Exelon Corporation · NASDAQ:EXC
Exelon — Morgan Stanley 12th Annual Global Electricity & Energy Conference 2005
47 slides from Exelon's conference presentation, Mar 8, 2005
Slide 1: Morgan Stanley 12th Annual Global Electricity & Energy Conference
Morgan Stanley 12th Annual Global Electricity & Energy Conference New York City March 9, 2005 Exelon Corporation Public Service Enterprise Group
Slide 2: Safe Harbor Language
Safe Harbor Language This presentation includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, for example, statements regarding benefits of the proposed merger of Exelon and PSEG, integration plans,
Slide 3: Additional Information
Additional Information This presentation is not a solicitation of a proxy from any security holder of Exelon or PSEG. The above- referenced Registration Statement on Form S-4 contains a preliminary joint proxy statement/prospectus and other relevant documents regarding the proposed merger of Exelon
Slide 4: Agenda
Agenda Exelon Update John Young PSEG Update Tom O'Flynn Merger Update Tom O'Flynn & John Young Executive VP, Finance and Markets Exelon Corporation Executive VP and CFO Public Service Enterprise Group
Slide 5: Exelon Agenda
Exelon Agenda Corporate Overview/Management Changes 2004 Performance and 2005 Outlook Illinois Post-2006 Update
Slide 6: Exelon Overview - 2004
Exelon Overview - 2004 Revenue $14.5B Net Income $1.86B Assets $42.8B Pennsylvania Utility Illinois Utility Nuclear Fossil Power Team Revenue $7.9B Net Income $673M Capacity 34.7GW Assets $16.4B Revenue $10.3B Net Income $1,128M Customers 5.1M Assets $27.6B
Slide 7: Management Team
Management Team John W. Rowe Chairman, President, CEO Randall E. Mehrberg EVP & General Counsel Chief Integration Officer John L. Skolds EVP & President Delivery & Generation John F. Young EVP Finance & Markets Pamela B. Strobel EVP & Chief Admin Officer President, BSC Frank M. Clark EVP & Chief of
Slide 8: 2004 Financial Summary
2004 Financial Summary $2.78 Operating Earnings (+6.5% over 2003) Core growth in retail volumes Higher generation margins Acquisition of the second half of AmerGen Exelon Way cost savings Reduced losses at Enterprises Lower interest expense Dividend increases totaling 60% in 2004 (current annual rat
Slide 9: Looking Back: 2000 - 2004
Looking Back: 2000 - 2004 Exelon had 9.6% average annual earnings per share growth driven by: PECO / Unicom merger Cost management initiatives Debt reduction and refinancings Effective commodity risk management Despite: Retail rate freeze Merchant power overbuild Volatile wholesale prices Note: See
Slide 10: 2005 Guidance
2004 Guidance Weather ComEd CTC Amort. / Depr. Nuclear Outages /Fuel Exelon Way Load Growth Other RNF Interest 2005 Guidance Invisible dataset 0 2.78 2.86 2.81 2.76 2.76 2.81 2.91 2.96 0 Green 2.78 0.11 0.03 0.05 0.05 0.05 0.1 0.05 0.09 3.1 2004A 2005E Interest O&M Expense/ Other ComEd CTC Expected
Slide 11: Exelon 2005 Focus
Exelon 2005 Focus We will continue to execute the fundamentals . . . Customers - improve reliability Competition - prepare for Illinois Post 2006 Employees - drive high performance Environment - focus on stewardship Shareholders - deliver value .. . . while we work to close the merger and plan the i
Slide 12: Illinois Post-2006 Update - Competition Benefiting IL Customers
Illinois Post-2006 Update - Competition Benefiting IL Customers Since the onset of customer choice in 1997, more than 70% of ComEd's biggest customers have chosen alternatives to bundled rates, some saving up to 15% Residential customers saved 20% with a rate reduction, and even more considering a 1
Slide 13: Illinois Post-2006 Update - Process Moving Forward
Illinois Post-2006 Update - Process Moving Forward 12/3/04 ICC staff report to General Assembly endorsed an auction process similar to New Jersey's (best fit with consensus of Procurement Working Group) ComEd made filings at the ICC on February 25 proposing an auction process Details of the filing a
Slide 14: PSEG Agenda
PSEG Agenda 2004 overview and 2005 outlook PSEG operating companies
Slide 15: PSEG Overview
PSEG Overview 2004 Earnings $726M* 2004 EPS $3.03* ROE 13% Assets $29B Regional Wholesale Energy Leveraged Leases Domestic/Int'l Energy Traditional T&D * From continuing operations, includes Parent impact of $(49)M, or $(0.20) per share EPS $1.44 ROE 13% Assets $13.6B EPS $1.29 ROE 11% Assets $8.6B
Slide 16: PSEG 2004 Financial Review
PSEG 2004 Financial Review $3.03 operating earnings includes impact of: Hope Creek Extended Outage ($0.34) Replacement Power Costs at Fossil and Salem ($0.15) Strengthening of Polish Zloty ($0.06) Increased annual dividend to $2.20 per share in 2004 2005 indicative annual dividend of $2.24 Energy Ho
Slide 17: PSEG 2005 Operating EPS Guidance
2004 Actual Power PSE&G Energy Holdings Other 2005 Estimate West 726 726 773 773 784 0 0 53 6 23 12 784 PSEG 2005 Operating EPS Guidance + Improved Nuclear & Fossil Operations - NDT O&M $3.15 - $3.35 $3.03 + Currency Impacts Preferred Dividend from Holdings Additional Shares
Slide 18: PSE&G Overview: Basic Facts
Basic Facts 10th largest electric distribution utility in the U.S. - 2.1M customers 9th largest gas distribution utility in the U.S. - 1.7M customers 2nd largest peak transmission utility in traditional PJM - 1,411 circuit miles PSE&G Overview 0 10 ml 1 2 3 4 5 6 7 8 9 W a r r e n C o .. H u n t e r
Slide 19: PSE&G Focuses on Performance
People Safe, Motivated, Productive Customer Care Operations Reliable, Low Cost Financial Reasonable Return PSE&G Focuses on Performance OSHA Index OSHA Incident Severity Rate Motor Vehicle Accidents Total Availability Employee Engagement Index Overtime Staffing Levels SAIFI MAIFI Transmission Availa
Slide 20: PSEG Power Overview
PSEG Power Overview Owned MW: 11,123 2004 Output (GWH): 20,787 Fuel Mix (MW): Gas 58% Coal 26% Oil 14% Other 2% Owned MW: 3,484 2004 Output (GWH): 24,673 2004 Capacity Factor: 81.8% Portfolio Management Asset Based Products BGSS FTR's Emissions Wholesale Commodity Trading Market/Business Development
Slide 21: 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 22: Reliability Pricing Model in PJM
Reliability Pricing Model in PJM Prices reflect locational and operational value Rational supply adequacy planning with 4-year forward commitments/prices Demand curve depicts market capacity price stability proportionate to system requirements Auction Date Effective Timeframe Nature of Auction Sept
Slide 23: RPM Implications to PSEG
RPM Implications to PSEG Market recognizes PSEG generation for reliability services provided Improved financial performance for PSEG Power Locational advantage of PSEG units Provides financial viability for peaking fleet Clearer investment and retirement decision-making parameters Potential for incr
Slide 24: PSEG Energy Holdings Overview
PSEG Energy Holdings Overview PSEG Global EBIT Contribution ($298M**) (After non-recourse interest) 8% 8% North America Chile Latin America (other than Chile) Asia Pacific Europe India and Oman EBIT 0.3 0.25 0.16 0.16 0.07 0.06 Chile 16% 6% 30% 25% Asia Pacific Europe North America Latin America (ot
Slide 25: PSEG 2005 Focus
PSEG 2005 Focus Improving nuclear operations Salem 1 and 2 reactor vessel head replacement Continued reliable, safe and low cost utility operations Branchburg transformer back in service June 30 Securitize Year 4 BGS $64M filing to eliminate electric revenue credit Mandatory convert adds equity in 2
Slide 26: Merger Update
Merger Update Tom O'Flynn Transaction Overview John Young Operational Opportunities Financial Profile Growth Drivers
Slide 27: Key Transaction Terms
Key Transaction Terms Offer Price: 1.225 shares of Exelon per PSEG share Ownership: 68% Exelon shareholders 32% PSEG shareholders Governance: John W. Rowe to be CEO E. James Ferland to be non-executive Chairman 18 Board members - 12 nominated by Exelon - 6 nominated by PSEG Timing: Expected to close
Slide 28: A "Win-Win" Combination
A "Win-Win"Combination Combined Company Enhanced earnings Regulatory and market diversity Increased operating flexibility Strong, stable cash flow with commitment to solid investment grade ratings Experienced management team PSEG Brings Excellence in transmission and distribution operations Expertis
Slide 29: Anticipated Timeline - Update
Dec 2004 Q1 2005 Q2 2005 Q3 2005 Q4 2005 Q1 2006 Anticipated Timeline - Update Announce Transaction 12/20/04 Exelon & PSEG Shareholder Meetings FERC, NJBPU, ICC Regulatory Filings 2/4/05 File Joint Proxy Statement 2/10/05 Work to Secure Regulatory Approvals (FERC, SEC, NRC, DOJ, NJBPU, NJDEP*, PAPUC
Slide 30: Strong Generation Platform
Strong Generation Platform Premier nuclear operator, based on consistent top quartile performance Balanced and diverse generation portfolio Reliable and commercially responsive fossil operations Experienced leader in wholesale power marketing and risk management Complementary Generation Portfolio Po
Slide 31: Opportunity for Improved Nuclear Performance
Exelon has proven track record of improving and sustaining safety, operating and cost performance Significant opportunity to improve PSEG fleet performance under Nuclear Operating Services Contract, started January 2005 Every 1% increase in capacity factor for PSEG's nuclear fleet generates pre-tax
Slide 32: Combined Generation Assets
Combined Generation Assets PEG: EXC: (MWs)* Baseload Load Following Peaking PJM 24,649 8,018 8,096 NEPOOL 503 837 163 NYISO 514 500 0 ERCOT 830 3,300 1,544 TOTAL 26,496 12,655 9,803 * Includes long-term contracts; excludes 2,531 MWs in other regions
Slide 33: Market Power Mitigation
Market Power Mitigation 2/4/05 - Filed the merger application with FERC Proposed Divestiture "Virtual Divestiture" Transfer control of 2,600MW of baseload nuclear energy Divest a total of 2,900MW fossil fuel facilities Peaking 1,000MW Mid-Merit 1,900MW at least 550MW coal-fired Exelon Baseload Load
Slide 34: Opportunity for Improved T&D Reliability
Opportunity for Improved T&D Reliability 2003 Key Performance Indicators Exelon Exelon PSE&G PSE&G Performance Quartile Performance Quartile Reliability - Outage Frequency (SAIFI) 1.09 2nd 0.63 1st Customer Satisfaction (ACSI) 70 4th 76 2nd Safety (OSHA Recordables Rate) 2.40 2nd 2.88 2nd Total T&D
Slide 35: Financial Benefits
Financial Benefits Stronger platform to achieve consistent earnings growth Annual synergies of approximately $400 million in year 1 growing to $500 million by year 2 Earnings accretion for both companies' shareholders in year 1 Nuclear contract provides earnings benefit for both companies starting i
Slide 36: $500 Million of Synergies in Year 2
$500 Million of Synergies in Year 2 Corporate/BSC 0.39 T&D 0.11 GENCO Corp 0.07 Trading 0.09 Nuclear 0.34 7% 9% 34% 39% 11% Trading Genco Corp/ Fossil T&D Corporate, Business Services Nuclear (1) Staffing 0.43 Nuclear Production Improvements 0.14 Nuclear Outages 0.03 IT 0.09 Corp Programs 0.15 Suppl
Slide 37: Solid Balance Sheet
Solid Balance Sheet Exelon and PSEG believe they will retain solid investment-grade ratings on a combined basis Pro Forma Key Ratios (1) Year 1 Year 2 Funds from Operations / Average Total Debt 28% 31% Funds from Operations Interest Coverage 5.8x 6.2x EBITDA Interest Coverage 7.0x 7.1x Debt / Capita
Slide 38: Pro Forma Cash Flow Illustration
ong ( FIO EXC PEG Merger Adj EEG (8 in Billions) 2007 2007-2007 2007 Estimated Net Income oe 10 O80 @ 35 Depreciation & Amortization 19 10 = 29 CapEx (2.0) (08) (0.1) © (3.0) Dividends (1.2) (0.6) = (1.8) Cash Before Debt Maturities 09 05 02 16 Securitized Debt Retired (0.6) (0.2) = (0.8) Available
Slide 39: EE&G Value Proposition
EE&G Value Proposition Solid Delivery Business Stable growth Improving operations Constructive regulatory processes in IL, NJ and PA Geographic diversity Exceptional Generation Business Large, low cost, low emissions generation fleet in competitive markets with strengthening wholesale prices Fuel, d
Slide 40: Well Positioned for Continued Earnings Growth
Well Positioned for Continued Earnings Growth 2005 2006 2007 2008 2009 2010 Load growth Repricing wholesale contracts Reinvesting/returning Free Cash Merger synergies Increasing environmental costs (fossil) Increasing capacity values Generation rate increase in PA DST rate relief in Illinois Market
Slide 41: Appendix
4 APPENDIX Exelwn.
Slide 42: Illinois Procurement Filing Overview
Illinois Procurement Filing Overview Annual "reverse auction" to procure supply for customers post 2006 Staggered 1, 3 and 5 year contracts for <1 MW customers Staggering creates rate stability for customers 100% of load bid out in year 1; 40% each year thereafter Recent New Jersey BGS auction resul
Slide 43: GAAP EPS Reconciliation 2000-2002
GAAP EPS Reconciliation 2000-2002
Slide 44: GAAP EPS Reconciliation 2003-2004
GAAP EPS Reconciliation 2003-2004 Reconciliation of GAAP Reported and Adjusted (non-GAAP) Operating Earnings per Diluted Share
Slide 45: Full Year 2004 Cash Reconciliation
Full Year 2004 Cash Reconciliation
Slide 46: 2005 Earnings Guidance
2005 Earnings Guidance Exelon's adjusted (non-GAAP) operating earnings for 2005 are expected to be in the range of $2.90 to $3.10 per share. Exelon's outlook for adjusted (non-GAAP) operating earnings excludes income resulting from investments in synthetic fuel-producing facilities, the financial im
Slide 47: Cash Flow Definitions
Cash Flow Definitions We define free cash flow as: Cash from operations (which includes pension contributions and the benefit of synthetic fuel investments), less Cash used in investing activities, less Transition debt maturities Common stock dividend payments at 2003 rates Other routine activities
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