Exelon Corporation · NASDAQ:EXC
Exelon — Edison Electric Institute Financial Conference 2005
39 slides from Exelon's conference presentation, Nov 4, 2005
Slide 1: Edison Electric Institute Financial Conference
Edison Electric Institute Financial Conference Hollywood, Florida November 6-9, 2005 Exelon Corporation Public Service Enterprise Group
Slide 2: 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 of Exelon Corporation (Exelon), Commonwealth Edison Co
Slide 3: Agenda
Agenda Tom O'Flynn Executive VP and CFO Public Service Enterprise Group John Young Executive VP, Finance and Markets Exelon Corporation PSEG Overview 2005 Performance 2006 Outlook & Environment Merger Update Exelon Overview 2005 Performance 2006 Outlook & Environment Illinois Update
Slide 4: PSEG Overview - 2005
PSEG Overview - 2005 Electric Customers: 2.1M Gas Customers: 1.7M ~40% of Operating Earnings Nuclear Capacity: 3,484 MW Total Capacity: 14,549 MW ~45% of Operating Earnings ~15% of Operating Earnings Traditional T&D Leveraged Leases Operating Earnings(1): $770M - $810M EPS Guidance: $3.15 - $3.35 As
Slide 5: PSEG YTD 2005 Performance
9/30/04 YTD Continuing Operations EPS Power PSE&G Energy Holdings Other 9/30/05 YTD Operating EPS West 720 715 715 716 730 0 0 3 0 35 21 725 PSEG YTD 2005 Performance Improved Nuclear & Fossil Operations $0.03 Depreciation $(0.04) Other $(0.01) Weather $0.05 Interest $0.03 O&M $(0.06) Demand & Other
Slide 6: 2005 Key Events
2005 Key Events Natural Gas Price Impact Longer-term Benefits Liquidity Customer Impact Dampened - BGS: 3-year contracts - BGSS: storage and hedges Balance Sheet Liquidity - $2.1B as of 10/28 - $500M of New Facilities Cash - Waterford Sale - Securitization: Year 4 BGS - Repatriation Regulatory Gas R
Slide 7: Attractive Pricing Environment
Attractive Pricing Environment PJM Western Hub (RTC) Forward Prices and NYMEX Natural Gas (Henry Hub) BGS Prices (NJ Avg -Approx) $32 - $33 $36 - $37 $44 - $46 PJM West RTC NYMEX (Henry Hub) $53 $55 $66 $5.15 - $5.35 $5.25 - $5.40 $6.50 - $6.65 RTC = round the clock
Slide 8: BGS and Long-Term Contracts
BGS and Long-Term Contracts 0% 20% 40% 60% 80% 100% Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 % of Nuclear and Coal Generation Generation output not under contract Other term energy contracts 2003 BGS United Illuminating 2004 BGS 2005 BGS PSEG Power T
Slide 9: 2005 Guidance
2005 Guidance Energy Prices Unit Operations Regulatory Filings Depreciation & Interest O&M Other 2006 Guidance 2007 2008 West 755 755 818 846 821 801 788 0 0 0 0 63 28 8 33 20 13 788 828 869.9 Meaningfully Above 2005-2006 Rates Gas Base Rate Case New Assets New Assets Sales Driven by Commodity Price
Slide 10: 2006 Assumptions and Sensitivities
2006 Assumptions and Sensitivities Assumption Change Per Share Impact Natural Gas Prices (NYMEX) $10/mmbtu $1/mmbtu $0.01 RTC Energy - PJM West $69/MWh $5/MWh $0.05 Nuclear Capacity Factor 91.4% 1% $0.04 PJM Capacity Prices $3/kW-yr $5/kW-yr $0.05
Slide 11: Merger Update
Merger Update Generation PEG: EXC:
Slide 12: Market Concentration Mitigation
Market Concentration Mitigation 7/1/05 - FERC issued merger approval order Working with DOJ and NJ BPU 4,000MW Fossil Divestiture Must complete within 12 months of merger closing Peaking: 1,200MW High Mid Merit: 900MW CCGT: 1,200MW Coal: 700MW Merrill Lynch advising on sale 2,600MW Nuclear Virtual D
Slide 13: Merger Regulatory Update
Merger Regulatory Update Status of major filings/approvals: FERC order approving Merger without hearing issued 7/1/05 FERC approved the application as proposed with no surprises New merger review provisions in energy bill do not apply DOJ Hart-Scott-Rodino review The waiting period expired September
Slide 14: EE&G Value Proposition
Unmatched scale and scope through merger Stable growth delivery business with improving operations Exceptional generation business uniquely positioned to benefit from: improving power market fundamentals increasing environmental restrictions on fossil fuels Strong balance sheet and financial discipl
Slide 15: Exelon Update
Exelon Update Exelon. 7
Slide 16: Exelon Overview - 2005
Exelon Overview - 2005 (1) Includes long-term contracts Note: See presentation appendix for adjusted (non-GAAP) operating reconciliations to GAAP 2005E Operating Earnings: $2.0-$2.1B EPS Guidance: $3.00-$3.15 Assets (9/30/05): $43B Pennsylvania Utility Illinois Utility Nuclear Generation Fossil Gene
Slide 17: Exelon YTD 2005 Performance
9/30/04 YTD Operating EPS Generation Margins Weather Other 9/30/05 YTD Operating EPS West 720 720 740 730 0 0 20 25 19 725 Higher margins on market sales $0.36 Higher costs to serve affiliate load $(0.20) $2.37 $2.17 Higher delivery volumes Asbestos reserve $(0.04) O&M $(0.03) Depreciation & amortiz
Slide 18: Exelon's EPS Drivers: 2004 - 2007
2004A 2005 Estimate 2006 Estimate 2007 East 2.78 3 3 0.125 0.24 $2.78 $3.00-$3.15 $3.00-$3.30 + Generation Margins + Weather + Load Growth - - Other Exelon's EPS Drivers: 2004 - 2007 + Generation Margins + Load Growth - - Weather - - Higher O&M + End of Illinois Transition Period + PECO Generation R
Slide 19: Exelon's Balance Sheet is Strong
Exelon consolidated: FFO / Interest 7.5x BBB/Baa2/BBB+ FFO / Debt 39% Debt Ratio 48% Generation: FFO / Interest 13.6x BBB+/Baa1/BBB+ FFO / Debt 87% Debt Ratio 29% ComEd: FFO / Interest 5.7x A-/A3/A- FFO / Debt 27% Debt Ratio 41%(2) PECO: FFO / Interest 12.6x A-/A2/A FFO / Debt 36% Debt Ratio 45% Not
Slide 20: End of Illinois Transition Period
ComEd becomes a pure wires business - - Returns determined through traditional regulatory processes - - No generation margin - - Rate increase expected on delivery services tariff (DST) Exelon Generation gets a market price for all its Midwest production - - Approximately 90 TWh nuclear and 10 TWh c
Slide 21: Composition of Operating Earnings
2002 2003 2004 2005E 2006E 2007* Generation 0.24 0.3 0.33 0.5 0.51 0.7 ComEd 0.47 0.45 0.42 0.26 0.27 0.14 PECO 0.29 0.25 0.25 0.24 0.22 0.16 A further shift in relative earnings contribution from Energy Delivery to Generation will occur in 2007 when ComEd becomes a pure wires company and Generation
Slide 22: Illinois Update
lilinois Update Exelon. 7
Slide 23: 1997 Illinois Restructuring Act
1997 Illinois Restructuring Act The Illinois Restructuring Act has benefited both customers and shareholders Consumers have benefited: Since 1997, ComEd residential electric rates have been reduced 20% and frozen through the end of 2006 As a result, residential customers will have enjoyed $4 billion
Slide 24: Moving Illinois Forward
Moving Illinois Forward Summer 2004 - ICC Stakeholder Workshops Consensus develops around the use of a competitive procurement process for establishing market-based rates post 2006 ICC staff report recommends a reverse auction (like New Jersey's) as the best available competitive procurement process
Slide 25: Actions Underway
Actions Underway Regulatory Trying to keep the ICC process on track Seeking FERC determination through Section 205 filing that affiliate contracts won through a reverse auction process will meet Edgar Standards and will be approved Legal Intervening in Attorney General's court case Recently appointe
Slide 26: In Summary
In Summary Continued strong financial performance at both PSEG and ComEd Merger approvals and integration efforts on track Combined company well positioned for future earnings growth Expect to resolve Illinois issues to the benefit of both our customers and shareholders
Slide 27: Appendix
Appendix Exelon. © PSEG
Slide 28: NJ BGS Auction Structure
20,000 4,000 8,000 12,000 16,000 2002 2003 2004 2005 2006 2007 2008 1 Year 170 Tranches 10 months 104 Tranches 34 months 51 Tranches 1 Year 50 Tranches 3 Years 51 Tranches 2006 FP Auction Load (projected) 2005 FP Auction Load 50 Tranches 2007 FP Auction Load (projected) Total NJ BGS Load (MW) NJ BGS
Slide 29: 2005 BGS Auction Results
2005 BGS Auction Results 2003 Auction 2004 Auction 2005 Auction East 32.1 36.9 45.14 West 20.6 17.55 20.77 $32 - $33 $36 -$37 $52.70 (10 Month NJ Avg.) $54.45 (12 Month NJ Avg.) $65.91 (36 Month NJ Avg.) $44 -$46 Transmission Ancillary services Load shape Congestion Risk premium Capacity ~ $20 ~ $18
Slide 30: Anticipated Merger Timeline
Dec 2004 Q1 2005 Q2 2005 Q3 2005 Q4 2005 Q1 2006 Announce Transaction 12/20/04 Shareholder Approvals 7/05 FERC, NJBPU, ICC Regulatory Filings 2/4/05 File Joint Proxy Statement 2/10/05 Work to Secure Regulatory Approvals (FERC, DOJ, ICC*, PAPUC, NJBPU, SEC, and others) Develop Transition Implementati
Slide 31: Marginal Revenue and Cost per MWh of Retail Load in 3Q
Marginal Revenue and Cost per MWh of Retail Load in 3Q 05 ExGen ComEd ExGen PECO 40 21 45 32 -78 14 -140 24 40 45 -40 -45 $/MWh Genco/ ComEd PPA Cost to serve incremental weather-driven load in the spot market in 3Q Genco ComEd PECO Illustration Using Approximate 3Q 05 Data Genco Generation serves b
Slide 32: Profit Impact of Higher Sales at ComEd and PECO in 3Q 05
Higher Sales to ComEd $/MWh ComEd Genco Exelon Weather Revenue 75 40 75 Cost* (40) (78) (78) Margin 35 (38) (3) Switching Revenue 40 40 40 Cost* (40) (61) (61) Margin -- (21) (21) Warm summer weather was favorable for Delivery but unfavorable for Generation and Exelon overall Higher customer retenti
Slide 33: Consolidated - Key Assumptions
Consolidated - Key Assumptions Source: 8/5/05 Exelon Investor Conference
Slide 34: Portfolio Sensitivities for Genco
Portfolio Sensitivities for Genco * ATC = Around the Clock Gas Price Sensitivity 1 ($ million pre-tax) Gas +20% Gas -20% Sep to Dec 2005 $7 ($2) Calendar 2006 $56 ($46) Power Price Sensitivity 2 ($ million pre-tax) Power +$1.00 ATC* Power -$1.00 ATC* Sep to Dec 2005 $4 ($3) Calendar 2006 $28 ($27) N
Slide 35: Deploying Our Cash
Note: Net Cash from Operations includes cash from normal operations, decommissioning investment, and debt issued for pension funding in 2005. See presentation appendix for definition of Free Cash Flow. 3.8 4.0 (0.8) (0.9) (0.5) (0.5) (0.6) (0.6) (1.0) (1.1) (1.1) (1.1) ($5.0) ($4.0) ($3.0) ($2.0) ($
Slide 36: GAAP Earnings to Adjusted Operating Earnings - YTD through Sept.
Note: Items may not add due to rounding. (in Millions, except EPS) Exelon Consolidated GAAP Earnings to Adjusted (non-GAAP) Operating Earnings - YTD through Sept.
Slide 37: Reconciliation of 2004 GAAP and Adjusted Operating Earnings per Share
Reconciliation of 2004 GAAP Reported and Adjusted (non-GAAP) Operating Earnings per Diluted Share
Slide 38: 2005/2006 Earnings Guidance
2005/2006 Earnings Guidance Exelon's outlook for 2005 adjusted (non-GAAP) operating earnings excludes unrealized mark-to-market adjustments from non-trading activities, income resulting from investments in synthetic fuel- producing facilities, the financial impact of the company's investment in Sith
Slide 39: Cash Flow Definition
Cash Flow Definition We define free cash flow as: Cash from operations (which includes pension contributions and the benefit of synthetic fuel investments), Cash used in investing activities, Debt issued for pension funding, Cash used for transition debt maturities, Common stock dividend payments, O
Exelon — Edison Electric Institute Financial Conference 2005 on 6ix