Earnings Conference Call • 2 nd Quarter 2009 July 24, 2009 EXHIBIT 99.2 |
2 Forward-Looking Statements This presentation 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 presentation. 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 presentation. This presentation includes references to adjusted (non-GAAP) operating earnings and non- GAAP cash flows that exclude the impact of certain factors. We believe that these adjusted operating earnings and cash flows are representative of the underlying operational results of the Companies. Please refer to the attachments to the earnings release and the appendix to this presentation for a reconciliation of adjusted (non-GAAP) operating earnings to GAAP earnings. Please refer to the footnotes of the following slides for a reconciliation non-GAAP cash flows to GAAP cash flows. |
3 Carbon Cost Reductions PA Procurement Nuclear Uprates - Lowest carbon intensity in the sector - $1.1 billion (2) and growing annual upside to Exelon revenues from implementation of Waxman-Markey legislation - Developing business plan for transmission company to improve reliability, reduce congestion, mitigate oversupply and allow our Midwest fleet to maintain its baseload value - $350 million in announced O&M reductions for 2010, more than half of which is sustainable - 1,300 MW - 1,500 MW in Exelon nuclear uprates by 2017, the equivalent of a new nuclear plant at roughly ½ the cost of new build and no incremental operating costs - $101.30/MWh (1) result in June PECO power procurement suggests higher margins at Exelon Generation in 2011 and beyond - ComEd and PECO plan to make up to $1 billion in investments to build smart grid infrastructure over the coming years, providing for a regulated return on investment (1) Reflects retail price including line losses and gross receipts tax (2) Assumes $15/tonne carbon pricing. Exelon’s Long-Term Growth Proposition Remains the Best in the Industry Transmission Smart Grid |
4 Key Financial Messages Q2 operating results of $1.03/share driven by: Exceptional nuclear operations – 93.9% capacity factor Increased electric distribution rates at ComEd effective September 2008 and gas distribution revenues at PECO effective January 2009 Reduction in O&M expenses of over $50 million in second quarter reflecting the impact of Exelon’s cost management initiatives Reaffirming 2009 operating earnings guidance of $4.00-$4.30/share 95-98% of 2009 expected generation hedged (1) On track to keep 2009 operating O&M (2) costs flat to 2008 at $4.5 billion Well-positioned for continued financial strength going forward Strong cash flow from operations (3) – forecasted at $5.4 billion for 2009, an increase of $700 million over original guidance assumptions Committed to an additional $350 million reduction in operating O&M (2) expense in 2010, a nearly 3.5% decline from 2009 levels (4) Refer to Earnings Release Attachments for additional details and to the Appendix for a reconciliation of adjusted (non-GAAP) operating EPS to GAAP EPS. (1) As of June 30, 2009. (2) Operating O&M excludes Decommissioning impact. ComEd and PECO operating O&M excludes energy efficiency spend recoverable under a rider. (3) Cash Flow from Operations primarily includes net cash flows provided by operating activities (excluding counterparty collateral activity) and net cash flows used in investing activities other than capital expenditures. (4) Exelon projects a nearly 3.5% decrease in year-over-year O&M spending, from approximately $4.5 billion in 2009 to $4.35 billion in 2010. These reductions represent over $350 million of O&M savings in 2010, as Exelon anticipated a 4% increase in O&M absent these actions. Note: Information contained on this slide is rounded. |
5 $1.01 $0.09 $0.82 $0.11 $0.05 $0.13 2008 2009 Operating EPS $1.74 $0.23 $1.74 $0.28 $0.12 $0.31 2008 2009 HoldCo/Other ExGen PECO ComEd 2 nd Quarter (Q2) (1) As expected, second quarter results were driven by higher quarter-over-quarter earnings at ComEd and PECO, offset by lower operating earnings at Exelon Generation (1) Refer to Earnings Release Attachments for additional details and to the Appendix for a reconciliation of adjusted (non-GAAP) operating EPS to GAAP EPS. $1.13 $0.99 GAAP EPS Year-to-Date (YTD) (1) $2.24 $2.06 $2.01 $2.07 $1.03 $1.13 |
6 Exelon Generation Operating EPS Contribution 2009 2008 Key Drivers – Q2 ’09 vs. Q2 ’08 (1) ‘08 Proprietary trading gains: ($0.07) ‘08 Uranium contract settlement: ($0.04) Unfavorable portfolio/market conditions: ($0.02) Higher nuclear fuel costs: ($0.02) Higher O&M primarily due to pension and OPEB expense and inflation partially offset by cost savings initiatives: ($0.01) Income taxes: ($0.01) (1) Refer to the Earnings Release Attachments for additional details and to the Appendix for a reconciliation of adjusted (non-GAAP) operating EPS to GAAP EPS (2) Outage days exclude Salem. 57 40 Refueling 21 3 Non-refueling Q2 2009 Q2 2008 Outage Days (2) 2Q YTD $1.01 $0.82 $1.74 $1.74 |
7 Key Drivers – Q2 ’09 vs. Q2 ’08 (1) Higher electric distribution rates: +$0.06 Lower O&M due to cost savings initiatives and decreased storm costs partially offset by higher pension and OPEB expense and inflation: $0.02 Reduced load: ($0.01) ComEd Operating EPS Contribution (1) Refer to the Earnings Release Attachments for additional details and to the Appendix for a reconciliation of adjusted (non-GAAP) operating EPS to GAAP EPS 2009 2008 2Q YTD $0.05 $0.13 $0.31 $0.12 |
8 PECO Operating EPS Contribution Key Drivers – Q2 ’09 vs. Q2 ’08 (1) Lower bad debt expense: +$0.05 Higher distribution revenues (2) : +$0.03 Competitive Transition Charge (CTC) amortization: ($0.02) Reduced load: ($0.02) Weather: ($0.02) 2009 2008 (1) Refer to the Earnings Release Attachments for additional details and to the Appendix for a reconciliation of adjusted (non-GAAP) operating EPS to GAAP EPS (2) Includes the impact of higher gas distribution rates effective January 2009 of $0.01. 2Q YTD $0.09 $0.11 $0.28 $0.23 |
9 ComEd Load Trends Weather-Normalized Load Customer Usage by Revenue Class Key Economic Indicators Top 380 Customer Usage by Segment Other 2% Residential 31% Small C&I 36% 380 Large C&I 18% Other Large C&I 13% 3% Leisure & Hospitality 9% Trade, Transportation & Utilities 11% Finance, Professional & Business Services 12% Health & Educational Services 13% Government 52% Manufacturing Chicago U.S. Unemployment rate (1) 10.6% 9.5% Q2 2009 annualized growth in gross domestic/metro product (2) (3.5)% (1.8)% 4/09 Home price index (3) (18.7)% (18.1)% (1) Source: Illinois Dept. of Employment Security and U.S. Dept. of Labor (July 2009 reports) (2) Source: Moody’s Economy.com (3) Source: S&P Case-Shiller Index (4) Adjusted for leap year impact (5) Not adjusted for leap year impact Q1 2009 (4) Q2 2009 2009E (5) Customer Growth (0.2)% (0.4)% (0.4)% Average Use-Per-Customer (1.0)% (0.9)% (1.0)% Total Residential (1.2)% (1.3)% (1.4)% Small C&I (1.3)% (3.7)% (2.0)% Large C&I (5.3)% (7.5)% (5.9)% All Customer Classes (2.5)% (4.1)% (3.0)% Note: C&I = Commercial & Industrial |
10 PECO Load Trends Other 2% Other Large C&I 21% 150 Large C&I 21% Small C&I 22% Residential 34% Weather-Normalized Electric Load Q1 2009 (3) Q2 2009 2009E (4) Customer Growth 0.1% (0.3)% 0.1% Average Use-Per-Customer 0.1% (1.7)% (0.5)% Total Residential 0.2% (2.0)% (0.4)% Small C&I 0.0% (0.7)% (1.1)% Large C&I (3.3)% (4.0)% (3.5)% All Customer Classes (1.1)% (2.6)% (1.8)% Customer Usage by Revenue Class Philadelphia U.S. Unemployment rate (1) 8.4% 9.5% Q2 2009 annualized growth in gross domestic/metro product (2) (2.8)% (1.8)% Key Economic Indicators Top 150 Customer Usage by Segment 18% Health & Educational Services 19% Manufacturing 21% Petroleum 3% Retail Trade 4% Other 9% Transportation, Communication & Utilities 13% Finance, Insurance & Real Estate 13% Pharmaceuticals (1) Source: Moody's Economy.com (June 2009) and U.S Dept. of Labor (July 2009) (2) Source: Moody’s Economy.com (3) Adjusted for leap year impact (4) Not adjusted for leap year impact |
11 (1) Represents an approximate range of expected gross margin, taking into account hedges in place, between the 5th and 95th percent confidence levels. Approximate gross margin ranges are based upon an internal simulation model and are subject to change based upon market inputs, future transactions and potential modeling changes. These ranges of approximate gross margin in 2010 and 2011 do not represent earnings guidance or a forecast of future results as Exelon has not completed its planning or optimization processes for those years. The price distributions that generate this range are calibrated to market quotes for power, fuel, load following products and options as of June 30, 2009. (2) Percent of expected generation hedged represents how many equivalent MW have been hedged at forward market prices as of June 30, 2009; all hedge products used are converted to an equivalent average MW volume and the calculation considers whether hedges are power sales or financial products. Hedging Update The primary objective of Exelon’s hedging program is to manage market risks and protect the value of our generation and our investment-grade balance sheet while preserving our ability to participate in improving long-term market fundamentals • We typically follow a 36-month ratable hedging program. • As we execute our hedging program, our percent of expected generation hedged increases and our potential range of earnings outcomes narrows as we move closer to the delivery year 2009 2010 2011 Percentage of Expected Generation Hedged (2) 95-98% 87-90% 59-62% Midwest 96-99 87-90 63-66 Mid-Atlantic 95-98 91-94 56-59 South 90-93 68-71 34-37 • For 2011, we are above our targeted hedge ratio primarily due to additional natural gas and power put options within the portfolio. • Put options allow us to reduce market risk while preserving upside potential 95% case 5% case $6,700 $6,500 $6,100 $6,700 $6,100 $8,400 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 $10,000 2009 2010 2011 |
12 2009 Operating Earnings Guidance 2009E 2008A $0.49 $3.46 $4.20 ComEd PECO Exelon Generation ComEd distribution revenue PECO gas revenue O&M and other Pension/OPEB Inflation Cost reduction initiatives Bad debt expense Nuclear fuel costs Depreciation and amortization PECO CTC 2009 Earnings Drivers ComEd PECO Exelon Generation Holdco Holdco Exelon $0.33 Exelon $4.00 - $4.30 (1) $0.45 - $0.55 $0.45 - $0.55 $3.10 - $3.35 (1) Adjusted (non-GAAP) Operating Earnings Guidance. Excludes the earnings impact of certain items as disclosed in the Appendix. Note: A = Actual; E = Estimate Reaffirming 2009 operating earnings guidance of $4.00-$4.30/share (1) – expect third quarter 2009 results between $0.90 to $1.00/share |
13 Cost Management Exelon remains committed to holding 2009 O&M spending flat to 2008, which includes realizing $150 million of cost savings this year • Year-to-date Exelon has realized $68 million of cost savings across the company, or 45% of our 2009 commitment • 100% of our remaining 2009 commitment has been identified Exelon also announced spending cuts which will save $350 million in 2010 from original planning assumptions, resulting in a nearly 3.5% reduction in total spending from 2009 levels (1) • Clearly defining our governance and oversight structure and streamlining corporate functions will result in the elimination of 400 positions across Exelon. Separately, and continuing its efforts to enhance operating efficiencies, ComEd will eliminate 100 management level positions • Additional costs savings will be achieved through changes to the company’s compensation program and other reductions in spending across each operating company • Exelon expects that half of the total O&M savings in 2010, or $175 million, will be sustainable Exelon is responding to today’s challenging environment by driving productivity and cost reductions while maintaining superior operations $4,500 $700 $1,050 $2,750 2009E $4,350 $4,500 Exelon Consolidated (3) $700 $750 PECO $1,000 $1,100 ComEd $2,700 $2,700 Exelon Generation 2010E 2008A O&M Expense (2) (in millions) (1) Exelon projects a nearly 3.5% decrease in year-over-year O&M spending, from approximately $4.5 billion in 2009 to $4.35 billion in 2010. These reductions represent over $350 million of O&M savings in 2010, as Exelon anticipated a 4% increase in O&M absent these actions. (2) Reflects operating O&M data and excludes Decommissioning impact. ComEd and PECO operating O&M exclude energy efficiency spend recoverable under a rider. (3) Exelon Consolidated includes operating O&M expense from Holding Company. (4) Reflects ~$175 million increase in operating O&M expense from 2008A to 2009E due to higher pension and OPEB expense. Note: Information contained on this slide is rounded. (4) |
14 Appendix |
15 Dollars shown are nominal, reflecting 6% escalation, in millions. Project plan includes off-ramps to defer or cancel as needed. MW Recovery and Component Upgrades are the replacement of major components in the plant that occur in the normal life cycle process – with newer technology, replacements result in increased efficiency. Equipment includes generators, turbines, motors and transformers. MW Recovery and Component Upgrades must conform to NRC standards, but do not require additional NRC approval. MUR (Measurement Uncertainty Recapture). Through the use of advanced techniques and more precise instrumentation, reactor power can be more accurately calculated. These uprates achieve up to 1.7 percent additional output. MUR uprates require NRC approval. EPU (Extended Power Uprate). Through a combination of more sophisticated analysis and upgrades to plant equipment, uprates can be obtained for as much as 20 percent of original licensed power level. EPU uprates require NRC approval. Exelon Nuclear Uprate Plan Year Uprates Become Operational • Incremental 1,300 – 1,500 MWs of nuclear uprates are safe, economical and proven methods to improve efficiency and output • Exelon has substantial experience managing successful uprate projects with 1,100 MWs of increased nuclear capacity over the past 10 years • Exelon’s $2,200 – 2,500 / kW overnight cost for its uprate projects is better value than the cost for a nuclear new build that has been estimated as high as $4,500 / kW (2007 dollars) Exelon’s Uprate Plan (2) EPUs (5) MURs (4) MW Recovery and Component Upgrades (3) Maximum Potential MWs 0 200 400 600 800 1000 1200 1400 1600 1999- 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2009- 2017 1,100 MWs 1,300 – 1,500 MW Average Overnight Cost Estimate: $2,200 - 2,500/KW Planned Capital Spend (1) ($ millions) $150 2017 $625 2013 $675 2012 $550 2011 $350 2010 $725 2015 $725 2014 $400 2016 $4,425 2008 - 2017 $225 2008 - 2009 Note: Information contained on this slide is rounded. (1) (2) (3) (5) (4) |
16 16 Reliability Pricing Model Auction PJM RPM Auction ($/MW-day) (1) All generation values are approximate and not inclusive of wholesale transactions. (2) All capacity values are in installed capacity terms (summer ratings) located in the areas. (3) EMAAC and MAAC obligation consists of load obligations from PECO. PECO PPA expires December 2010. (4) RTO obligation represents the remainder of the ComEd auction load that ends in May 2010. (5) MAAC = Mid-Atlantic Area Council; APS = Allegheny Power System. Exelon Generation Participation within PJM Reliability Pricing Model (1) 2009/2010 2010/2011 2011/2012 2012/2013 in MW Capacity (2) Obligation Capacity (2) Obligation Capacity (2) Capacity (2) RTO 12,800 3,800 - 4,100 (4) 12,800 23,200 12,100 EMAAC 9,800 9,300 - 9,400 (3) 9,500 MAAC + APS 1,500 MAAC 11,100 9,300 - 9,400 (3) 1,500 40.80 197.67 148.80 111.92 191.32 191.32 102.04 174.29 174.29 110.00 110.00 110.00 133.37 139.73 16.46 RTO Eastern MAAC MAAC + APS MAAC 2007/2008 2008/2009 2009/2010 2010/2011 2011/2012 2012-2013 (5) Note: Information contained on this slide is rounded. |
17 Illinois Power Agency RFP Procurement • On May 1, 2009, the Illinois Commerce Commission approved the bids from the RFP Procurement held on April 29, 2009, for the remaining ComEd 2009-2010 load (~29% of the total) and a portion of its 2010-2011 load (~8% of the total) – Contracts were awarded to 10 successful bidders – $33.23 average ATC price for 2009-2010 planning year, in addition to: • Financial Swap price (ATC baseload energy only) of $49.04 for June 2009 – December 2009 and $50.15 for January 2010 – May 2010, • Auction clearing price of $63.33 (1) (fixed price contract, which includes energy, ancillary, load shape, etc.) NOTE: Chart is for illustrative purposes only. Information on this slide is rounded Jun 2007 Jun 2008 Jun 2009 Jun 2010 Jun 2011 Jun 2012 Jun 2013 Future Procurement by Illinois Power Agency Auction Contracts Financial Swap 4/09 RFP 2010 2010 2011 2012 2011 Volumes secured in 2009 IPA Procurement Event (GWh) Off-Peak Peak Contract Period 2,461 7,673 983 June 2010 – May 2011 5,712 June 2009 – May 2010 The procurement event included monthly peak and off-peak standard wholesale block energy products (in 50 MW blocks) to be delivered to NiHub 4/09 RFP 3/08 RFP Next RFP to be held in Spring 2010 (1) CPP B -41-Month Auction Product for period Jan. 1, 2007 – May 31, 2010. |
18 PECO Procurement Results With a successful residential procurement in June, PECO has made progress toward purchasing the power needed to serve customers beginning in 2011 On June 17, 2009, the PAPUC approved the bids from the RFP held on June 15, 2009, which included 21% of PECO’s residential default service load for 2011 and a portion of its load obligation for 2012 and 2013 Contracts were awarded to two bidders out of eleven total bidders RFP for full requirements (1) resulted in average wholesale price of $88.61($/MWh) Based on the results of its initial RFP, PECO estimates the average residential bill would increase by 9% beginning Jan.1, 2011 (1) Full requirements product includes load following energy, capacity, ancillary transmission services and Alternative Energy Portfolio Standard requirements. (2) See PECO Procurement website (http://www.pecoprocurement.com) for additional details regarding PECO’s procurement plan and RFP results. Residential 23% of planned full requirements contracts (17 and 29-mo terms) 40MW of baseload (24x7) energy block products (12-mo duration) Small Commercial 24% of planned full requirements contracts (17-mo term) Medium Commercial & Industrial 16% of planned full requirements contracts (17-mo term) 85% full requirements 15% full requirements spot Medium Commercial & Industrial (peak demand >100 kW but <= 500 kW) 100% full requirements spot Large Commercial & Industrial (peak demand >500 kW) 90% full requirements 10% full requirements spot 75% full requirements 20% energy block 5% energy only spot Products Small Commercial (peak demand <100 kW) Residential Customer Class Residential 26% of planned full requirements contracts • 17 month (Jan 2011 – May 2012) • 29 month (Jan 2011- May 2013) 40MW of baseload (24x7) energy block products • 12 month (Jan 2011- Dec 2011) PECO Procurement Plan (2) Fall 2009 RFP Spring 2009 RFP |
19 5.03 5.03 0.51 0.51 6.26 2.57 10.13 PECO Average Residential Electric Rates (1) Average of PECO’s residential rates (2) Provided for illustration only. Only represents 21% of PECO’s residential procurement for 2011. (3) Average wholesale price for full requirements products. 2011 2010 Energy / Capacity Competitive Transition Charge (CTC) Transmission Distribution 14.37¢ (1) Unit Rates (¢/kWh) Electric Restructuring Settlement ~9% 15.67¢ Assumptions Illustrative Rate Increase Based on Average PECO Residential Full- Requirements Procurement Results (2) • 2011 illustrative residential rate based on Spring 2009 RFP full requirements product prices • 2011 default service residential rate will reflect associated full requirements costs, block energy costs, and spot market purchases, all of which will be acquired through multiple procurements • Rates will vary by customer class • Retail rate components include line losses and gross receipts taxes Residential Spring 2009 $88.61 / MWH PECO Procurement Results (3) Impact of Spring 2009 Procurement |
20 $0 $20 $40 $60 $80 $100 $120 PA Gross Receipts Tax (5.90%) Distribution Losses (7.35%) Full Requirements Cost PJM Whub ATC Forward Energy Price Average PECO Full Requirements Residential Price $101.30/MWh (2) $31.00 - $32.00 $56.00 - $57.00 Full Requirements Costs ($/MWh) Average Full-Requirements Retail Sales Price (1) Load Shape & Ancillary Services $9.00 Capacity $12.00 Transmission & Congestion $8.00 - $9.00 Renewable Energy Credits $1.00 Migration & Volumetric Risk & Other $1.00 ~$7.00 ~$6.00 (1) Term of sale is January 1, 2011 to May 31, 2013. (2) On June 17, 2009 Generation disclosed an estimated retail price of $100-102/MWh. On July 15, 2009 PECO disclosed an average full-requirements retail sales price of $101.30/MWh for its Spring 2009 RFP (i.e., inclusive of Pennsylvania Gross Receipts Tax and adjustment for PECO distribution losses, but not Network Transmission Service). (3) On July 15, 2009 the Independent Evaluator (NERA) announced an average wholesale winning bid price of $88.61/MWh for PECO’s Spring 2009 RFP (reflecting residential full- requirements products only with delivery beginning January 1, 2011). (1) Term of sale is January 1, 2011 to May 31, 2013. (2) On June 17, 2009 Generation disclosed an estimated retail price of $100-102/MWh. On July 15, 2009 PECO disclosed an average full-requirements retail sales price of $101.30/MWh for its Spring 2009 RFP (i.e., inclusive of Pennsylvania Gross Receipts Tax and adjustment for PECO distribution losses, but not Network Transmission Service). (3) On July 15, 2009 the Independent Evaluator (NERA) announced an average wholesale winning bid price of $88.61/MWh for PECO’s Spring 2009 RFP (reflecting residential full- requirements products only with delivery beginning January 1, 2011). Average Wholesale Energy Price (3) $88.61 |
21 Q2 07 Q2 08 Q2 09 ComEd and PECO Accounts Receivable >60 days 31-60 days 0-30 days ComEd Accounts Receivable (1) Through the second quarter of 2009, ComEd has experienced only slight deterioration in its accounts receivable aging; PECO has experienced some improvement % of AR Q2 07 Q2 08 Q2 09 PECO Accounts Receivable (1) % of AR $781M $768M $755M $761M $827M $740M (1) Accounts receivable amounts include unbilled receivables and are gross of allowance for uncollectible accounts at ComEd and PECO and long-term receivables at PECO. >60 days 31-60 days 0-30 days Note: Information contained on this slide is rounded. |
22 2009 Projected Sources and Uses of Cash 5,450 3,300 950 1,200 Cash Flow from Operations (1) (100) 0 250 (50) Other (600) 0 (250) (50) Net Financing (excluding Dividend): (2) 250 0 250 0 Planned Debt Issuances (3)(4) Net Financing (excluding Dividend): (2) (750) 0 (750) 0 Planned Debt Retirements (5) $500 $400 $50 $50 Beginning Cash Balance (3,400) (2,050) (400) (875) Capital Expenditures $1,950 $1,650 $350 $325 Cash Available before Dividend (1,400) Dividend (6) $550 Cash Available after Dividend Exelon (7) ($ in Millions) (1) Cash Flow from Operations primarily includes net cash flows provided by operating activities (excluding counterparty collateral activity) and net cash flows used in investing activities other than capital expenditures. PECO Cash Flow from Operations includes $500M for Competitive Transition Charges. (2) Net Financing (excluding Dividend) = Net cash flows used in financing activities excluding dividends paid on common and preferred stock. (3) Excludes Exelon Generation and ComEd tax-exempt bonds that are backed by letters of credit (LOCs). ComEd reissued $191M of tax exempt debt in May backed by LOCs. Generation plans to remarket their bonds into a different interest rate mode and refinance with new tax-exempt bonds, both not expected to utilize credit enhancement (4) Excludes PECO’s Accounts Receivable Agreement with Bank of Tokyo. Assumes PECO’s A/R Agreement is extended in accordance with its terms beyond September 18, 2009. (5) Planned Debt Retirements are $17M, $721M, and $12M for ComEd, PECO, and ExGen, respectively. Includes securitized debt. (6) Assumes 2009 Dividend of $2.10 per share. Dividends are subject to declaration by the board of directors. (7) Includes cash flow activity from Holding Company, eliminations, and other corporate entities. Note: Information contained on this slide is rounded. |
23 Sufficient Liquidity (1) Excludes previous commitment from Lehman Brothers Bank. (2) Available Capacity Under Facilities represents the unused bank commitments under the borrower’s credit agreements net of outstanding letters of credit and facility draws. The amount of commercial paper outstanding does not reduce the available capacity under the credit agreements. (3) Includes cash flow activity from Holding Company, eliminations, and other corporate entities. (0) -- -- -- Outstanding Facility Draws (513) (160) (10) (337) Outstanding Letters of Credit $7,317 $4,834 $574 $952 Aggregate Bank Commitments (1) 6,804 4,674 564 615 Available Capacity Under Facilities (2) (0) -- -- -- Outstanding Commercial Paper $6,804 $4,674 $564 $615 Available Capacity Less Outstanding Commercial Paper Exelon (3) ($ in Millions) Exelon has no commercial paper outstanding and its bank facilities are largely untapped Available Capacity Under Bank Facilities as of July 17, 2009 |
24 Notes: Exelon and PECO metrics exclude securitization debt. See following slide for FFO (Funds from Operations)/Interest, FFO/Debt and Adjusted Book Debt Ratio reconciliations to GAAP. (1) Reflects S&P updated guidelines, which include imputed debt and interest related to purchased power agreements (PPA), unfunded pension and other postretirement benefits (OPEB) obligations, capital adequacy for energy trading, operating lease obligations, and other off-balance sheet debt. Debt is imputed for estimated pension and OPEB obligations by operating company. (2) Excludes items listed in note (1) above. (3) Current senior unsecured ratings for Exelon and Exelon Generation and senior secured ratings for ComEd and PECO as of July 23, 2009. On July 21, 2009, following the termination of Exelon’s offer to acquire NRG, Fitch removed Exelon and Exelon Generation from Rating Watch Negative and assigned their rating’s outlook as stable. On July 22, 2009, S&P removed Exelon, ComEd, PECO and Exelon Generation rating’s outlook from CreditWatch with negative implications to stable for all entities. On July 23, 2009, Moody’s confirmed the ratings of Exelon and Exelon Generation and assigned their rating outlook as stable. Moody’s also confirmed PECO’s long-term debt rating but changed the outlook to negative. Projected 2009 Key Credit Measures BBB A- A- BBB- S&P Credit Ratings (3) BBB+ A BBB BBB+ Fitch Credit Ratings (3) A3 A2 Baa2 Baa1 Moody’s Credit Ratings (3) 4.3x 4.3x FFO / Interest ComEd: 21% 16% FFO / Debt 42% 49% Rating Agency Debt Ratio 3.4x 3.3x FFO / Interest PECO: 15% 12% FFO / Debt 48% 53% Rating Agency Debt Ratio 25% 47% Rating Agency Debt Ratio 128% 51% FFO / Debt 31.2x 11.2x FFO / Interest Exelon Generation: 50% 36% 7.4x Without PPA & Pension / OPEB (2) 61% Rating Agency Debt Ratio 25% FFO / Debt 6.0x FFO / Interest Exelon Consolidated: With PPA & Pension / OPEB (1) |
25 FFO Calculation and Ratios FFO Calculation = FFO - PECO Transition Bond Principal Paydown + Gain on Sale, Extraordinary Items and Other Non-Cash Items (3) + Change in Deferred Taxes + Depreciation, amortization (including nucl fuel amortization), AFUDC/Cap. Interest Add back non-cash items: Net Income Adjusted Interest FFO + Adjusted Interest = Adjusted Interest + 7% of Present Value (PV) of Operating Leases + Interest on imputed debt related to PV of Purchased Power Agreements (PPA), unfunded Pension and Other Postretirement Benefits (OPEB) obligations, and Capital Adequacy for Energy Trading (2) , as applicable - PECO Transition Bond Interest Expense Net Interest Expense (Before AFUDC & Cap. Interest) FFO Interest Coverage + Capital Adequacy for Energy Trading (2) FFO = Adjusted Debt + PV of Operating Leases + 100% of PV of Purchased Power Agreements (2) + Unfunded Pension and OPEB obligations (2) + A/R Financing Add off-balance sheet debt equivalents: - PECO Transition Bond Principal Balance + STD + LTD Debt: Adjusted Debt (1) FFO Debt Coverage Rating Agency Capitalization Rating Agency Debt Total Adjusted Capitalization Adjusted Book Debt = Total Rating Agency Capitalization + Off-balance sheet debt equivalents (2) Total Adjusted Capitalization = Rating Agency Debt + Off-balance sheet debt equivalents (2) Adjusted Book Debt = Total Adjusted Capitalization + Adjusted Book Debt + Preferred Securities of Subsidiaries + Total Shareholders' Equity Capitalization: = Adjusted Book Debt - Transition Bond Principal Balance + STD + LTD Debt: Debt to Total Cap Note: Reflects S&P guidelines and company forecast. FFO and Debt related to non-recourse debt are excluded from the calculations. (1) Uses current year-end adjusted debt balance. (2) Includes debt equivalents for A/R Financings, operating lease obligations, imputed debt related to PV of PPAs, underfunded Pension and OPEB obligations, and Capital Adequacy for Energy Trading. (3) Reflects depreciation adjustment for PPAs and decommissioning interest income and contributions. |
26 Q2 GAAP EPS Reconciliation NOTE: All amounts shown are per Exelon share and represent contributions to Exelon's EPS. (0.04) - - (0.02) (0.02) 2009 severance charges 0.10 - - - 0.10 Unrealized gains related to nuclear decommissioning trust funds (0.01) (0.01) - - - NRG acquisition costs (0.03) - - - (0.03) 2007 Illinois electric rate settlement (0.16) - - - (0.16) Mark-to-market adjustments from economic hedging activities 0.10 (0.02) - 0.06 0.06 Non-cash remeasurement of income tax uncertainties and reassessment of state deferred income taxes $0.99 $(0.06) $0.11 $0.17 $0.77 Q2 2009 GAAP Earnings (Loss) Per Share $1.03 $(0.03) $0.11 $0.13 $0.82 2009 Adjusted (non-GAAP) Operating Earnings (Loss) Per Share Exelon Other PECO ComEd ExGen Three Months Ended June 30, 2009 $1.13 - $0.09 $0.05 $0.99 Q2 2008 GAAP Earnings Per Share $1.13 $(0.02) $0.09 $0.05 $1.01 2008 Adjusted (non-GAAP) Operating Earnings (Loss) Per Share (0.07) - - - (0.07) 2007 Illinois Electric Rate Settlement 0.09 0.02 - - 0.07 Mark-to-market adjustments from economic hedging activities (0.02) - - - (0.02) Unrealized losses related to nuclear decommissioning trust funds Exelon Other PECO ComEd ExGen Three Months Ended June 30, 2008 |
27 YTD GAAP EPS Reconciliation NOTE: All amounts shown are per Exelon share and represent contributions to Exelon's EPS. $2.01 $0.01 $0.23 $0.12 $1.65 YTD 2008 GAAP Earnings Per Share 2.06 $(0.03) $0.23 $0.12 $1.74 2008 Adjusted (non-GAAP) Operating Earnings (Loss) Per Share (0.14) - - - (0.14) 2007 Illinois Electric Rate Settlement 0.17 0.04 - - 0.13 Mark-to-market adjustments from economic hedging activities (0.08) - - - (0.08) Unrealized losses related to nuclear decommissioning trust funds Exelon Other PECO ComEd ExGen Six Months Ended June 30, 2008 (0.20) - - - (0.20) Impairment of certain generating assets (0.04) - - (0.02) (0.02) 2009 severance charges 0.05 - - - 0.05 Unrealized gains related to nuclear decommissioning trust funds (0.03) (0.03) - - - NRG acquisition costs (0.06) - - - (0.06) 2007 Illinois electric rate settlement 0.01 - - - 0.01 Mark-to-market adjustments from economic hedging activities 0.10 (0.02) - 0.06 0.06 Non-cash remeasurement of income tax uncertainties and reassessment of state deferred income taxes $2.07 $(0.14) $0.28 $0.35 $1.58 YTD 2009 GAAP Earnings (Loss) Per Share $2.24 $(0.09) $0.28 $0.31 $1.74 2009 Adjusted (non-GAAP) Operating Earnings (Loss) Per Share Exelon Other PECO ComEd ExGen Six Months Ended June 30, 2009 |
28 2009 Earnings Outlook • Exelon’s 2009 adjusted (non-GAAP) operating earnings outlook excludes the earnings impacts of the following: • Mark-to-market adjustments from economic hedging activities • Unrealized gains and losses from nuclear decommissioning trust fund investments primarily related to the Clinton, Oyster Creek, and Three Mile Island nuclear plants (the former AmerGen Energy Company, LLC units) • Any significant impairments of assets, including goodwill • Any changes in decommissioning obligation estimates • Costs associated with the 2007 Illinois electric rate settlement agreement, including ComEd’s previously announced customer rate relief programs • 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 • Certain costs associated with the proposed offer to acquire NRG Energy, Inc. • Non-cash remeasurement of income tax uncertainties and reassessment of state deferred income taxes • Other unusual items • Significant future changes to GAAP • Operating earnings guidance assumes normal weather for the remainder of the year |
29 Important Information The following slides are intended to provide additional information regarding the hedging program at Exelon Generation and to serve as an aid for the purposes of modeling Exelon Generation’s gross margin (operating revenues less purchased power and fuel expense). The information on the following slides is not intended to represent earnings guidance or a forecast of future events. In fact, many of the factors that ultimately will determine Exelon Generation’s actual gross margin are based upon highly variable market factors outside of our control. The information on the following slides is as of June 30, 2009. Exelon plans to update these hedging disclosures on a quarterly basis. Certain information on the following slides is based upon an internal simulation model that incorporates assumptions regarding future market conditions, including power and commodity prices, heat rates, and demand conditions, in addition to operating performance and dispatch characteristics of our generating fleet. Our simulation model and the assumptions therein are subject to change. For example, actual market conditions and the dispatch profile of our generation fleet in future periods will likely differ – and may differ significantly – from the assumptions underlying the simulation results included in the slides. In addition, the forward- looking information included in the following slides will likely change over time due to continued refinement of our simulation model and changes in our views on future market conditions. |
30 30 Portfolio Management Objective Align Hedging Activities with Financial Commitments • Power Team utilizes several product types and channels to market • Wholesale and retail sales • Block products • Load-following products and load auctions • Put/call options • Exelon’s hedging program is designed to protect the long-term value of our generating fleet and maintain an investment-grade balance sheet • Hedge enough commodity risk to meet future cash requirements if prices drop • Consider: financing policy (credit rating objectives, capital structure, liquidity); spending (capital and O&M); shareholder value return policy • Consider market, credit, operational risk • Approach to managing volatility • Increase hedging as delivery approaches • Have enough supply to meet peak load • Purchase fossil fuels as power is sold • Choose hedging products based on generation portfolio – sell what we own • Heat rate options • Fuel products • Capacity • Renewable credits By design, our hedging program allows us to weather short-term, adverse market conditions while positioning us to participate in long-term upside potential % Hedged High End of Profit Low End of Profit Open Generation with LT Contracts Portfolio Optimization Portfolio Management Portfolio Management Over Time |
31 31 31 Percentage of Expected Generation Hedged • How many equivalent MW have been hedged at forward market prices; all hedge products used are converted to an equivalent average MW volume • Takes ALL hedges into account whether they are power sales or financial products Equivalent MWs Sold Expected Generation = • Our normal practice is to hedge commodity risk on a ratable basis over the three years leading to the spot market • Carry operational length into spot market to manage forced outage and load-following risks • By using the appropriate product mix, expected generation hedged approaches the mid-90s percentile as the delivery period approaches • Participation in larger procurement events, such as utility auctions, and some flexibility in the timing of hedging may mean the hedge program is not strictly ratable from quarter to quarter Exelon Generation Hedging Program |
32 32 32 2009 2010 2011 Estimated Open Gross Margin (millions) (1,2) $5,100 $6,000 $6,150 Open gross margin assumes all expected generation is sold at the Reference Prices listed below Reference Prices (1) Henry Hub Natural Gas ($/MMBtu) NI-Hub ATC Energy Price ($/MWh) PJM-W ATC Energy Price ($/MWh) ERCOT North ATC Spark Spread ($/MWh) (3) $4.26 $29.42 $40.30 ($0.09) $6.06 $33.38 $48.64 ($2.17) $6.89 $35.12 $52.21 ($0.77) (1) Based on June 30, 2009 market conditions. (2) Gross margin is defined as operating revenues less fuel expense and purchased power expense, excluding the impact of decommissioning and other incidental revenues. Open gross margin is estimated based upon an internal model that is developed by dispatching our expected generation to current market power and fossil fuel prices. Open gross margin assumes there is no hedging in place other than fixed assumptions for capacity cleared in the RPM auctions and uranium costs for nuclear power plants. Open gross margin contains assumptions for other gross margin line items such as various ISO bill and ancillary revenues and costs and PPA capacity payments. The estimation of open gross margin incorporates management discretion and modeling assumptions that are subject to change. (3) ERCOT North ATC spark spread using Houston Ship Channel Gas, 7,200 heat rate, $2.50 variable O&M. Exelon Generation Open Gross Margin and Reference Prices |
33 33 33 (1) Expected generation represents the amount of energy estimated to be generated or purchased through owned or contracted for capacity. Expected generation is based upon a simulated dispatch model that makes assumptions regarding future market conditions, which are calibrated to market quotes for power, fuel, load following products, and options. Expected generation assumes 10 refueling outages in 2009 and 2010 and 11 refueling outages in 2011 at Exelon-operated nuclear plants and Salem. Expected generation assumes capacity factors of 93.6%, 92.8% and 92.8% in 2009, 2010 and 2011 at Exelon-operated nuclear plants. These estimates of expected generation in 2010 and 2011 do not represent guidance or a forecast of future results as Exelon has not completed its planning or optimization processes for those years. (2) Percent of expected generation hedged is the amount of equivalent sales divided by the expected generation. Includes all hedging products, such as wholesale and retail sales of power, options, and swaps. Uses expected value on options. (3) Effective realized energy price is representative of an all-in hedged price, on a per MWh basis, at which expected generation has been hedged. It is developed by considering the energy revenues and costs associated with our hedges and by considering the fossil fuel that has been purchased to lock in margin. It excludes uranium costs and RPM capacity revenue, but includes the mark-to-market value of capacity contracted at prices other than RPM clearing prices including our load obligations. It can be compared with the reference prices used to calculate open gross margin in order to determine the mark-to-market value of Exelon Generation's energy hedges. 2009 2010 2011 Expected Generation (GWh) (1) 169,800 165,500 164,700 Midwest 99,600 97,700 97,700 Mid-Atlantic 57,500 58,500 58,100 South 12,700 9,300 8,900 Percentage of Expected Generation Hedged (2) 95-98% 87-90% 59-62% Midwest 96-99 87-90 63-66 Mid-Atlantic 95-98 91-94 56-59 South 90-93 68-71 34-37 Effective Realized Energy Price ($/MWh) (3) Midwest $47.00 $46.75 $45.00 Mid-Atlantic $36.25 $34.50 $62.00 ERCOT North ATC Spark Spread $5.25 $3.50 $4.75 Generation Profile |
34 34 34 Gross Margin Sensitivities with Existing Hedges (millions) (1) Henry Hub Natural Gas + $1/MMBtu - $1/MMBtu NI-Hub ATC Energy Price +$5/MWH -$5/MWH PJM-W ATC Energy Price +$5/MWH -$5/MWH Nuclear Capacity Factor +1% / -1% 2009 $8 $0 $6 ($3) $8 ($2) +/-$20 2010 $40 ($30) $55 ($50) $25 ($20) +/-$50 2011 $280 ($240) $205 ($195) $170 ($165) +/-$55 (1) Based on June 30, 2009 market conditions and hedged position. Gas price sensitivities are based on an assumed gas-power relationship derived from an internal model that is updated periodically. Power prices sensitivities are derived by adjusting the power price assumption while keeping all other prices inputs constant. Due to correlation of the various assumptions, the hedged gross margin impact calculated by aggregating individual sensitivities may not be equal to the hedged gross margin impact calculated when correlations between the various assumptions are also considered. Exelon Generation Gross Margin Sensitivities (with Existing Hedges) |
35 35 35 Exelon Generation Gross Margin Upside / Risk (with Existing Hedges) (1) Represents an approximate range of expected gross margin, taking into account hedges in place, between the 5th and 95th percent confidence levels. Approximate gross margin ranges are based upon an internal simulation model and are subject to change based upon market inputs, future transactions and potential modeling changes. These ranges of approximate gross margin in 2010 and 2011 do not represent earnings guidance or a forecast of future results as Exelon has not completed its planning or optimization processes for those years. The price distributions that generate this range are calibrated to market quotes for power, fuel, load following products, and options as of June 30, 2009. 95% case 5% case $6,700 $6,500 $6,100 $6,700 $6,100 $8,400 $5,000 $6,000 $7,000 $8,000 $9,000 $10,000 2009 2010 2011 |
36 36 36 Midwest Mid-Atlantic ERCOT Step 1 Start with fleetwide open gross margin $5.10 billion Step 2 Determine the mark-to-market value of energy hedges 99,600GWh * 97% * ($47.00/MWh-$29.42/MWh) = $1.70 billion 57,500GWh * 96% * ($36.25/MWh-$40.30/MWh) = ($0.22 billion) 12,700GWh * 91% * ($5.25/MWh-($0.09)/MWh) = $0.06 billion Step 3 Estimate hedged gross margin by adding open gross margin to mark-to- market value of energy hedges Open gross margin: $5.10 billion MTM value of energy hedges: $1.70 billion + ($0.22 billion) + $0.06 billion Estimated hedged gross margin: $6.64 billion Illustrative Example of Modeling Exelon Generation 2009 Gross Margin (with Existing Hedges) |
37 37 50 60 70 80 90 100 110 120 130 140 150 7/08 8/08 9/08 10/08 11/08 12/08 1/09 2/09 3/09 4/09 5/09 6/09 7/09 20 30 40 50 60 70 80 7/08 8/08 9/08 10/08 11/08 12/08 1/09 2/09 3/09 4/09 5/09 6/09 7/09 35 45 55 65 75 85 95 105 7/08 8/08 9/08 10/08 11/08 12/08 1/09 2/09 3/09 4/09 5/09 6/09 7/09 5.5 6.5 7.5 8.5 9.5 10.5 11.5 7/08 8/08 9/08 10/08 11/08 12/08 1/09 2/09 3/09 4/09 5/09 6/09 7/09 37 Market Price Snapshot Forward NYMEX Natural Gas PJM-West and Ni-Hub On-Peak Forward Prices PJM-West and Ni-Hub Wrap Forward Prices 2010 2011 Rolling 12 months, as of July 17, 2009. Source: OTC quotes and electronic trading system. Quotes are daily. Forward NYMEX Coal $5.81 $6.59 2010 2011 $54.96 $65.90 2010 Ni-Hub 2011 Ni-Hub 2011 PJM-West 2010 PJM-West 2010 Ni-Hub 2011 Ni-Hub 2011 PJM-West 2010 PJM-West $53.90 $59.30 $40.45 $24.48 $39.48 $22.81 $42.75 $37.43 |
38 38 4.5 5.5 6.5 7.5 8.5 9.5 10.5 11.5 12.5 13.5 14.5 7/08 8/08 9/08 10/08 11/08 12/08 1/09 2/09 3/09 4/09 5/09 6/09 7/09 8 8.2 8.4 8.6 8.8 9 9.2 9.4 9.6 9.8 10 7/08 8/08 9/08 10/08 11/08 12/08 1/09 2/09 3/09 4/09 5/09 6/09 7/09 45 50 55 60 65 70 75 80 85 90 95 6/08 7/08 8/08 9/08 10/08 11/08 12/08 1/09 2/09 3/09 4/09 5/09 6/09 7/09 5 6 7 8 9 10 11 7/08 8/08 9/08 10/08 11/08 12/08 1/09 2/09 3/09 4/09 5/09 6/09 7/09 38 Market Price Snapshot 2011 2010 2010 2011 2010 2011 Houston Ship Channel Natural Gas Forward Prices ERCOT North On-Peak Forward Prices ERCOT North On-Peak v. Houston Ship Channel Implied Heat Rate 2010 2011 ERCOT North On Peak Spark Spread Assumes a 7.2 Heat Rate, $1.50 O&M, and $.15 adder $5.54 $6.34 $55.31 $47.77 $8.62 $8.73 $5.28 $7.10 Rolling 12 months, as of July 17, 2009. Source: OTC quotes and electronic trading system. Quotes are daily. |