Cash flow’s rising. Capex is flowing. And Exelon’s staring down 33 GW of fresh load growth from data centers and AI-fueled infrastructure, most of it clustered right where they operate.
But that’s not the whole picture: the market still thinks this is a sleepy, rate-capped utility playing defense.
I don’t see it that way. What’s coming down the pipe is a generation capacity buildout the size of Texas.
Exelon is already reworking regulatory filings to match that reality, and if those approvals go through, this entire business model resets on higher demand, higher returns, and structurally higher relevance.
Action: Accumulate shares under $45 while regulatory catalysts are still being priced like paperwork. Once rate base expansion meets real volume, this rerates fast.
Why the Market Overcorrected and What Comes Next
From mid-2022 through early 2024, Exelon got lumped in with the rest of the “boring utilities” due to slow growth, interest-rate sensitive, and facing regulatory drag.
The Constellation Energy spin-off stripped away its generation upside, and what remained was a transmission and distribution (T&D) business trading like a bond proxy.
Then rates jumped, and the bond proxies got dumped.
Exelon’s yield lost its shine in a 5% Fed Funds world. On top of that, regulatory delays in Illinois and Maryland, plus noise around grid reliability, kept sentiment muted.
Even as earnings held firm, the stock was treated like dead money. I saw a name with stable returns, but no narrative.
Now that’s starting to shift.
Three things have changed:
The AI power demand story is real — and Exelon is at ground zero, with massive utility exposure to the Mid-Atlantic and Midwest, where data center load is spiking.
Capex visibility is improving — with ~$34 billion planned through 2027, and early signals that regulators are warming to higher allowed ROEs.
The market is finally separating Exelon from the pack — this isn’t an IPP or a stretched grid player. It’s a rate-regulated machine with growing demand and structurally rising volumes.
To me, the story is moving from “safe and slow” to “underrated and positioned.”
The 2022–2024 discount made sense when grid growth was linear. But when load forecasts start looking exponential, and your service territory sits under that curve, it’s time to redraw the playbook.
Regulated Utilities Could Be the Spark
Forget the legacy image of utilities as slow, rate-capped coupon clippers. Exelon’s six regulated utilities, including ComEd, PECO, and BGE, are morphing into growth conduits for AI infrastructure, electrification, and grid modernization.
The spark? Load growth is no longer flat.
In northern Illinois alone, ComEd just projected an 11% load increase over the next five years, nearly double its historical pace. Why? Data centers, EV chargers, and manufacturing reshoring.
And this isn’t hypothetical: Exelon already has over 1.6 GW of confirmed load requests from hyperscale and enterprise operators across its territories. That’s real demand, not PowerPoint fluff.
At the same time, Exelon is deploying capital with precision. Its ~$34 bllion five-year investment plan is aimed directly at reliability, digital grid upgrades, and capacity expansions.
These aren’t vanity projects. These are ROE-approved upgrades backed by state commissions with track records of constructive regulation.
What stands out to me is how aligned the business model is to long-cycle secular trends. Exelon isn’t guessing at where the growth is going, it’s standing in front of it.
Every substation built for AI load, every transformer upgraded for EV capacity, feeds directly into the rate base. That’s how you scale durable, regulated returns without having to chase commodity upside.
In a sector full of bloated yield plays and transition laggards, Exelon’s grid-first, growth-backed model is exactly the kind of inflection the market tends to miss, until the earnings compounding shows up.
Why Capital Return and Passive Flows Could Drive a Re-Rating
Exelon may not have the narrative flash of a tech IPO, but its mechanics are setting it up for a clean, structural re-rating, driven not by hype, but by how capital quietly flows in this market.
The biggest lever is capital return.
In 2024, Exelon raised its dividend by 5%, marking the third consecutive hike since the 2022 Constellation spin-off. It’s now targeting 6–8% annual dividend growth, powered by stable earnings and a growing regulated rate base.
And while it’s not buying back stock aggressively yet, the balance sheet gives them room. Debt-to-equity is trending downward, and FFO coverage is solid.
After years of balance sheet repositioning and regulatory noise, Exelon is back in a place where it can reward long-term holders. That’s the setup I look for: a utility that used to be penalized for exposure to wholesale markets, now earning a re-rate for predictability.
There’s also a passive tailwind in play. With clean separation from Constellation and a more focused earnings stream, Exelon has become a clean index component.
Flows into utility ETFs and dividend funds have steadily increased in 2024, and as portfolio managers reshuffle toward defensive cash compounders, EXC could quietly benefit.
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Utilities Are Back in Demand, and Exelon’s Right in the Flow
Utilities aren’t supposed to outperform in up markets. But 2025 is a regime shift. Sticky inflation, higher-for-longer rates, and geopolitical tension are pushing institutional capital back toward steady, yield-backed names. And Exelon is positioned better than most.
Electricity demand is climbing, not from suburban sprawl or retail growth, but from data centers, AI infrastructure, and grid electrification. Exelon’s service territories — especially in the Mid-Atlantic and Midwest — are directly in the path of this demand curve.
PJM Interconnection, which oversees the grid in Exelon’s backyard, has already flagged data centers and industrial load growth as major factors for capacity planning.
I’m watching this closely: utilities with regulated infrastructure and favorable rate cases in growth corridors are going to reprice, because they’re suddenly capacity-constrained and politically relevant.
That puts Exelon in the same conversation as names like NextEra, but without the premium multiple.
From where I sit, the market’s still trying to treat all utilities the same, but Exelon’s urban footprint, IRA exposure, and scale mean it’s actually a compounder dressed like a value stock.
Risks and Re-Rating Potential
Exelon’s not bulletproof. It’s a regulated utility with regional exposure, political oversight, and capital intensity. But the perceived risk and the actual risk here are diverging.
Yes, utilities face rising capex needs, and that means more regulatory filings, rate approvals, and debt.
Exelon’s ~$40 billion capital plan through 2027 is aggressive, and will push leverage higher before it comes down. But the return on that rate base expansion is visible, regulated, and already in motion.
Another overhang are legacy ComEd headlines. Some investors still anchor the 2020s bribery case in Illinois. But since the separation from Constellation, Exelon’s governance has tightened up, and state-level relationships have stabilized.
I’m not ignoring the optics, I’m just not pricing the stock as if those risks are still live.
I see re-rating potential through multiple channels:
Valuation rerate as grid and data demand stories play out.
Passive flows if Exelon starts popping up in more ESG and AI-adjacent utility baskets.
Yield compression if Fed cuts put income stocks back in vogue.
The bar’s not high here. All Exelon has to do is keep executing on its capital plan, raise the dividend modestly, and show rate base momentum. If it does, the stock moves to 17–18x earnings with very little multiple stretch.
Final Word: Betting on the Grid Rebuilders
Exelon is rebuilding where it counts: rate base, ROE, credibility. It’s aligned with regulators, executing a clear capital plan, and riding secular trends in electrification and data demand that aren’t going anywhere.
From my seat, this is the kind of stock that re-rates not through headlines, but through quarters. The setup reminds me of other misunderstood compounders: slow, visible, and quietly consistent. When those names start to move, they tend to move for years.
Action Recap
✅ Buy Zone: Accumulate between $34 and $36 ahead of Q3 earnings and full-year guidance clarity.
✅ Catalyst to Watch: ROE improvement across jurisdictions, load recovery in data center corridors, and signs of credit rating upgrades from S&P or Moody’s.
✅ Medium-Term Target: $42–$45 based on regulated earnings growth, FFO stability, and valuation re-rating toward peer averages.
✅ Risk Management Tip: Watch for inflation-driven cost push on capital projects and rate case outcomes in Illinois and Pennsylvania. Trim exposure if ROE compression worsens in key territories.
That’s our coverage for today, thanks for reading! Reply to this email with feedback or any names you want us to dig into next.
Best Regards,
—Noah Zelvis
Undervalued Edge
