Exelon Corporation · NASDAQ:EXC
Exelon — Investor Day (September 2004)
53 slides from Exelon's investor day presentation, Sep 17, 2004
Slide 1: Power Marketing Update
Power Marketing Update Bernstein Investor Meeting Kennett Square September 17, 2004
Slide 2: Forward-Looking Statements
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
Slide 3: Agenda - Bernstein Investor Meeting
Introduction 10:00 - 10:15 Bob Shapard, EVP & CFO Michael Metzner, VP, Investor Relations Generation Co. Overview 10:15 - 10:30 John Young, EVP & President, Exelon Generation Power Marketing Overview 10:30 - 10:45 Ian McLean, EVP & President, Power Team Portfolio Management 10:45 - 11:30 Ken Cornew,
Slide 4: Context for Today's Discussion
Context for Today's Discussion
Slide 5: Key Message: Exelon is well positioned for end of transition periods
Key Message: Exelon is well positioned for end of transition periods in Illinois and Pennsylvania Large, low-cost base load generator Large, stable retail customer base Strong Balance Sheet Driving strong earnings and cash flow growth through Exelon Way Improving power market fundamentals Increasing
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 increase in wires charges to recover increased investment in transmission and distribution infrastructure an
Slide 7: 2007 ComEd POLR Price Sensitivity to Fuel Prices
2007 ComEd POLR Price Sensitivity to Fuel Prices PRB Coal $/Ton HH Gas $/MMBTU * Fuel prices assumed in CERA's 2007 MAIN ATC price forecasts (avg. of "Technology Enhanced" and "Rear View Mirror" scenarios) ** POLR price assumed to be 1.5 x CERA's 2007 MAIN ATC price forecast of $33 per MWh (average
Slide 8: ComEd Delivery Service Investments
ComEd Delivery Service Investments ComEd has made significant investments in Delivery Rate Base and experienced significant increases in costs since the last rate case test year (2000). Note: Financial data is simplified and rounded for illustrative purposes.
Slide 9: Metropolitan Residential Electric Rates
Example Example Example Metropolitan Residential Electric Rates Source: EEI Typical Bill and Average Rate report - Winter 2004 (2003 data)
Slide 10: Generation Company Overview
Generation Company Overview John F. Young President, Exelon Generation Company Bernstein Investor Meeting Kennett Square September 17, 2004
Slide 11: Exelon Generation: An Overview
Exelon Generation Competitive Energy Supply Business Exelon Nuclear Operates and maintains Exelon's nuclear assets Nuclear Capacity: 16.6 GW Exelon Power Operates and maintains Exelon's fossil and hydro units Fossil Capacity: 7.1 GW Hydro Capacity: 1.6 GW Power Team Optimizes value of energy supply
Slide 12: Our Regional Positions
Nuclear 44% Oil 3% Renewable 1% Peaking 21% CCGT 11% Hydro 4% Coal 16% Capacity ~38 GW* *Includes long-term contracts CCGT = combined-cycle gas turbine Owned Generation: 2.5 GW Contracted Generation: 2.9 GW TXU Tolling Contract: 2.3 GW ERCOT & South Owned Generation: 11.2 GW Contracted Generation: 0
Slide 13: Our Foundation for Operations
Our Foundation for Operations A defined management model that drives sustainable performance in Operational excellence Productivity improvement Cost management Depth of talent and experience Structured leadership development and recruiting A bench capable of meeting current and future challenges Rig
Slide 14: Nuclear Performance - Production
Nuclear Performance - Production Consistent growth in generation output Consistently high capacity factors Consistent performance and industry leadership in refueling outage execution Nuclear production performance is consistently good.
Slide 15: Nuclear Performance - Cost
Nuclear Performance - Cost Exelon Nuclear is consistently cost competitive Consistent improvement in production cost Consistent improvement in all-in cost Exelon's 5 big dual unit sites are the 5 lowest cost plants in the U.S. -- they define the top decile of performance Exelon Nuclear's low cost ge
Slide 16: Exelon Power - Improvements
Exelon Power - Improvements Condition-based overhauls are resulting in production improvements and economic gains Production improvements: coal unit mill performance, steam unit boiler reliability, turbine reliability, feedwater heaters, condensers >350 MW gained or recaptured through uprates and ma
Slide 17: Exelon Generation: Sustained Excellence
Exelon Generation: Sustained Excellence Operating plans based on business imperatives Continued focus on performance discipline Experienced leader in risk management Deep bench of talent and experience Effectively integrated portfolio strategy Positioned to capitalize on market dynamics
Slide 18: Power Marketing Overview
Power Marketing Overview Ian P. McLean President, Power Team Bernstein Investor Meeting Kennett Square September 17, 2004
Slide 19: Power Team: Value Added Intermediary
Nuclear Fossil Hydro Generation Power Team ComEd PECO Wholesale Power & Fuel Markets Affiliates Supply Contracts Power Team manages the interaction between the generation portfolio and the wholesale customers and markets in order to reduce risk and optimize Exelon Generation profitability. Long-Term
Slide 20: Approach to Portfolio Management Over Time
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 relevant commercial options
Slide 21: The Wholesale Market Is Still Evolving
The Wholesale Market Is Still Evolving Lack of "Organized Markets" Bilateral markets as another source of value Despite regions having surplus, there are customers with significant unmet needs in the next several years Contract expiration Load growth Very few active and creditworthy players Increase
Slide 22: Coordinated Marketing Strategy
Coordinated Marketing Strategy Generation marketing strategy is aimed at delivering results Improving margins Securing long-term customer base Managing earnings risk Long-term focus on strategy, planning and analysis All unregulated operations under one roof Coordinated use of short, mid, and long-t
Slide 23: Portfolio Management
Portfolio Management Kenneth W. Cornew Senior Vice President, Power Team Bernstein Investor Meeting Kennett Square September 17, 2004
Slide 24: Midwest Portfolio Characteristics
Midwest Portfolio Characteristics Indiana Illinois Chicago Portfolio Opportunities / Challenges Recent integration into PJM market has added liquidity to the standard and structured product markets Length from base-load units to participate in higher market prices Load following capability is purcha
Slide 25: Portfolio Management 2004 and 2005 - Midwest
Significant Insignificant Portfolio Management 2004 Hedged for the remainder of the year around the clock Manage operational risk of baseload length in the off peak hours Portfolio Management in 2005 Includes changes in generation stack due to roll off of PPAs Length remains in the second, third and
Slide 26: Mid-Atlantic Portfolio Characteristics
Pennsylvania Maryland New Jersey Delaware Plant 2005 Capacity (MW) Average Variable Cost ($/Mwh) Nuclear 5,767 5.00 Hydro 1,618 NA Coal 1,441 $34.00 LFG/Cogen/Contract 406 $50.00 Resid Oil and Peakers* 1,975 $65 resid oil / $100 gas Total Capacity 11,207 Demand - PPA Annual (Gwh) (2005) 37,829 PPA P
Slide 27: Portfolio Management - Mid-Atlantic Commodity Impact
Significant Insignificant Commodity Impact Comments Natural Gas Prices Gas is increasingly on the margin We have a substantial amount of base-load capacity. Therefore, gas price movements drive the power market and affect our margins. Oil Prices Oil on the margin a significant proportion of the time
Slide 28: ERCOT/South Portfolio Characteristics
ERCOT/South Portfolio Characteristics Plant Capacity Average Variable Cost ($/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 $6.30/MMBtu gas price ** TXU tolling deal totaling 2,334 MW Texas Oklahoma Georgia Portfolio Opportuni
Slide 29: ERCOT/South: Key Elements
Significant Insignificant Minimal oil capacity Oil Spark The entire portfolio is spark based; 40% are high efficiency combined-cycle units Gas Spark Oil not on the margin in the region Oil Prices Gas on the margin a significant proportion of the time; however, spark determines regional profit Natura
Slide 30: Portfolio Sensitivities for Generation Co.
Gas Price Sensitivity 1 ($ million pre-tax) Gas +20% Gas -20% 2004 $13 ($13) 2005 $15 $4 Power Price Sensitivity 2 ($ million pre-tax) Power +$1.00 Power -$1.00 2004 $5 ($4) 2005 $22 ($20) Coal Price Sensitivity 3 ($ million pre-tax) PRB 4 Coal +$1.00 PRB 4 Coal -$1.00 2004 $1 ($1) 2005 $6 ($6) Note
Slide 31: Illinois Post-06 Update
Illinois Post-06 Update Anne R. Pramaggiore Vice President, ComEd Bernstein Investor Meeting Kennett Square September 17, 2004
Slide 32: Post-2006 Overview
Debate around Post-2006 issues occurring in ICC-sponsored workshop process: Commissioner Erin O'Connell-Diaz serves as Chair of the workshop process Workshops began April 29, 2004, with a kick-off symposium and will end in September 2004 ICC plans to submit Report to Illinois General Assembly on Pos
Slide 33: ICC Workshop Process Timeline
ICC Workshop Process Timeline Education Process Scenario Analysis ICC Process Launch Stakeholder Positions Identified Key Milestones: ICC Workshop Process finalized 4/1 5 Working Groups and Conveners appointed: - Procurement - Rates - Competition - Service Obligations - Energy Assistance Intervenor
Slide 34: ICC Workshop Process Recap
ICC Workshop Process Recap 12 scenarios are being analyzed, most are variations of two basic models: "Full Requirements" procurement model (NJ/MD) "Portfolio Management" procurement model (CA) Strong support for competitive procurement has emerged, with ongoing debate concerning: The specific procur
Slide 35: POLR Pricing
POLR Pricing Mike Freeman, Power Transactions Shravan Chopra, Manager, Pricing Bernstein Investor Meeting Kennett Square September 17, 2004
Slide 36: Current Model
Current Model Utility Genco Base Intermed Peak Customers Hours Genco is sole supplier of customer load through a PPA with ComEd Bundled service for customers >3MW has been declared competitive Genco/ComEd PPA Bundled Rate Customer Load
Slide 37: Competitive Procurement Model
Competitive Procurement Model Competitive Suppliers Utility Genco Base Intermed Peak Customers - - Load up for auction XX% XX% XX% Hours Percentages of System Load Multiple winning bidders would supply customer load in vertical slices (fixed % of hourly energy demand) New rates determined by auction
Slide 38: NJ Auction Design Example
2007 2008 2010 2009 2011 33% 67% 100% 2012 2013 Auction Year 1 1/3 Load 1/3 Load for 3 years % of POLR Load 1/3 Load 1/3 Load 1/3 Load for 3 years 1/3 Load for 3 years NJ auction (example for illustrative purposes) Rate stability concerns can be addressed through staggered purchases of full requirem
Slide 39: BGS Auction
Basic Generation Service (BGS): Over 11,000 MW of load auctioned across 4 utilities in New Jersey in February 2004 Over 15 winners in the auctions Winning bids for POLR product were 50-60% above the standard block product at PJM West Hub Overview Risk management of the BGS full requirement contracts
Slide 40: 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 an
Slide 41: 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 42: Pennsylvania Regulatory Update
Pennsylvania Regulatory Update Lisa Crutchfield Vice President, PECO Bernstein Investor Meeting Kennett Square September 17, 2004
Slide 43: 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 44: 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 45: 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 46: 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 47: PECO Bundled Rates
PECO Bundled Rates PECO's bundled rates (which include charges for transmission & distribution, stranded cost recovery and a capacity and energy charge, or shopping credit) were capped through 2010. The bundled rate is scheduled to increase in 2006 and 2007 with the following estimated impact on Exe
Slide 48: Market Fundamentals
Market Fundamentals Jim Lockhart, Fuels Forecasting Bruce Lamson, Manager, Market Planning Bernstein Investor Meeting Kennett Square September 17, 2004
Slide 49: Economic Growth Drives the Regional Demand for Electricity
Real U.S. GDP is expected to grow at an average of 3.5% over the next five years Economic growth will vary by region Mid-Atlantic 3.4% Midwest 3.2% Texas 4.2% Nationwide, electricity use is expected to grow at about 2.2% per year, strongest growth in the South and West Economic Growth Drives the Reg
Slide 50: International Fuel Markets Impact Domestic Electricity Prices
0% 20% 40% 60% 80% 100% 2005 2007 2005 2007 2005 2007 ComEd ERCOT North PJM East Coal Gas Oil Fuel prices are higher than in the '90's, unlikely to return to the same low levels Strong demand and little excess supply have driven oil prices higher High oil prices and tight domestic supply cause high
Slide 51: Regional and Sub-Regional Reserve Margins Are Declining
Regional and Sub-Regional Reserve Margins Are Declining Exelon's regional and sub-regional (MAIN ComEd, PJM East and ERCOT North) projected planning reserve margins are expected to decline at a faster rate than previously forecasted due to: Economic recovery translating into higher projected electri
Slide 52: Consultant Price Forecasts
PJM Energy and Capacity ($/MWh) MAIN Energy and Capacity ($/MWh) Consultant Price Forecasts Sources: Platts Research and Consulting Outlook For Power in North America (Q2 2004) CERA New Realities, New Risks: North American Power and Gas Scenarios (December 2003) Industry price forecasts are driven b
Slide 53: Trade Floor Tour
Trade Floor Tour Walt Kuhn, Director, Power Transactions Bernstein Investor Meeting Kennett Square September 17, 2004