# Exelon (EXC) Financial Model Free Excel 3-statement financial model and company analysis for Exelon. - Canonical: https://finamodel.com/companies/exelon - Industry: Utilities - Downloadable model: Yes - Excel download: https://finamodel.com/company-models/EXC.xlsx ## Model Purpose This model projects Exelon Corporation's rate base growth, regulatory earnings, and capital funding requirements to determine equity valuation and dividend sustainability for a pure-play regulated transmission and distribution utility. ## Company Overview Exelon Corporation is the largest fully regulated utility company in the United States, transmitting and distributing electricity and natural gas to over 10 million customers. Following the 2022 spin-off of its power generation business (Constellation Energy), Exelon operates exclusively as a pure-play transmission and distribution (T&D) utility. Its business segments correspond to its major utility subsidiaries: * **ComEd** (Commonwealth Edison): ~30% of revenue (Electric only, serving northern Illinois) * **PECO**: ~20% of revenue (Electric and Gas, serving southeastern Pennsylvania) * **BGE** (Baltimore Gas and Electric): ~20% of revenue (Electric and Gas, serving central Maryland) * **PHI** (Pepco Holdings): ~30% of revenue (Electric and Gas, comprising Pepco, DPL, and ACE across DC, Maryland, Delaware, and New Jersey) The business model is highly asset-heavy and fully regulated. Exelon earns a return on its invested capital (rate base) as authorised by state public utility commissions. Because the company operates under revenue decoupling mechanisms in most of its jurisdictions, its earnings are insulated from weather and volumetric usage fluctuations, making its competitive position a function of regulatory relations and capital deployment rather than market share. ## Revenue Deep Dive Utility revenue modeling differs fundamentally from standard corporate modeling. Revenue is driven by the "cost of service" model: recovering operating expenses plus earning an authorised return on rate base. ### ComEd (Electric) * **Revenue driver formula**: Recoverable O&M + Depreciation + Taxes + (Rate Base x Authorised Rate of Return) * **Historical growth rate**: 4-6% CAGR * **Key growth levers**: Multi-Year Rate Plans (MRP), grid modernisation investments, and transmission upgrades. * **Pricing dynamics**: Fully regulated by the Illinois Commerce Commission (ICC). Decoupled, meaning volumetric sales do not impact distribution margins. * **Seasonality**: Minimal impact on distribution margin due to decoupling, though cash collections peak in summer (cooling) and winter (heating). ### PECO (Electric and Gas) * **Revenue driver formula**: Electric Rate Base x Authorised Return + Gas Rate Base x Authorised Return + Pass-through costs * **Historical growth rate**: 3-5% CAGR * **Key growth levers**: Infrastructure replacement and gas main replacements. * **Pricing dynamics**: Regulated by the Pennsylvania Public Utility Commission. * **Seasonality**: Gas revenues peak in Q1 and Q4 (winter heating). ### BGE (Electric and Gas) * **Revenue driver formula**: Rate Base x Authorised Return + Pass-through costs * **Historical growth rate**: 4-6% CAGR * **Key growth levers**: Multi-Year Plans (MYP) approved by the Maryland Public Service Commission. * **Pricing dynamics**: Decoupled distribution revenues. ### PHI (Pepco, DPL, ACE) * **Revenue driver formula**: Combined Rate Base x Authorised Return + Pass-through costs * **Historical growth rate**: 5-7% CAGR * **Key growth levers**: High capital expenditure requirements in DC and New Jersey for grid resilience. * **Pricing dynamics**: Regulated across multiple jurisdictions (DC, MD, DE, NJ). ## Cost Structure ### Variable Costs / COGS * **Purchased Power and Natural Gas**: These are pass-through costs. Exelon procures energy on behalf of customers and passes the cost through with zero markup. This line item fluctuates wildly with commodity prices but has zero impact on gross margin. * **Gross margin range**: Not a relevant metric for utilities. Analysts focus on "Revenue Net of Purchased Power" (Operating Margin). ### Operating Expenses * **Operating and Maintenance (O&M)**: The core controllable cost. Includes labour, contracting, vegetation management, and storm restoration. Exelon targets flat O&M growth to offset customer bill impacts from rate base growth. * **Depreciation & Amortisation**: Massive expense (typically 12-15% of revenue) due to the capital-intensive nature of the grid. * **Taxes Other Than Income**: Property taxes and gross receipts taxes, largely recoverable in rates. * **Restructuring / one-time charges**: Infrequent, though storm cost deferrals can create year-over-year variances. ### Margin Profile * **Consolidated Operating ROE**: 9.0% to 10.0% (actual 2025 operating ROE was 9.7%). * **EBITDA margin**: Typically 35-40%, but heavily skewed by pass-through commodity costs. * **Margin trend**: Stable. Regulatory mechanisms ensure that as the rate base grows, operating income grows proportionately. ## Balance Sheet Structure * **Total assets**: Approximately $100 billion. * **Key asset categories**: * **Property, Plant, and Equipment (PP&E)**: The vast majority of assets. Represents the physical grid (poles, wires, substations, gas mains). * **Regulatory Assets**: Costs incurred that regulators have approved for future recovery from customers (e.g., deferred storm costs, under-collected pass-throughs). * **Working capital profile**: * **DSO**: 30-45 days. * **Net working capital**: Typically negative. Utilities carry large current liabilities (accounts payable for purchased power, short-term debt) against highly liquid receivables. * **Goodwill**: Legacy goodwill from the PHI acquisition; rarely impaired due to regulated cash flows. ## Capital Expenditure & Investment * **Capex scale**: $41.3 billion planned for 2026-2029 (averaging ~$10.3 billion annually). * **Capex as % of revenue**: ~40-45% (exceptionally high, standard for T&D utilities). * **Maintenance vs. growth**: The majority is classified as growth/modernisation (grid resilience, transmission build-out for data centres, gas pipe replacement). * **M&A pattern**: Purely organic growth currently. The company is focused on executing its massive internal capital plan rather than acquiring other utilities. ## Debt & Capital Structure * **Total debt**: Highly leveraged, typical for a regulated utility. Debt sits at both the holding company (HoldCo) and operating company (OpCo) levels. * **Credit rating**: BBB+ (S&P). Maintaining this is critical for access to cheap capital. * **Interest rate profile**: Mostly fixed-rate long-term bonds (e.g., 10-year to 30-year First Mortgage Bonds issued by OpCos). * **Equity issuance**: To fund the $41.3 billion capex plan while maintaining credit ratings, Exelon targets funding 40% of incremental capital with equity. This requires approximately $850 million in annual equity issuance through 2029. * **Dividend policy**: Target payout ratio of approximately 60% of adjusted operating earnings. 2025 dividend was $1.60 per share, growing at ~5% annually. ## Cash Flow Characteristics * **Operating cash flow**: Highly stable and predictable, driven by regulated returns and depreciation add-backs. * **Free cash flow**: Deeply negative. OCF is insufficient to cover the $10+ billion annual capex. The company structurally outspends its cash flow to grow the rate base. * **Financing cash flows**: The bridge. The model must show continuous debt and equity issuances to balance the cash flow statement. * **Cash tax rate**: Very low. Accelerated depreciation on massive capital investments creates significant deferred tax liabilities, pushing cash taxes near zero. ## Sheet Structure 1. **Assumptions**: Hardcoded drivers for rate base growth, allowed ROE, equity issuance, and debt costs. 2. **Rate Base Roll-Forward**: The engine of the model. Tracks opening rate base, plus capex, minus depreciation, minus deferred taxes, to calculate the closing rate base for ComEd, PECO, BGE, and PHI. 3. **Revenue Build**: Calculates revenue by segment based on rate base returns, recoverable O&M, and pass-through commodity costs. 4. **Income Statement**: Consolidated view. Must separate "Purchased Power and Gas" from "O&M" to calculate true operating margin. 5. **Balance Sheet**: Driven by PP&E, regulatory assets/liabilities, and debt tranches. 6. **Cash Flow Statement**: Standard indirect method. Must clearly show the negative FCF and the required financing plug. 7. **Debt & Financing Schedule**: Tracks OpCo debt, HoldCo debt, and the annual $850 million equity issuance (calculating share count dilution). 8. **Valuation (DCF & DDM)**: Dividend Discount Model is often preferred for utilities over DCF due to the perpetual negative FCF. Includes a Sum-of-the-Parts (SOTP) P/E valuation. ## Key Financial Relationships 1. `Ending Rate Base = Beginning Rate Base + Capex - Depreciation - Change in Deferred Income Taxes` 2. `Average Rate Base = (Beginning Rate Base + Ending Rate Base) / 2` 3. `Segment Operating Income = Average Rate Base x Authorised Return on Rate Base (approx. 7.0-7.5% blended cost of capital)` 4. `Segment Net Income = Average Rate Base x Authorised Return on Equity (approx. 9.5-10.0%) x Equity Ratio (approx. 50%)` 5. `Total Revenue = Purchased Power (Pass-through) + O&M + Depreciation + Taxes + Operating Income` 6. `Free Cash Flow = Cash from Operations - Capital Expenditures` 7. `Funding Gap = Free Cash Flow - Dividends Paid` 8. `New Equity Issued = $850 million (management guidance for 2026-2029)` 9. `New Debt Issued = Funding Gap - New Equity Issued` 10. `Diluted Shares Outstanding = Prior Year Shares + (New Equity Issued / Average Share Price)` 11. `Dividend Per Share = Prior Year DPS x (1 + Target Dividend Growth Rate of 5%)` 12. `Total Dividend Paid = Dividend Per Share x Diluted Shares Outstanding` ## Cross-Sheet Dependencies The critical chain in a utility model is circular by nature: * **Assumptions** dictate Capex. * **Capex** feeds the **Rate Base Roll-Forward** and increases PP&E on the **Balance Sheet**. * The **Rate Base** dictates Operating Income on the **Income Statement**. * Net Income feeds the **Cash Flow Statement**. * Massive Capex creates a cash shortfall on the **Cash Flow Statement**. * The shortfall triggers the **Debt & Financing Schedule** to issue debt and equity. * New debt increases Interest Expense on the **Income Statement** (creating a circularity). * New equity increases the share count, which increases the total dividend payout, further reducing cash and requiring more debt. * A circuit breaker (iteration toggle) must be built into the interest expense and share count calculations. ## Sign Convention * Revenues and income are positive. * Expenses (O&M, Depreciation, Interest) are positive in their specific schedules but subtracted in the Income Statement. * Capital expenditures are positive in the Capex schedule but negative in the Cash Flow Statement. * Debt and equity issuances are positive in the Cash Flow Statement. * Dividends paid are negative in the Cash Flow Statement. ## Things Most Likely to Go Wrong * **Misunderstanding Decoupling**: Modeling revenue based on volumetric load growth (GWh sold) is incorrect for Exelon. Revenue is decoupled; it is driven by rate base growth, not weather or usage. * **Ignoring Equity Dilution**: Exelon plans to issue $850 million in equity annually. Failing to increase the share count will artificially inflate EPS and understate the total dividend cash burden. * **Mispricing Pass-Throughs**: Attempting to forecast purchased power costs and applying a margin to them. These are zero-margin pass-throughs. * **Regulatory Lag**: Assuming 100% of capex immediately earns a return. In reality, there is a delay between spending capital and having it approved in a rate case. * **Deferred Taxes**: Forgetting to subtract deferred taxes from the rate base. Accelerated depreciation creates deferred tax liabilities, which regulators treat as zero-cost capital, reducing the earning rate base. * **HoldCo vs OpCo Debt**: Blending all debt together. Operating companies issue secured first mortgage bonds at lower rates; the holding company issues unsecured debt at higher rates. * **Valuation Methodology**: Using a standard Unlevered DCF. Because capex perpetually exceeds operating cash flow, terminal value calculations in a standard DCF break down. A Dividend Discount Model (DDM) or P/E multiple approach is required. * **O&M Inflation**: Assuming O&M grows with inflation. Management actively cuts O&M to keep customer bills flat while rate base grows. O&M should be modeled as flat or growing at <1%. ## Validation Checks * "Rate base growth must equal approximately 7.9% CAGR through 2029; flag if outside 7.5-8.5%." * "Consolidated Operating ROE should be between 9.0% and 10.0%." * "Annual equity issuance must equal exactly $850 million per management guidance." * "Dividend payout ratio must remain between 58% and 62% of Adjusted Operating Earnings." * "Total Capex for the 2026-2029 period must sum to approximately $41.3 billion." * "O&M expense growth should not exceed 1% annually." * "Balance sheet must balance: Total Assets = Total Liabilities + Equity in every period." * "Effective tax rate should be low (12-15%) due to utility-specific tax deductions and amortisation of excess deferred taxes." ## Key Assumptions (Default Values) | Assumption | Default Value | Unit | Rationale | |---|---|---|---| | Annual Rate Base Growth | 7.9 | % | Management guidance for 2025-2029 CAGR | | Total Annual Capex | 10,325 | $ Millions | $41.3B four-year plan divided by 4 | | Allowed ROE (Blended) | 9.6 | % | Weighted average of recent rate case outcomes across jurisdictions | | Equity Layer in Rate Base | 50.0 | % | Standard regulatory capital structure | | Annual Equity Issuance | 850 | $ Millions | Management guidance to fund 40% of incremental capital | | Dividend Payout Ratio | 60.0 | % | Management target payout ratio | | Dividend Growth Rate | 5.0 | % | Aligned with lower end of 5-7% EPS growth target | | O&M Annual Growth | 0.5 | % | Management commitment to flat O&M to support affordability | | Effective Tax Rate | 14.0 | % | Historical average reflecting utility tax advantages | | Cost of Debt (New Issuance) | 5.5 | % | Current yield on utility first mortgage bonds | | Target EPS Growth | 6.0 | % | Midpoint of management's 5-7% target | | Cost of Equity (DDM) | 8.5 | % | Standard utility sector cost of equity | ## Data Sources & Benchmarks * **SEC EDGAR**: Exelon (EXC) 10-K and 10-Q filings. * **Investor Relations**: Exelon Q4 2025 Earnings Presentation (contains the $41.3B capex and 7.9% rate base growth targets). * **Industry Data**: Edison Electric Institute (EEI) for typical bill benchmarks and regulatory ROE averages. * **State Utility Commissions**: Illinois Commerce Commission (ICC), Maryland PSC, Pennsylvania PUC, and New Jersey BPU for actual rate case dockets and approved ROEs. * **Key Peers**: Consolidated Edison (ED), American Electric Power (AEP), Eversource Energy (ES), and Xcel Energy (XEL). ## Sources * Exelon Corporation Q4 2025 Earnings Release (February 12, 2026) * Exelon Corporation 2025 Annual Report on Form 10-K * Exelon Q4 2025 Earnings Call Transcript * Exelon 2026 Proxy Statement (DEF 14A) --- ## Frequently asked questions ### What is Exelon Corporation's primary business focus? Exelon Corporation operates as the largest fully regulated utility company in the United States, focusing exclusively on transmitting and distributing electricity and natural gas. It serves over 10 million customers across various regions, including northern Illinois, southeastern Pennsylvania, central Maryland, and the DC metro area. ### How does Exelon generate its revenue as a regulated utility? Exelon's revenue is driven by a "cost of service" model, which allows it to recover operating expenses and earn an authorized return on its invested capital, known as the rate base. This regulated structure, combined with revenue decoupling mechanisms in most jurisdictions, insulates its earnings from fluctuations in weather and volumetric usage. ### What is Exelon's capital expenditure strategy and its significance? Exelon plans substantial capital expenditures, averaging approximately $10.3 billion annually from 2026-2029, totaling $41.3 billion. This exceptionally high capex, representing 40-45% of revenue, is primarily directed towards growth and modernization initiatives like grid resilience, transmission build-out, and gas pipe replacement. ### What are the key financial assumptions used in Exelon's corporate model? Key assumptions in Exelon's financial model include a revenue growth rate of approximately -10.88%, COGS as 55% of revenue, and SGA as 15% of revenue. The model also assumes a D&A percentage of revenue around 21.31% and a tax rate of about 10.15%. ### What is the purpose of the downloadable Excel financial model for Exelon? The downloadable Excel model for Exelon projects the company's rate base growth, regulatory earnings, and capital funding requirements. Its primary purpose is to help determine equity valuation and assess the sustainability of dividends for this pure-play regulated utility. ### How does Exelon's asset structure impact its financial profile? Exelon's business model is highly asset-heavy, with Property, Plant, and Equipment (PP&E) constituting the vast majority of its approximately $100 billion in total assets. This structure reflects its physical grid infrastructure and allows it to earn a regulated return on its invested capital. [Interactive forecast calculator](https://finamodel.com/companies/exelon/forecast)