utilities performed
well financially,
partly as a result of
favorable weather
and lower storm costs, as well as solid rate recovery and overall cost management.
Financial Performance
Our GAAP earnings were $2.00 per diluted share in 2013, compared to $1.42 in 2012. On an operating (non-GAAP) basis, our earnings were $2.50 per diluted share, compared to $2.85 in 2012. 2013 earnings cannot be directly compared to 2012 earnings given the inclusion of Constellation and BGE in Exelon’s financial results commencing in March 2012. However, the overall $0.35 decrease in non-GAAP operating earnings primarily reflects continuing declines in realized power and gas prices during 2013, in part driven by the abundance of natural gas supply, continued sluggish demand and subsidized renewable generation; these are partially offset by improved returns at the utilities, realization of additional post-merger synergies, and operational excellence. The increase in GAAP earnings reflects the adverse impact of merger-related costs in 2012, partially offset by 2013 charges for an income tax matter, the cancellation of certain nuclear uprate projects and the accounting impairment of certain wind generating assets.
Our stock price remains correlated to natural gas prices, as well as to our power markets and overall economic conditions. While 2013 calendar year spot market prices for natural gas were higher than 2012 levels, the NYMEX forward price curves were down slightly at year-end. Power prices have not yet recovered from last year’s PJM capacity auction. During the course of 2013, power price forward curves dropped nearly 7% in PJM West and 5% in NiHub. These challenges were intensified by Exelon’s nuclear concentration, exposure of our generation revenues to volatility in natural gas prices, and substantial presence in Midwest markets that are impacted by excess generation from subsidized renewables, flat load growth and distorted market designs. All these factors negatively affected our share price in 2013.