Exelon Corporation · NASDAQ:EXC
Exelon — Merrill Lynch Investor Meeting, Kennett Square (June 2004)
41 slides from Exelon's conference presentation, Jun 10, 2004
Slide 1: Power Marketing Overview
Power Marketing Overview Merrill Lynch Investor Meeting Kennett Square June 11, 2004 Exelon Corporation
Slide 2: Forward-Looking Statements
This presentation contains certain 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 the forward-looking statements made by a regist
Slide 3: Agenda - Merrill Lynch Investor Meeting
Welcome/Agenda 9:00 - 9:15 Bob Shapard, EVP & CFO Power Marketing Overview 9:15 - 9:30 Ian McLean, EVP & President, Power Team Portfolio Management 9:30 - 10:15 Ken Cornew, SVP, Power Transactions POLR Pricing 10:15 - 11:15 Mike Freeman, Power Transactions Shravan Chopra, Manager, Pricing Post Trans
Slide 4: Context for Today's Discussion
Context for Today's Discussion
Slide 5: Key Message: Exelon well positioned for end of transition periods
Key Message: Exelon is well positioned for end of transition periods in Illinois and Pennsylvania Divesting underperforming assets Driving strong earnings and cash flow growth through Exelon Way Strong credit position Large, low-cost base load generator Large, stable retail customer base Recovering
Slide 6: ComEd Bundled Tariff for Mass Market
ComEd Bundled Tariff for Mass Market 2003 Actual* 2007 Estimate RES SCI LCI LCI (< 3 MW) Non-Wires Rate 49 43 49.9 49.9 48.9 28 Line Losses 3 3 Wires Rate 25 31 35.1 15.1 10.1 3 77 77 Assumes 25% increase in wires charges to recover increased investment in transmission and distribution infrastructur
Slide 7: Power Team: Value Added Intermediary
Power Team: Value Added Intermediary Nuclear Fossil Hydro Generation Exelon Power Team ComEd PECO Wholesale Power & Fuel Markets Affiliates Contracts Power Team manages the interaction between the generation portfolio and the wholesale customers in order to reduce risk and optimize Exelon Generation
Slide 8: Power Marketing Overview
Power Marketing Overview Exelon Planning Corporate Strategy Mkt. Fundamentals Power Marketing Portfolio Mgt. Power Transactions Fuels Transactions Long-Term Mktg. Trade Floor Mgt. Operations Acct'g & Finance Financial Reporting Mgt. Analysis Risk Quantification Risk Control Risk Control Credit Manag
Slide 9: Portfolio Management
Portfolio Management Current Position Risk Control Process
Slide 10: Midwest Portfolio Characteristics
Midwest Portfolio Characteristics *Assuming $6.30/MMBtu gas price Indiana Illinois Chicago Portfolio Opportunities / Challenges Recent integration into PJM market will add liquidity to the standard and structured product markets Length from base load units to participate in higher market prices Load
Slide 11: Mid-Atlantic Portfolio Characteristics
Pennsylvania Maryland New Jersey Delaware Mid-Atlantic Portfolio Characteristics * Assuming $6.30/MMBtu gas price Plant 2004 Capacity (MW) Average Variable Cost ($/Mwh) Nuclear 5,743 5.00 Hydro 1,611 NA Coal 1,453 $34.00 Intermediate/NUG 250 $50.00 Peakers 2,108 $65 resid oil / $100 gas Total Capaci
Slide 12: ERCOT/South Portfolio Characteristics
ERCOT/South Portfolio Characteristics Plant Capacity Average Variable Cost ($/Mwh) Combined Cycle* 1,975 MW $50.50 Peakers* 3,394 MW $75.00 Total Capacity 5,369 MW Summer Toll** 2,334 MW * Assuming $6.30/MMBtu gas price ** TXU tolling deal totaling 2,334 MW Texas Oklahoma Georgia Portfolio Opportuni
Slide 13: Portfolio Management Process
Portfolio Management Process Approach to Portfolio Management Over Time Time Before Expiration of Contract % Hedged % Hedged High End of Profit Low End of Profit Load Only Long View Long-Term Portfolio Balancing Portfolio Optimization and Risk Management Operating Profit ($ Million) Develop a set of
Slide 14: Portfolio Management Q&A
Exelon. Portfolio Management Q&A 14
Slide 15: POLR Pricing
POLR Pricing Competitive Procurement Model Lessons from NJ BGS Auction Price Build-up
Slide 16: Current Model
Current Model Utility Genco Base Intermed Peak Customers <1MW Hours Genco is sole supplier of customer (<1MW) load through a PPA with ComEd Genco/ComEd PPA Bundled Rate Customer Load (<1MW)
Slide 17: Competitive Procurement Model
Competitive Procurement Model Competitive Suppliers Utility Genco Base Intermed Peak Customers <1MW - - Load up for auction XX% XX% XX% Hours Vertical Slices of System Load Multiple winning bidders would supply customer load in vertical slices (fixed % of hourly energy demand) New rates determined b
Slide 18: BGS Auction
BGS Auction Basic Generation Service (BGS): Over 11,000 MW of load auctioned across 4 utilities in New Jersey in Feb 2004 Over 15 winners in the auctions Winning bids were at 50-60% "adder" over the standard block product Overview Risk management of the BGS full requirement contracts for the winners
Slide 19: Full Requirements Contracts
Full Requirements Contracts Components of a Full Requirements Price A. Underlying Energy - Standard Block Energy Price - Load Shape Price - Volume Risk B. Customer Migration Risk C. Capacity Price D. Ancillaries Price E. Other Risks - Transmission (Congestion) - Credit - Regulatory Components of a T
Slide 20: Risk Management of Full Requirements
Risk Management of Full Requirements Forecasted Load and Underlying Energy Curve Actual Load and Underlying Energy Curve Standard Block Products Expected Load Shape Long Short Standard Block Products Actual Load Shape Shorter Longer Forecast............. One of numerous realities........ - Regulator
Slide 21: POLR Pricing Q&A
Exelon. POLR Pricing Q&A a
Slide 22: Post-Transition Regulatory Update ComEd PECO
Post-Transition Regulatory Update ComEd PECO
Slide 23: ICC Post-2006 Overview
ICC Post-2006 Overview Education Process Consensus Development Scenario Analysis ICC Process Launch Stakeholder Positions Identified Key Milestones: ICC Workshop Process finalized 4/1 5 Working Groups and conveners appointed Procurement - Dave Vite, IRMA Rates - Glenn Rippie, Foley & Lardner Competi
Slide 24: Stakeholder Positions
Stakeholder Positions (based on comments) Continuum of State Restructuring Models Texas New Jersey / Maryland Reliant ComEd Ameren Labor Mirant Mid American Midwest Gen CUB AG City Cook County Ohio California / Montana
Slide 25: PA PUC POLR Timeline
PA PUC POLR Timeline Roundtable Announced Roundtables 1 & 2 Roundtables 3 & 4 Final Roundtable POLR Rulemaking Process Milestones: 3/4 - Motion of Comm. Thomas to initiate Roundtables. 3/18 - PUC Issues Secretarial Letter and POLR Issues List. Milestones: 4/5 - Deadline for Interested Parties to not
Slide 26: Major PA Utilities Post Transition Dates
Major PA Utilities Post Transition Dates 1/1/05 1/1/07 1/1/09 1/1/10 1/1/11 Duquesne (11%) Penn Power (3%) Allegheny Power (13%) PP&L (24%) PECO Energy (29%) Pennelec (11%) MetEd (9%) [Duquesne (11%)] Proposed stipulation "extends" Post-Transition to 1/1/11. Post-Transition for almost 75% of custome
Slide 27: PA POLR Generation Procurement Models
PA POLR Generation Procurement Models Cost of Service Purchased Power Agreements (PPA) UGI Duquesne Request for Proposal (RFP) (Maryland) Allegheny Power Amerada Hess Calpine Citizens Power Wellsboro Electric Horizontal Auction Full Requirements/ Vertical Auction (NJ Model) PPL FirstEnergy (EDC) DTE
Slide 28: Electric Restructuring & Merger Settlements Unit Rates
4 2.41 0.45 2.43 4.55 5 2.41 0.45 2.4 4.58 6 2.53 0.45 2.66 4.85 7 2.53 0.45 2.66 5.35 8 2.53 0.45 2.66 5.35 9 2.53 0.45 2.66 5.35 10 2.53 0.45 2.66 5.35 Electric Restructuring & Merger Settlements Energy & Capacity CTC Transmission Distribution 9.96¢ 9.84¢ 9.84¢ + 7% 10.49¢ + 5% 10.99¢ 10.99¢ 10.99
Slide 29: Post-Transition Regulatory Update Q&A
Post-Transition Regulatory Update Q&A
Slide 30: Market Fundamentals
Market Fundamentals Underlying Fuel Prices Reserve Margins Power Price Forecasts
Slide 31: Economic Growth and Fuels Overview
Electricity demand is expected to grow at more than 2% per year for the rest of the decade based on the forecast of underlying GDP. Load growth is projected to be stronger in the South and West, and will follow new construction. Fuel prices are higher than they were in the 1990's, and are unlikely t
Slide 32: Robust economic growth will drive load higher
GDP GDP Forecast Electricity Use Electricity Use Forecast 1995 0.02504315 0.028897282 1996 0.037003352 0.028388904 1997 0.04497594 0.014491889 1998 0.041750445 0.039795904 1999 0.04449988 0.020281682 2000 0.036598447 0.031500531 2001 0.005065204 -0.014115574 2002 0.021929911 0.029882021 2003 0.03123
Slide 33: Gas and oil price history and forecasts
Gas PIRA CERA NYMEX 2000 27.25947 Feb _2000 29.366 Mar_2000 29.84174 Apr_2000 25.72211 May_2000 28.78818 Jun_2000 31.82227 Jul_2000 29.69684 Aug_2000 31.26391 Sep_2000 33.884 Oct_2000 33.10864 Nov_2000 34.41714 Dec_2000 28.4365 2001 29.58571 Feb _2001 29.60947 Mar_2001 27.24455 Apr_2001 27.49 May_20
Slide 34: Gas and oil price data
Gas Oil PIRA CERA NYMEX 2000 4.699908621 2.40925 Feb _2000 5.063103448 2.6555 Mar_2000 5.145127586 2.791522 Apr_2000 4.434846552 3.030158 May_2000 4.96347931 3.580909 Jun_2000 5.486598276 4.284091 Jul_2000 5.120144828 3.973684 Aug_2000 5.39032931 4.418478 Sep_2000 5.842068966 5.0579 Oct_2000 5.70838
Slide 35: Coal prices have climbed sharply in the East
2000 4.375 24.14 2001 9.3375 40.41 2002 5.85 29.65 2003 6.2125 6.2125 6.2125 31.1 31.1 31.1 2004 8 5.8625 48 35 2005 8.07 5.41375 48.96 33.25 2006 8.15 5.3375 49.9392 31.5875 2007 8.344386736 4.930213729 50.937984 30.008125 2008 8.360924014 4.747415735 51.95674368 28.50771875 2009 8.225807106 4.4876
Slide 36: PJM Eastern and MAIN reserve margins
PJM Eastern Region reserve margin drops below 15% by 2007 3,500 MW of new Combined Cycle Gas Turbine (CCGT) generation expected to enter market 2004 - 2005; 1,900 MW of older inefficient generation expected to retire Average annual net imports expected to be ~1,700 MW in 2005, declining to ~1,000 MW
Slide 37: Supply fundamentals and pricing: PJM East Supply Curve
Supply fundamentals and pricing Supply fundamentals PJM East Region - Supply Curve Cumulative Supply (MW) Reserve Margin (%) Load will increasingly be met by higher cost generation, fueled by volatile natural gas and oil. Exelon Generation Forecast: April, 2004 Note: HR = Heat rate
Slide 38: PJM East Region Consultant Forecasts
needs Needs Supply fundamentals and pricing Supply fundamentals PJM East Region - Consultant Forecasts Source: Platts Research and Consulting Outlook For Power in North America, Quarter 1 2004 CERA New Realities, New Risks: North American Power and Gas Scenarios (December 2003) ATC Energy and Capaci
Slide 39: Supply fundamentals: MAIN Market Supply Curve
Supply fundamentals and pricing Supply fundamentals MAIN Market - Supply Curve Cumulative Supply (MW) Reserve Margin (%) Energy prices will be influenced increasingly by higher variable cost supply. Capacity prices will strengthen over time as reserve margins decline. Exelon Generation Forecast: Apr
Slide 40: MAIN Market Consultant Forecasts
needs Needs Supply fundamentals and pricing Supply fundamentals Energy and Capacity ( $/MWh) Implied Heat Rate (Btu/kWh) and Delivered Gas Price ($/MMBtu) MAIN Market - Consultant Forecasts Industry price forecasts are driven by load growth, retirements, and fuel prices. Source: Platts Research and
Slide 41: Market Fundamentals Q&A
Exelon. Market Fundamentals Q&A 41
Exelon — Merrill Lynch Investor Meeting, Kennett Square (June 2004) on 6ix