Exelon Corp. Executive Senior Vice President and CFO Joseph Nigro sees the company's new pure-play, transmission and distribution utility structure offering investors a clearly attractive proposition as a fully regulated business with no generation exposure and plans to spend nearly $30 billion to reduce emissions even further.

The company's power generation and retail energy business, now called Constellation Energy Corp., began trading publicly Feb. 2. Nigro said in an interview that the separation marks one more step in the sector's broader shift away from so-called hybrid utilities.

"The industry had moved away from having competitive and regulated businesses together," Nigro said. "They're two very different business models, and as your businesses continue to grow at different rates and you invest in them at different rates, that creates some challenges."

The hybrid model created when Exelon acquired Constellation in 2012 stoked "confusion among different stakeholders," according to Nigro, making the separation a "cleaner story on both sides" now that the cost of operating generation assets in nonregulated jurisdictions, which could not be recovered in customer bills, has been eliminated.

Constellation has more than 31,000 MW of generating capacity from nuclear, wind, solar, natural gas and hydro assets. It could also add to its 22,000-MW nuclear fleet if assets come up for sale as state and federal policy begins to reflect the technology's value as a carbon-free power source.

Despite concerns that the new Exelon may be less attractive to environmental, social and governance investors given its "better starting point" on emissions reductions, the company's management is confident about its appeal to shareholders.

Exelon intends to reduce operating emissions 50% or more by 2030 and achieve net-zero by 2050, in line with many utility industry peers. Nigro said the company has multiple options to cut CO2: "You look at equipment turnover when you think about our gas pipelines and improving things like leakage on those systems."

Several analysts agree that the newly simplified Exelon has an attractive environmental profile. "Exelon post-spin has a clean profile that fits into most ESG funds metrics, even if an exclusionary, already clean approach is used versus a rate of change approach," UBS analysts wrote in a Feb. 2 report. For Morgan Stanley, Exelon "represents one of very few utilities" with no nuclear or coal exposure.

At the heart of Exelon's slimmed-down structure is a $29 billion capital spending program from 2022 through 2025 that includes improvements aimed at cybersecurity, transportation electrification, gas infrastructure replacement and integrating renewables into existing transmission and distribution systems.

A large proportion of that spending will be on grid hardening, Nigro said, adding that any planned investment will be done "in concert with [Exelon's] regulators."

In February 2021, Maryland released a plan calling for a 50% reduction in greenhouse gases by 2030 and net-zero greenhouse gas emissions by 2045. Exelon subsidiaries Baltimore Gas and Electric Co., Delmarva Power & Light Co. and Potomac Electric Power Co., all of which operate in portions of Maryland, all intend to electrify 50% of their passenger vehicles and medium-duty fleets by 2030.

Governance is also a key focus for the new Exelon. In July 2020, subsidiary Commonwealth Edison Co. reached a deal with federal investigators deferring prosecution for three years on a bribery charge related to a yearslong effort by the Chicago utility to steer jobs and contracts to associates of a state elected official in a bid to influence legislation. Along with a $200 million fine, ComEd must continue cooperating with the government and improve its corporate compliance program. At the end of the three-year period, the utility can move for dismissal.

"We revamped our processes on that side," Nigro said. "We brought in some outside resources that work for the company now as the head of compliance."

S&P Global Ratings, which rates Exelon BBB+ at the issuer level, said in a Feb. 2 research update its positive outlook for the company reflects expectations that ComEd will continue to meet the terms of the deferred prosecution agreement, "leading to our assessment that further violations will not be identified by the completion of the three-year term."

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