July 24, 2009

 Exelon Announces Second Quarter Results; Reaffirms Full Year 2009 Earnings Guidance 

 Exelon Corporation (NYSE: EXC) today announced that its second quarter 2009 consolidated earnings prepared in accordance with GAAP were $657 million, or $0.99 per diluted share, compared with earnings of $748 million, or $1.13 per share. 

  

CHICAGO (July 24, 2009) – Exelon Corporation (NYSE: EXC) today announced that its second quarter 2009 consolidated earnings prepared in accordance with GAAP were $657 million, or $0.99 per diluted share, compared with earnings of $748 million, or $1.13 per share, in the second quarter of 2008.

Exelon’s adjusted (non-GAAP) operating earnings for the second quarter of 2009 were $683 million, or $1.03 per diluted share, compared with $746 million, or $1.13 per diluted share, for the same period in 2008.

“We delivered very good earnings in the second quarter despite the weak economy and lower demand,” said John W. Rowe, Exelon’s chairman and CEO.  “Not only did we continue to operate extremely well, but Exelon again showed its ability to deliver on its commitments by reducing expenses and setting additional cost reduction targets for 2010.  Our performance allows me to reaffirm our full year operating earnings guidance range of $4.00 to $4.30 per share.”

The decrease in second quarter 2009 adjusted (non-GAAP) operating earnings to $1.03 per share from $1.13 per share in second quarter 2008 was primarily due to:

  • Lower operating income at Exelon Generation Company, LLC (Generation) largely due to revenue in 2008 from certain long option gains in the proprietary trading portfolio and income recognized in 2008 related to a legal settlement of a uranium supply contract;
  • Lower energy gross margins at Generation largely due to unfavorable portfolio and market conditions and higher nuclear fuel costs;
  • Reduced load at Commonwealth Edison Company (ComEd) and PECO Energy Company (PECO), primarily driven by current economic conditions and the impact of unfavorable weather conditions in the PECO service territory; and
  • Increased depreciation and amortization expense primarily related to the higher scheduled competitive transition charge (CTC) amortization at PECO and increased depreciation across the operating companies due to ongoing capital expenditures.

Lower second quarter 2009 earnings were partially offset by:

  • Increased electric distribution revenue at ComEd resulting from the September 2008 distribution rate case order;
  • Decreased operating and maintenance expense largely due to savings achieved through the ongoing cost management initiative and lower uncollectible accounts expense at PECO, partially offset by increased pension and other postretirement benefits (OPEB) expense; and
  • Increased distribution revenue at PECO, partially reflecting new rates effective January 1, 2009, resulting from the 2008 gas distribution rate case.

Adjusted (non-GAAP) operating earnings for the second quarter of 2009 do not include the following items (after-tax) that were included in reported GAAP earnings:

  • Mark-to-market losses of $106 million, or $0.16 per diluted share, primarily from Generation’s economic hedging activities;
  • Federal and state income tax benefits of $66 million, or $0.10 per diluted share, primarily reflecting the non-cash remeasurement of income tax uncertainties and a reassessment of state deferred income taxes;
  • Unrealized gains of $64 million, or $0.10 per diluted share, related to nuclear decommissioning trust (NDT) fund investments;
  • A charge of $20 million, or $0.03 per diluted share, for the costs associated with the 2007 Illinois electric rate settlement agreement;
  • A charge of $24 million, or $0.04 per diluted share, for severance costs as a result of headcount reductions as part of Exelon’s cost reduction program announced in June 2009; and
  • External costs of $6 million, or $0.01 per diluted share, related to Exelon’s proposed acquisition of NRG Energy, Inc. (NRG).

Adjusted (non-GAAP) operating earnings for the second quarter of 2008 did not include the following items (after-tax) that were included in reported GAAP earnings:

  • Mark-to-market gains of $62 million, or $0.09 per diluted share, primarily from Generation’s economic hedging activities;
  • A charge of $45 million, or $0.07 per diluted share, for the costs associated with the 2007 Illinois electric rate settlement agreement; and
  • Unrealized losses of $15 million, or $0.02 per diluted share, related to NDT fund investments.

2009 Earnings Outlook

Exelon reaffirmed its guidance range for 2009 adjusted (non-GAAP) operating earnings of $4.00 to $4.30 per share.  Exelon expects adjusted (non-GAAP) operating earnings for the third quarter of 2009 to be in the range of $0.90 to $1.00 per share.  Operating earnings guidance is based on the assumption of normal weather for the remainder of the year.

The outlook for 2009 adjusted (non-GAAP) operating earnings for Exelon and its subsidiaries excludes the following items:

  • Mark-to-market adjustments from economic hedging activities
  • Unrealized gains and losses from NDT fund investments primarily related to the Clinton, Oyster Creek and Three Mile Island nuclear plants (the former AmerGen Energy Company, LLC units) 
  • Significant impairments of assets, including goodwill
  • Changes in decommissioning obligation estimates
  • Costs associated with the 2007 Illinois electric rate settlement agreement
  • Costs associated with ComEd’s 2007 settlement with the City of Chicago
  • Costs incurred for employee severance related to the cost reduction program announced in June 2009
  • External costs associated with the proposed acquisition of NRG
  • Non-cash remeasurement of income tax uncertainties and reassessment of state deferred income taxes
  • Other unusual items
  • Significant future changes to GAAP

Second Quarter and Recent Highlights

  • Proposal to Acquire NRG:  On July 21, 2009, Exelon announced that it terminated its pending offer to acquire all of the outstanding shares of NRG common stock.  Exelon believes it could have been successful in completing the transaction but was unwilling to raise its price to a level that would undermine its own value proposition.
  • First Anniversary of Exelon 2020:  Exelon 2020 is the company’s comprehensive strategy announced one year ago to reduce, offset or displace more than 15 million metric tons of greenhouse gas (GHG) emissions per year by 2020 by greening its own operations, helping customers and the communities Exelon serves reduce their GHG emissions, and offering more low-carbon electricity in the marketplace.  The 2009 update reports that Exelon so far has reduced more than one-third, or 6 million metric tons, of its GHG emissions.

Exelon has relied on greening its operations to achieve the bulk of its emissions reductions to date. It also has announced plans to offer substantial new low-carbon electricity in the marketplace by raising the output of Exelon nuclear plants and investing in new renewable energy projects.  Going forward, the company will increase its investment in customer initiatives to continue progress toward its 2020 goal.  ComEd and PECO will spend more than $350 million through 2011 on energy efficiency and demand response programs that will help residential and business customers reduce their energy consumption by more than 1.6 million megawatt-hours (MWhs) and reduce peak load by 226 megawatts (MWs).

  • Nuclear Operations:  Generation’s nuclear fleet, including its owned output from the Salem Generating Station operated by PSEG Nuclear LLC, produced 34,995 gigawatt-hours (GWhs) in the second quarter of 2009, compared with 35,069 GWhs in the second quarter of 2008.  The Exelon-operated nuclear plants achieved a 93.9 percent capacity factor for the second quarter of 2009 compared with 95.8 percent for the second quarter of 2008.  The Exelon-operated nuclear plants completed three scheduled refueling outages in the second quarter of 2009, compared with completing two scheduled refueling outages in the second quarter of 2008.  The number of refueling outage days totaled 57 and 40, respectively, in the second quarter of 2009 and 2008.  Also contributing to lower total nuclear output was a higher number of non-refueling outage days at the Exelon-operated plants, which totaled 21 days in the second quarter of 2009, compared to 3 days in the second quarter of 2008.
  • Fossil and Hydro Operations:  Generation’s fossil fleet commercial availability was 98.6 percent in the second quarter of 2009, compared with 92.8 percent in the second quarter of 2008, primarily reflecting the impact of recent capital investments and enhanced inspection programs across the fleet.  The equivalent availability factor for the hydroelectric facilities was 98.8 percent in the second quarter of 2009, compared with 94.4 percent in the second quarter of 2008, primarily due to an earlier than planned annual inspection at Muddy Run in the first quarter of 2009 and the overhaul of Conowingo Unit 2 in 2008.
  • Hedging Update:  Exelon’s hedging program involves the hedging of commodity risk for Exelon’s expected generation typically on a ratable basis over a three-year period.  Expected generation represents the amount of energy estimated to be generated or purchased through owned or contracted-for capacity.  The proportion of expected generation hedged as of June 30, 2009 is 95-98 percent for 2009, 87-90 percent for 2010 and 59-62 percent for 2011.  The primary objective of Exelon’s hedging program is to manage market risks and protect the value of its generation and its investment grade balance sheet while preserving its ability to participate in improving long-term market fundamentals.
  • Nuclear Uprate Program:  On June 12, 2009, Exelon announced the completion of an approximate 38-MW increase in output at its Quad Cities plant in Illinois and launched a series of planned power uprates across its nuclear fleet that will generate between 1,300 and 1,500 MWs of additional generation capacity within eight years through equipment upgrades and efficiency improvements.  Exelon’s uprate projects use proven technologies and are overseen by the Nuclear Regulatory Commission.  Uprate projects are already underway at a number of Exelon’s nuclear stations, which are expected to produce nearly a quarter of the new MWs.  The remainder of uprate MWs will come from additional projects across Exelon’s nuclear fleet beginning in 2010 and ending in 2017. 
  • Cost Reduction Program: On June 18, 2009, Exelon announced a reorganization of its senior executive team and structure to reflect a leaner corporate management model.  These and related changes are being driven by economic challenges confronting all parts of Exelon’s business and industry, including the need for continued focus on cost management through enhanced efficiency and productivity.  The company announced major spending cuts which will achieve approximately $350 million in operations and maintenance expense savings in 2010.  These savings are expected to result in a nearly 3.5 percent reduction in year-over-year operating and maintenance spending, from $4.5 billion in 2009 to $4.35 billion in 2010.  The spending cuts include the elimination of approximately 500 positions, mostly in corporate support functions.  The company expects over half of the $350 million in cost savings to be sustainable.  Exelon incurred a second quarter 2009 after-tax severance charge of approximately $24 million associated with the elimination of the 500 positions.
  • ComEd Energy Procurement:  On January 7, 2009, the Illinois Commerce Commission approved the Illinois Power Agency’s plan for procurement of ComEd’s expected energy requirements from June 2009 through May 2010.  The procurement plan includes approximately 38 percent of ComEd’s expected energy requirements purchased through the spot market with a significant portion of the purchases hedged by the financial swap contract with Generation and 33 percent being met through existing supplier contracts.  The remaining energy requirements were met through the standard products purchased as a result of the 2009 request for proposal (RFP) process completed in May 2009.  Approximately 8 percent of ComEd’s energy requirements from June 2010 through May 2011 were also procured through the contracts entered into as a result of the 2009 RFP process.  
  • PECO Energy Procurement:  On June 2, 2009, the Pennsylvania Public Utility Commission (PAPUC) approved the settlement of PECO’s default service provider program, under which PECO will provide default electric service following the expiration of electric generation rate caps on December 31, 2010.

During 2009 and 2010, PECO will conduct four procurements for the residential class and for full requirements fixed price products and block products for electric generation supply commencing in 2011.  During 2009 and 2010, PECO will also conduct three procurements for the small commercial and medium commercial classes for full requirements fixed price products and one procurement for full requirements spot price products.  For the large commercial and industrial class, PECO will conduct one procurement for full requirements fixed price products and one procurement for full requirements spot price products.

On June 17, 2009, the PAPUC approved the results of PECO’s first competitive procurement RFP.  The June 2009 electric generation procurements were for service to the residential class and included full requirements fixed price contracts for 17-month and 29-month periods beginning January 1, 2011, and block contracts to procure electric generation for the 12-month period beginning January 1, 2011.  On July 15, 2009, PECO announced the results of the first competitive procurements, which accounted for approximately 21 percent of the electricity needed for PECO’s residential customers.  The purchases resulted in a price of 10.1 cents per kilowatt hour (kWh), indicating a 9 percent energy price increase for an average residential customer beginning in 2011.  PECO’s next residential purchase and initial generation supply purchases for the small and medium commercial classes will take place in September 2009.

  • Credit Rating Actions:  Following the termination of Exelon’s proposed offer for NRG, the rating agencies took the following actions.

On July 21, 2009, Fitch Ratings, Ltd. removed Exelon Corp. and Generation from Ratings Watch Negative.  The ratings for Exelon and Generation were affirmed and each entity was assigned a Stable Ratings Outlook.

On July 22, 2009, Standard & Poor’s Ratings Services (S&P) affirmed its corporate credit rating on Exelon Corp., Generation and PECO of “BBB” and removed their ratings from CreditWatch with negative implications.  In addition, S&P raised the corporate credit rating of ComEd to “BBB” from “BBB-”, raised its debt and preferred stock ratings and removed its ratings from CreditWatch with negative implications.  An S&P research report cited “improvement in both ComEd’s business risk profile and its financial measures”.  The outlook for ratings of all the Exelon entities is stable.

On July 23, 2009, Moody’s Investors Service (Moody’s) confirmed the ratings of Exelon Corp. and Generation and assigned a stable outlook.  Moody’s also confirmed the long-term debt rating of PECO but downgraded its short-term rating to “P-2” from “P-1” and changed the outlook on PECO’s long-term debt to negative.

OPERATING COMPANY RESULTS

Exelon Generation consists of owned and contracted electric generating facilities, wholesale energy marketing operations and competitive retail sales operations. 
 
Second quarter 2009 net income was $512 million compared with $653 million in the second quarter of 2008.  Second quarter 2009 net income included (all after tax) mark-to-market losses of $106 million from economic hedging activities before the elimination of intercompany transactions, unrealized gains of $64 million related to NDT fund investments, the benefit from a reassessment of state deferred income taxes of $38 million, a charge of $18 million for the costs associated with the 2007 Illinois electric rate settlement and a charge of $9 million for the costs incurred for severance.  Second quarter 2008 net income included (all after tax) mark-to-market gains of $47 million from economic hedging activities, a charge of $44 million for the costs associated with the 2007 Illinois electric rate settlement and unrealized losses of $15 million related to NDT fund investments.  Excluding the impact of these items, Generation’s net income in the second quarter of 2009 decreased $122 million compared with the same quarter last year primarily due to:

  • Income recognized in the second quarter of 2008 related to certain long option gains in the proprietary trading portfolio and a uranium contract settlement;
  • Lower energy gross margins, largely due to unfavorable portfolio and market conditions and higher nuclear fuel costs; and
  • Higher operating and maintenance expense, primarily reflecting increased pension and OPEB expense.

Generation’s average realized margin on all electric sales, including sales to affiliates and excluding trading activity, was $38.96 per MWh in the second quarter of 2009 compared with $40.53 per MWh in the second quarter of 2008.

ComEd consists of the electricity transmission and distribution operations in northern Illinois. 
 
ComEd recorded net income of $116 million in the second quarter of 2009, compared with net income of $35 million in the second quarter of 2008.  Second quarter 2009 net income included (all after tax) the benefit from a non-cash remeasurement of income tax uncertainties of $40 million, a charge of $11 million for the costs incurred for severance, and $2 million for the costs associated with the Illinois electric rate settlement.  Second quarter 2008 net income included an after-tax charge of $1 million for the costs associated with the Illinois electric rate settlement.  Excluding the impact of these items, ComEd’s net income in the second quarter of 2009 increased $53 million from the same quarter last year primarily due to:

  • Increased distribution revenue due to the September 2008 distribution rate case order; and
  • Lower operating and maintenance expense, which primarily reflected the impact of the cost reduction initiative and decreased storm costs, partially offset by increased pension and OPEB expense.

The increase in net income was partially offset by:

  • Reduced load, primarily driven by current economic conditions.

In the second quarter of 2009, cooling degree-days in the ComEd service territory were down 7.8 percent relative to the same period in 2008, but were 21.0 percent below normal.  ComEd’s total retail kilowatt-hour (kWh) deliveries decreased by 4.3 percent quarter over quarter, with declines in deliveries to all major customer classes.  In addition, the number of residential customers being served in the ComEd region decreased 0.4 percent from the second quarter of 2008. 

Weather-normalized retail kWh deliveries decreased by 4.1 percent from the second quarter of 2008.  For ComEd, weather had an unfavorable after-tax impact of $1.2 million on second quarter 2009 earnings relative to 2008 and an unfavorable after-tax impact of $5.2 million relative to normal weather that was incorporated in earnings guidance. 

PECO consists of the electricity transmission and distribution operations and the retail natural gas distribution business in southeastern Pennsylvania. 
 
PECO’s net income in the second quarter of 2009 was $71 million, up from $58 million in the second quarter of 2008.  Second quarter 2009 net income included (after tax) a charge of $3 million for the costs incurred for severance.  Excluding the impact of this item, PECO’s net income in the second quarter of 2009 increased by $16 million compared with the same quarter last year primarily due to:

  • Lower uncollectible accounts expense; and
  • Higher distribution revenue, partially reflecting new rates effective January 1, 2009, resulting from the 2008 gas distribution rate case.

The increase in net income was partially offset by:

  • Reduced load, primarily driven by current economic conditions and the impact of unfavorable weather conditions; and
  • Higher CTC amortization, which was in accordance with PECO’s 1998 restructuring settlement with the PAPUC.  As expected, the increase in amortization expense exceeded the increase in CTC revenues.

In the second quarter of 2009, cooling degree-days in the PECO service territory were down 10.4 percent from 2008, but were 6.0 percent above normal.  Heating degree-days were up 1.0 percent from 2008 and were 9.6 percent below normal.  Total retail kWh deliveries were down 5.5 percent from last year, largely reflecting a decline in deliveries to residential and large commercial and industrial customers, primarily driven by current economic conditions and the impact of unfavorable weather conditions.  The number of residential electric customers being served in the PECO region decreased 0.3 percent from the second quarter of 2008. 

Weather-normalized retail kWh deliveries decreased by 2.6 percent from the second quarter of 2008, primarily reflecting decreased residential and large commercial and industrial deliveries.  For PECO, weather had an unfavorable after-tax impact of $13 million on second quarter 2009 earnings relative to 2008 and an unfavorable after-tax impact of $8 million relative to normal weather that was incorporated in earnings guidance.


Adjusted (non-GAAP) Operating Earnings

Adjusted (non-GAAP) operating earnings, which generally exclude significant one-time charges or credits that are not normally associated with ongoing operations, mark-to-market adjustments from economic hedging activities and unrealized gains and losses from NDT fund investments, are provided as a supplement to results reported in accordance with GAAP.  Management uses such adjusted (non-GAAP) operating earnings measures internally to evaluate the company’s performance and manage its operations.  Reconciliation of GAAP to adjusted (non-GAAP) operating earnings for historical periods is attached.  Additional earnings release attachments, which include the reconciliation on page 7, are posted on Exelon’s Web site: www.exeloncorp.com and have been filed with the Securities and Exchange Commission on Form 8-K on July 24, 2009.
 
Conference call information: Exelon has scheduled a conference call for 11 AM ET (10 AM CT) on July 24, 2009.  The call-in number in the U.S. and Canada is 800-690-3108, and the international call-in number is 973-935-8753.  If requested, the conference ID number is 20118989.  Media representatives are invited to participate on a listen-only basis.  The call will be web-cast and archived on Exelon’s Web site: www.exeloncorp.com.  (Please select the Investor Relations page.)

Telephone replays will be available until August 10.  The U.S. and Canada call-in number for replays is 800-642-1687, and the international call-in number is 706-645-9291.  The conference ID number is 20118989.

 

 

Forward Looking Statements

This press release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, that are subject to risks and uncertainties.  The factors that could cause actual results to differ materially from these forward-looking statements include those discussed herein as well as those discussed in (1) Exelon’s 2008 Annual Report on Form 10-K in (a) ITEM 1A. Risk Factors, (b) ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and (c) ITEM 8. Financial Statements and Supplementary Data: Note 18; (2) Exelon’s Second Quarter 2009 Quarterly Report on Form 10-Q (to be filed on July 24, 2009) in (a) Part II, Other Information, ITEM 1A. Risk Factors and (b) Part I, Financial Information, ITEM 1. Financial Statements: Note 14; and (3) other factors discussed in filings with the Securities and Exchange Commission (SEC) by Exelon Corporation, Commonwealth Edison Company, PECO Energy Company and Exelon Generation Company, LLC (Companies).  Readers are cautioned not to place undue reliance on these forward-looking statements, which apply only as of the date of this press release.  None of the Companies undertakes any obligation to publicly release any revision to its forward-looking statements to reflect events or circumstances after the date of this press release.

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 Exelon Corporation is one of the nation’s largest electric utilities with approximately 5.4 million customers and $19 billion in annual revenues.  The company has one of the industry’s largest portfolios of electricity generation capacity, with a nationwide reach and strong positions in the Midwest and Mid-Atlantic.  Exelon distributes electricity to approximately 5.4 million customers in Illinois and Pennsylvania and natural gas to approximately 485,000 customers in southeastern Pennsylvania.  Exelon is headquartered in Chicago and trades on the NYSE under the ticker EXC.

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