Exelon EXC Business Risk Report

A. Fluctuations in energy prices: Exelon’s financial performance can be significantly affected by the volatility in the prices of electricity and natural gas. Changes in fuel prices, particularly natural gas, can influence the cost of electricity production, impacting Exelon’s profitability.

B. Competition from renewable energy sources: As renewable energy becomes more cost-effective and its adoption increases, Exelon faces significant competition. This shift challenges Exelon’s existing infrastructure, primarily based on nuclear and fossil fuels, to stay relevant and profitable in a changing energy market.

A. Changes in government regulations: Exelon is subject to extensive regulation by federal, state, and local agencies. Changes in policies, such as those related to the deregulation of energy markets or greenhouse gas emissions, could impose new costs or operational constraints on Exelon.

B. Compliance with environmental standards: Compliance with environmental laws and regulations is a major concern for Exelon. Non-compliance could lead to significant fines, penalties, or enforced facility shutdowns, impacting its business operations and financial condition.

A. Potential cyber attacks: Exelon, like other energy companies, faces significant risks from cyber threats that could disrupt operational technology and critical infrastructure, leading to loss of service and damage to the company’s reputation.

B. Disruption in energy supply chain: Exelon’s operations rely heavily on a stable supply chain for fuel and other essential inputs. Disruptions, whether due to natural disasters, geopolitical tensions, or supplier issues, can affect its ability to produce or deliver energy.

A. Interest rate fluctuations: As a company that manages significant debt levels, Exelon is exposed to interest rate risk. Rising rates could increase the cost of existing variable debt and the cost of issuing new debt, impacting financial stability.

B. Debt obligations management: Effective management of high levels of debt is critical for Exelon. The company must strategically manage its debt maturities and financing needs to avoid adverse impacts on its liquidity and credit ratings.

A. Public perception of environmental impact: Exelon’s operations impact the environment significantly, leading to close public and regulatory scrutiny. Negative perceptions can impact customer base, regulatory relationships, and potentially, operations.

B. Stakeholder relationships management: Maintaining positive relationships with stakeholders, including investors, regulators, and communities, is crucial. Poor management of these relationships could lead to resistance in project deployments and other business activities.

A. Diversification of energy sources: Exelon is diversifying its energy portfolio by investing in renewables and other clean energy technologies to mitigate risks associated with reliance on traditional energy sources.

B. Regular compliance audits: Regular audits help ensure compliance with regulatory requirements, reducing the risk of penalties and fines and helping sustain operational licenses.

C. Enhanced cybersecurity measures: Exelon has invested in robust cybersecurity infrastructures and protocols to protect against potential cyber attacks, safeguarding critical infrastructure and customer data.

D. Hedging strategies for financial risks: Exelon uses various financial instruments to hedge against financial risks such as interest rate fluctuations and energy price volatility, aiming to stabilize earnings and cash flows.

E. Transparent communication with stakeholders: Exelon prioritizes transparent communication with stakeholders through regular updates and disclosures, building trust and supporting ongoing engagement with its key audiences.