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Summary Growth investments directed at improving generational assets and growing regulated asset base will ensure rate base growth and earnings stability for the company in the long run. Recent POM acquisition approval is signaling that EXC’s regulated EPS growth will improve in coming quarters. Future cash flows remain strong due to EXC’s efforts to have a large, regulated asset base. I reiterate my bullish stance on Exelon Corporation (NYSE: EXC ); the company is making good progress on its plan to have an extended regulated asset base through acquisitions and investments. EXC’s ongoing capital investments in several infrastructure development projects will add value to shareholder wealth, which will portend well for the stock price. Moreover, the company’s nuclear operation divesture plan is still under consideration; the plan, if approved, will strengthen EXC’s competitive position in the long run. The company’s rapidly growing regulated asset base provides a foundation for stable earnings and cash flow base, which will support dividend growth in future years. EXC currently offers an attractive dividend yield of 3.9%. Attractive Long-Term Growth Path Since the start of 2015, the volatile interest rate environment has weighed on utility stocks, and the utility sector underperformed the broad market in 1H’15. Owing to improving economic conditions in the U.S., the Fed is likely to increase short-term interest rates in 2H’15, which will put pressure on the stock prices of utility companies, including EXC. Despite the fear of a rise in interest rates, I believe EXC’s performance in the coming quarters will stay strong, mainly supported by the correct strategic efforts of the company. EXC, along with other utility companies in the industry, including American Electric Power (NYSE: AEP ) and PPL Corp. (NYSE: PPL ), have a robust capital spending outlook, which will support earnings growth in the next five years. EXC is following the industry norm by making hefty growth investments and acquisitions in regulated business to secure its long-term growth. During 2014, EXC spent almost $1.78 billion on several infrastructural growth-related projects, up 46.6% year-over-year. As per its recent sustainability report, the company has invested around $3.1 billion for electric and gas utility infrastructure, which includes a $500 million investment in the installation of smart meter technology during 2015. I believe the company’s recent approach to provide safe and reliable energy is bringing convenience for customers in a way that creates value for it over the long term. Another important area of investment has been EXC’s increased focus on improving its power generation capacity through the expansion and improvement of the gas business. In this regard, the company’s previously acquired 6 natural gas power plants in Maryland have started operations from June 28. The 128MW power plants will benefit EXC by improving its natural gas production capacity in the Maryland state and will ultimately add towards its rate base growth and positively affect the stock price. Moreover, the company has recently received approval for the much-awaited PEPCO Holdings (NYSE: POM ) merger from the Delaware Public Service Commission (PSC); the $6.8 billion merger is expected to complete in 2H’15, which will strengthen the company’s regulated operations and will positively affect the stock price. The upside of this merger rests in improving the EXC business and financial risk profile, as its regulated operations will increase; the company’s management expects that the merger will add nearly 15 cents-to-20 cents to EXC’s EPS during the first full year of operation. In fact, a rate base of nearly $26 billion has been projected for the combined entity, which indicates significant upside for its future ROE and cash flows. Moving ahead, under its plan of making strategic investments in diversifying the power generation portfolio, the company is planning to spend around $16 billion over the next five years, which I believe will enhance EXC’s future financial performance. On the other side, the company’s plan to shut down its loss making, Illinois-based 6 out of 11 nuclear power plants is still on hold. Recently, five of these nuclear units have failed to clear PJM’s base residual auction; despite the inability of its nuclear units to qualify for the PJM rate base auction, analysts are hoping that EXC will generate $150 million more in capacity revenue during 2017-2018 than it would have attained if all of its capacity had cleared the auction. However, the failure to qualify for the PJM auction has strengthened the company’s case before legislatures to shut down the nuclear plants. So, either the FERC should support them or LCPS standards should be changed to support its nuclear operations. While EXC is still in talks with the FERC to lower LCPS standards, I continue to believe that the closure of nuclear power plants is positively affecting the company’s performance in the long term, and will allow the company to focus more on stable regulated operations. EXC has an attractive dividend payment plan, which is strongly backed by its healthy cash flow base. Thus far, its healthy dividend payments have earned the company a decent dividend yield of 3.9% and a modest payout ratio of 48% , which indicates that there is significant room left for further dividend hikes, if the company opts to increase the payout ratio. Given EXC’s strong commitment to having a large, regulated asset base, I continue to believe in the security and sustainability of EXC’s future cash flow base, which ensures dividend stability and dividend growth in the years ahead. I recommend investors to keep track of the upcoming 2Q’15 earnings, as the company will provide an update on its capital expenditure outlook and will discuss its plans to increase regulated operations, which could have a significant impact on the stock price. According to the company’s guidance, EXC is expected to report EPS in a range of $0.45-$0.55 for Q2’15. In contrast, analysts are anticipating EPS of $0.51 for 2Q’15. The following table shows analysts; EPS forecast for EXC’s 2Q’15. Consensus EPS Forecast Low EPS Forecast High EPS Forecast 2Q’15 $0.51 $0.48 $0.55 Source: Nasdaq.com Risks The company continues to face operational and financial risk from its nuclear energy generation assets. Moreover, uncertainty about regulatory rate approvals, changes in national energy demand, stringent environmental standards and unforeseen negative economic changes are key risks that might hamper EXC’s future stock price performance. Conclusion I am bullish on EXC and believe the company will deliver a healthy performance in the long term. The company’s growth investments directed at improving its generational assets and growing its regulated asset base will ensure rate base growth and earnings stability in the long run. Furthermore, the recent POM acquisition approval is signaling that EXC’s regulated EPS growth will improve in the coming quarters. Moreover, the company’s future cash flows remain strong due to its efforts to have a large, regulated asset base, which will support dividend growth and make dividends more stable. Analysts have also projected a healthy next five-years earnings growth of 4.9% for EXC, as shown below in the chart. Source: Nasdaq.com Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.