Exelon Corporation · NASDAQ:EXC
Exelon — Edison Electric Institute Conference 2006
70 slides from Exelon's conference presentation, Nov 6, 2006
Slide 1: Value Driven
Value Driven John F. Young Executive Vice President & Chief Financial Officer Edison Electric Institute Conference Las Vegas, Nevada November 5-8, 2006
Slide 2: Exelon Investor Relations Contacts
Exelon Investor Relations Contacts Inquiries concerning this presentation should be directed to: Exelon Investor Relations 10 South Dearborn Street Chicago, Illinois 60603 312-394-2345 312-394-4082 (Fax) For copies of other presentations, annual/quarterly reports, or to be added to our email distrib
Slide 3: Forward-Looking Statements
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 statem
Slide 4: Agenda
Agenda The Exelon Story ComEd PECO Exelon Generation Exelon Today's discussion will focus on "The Next Five Years", including earnings drivers for 2007 - 2011 by Operating Company
Slide 5: The Exelon Story - Value Driven
The Exelon Story - Value Driven Demonstrated ability to add value during transformation from an integrated utility to a predominantly merchant generator Premier U.S. nuclear generator uniquely positioned to capture market opportunities through operational and commercial excellence Primary source of
Slide 6: The Exelon Companies
'05 Earnings(1): $1,125M '06E Earnings(3): $1,250 - $1,320M '05 EPS(1): $1.66 '06 EPS Guidance(3): $1.85 - $1.95 Credit Rating(4): BBB+ The Exelon Companies Pennsylvania Utility Illinois Utility Nuclear, Fossil & Hydro Generation Power Marketing '05 Earnings(1): $527M $533M '06E Earnings(3): $510 -
Slide 7: Multi-Regional, Diverse Company
Multi-Regional, Diverse Company Note: Megawatts based on Exelon Generation's ownership as of 12/31/05; excludes investments in two facilities in Mexico of 230 MWs. Generating Plants %MW Nuclear Hydro Coal Intermediate Peaker 50 5 9 7 29 Midwest Generation Owned: 11,300 MW Contracted: 5,291 MW Total:
Slide 8: Strong Financial Performance
2000 2001 2002 2003 2004 2005 2006E East 1.93 2.24 2.41 2.61 2.78 3.1 3.15 0.3 Q3 Highlights Solid financial operating EPS results Higher generation margins Strong nuclear and fossil performance Higher O&M costs Unfavorable ICC Rate Order ComEd goodwill charge of $776M Rehearing process underway ICC
Slide 9: ComEd
ae ComEd. An Exelon Company i.
Slide 10: ComEd Operating Earnings: 2007 Estimate
ComEd Operating Earnings: 2007 Estimate As a "wires-only" company, ComEd was always expected to earn less on an operating basis in 2007 than in prior years. The unfavorable ICC Order in the Distribution Case further depressed ComEd's 2007 earnings outlook. 510 250 80 20 50 55 - - End of transition p
Slide 11: ComEd Operating Earnings: Next Five Years
Low 80 55 ComEd Operating Earnings: Next Five Years $80M - $135M 2007 - 2011 Earnings Drivers Regular DST Rate Requests (Minimize Regulatory Lag) Rate Base Growth Load Growth After 2007, assuming no rate freeze legislation or similar event, ComEd's earnings are expected to increase as regulatory lag
Slide 12: Important ComEd Milestone: Purchased Power Cost Recovery
Important ComEd Milestone: Purchased Power Cost Recovery ICC authorized recovery of purchased power costs in the Distribution Case Rate Order - July 2006 Illinois auction approved - September 2006 Culmination of nearly three-year process to approve procurement methodology Resulted in customer rates
Slide 13: PECO
i => PECO. An Exelon Company .
Slide 14: PECO Average Electric Rates
PECO Average Electric Rates 2006 2.59 0.46 2.7 4.92 2007 2.59 0.46 2.7 5.43 2008 - 2010 2.59 0.46 2.7 5.43 2011 2.59 0.46 9.09 Energy / Capacity Competitive Transition Charge Transmission Distribution 10.67¢ 11.18¢ 11.18¢ Unit Rates (¢/kWh)(1) (1) Rates increased from original settlement by 1.6% to
Slide 15: PECO Expected Rate Base
PECO Expected Rate Base 2007 2008 2009 2010 2011 Distribution Rate Base 2.5 2.6 2.8 2.9 3 Transmission Rate Base 0.5 0.5 0.5 0.5 0.6 Gas Rate Base 1 1.1 1.1 1.1 1.2 CTC Rate Base 3 2.4 1.7 0.9 $- Change in rate base is amortization of stranded assets offset by CapEx - Depreciation Post transition, P
Slide 16: PECO Operating Earnings: Next Five Years
Low 410 400 30 30 PECO Operating Earnings: Next Five Years $410M - $440M PECO is expected to provide a predictable source of earnings to Exelon through the remainder of the transition period PECO - 2011 Assumptions Rate Base: ~$4.7B Equity: ~50% ROE: ~10% 2006 Guidance(1) 2011 2006 - 2011 Earnings D
Slide 17: Exelon Generation
mn — Erker Exelon. Generation .
Slide 18: Exelon Generation Value Proposition
Exceptional generation business uniquely positioned to capture value of: Large, low-cost, low-emissions, well-run nuclear fleet Upside from end of below-market POLR contracts in Illinois and Pennsylvania Tightening reserve margins Exelon Generation captures market opportunities and rigorously manage
Slide 19: Nuclear Operations: Sustained Performance
EXC 93.1% Nuclear Operations: Sustained Performance Exelon Nuclear's sustained performance is a competitive advantage; September 2006 YTD capacity factor was 94.1% Sources: Platt's, Nuclear News, NRC and Department of Energy Range of Nuclear Capacity Factors (2001-2005)
Slide 20: Nuclear Operations: Track Record of Excellence
Nuclear Operations: Track Record of Excellence The Exelon Nuclear model works - and is scalable Scalability of Exelon Model 1998 1999 2000 2001 2002 2003 2004 2005 2006 Unicom 64.88140641 89.59640843 94.37956501 93.85704678 PECO 85.68843377 93.09515073 94.19145057 93.85704678 AmerGen 55.32715176 80.
Slide 21: Nuclear Going Forward
Nuclear Going Forward Recently announced intent to apply for Construction & Operating License ("COL") in ERCOT by end of 2008 Preserves option to participate in Energy Policy Act incentives Supports NRC resource planning New nuclear designs offer improved features, passive safety systems, competitiv
Slide 22: Total Portfolio Characteristics
Total Portfolio Characteristics 2006 2007 Nuclear 139300 139200 Fossil & Hydro 32000 37400 Forward / Spot Purchases 29300 7400 2006 2007 Load (2006: ComEd & PECO, 2007: PECO) 118900 40500 Actual & Expected Forward Hedges 71900 131100 Open Position 9800 12400 Expected Total Supply Expected Total Sale
Slide 23: Total Portfolio Revenue Net Fuel
Total Portfolio Revenue Net Fuel Load Nuclear & Hedges Other Supply Total 2006 -1200 5700 350 4850 2007 -950 6850 700 6600 2007 2006 Legend Total Portfolio Revenue Net Fuel Increase ('06-'07): ~$1,750M + $250M + $1,150M + $350M Expiration of below market ComEd PPA offset by higher cost-to-serve PECO
Slide 24: Portfolio Management
Recent Examples Supplemented portfolio with load following products Maintained length for opportunistic sales Used physical and financial fuel products to manage variability in fossil generation output Deployed option strategies in the Midwest and Mid-Atlantic to protect against retail load switchin
Slide 25: Commodity Hedging Targets
Flexibility in our targeted financial hedge ranges allows us to be opportunistic while mitigating downside risk Definition Percent Financially Hedged is our estimate of the gross margin that is not at risk due to a market price drop and assuming normal generation operating conditions The formula is:
Slide 26: Exelon Generation Operating Earnings: Next Five Years
Exelon Generation Operating Earnings: Next Five Years $1,250M - $1,320M Exelon Generation is poised for earnings growth over the next five years driven by the end of the IL and PA transition periods and its unique competitive position 2006 Guidance(1) 2011 2007 (1) 2006 Operating Earnings Guidance;
Slide 27: Slide 27
Slide 28: Value Return Policy
Exelon's changing composition of earnings warrants a new value return policy Existing dividend policy based on a business mix in which the regulated utilities contributed a larger share of earnings Existing share repurchase program designed solely to offset dilution from shares issued under Exelon's
Slide 29: 2006 Exelon Investor Conference
2006 Exelon Investor Conference The Swissotel Chicago 323 East Wacker Drive December 11th & 12th December 11th - Pre-Conference 6:00 - 10:00pm - Reception & Dinner The Field Museum December 12th - Conference 7:15AM: Registration & Breakfast 8:00AM: Conference Program Grand Ballroom, The Swissotel Ch
Slide 30: Value Driven: Vision, Goals and Values
Value Driven . our vision Exelon will be the best electric and gas company in the United States. Working together, we will set the standard of excellence in the eyes of our customers, employees, investors and the communities we serve. our goals > Operate at world-clas levels of safety, reliability,
Slide 31: Appendix - Financial and Operational Statistics
Appendix - Financial and Operational Statistics
Slide 32: Projected 2006 Key Credit Metrics
Exelon Consolidated: FFO / Interest 5.6x BBB 4.5x - 6.5x FFO / Debt 27% 30% - 45% Debt Ratio 53%(3) Generation: FFO / Interest 11.2x BBB+ 5.5x - 7.5x FFO / Debt 77% 40% - 55% Debt Ratio 35% ComEd: FFO / Interest 3.8x BBB 5.5x - 7.5x FFO / Debt 17% 40% - 55% Debt Ratio 39%(3) PECO: FFO / Interest 5.5
Slide 33: Value Return Framework
Value Return Framework After meeting commitments and analyzing value creation opportunities, free cash flow and/or balance sheet capacity will be used to return value to shareholders Free Cash Flow before Dividends and CapEx Committed Dividends Return Value via Share Repurchase, Increased Dividends
Slide 34: ComEd Expected Rate Base
ComEd Expected Rate Base 2007 2008 2009 2010 2011 Distribution 5.9 6.4 6.8 7.2 7.7 Transmission 1.6 1.8 1.8 1.9 1.9 Transmission Distribution $ in billions (as of beginning of year) $7.6 $8.2 $8.6 $9.1 $9.6
Slide 35: ComEd Regulatory Calendar
2004 & Q1-Q2 2005 8/31/05: Distribution case filed 2/25/05: Procurement case filed Rates frozen since 1997 and subsequently reduced 20%. ComEd's mitigation proposal would ease residential customers' transition to cost-based rates. New rates effective January 2, 2007. 12/16/05: FERC confirms auction
Slide 36: ComEd Regulatory Update
ComEd Regulatory Update Distribution Rate Case ICC Order provided for $8M increase, vs. the Administrative Law Judges' (ALJs') Proposed Order of $164M and ComEd's original request of $317M Due to the ICC Order, ComEd and Exelon recorded an after-tax impairment charge of ~$776M in 3Q06 based on resul
Slide 37: ComEd Regulatory Update (cont'd)
ComEd Regulatory Update (cont'd) Residential Rate Stabilization Case On August 29, ComEd submitted a modified plan that ICC Staff supports: "10/10/10" caps from 2007 to 2009; deferral recovery from 2010 to 2012 with 6.5% annual carrying charge Phase-in plan is optional (residential customers may "op
Slide 38: Adding Value for Illinois Consumers
Adding Value for Illinois Consumers 10 Year Price Trends (in % price increases 1996 - 2006) Sources: 10-Year Price Trends: CPI, City Average for all Urban Consumers, Dept of Labor, Bureau of Labor Statistics Electricity Rates in Major Cities: Edison Electric Institute (EEI) -- Typical Bills and Aver
Slide 39: ComEd - Rate Case Summary
ComEd - Rate Case Summary While the Administrative Law Judges' (ALJs') Proposed Order provided for a revenue increase of $164M compared to ComEd's original request of $317M, the ICC Order provided for only an $8M increase ($ in millions) Revenue Requirement Revenue Increase Original request $1,895 $
Slide 40: Post Auction Processes
Post Auction Processes Conduct Auction NERA Economic Consulting was the Auction Manager under the oversight of the ICC Staff The auction was conducted in rounds for which the Auction Manager announced a price for each product Bidders bid for number of tranches they would serve for each product at th
Slide 41: ComEd Energy Procurement Plan: Term Structures
33% of load 33% of load 33% of load 3 yrs. + 5 mos. 3 yrs. 3 yrs. 3 yrs. 2 yrs. + 5 mos. 3 yrs. 3 yrs. 3 yrs. 17 mos. 3 yrs. 3 yrs. 3 yrs. 3 yrs. >> 3 yrs.>> Calendar Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 PJM Planning Year (June 1- May 31) 2008 2009 2010 2011 2012 2013 201
Slide 42: Illinois Auction Results
Illinois Auction Results Ancillary services Load shape Congestion Risk premium Capacity Other Costs: ATC Energy Price** ComEd energy 48.5 adder 15 $63.76/MWh (Blended Price*) ~ $15 ~$48 - $49 Winning Bidders: Ameren Energy Marketing American Electric Power Conectiv Energy Supply Constellation Energy
Slide 43: Plan for Major Regulatory Filings
2007 2008 2009 2010 2011 FERC activity on Transmission Rate Design PJM & PJM/MISO Potential Gas Rate Case POLR Rates Effective (1/1/11) Filing per Regulations (10/09) PUC issues final POLR Regulations Transmission Gas POLR Plan for Major Regulatory Filings
Slide 44: Midwest Revenue Net Fuel
Load Nuclear & Hedges Other Supply Total 2006 -750 3250 -50 2450 2007 0 3950 50 4000 2007 2006 Legend Midwest Revenue Net Fuel Increase ('06-'07): ~$1,550M Expiration of below market PPA Improved nuclear performance and higher power prices +$750M +$700M +$100M +$1,550M ($ in millions, pre-tax) Midwe
Slide 45: Mid-Atlantic Revenue Net Fuel
Mid-Atlantic Revenue Net Fuel Load Nuclear & Hedges Other Supply Total 2006 -450 2450 450 2450 2007 -950 2900 650 2600 2007 2006 Legend Mid-Atlantic RNF Increase ('06-'07): ~$150M ($500M) + $450M + $200M Higher prices / increased cost-to-serve Improved Nuclear performance and higher power prices +15
Slide 46: South Revenue Net Fuel
South Revenue Net Fuel Generation & Hedges Total 2006 -40 -40 2007 -50 -50 2007 2006 Legend Total Portfolio RNF Decrease ('06-'07): ~($10)M ($10M) Higher spark spreads offset by roll-off of income from the TXU toll agreement ($10M) ($ in millions, pre-tax)
Slide 47: Midwest Portfolio Characteristics
2006 2007 Nuclear 90700 91100 Coal 9000 10000 Forward/Spot Purchases & Other Generation 14900 2100 Midwest Portfolio Characteristics 2006 2007 ComEd Load 79100 0 Actual and Expected Forward Hedges 31400 95000 Open Position 4100 8200 Expected Midwest Supply Expected Midwest Sales Includes Illinois lo
Slide 48: Mid-Atlantic Portfolio Characteristics
Mid-Atlantic Portfolio Characteristics 2006 2007 Nuclear 48600 48100 Fossil & Hydro 11500 12100 Forward / Spot Purchases 8750 5900 2006 2007 PECO Load 39800 40500 Actual & Expected Forward Hedges 25100 22300 Open Position 3950 3300 Expected Mid-Atlantic Supply Expected Mid-Atlantic Sales GWh GWh Not
Slide 49: South Portfolio Characteristics
South Portfolio Characteristics 2006 2007 Generation 10800 13600 Forward / Spot Purchases 6300 1100 2006 2007 Actual & Expected Forward Hedges 15400 13800 Open Position 1700 900 Expected South Supply Expected South Sales GWh GWh Note: 2007 position is projected as of end of 2006
Slide 50: Nuclear Performance - Cost Management
Nuclear Performance - Cost Management Exelon Nuclear's production cost is consistently lower than the industry average; September 2006 YTD cost was $13.71/MWh Range of Nuclear Production Costs (2001-2005) Source: Electric Utility Cost Group. Exelon data excludes Salem. EXC
Slide 51: Nuclear Performance - Production
Nuclear Performance - Production Sustained nuclear production reliability Continued growth in generation output Consistently high capacity factors Continued excellence in refueling outage performance Exelon Nuclear's sustained reliability is a competitive advantage Data sources: Nucleonics Week, INP
Slide 52: Nuclear Performance - Fuel Costs
Nuclear Performance - Fuel Costs Uranium market prices have increased, but Exelon is managing its portfolio Reduced uranium demand by 25% Contracting strategy protects us and ensures we are significantly below current spot market prices through 2011 Uranium is small component of total production cos
Slide 53: Announced Nuclear Projects
Announced Nuclear Projects 17 projects totaling ~35,000 MWs have been announced Company Owner Site State Type of Site Technology MWs COL Submission Date NuStart TVA/Southern Bellefonte Alabama Characterized site AP1000 (2 units) 2,234 Oct-07 NuStart Entergy Grand Gulf Mississippi Operating Nuclear S
Slide 54: Energy Policy Act - Nuclear Incentives
Energy Policy Act - Nuclear Incentives Production Tax Credit (PTC) $18 per MWh, 8 year PTC for first 6,000 MWe of new capacity Cap of $125M per 1,000 MWe of capacity per year Protects against a decrease in market prices and revenues earned Significantly improves EPS Benefit will be allocated/ prorat
Slide 55: Commodity Hedging - Transition to Market in the Midwest
Market implied heat rate NYMEX Historic Fwd. Gas Commodity Hedging - Transition to Market in the Midwest Power Team utilized put options in power and natural gas to smoothly transition to the load auction. The recent increase in market implied heat rates enhanced the value of our gas hedge.
Slide 56: 2007 Around-the-Clock Historical Forward Prices
PJM West Hub PJM NI Hub 4/19: $73.94 2/16: $61.56 4/20: $53.49 2/16: $43.80 9/28: $56.81 9/25: $43.01 Source: OTC quotes and electronic trading systems. 2007 Around-the-Clock Historical Forward Prices As Exelon becomes a more commodity-driven business, wholesale power price movements will have an in
Slide 57: Current Market Prices
Current Market Prices 1) 2004 and 2005 are actual settled prices. 4) Average NYMEX settled prices 2) Real Time LMP (Locational Marginal Price) 5) 2006 information is a combination of actual prices through October 27, 2006 and forward market prices for the balance of the year 3) Next day over-the-cou
Slide 58: Generation Technology Cost Comparison
Energy/ Capacity $/MWh POLR Price $/MWh Variable Costs Fixed Costs 0 14 27 41 54 68 95 108 1,500 Net MWe 93% Capacity Factor ~$1,580 / kWe $4.00 / MWh Fuel ~3 years to Permit ~5 years to Construct Tech. Readiness: Low 500 Net MWe 85% Capacity Factor ~$2,000 / kWe $2.10 / MMBTU Fuel ~2 years to Permi
Slide 59: Appendix - GAAP EPS Reconciliation
Appendix - GAAP EPS Reconciliation
Slide 60: GAAP EPS Reconciliation 2000-2002
GAAP EPS Reconciliation 2000-2002
Slide 61: GAAP EPS Reconciliation 2003-2005
GAAP EPS Reconciliation 2003-2005
Slide 62: GAAP EPS Reconciliation Nine Months Ended Sep. 30, 2006 and 2005
GAAP EPS Reconciliation Nine Months Ended Sep. 30, 2006 and 2005 2005 GAAP Reported EPS $2.60 Mark-to-market (0.11) Investments in synthetic fuel-producing facilities (0.11) Charges related to proposed merger with PSEG 0.02 Reduction in severance reserves (0.01) 2005 financial impact of Generation's
Slide 63: GAAP Earnings Reconciliation Year Ended December 31, 2005
GAAP Earnings Reconciliation Year Ended December 31, 2005 (in millions) ComEd PECO ExGen Other Exelon 2005 GAAP Reported Earnings (Loss) $(685) $517 $1,098 $(7) $923 Mark-to-market - - 10 - 10 Investments in synthetic fuel-producing facilities - - - (81) (81) Charges related to proposed merger with
Slide 64: GAAP EPS Reconciliation Year Ended December 31, 2005
GAAP EPS Reconciliation Year Ended December 31, 2005 ComEd (a) PECO (a) ExGen (a) Other (a) Exelon (a) 2005 GAAP Reported Earnings (Loss) Per Share (b) $(1.02) $0.76 $1.62 $(0.01) $1.36 Mark-to-market - - 0.02 - 0.02 Investments in synthetic fuel-producing facilities - - - (0.12) (0.12) Charges rela
Slide 65: 2006 - 2007 Exelon Earnings Guidance
2006 - 2007 Exelon Earnings Guidance Exelon's outlook for 2006 - 2007 adjusted (non-GAAP) operating earnings excludes the earnings impacts of the following: mark-to-market adjustments from non-trading activities; investments in synthetic fuel-producing facilities; certain costs associated with the t
Slide 66: FFO Calculation and Ratios
FFO Calculation and Ratios FFO Calculation Net Income Add back non-cash items: + Depreciation, amortization (including nucl fuel amortization), AFUDC/Cap Int + Change in Deferred Taxes + Gain on Sale and Extraordinary Items + Trust-Preferred Interest Expense - Transition Bond Principal Paydown = FFO
Slide 67: Exelon Corporation 2005-06 Fact Book
value driven Exelon Corporation 2005-06 Fact Book Table of Contents Introduction Exelon at a Glance Profile, Vision and Quick Facts Company Overview Corporate Structure and Operating Company Summary State Utility Regulation Illinois Commerce Commission, ComEd Rate Case and Auction Structure Pennsylv
Slide 68: Exelon Operating Companies
Exelon Traditional Transmission and DistributionRegional Wholesale Energy ComEd PECO Exelon An Exelon Company An Exelon Company Generation Illinois Utility Pennsylvania Utility Nuclear Generation 2005 2005 Fossil Generation (in millions) (in millions) Renewable/Hydro Generation Revenues: $6,264 Reve
Slide 69: State Utility Regulation
CPP-B 33% of load 3 years + 5 months 3 years3 years3 years 33% of load 2 years + 5 months 3 years3 years3 years3 years > 33% of load 17 months 3 years3 years3 years3 years > CPP-A 17 months 1 year 1 year 1 year 1 year 1 year 1 year 1 year 1 year 1 year 1 year 1 year calendar year2007 2008 2009 2010
Slide 70: Map of Exelon Service Area and Selected Generating Assets
Illinois A Exelon Corporate HQ A ComEd HQ B Exelon Nuclear HQ 1 Braidwood (N) 2 Byron (N) 3 Clinton (N) 4 Dresden (N) 5 LaSalle (N) 6 Quad Cities (N) 7 Southeast Chicago (F) Maine 8 Wyman (F) Maryland 9 Conowingo (R) Massachusetts 10 Framingham (F) 11 New Boston (F) 12 West Medway (F) New Jersey 13