or two. And my second question, I'll just ask it right now is a public service enterprise group just announced that they're pulling out of the retail business. Is this a potential opportunity for Constellation?

First question, new builds are driven based off of market needs in economics and unless we get the economics to support new asset entry, you will get to see what we've seen in the last couple of years, the decline then we have to see what comes out of the resiliency review on how the market values different sources from fixed view. So, there will be an evolution before we'll see a real opening or a market response to the demand need for assets or investments to be made to come in. It's basic economics right now. The market is barely supporting the assets that are operating today. So, why would you invest into new assets when you are not going to get a recovery or return on your capital? Just a second you can…

Okay, understood.

-- into new assets when you are not going to get a recovery or return on your capital.

Okay.

Hi, Michael, it's Jim here. I can speak to that question. I think you know with the announcements of folks leaving or coming into the retail market, we're always on top of that and looking for opportunities to look for value and acquire books of business. In this case, I think you know if you think it's noted, that they're going to supply their contracts as they roll off. We'll obviously there to serve customers as the number one C&I customer and the number two resi customer in the country, so a lot for the business and they will alone. I think for us, we have that scale, we've developed that scale over the years through acquisitions and in organic growth and our platform is very capable of acquiring new customers and retaining existing customers pretty easily. We've been having a lot of success also just finding new products and solutions for customers in both the residential space and C&I space, so we'll keep taking advantage of those opportunities that are in front of us.

Great. Thank you very much.

Thank you, Michael. Your next question comes from the line as Jonathan Arnold from Deutsche Bank. Jonathan, your line is now open.

Good morning, guys.

Hi, Jon.

Just to pick up on the discussion around the state legislation and potentially not leading legislation, and Kathleen I heard your comments that you know there could be different answers depending on which state you're talking about. But is it fair to say, the way you said today that you think Illinois would have to legislate and then I'm curious, what you think about the state of play in New Jersey? Kathleen Barrón: You're correct, Jonathan. I agree with your assessment in Illinois, there will be a need for legislation legislation to adjust those changes in rules. And I think a positive for us is that we are seeing not just here but across the country our growing sentiment among environmental groups and policymakers that the fastest and cheapest path to de-carbonizing is a policy that uses all zero carbon resources. And so to the extent states want to act to increase their clean energy ambition. We would be expected -- we would expect that all assets including ours would be able to participate in that type of policy as FERC for allowing the states to go ahead and procure a clean capacity directly allows them to do so in a way that's going to be able to keep costs down per customers and achieve clean energy goals at the same time. So we would look to that kind of structure to the extent you know the FERC puts this car down in the tariff you know in Illinois. And here in New Jersey given the way that the state law is written there and the authority at that DPU level to do the capacity procurement through the existing BGS structure, there would not need - there would not be a need for a incremental legislation to allow that state's procurement of that to flow through the BGS. So that's why I said I think the answer is different depending on which jurisdiction you're in.

Okay, great. I was just waiting to see if you provide that on the individual states. So thank you. Could I just ask one quick follow-up on the cost savings, you've obviously laid out how you expect that to be timed the Q3 2018 cost reductions? Can you remind us how much of the $250 million you've announced last year was flowing into Exgen and maybe what the sort of sequencing is there in terms of how those ramp up as we're trying to unravel the numbers I guess is slide 15.

Yes, that is in a numbers. I think we're looking for the page now Joe's got it.

The 250 last year all of it is flowing into ExGen, the reductions were taken at ExGen across the platform nuclear constellation in our…

And the timing, Joe, is it kind of across the period until 2020 or most of it going to already there in…

2019, you'll get to run rate year.

Okay. All right. Thanks for that.

Thank you, Jonathan. That concludes the question and answer session of today's webcast. I'll hand the call over back to Mr. Chris Crane, CEO of Exelon Corporation.

Thanks again everybody for joining. Thanks for the questions. Hopefully, we covered everything. Any other concerns, please get a hold of IR or myself, and we'd be glad to continue to discuss them, but thanks to the team. All the 34,000 plus employees at Exelon for delivering another strong quarter and talk to you soon. Thanks.

Thank you. And that concludes today's webcast. Thank you all for participating. You may now disconnect.