Slide 1: Power Marketing Update
Power Marketing Update Harris Nesbitt Investor Meeting Kennett Square March 31, 2005
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 a
Slide 4: Agenda
Introduction and Generation Co. Overview 9:30 - 10:00 John Young, EVP, Finance and Markets Michael Metzner, VP, Investor Relations Power Marketing Overview 10:00 - 10:45 Ian McLean, EVP & President, Power Team Ken Cornew, SVP, Power Transactions Illinois Post-06 Update 10:45 - 11:30 William McNeil,
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 Solid Delivery business Exceptional Generation/Power Marketing platform Strong balance sheet and financial discipline Expanding and evolving wholesale markets (PJM) Strong momentum for competitive procu
Slide 6: Generation Company Overview
Generation Company Overview John F. Young Executive Vice President, Finance and Markets Harris Nesbitt Investor Meeting Kennett Square March 31, 2005
Slide 7: 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 Exelon Overview - 2004
Slide 8: Exelon Generation Overview
Exelon Generation Competitive Energy Supply Business Exelon Nuclear Operates and maintains Exelon's nuclear assets Nuclear Capacity: 17.2 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 9: Our Regional Positions
Note: Megawatts based on Exelon Generation's ownership as of 3/29/05 Midwest Owned Generation: Contracted Gen: Total Generation: ComEd PPA Peak Load: 11,679 MW 4,954 MW 16,633 MW 18,375 MW ERCOT/South Owned Generation: Contracted Gen: Total Generation: 2,494 MW 2,875 MW 5,369 MW Mid-Atlantic Owned G
Slide 10: 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 11: Nuclear Performance - Production
Nuclear Performance - Production Consistent growth in generation output Consistently high capacity factors (6 units in top decile) Consistent performance and industry leadership in refueling outage execution (4 of the 5 shortest outages in 2004 - they define top decile) Nuclear production performanc
Slide 12: Nuclear Performance - Cost
Nuclear Performance - Cost Exelon Nuclear is consistently cost competitive Consistent improvement in production cost Exelon's 5 big dual unit sites are 5 of the 6 lowest cost dual unit sites in the U.S. - they define the top decile of performance Exelon Nuclear's low cost generation is a significant
Slide 13: Exelon Power - Improvements
Exelon Power - Improvements Condition-based overhauls are resulting in production improvements and economic gains Production improvements: boiler and turbine overhauls, main steam-line piping replacement, and digital control upgrades Economic gains: plant upgrades to allow new participation in ancil
Slide 14: 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 15: Power Marketing Overview
Power Marketing Overview Ian P. McLean President, Power Team Harris Nesbitt Investor Meeting Kennett Square March 31, 2005
Slide 16: 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 17: 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 18: Portfolio Management
Portfolio Management Kenneth W. Cornew Senior Vice President, Power Team Harris Nesbitt Investor Meeting Kennett Square March 31, 2004
Slide 19: 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 20: Midwest Portfolio Management in 2005 and 2006
Significant Insignificant Portfolio Management in 2005 Includes changes in generation stack due to roll off of PPAs Off-peak length is a major driver of open position Natural gas is purchased for peakers in the summer for high-load days Acquired intermediate products from bilateral market to better
Slide 21: Mid-Atlantic Portfolio Characteristics
Pennsylvania Maryland New Jersey Delaware Plant 2005 Capacity (MW) Average Variable Cost ($/Mwh) Nuclear 5,890 $5.00 Hydro 1,645 NA Coal 1,420 $34.00 LFG/Cogen/Contract 250 $50.00 Resid Oil and Peakers* 2,218 $65 resid oil / $120 gas Total Capacity 11,423 Demand - PPA Annual (Gwh) (2005) 37,829 PPA
Slide 22: Mid-Atlantic Commodity Impact and Portfolio Management
Significant Insignificant Commodity Impact Comments Natural Gas Prices Gas is increasingly on the margin We have a substantial amount of base-load capacity. Therefore, gas price movements drive the power market and affect our margins. Oil Prices Oil on the margin a significant proportion of the time
Slide 23: ERCOT/South Portfolio Characteristics
ERCOT/South Portfolio Characteristics Plant Capacity Average Variable Cost ($/Mwh) Combined Cycle* 1,975 MW $60.00 Peakers* 3,394 MW $90.00 Total Capacity 5,369 MW * Assuming $7.50/MMBtu gas price Texas Oklahoma Georgia Portfolio Opportunities / Challenges The portfolio assets are in the ERCOT, SPP
Slide 24: ERCOT/South Portfolio Management
Significant Insignificant Minimal oil capacity Oil Spark The entire portfolio is spark based; 40% are high efficiency combined-cycle units Gas Spark Oil not on the margin in the region Oil Prices Gas on the margin a significant proportion of the time; however, spark determines regional profit Natura
Slide 25: Portfolio Sensitivities for Generation Co.
Gas Price Sensitivity 1 ($ million pre-tax) Gas +20% Gas -20% 2005 $28 ($5) 2006 $58 ($30) Power Price Sensitivity 2 ($ million pre-tax) Power +$1.00 Power -$1.00 2005 $16 ($12) 2006 $38 ($33) Notes: 1. Gas prices were changed with a correlated change in power prices (power prices in the South and E
Slide 26: Illinois Post-06 Update
Illinois Post-06 Update William P. McNeil Director, Regulatory Strategies, ComEd Harris Nesbitt Investor Meeting Kennett Square March 31, 2005
Slide 27: Competition Benefiting IL Customers
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 10-year rate freeze when the
Slide 28: Process Moving Forward
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 and case schedule were previe
Slide 29: 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 30: ComEd Bundled Tariff for Mass Market
ComEd Bundled Tariff for Mass Market 2000 2004 2007 Distr 22 22.5 25.7 Trans 3 4 4.25 Line Losses 3 3 3 Energy/Other 49 47.5 45 10 77 77 Assumes increase in wires charges to recover increased investment in transmission and distribution infrastructure and costs. Notes: 2000 and 2004 are representativ
Slide 31: 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. Note: Financial data is simplified and rounded for illustrative purposes.
Slide 32: POLR Pricing
POLR Pricing Mike Freeman, Power Transactions Shravan Chopra, Manager, Pricing Harris Nesbitt Investor Meeting Kennett Square March 31, 2005
Slide 33: Current Model
Current Model Utility Genco 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 34: Competitive Procurement Model
Competitive Procurement Model Competitive Suppliers Utility Genco 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 results Clock Auctio
Slide 35: Understanding the Auction: Product Laddering
Understanding the Auction: Product Laddering ComEd Suggested Load Auctioned by Term 50% Auction Load Cap allows ExGen to sell slightly less than 50% of its economic generation directly to ComEd; remainder sold through other channels Annual auctions allow for rebalancing position up to the load cap c
Slide 36: BGS Auction Summary
Fourth annual reverse auction in NJ completed 2/16/05 While the wholesale price of energy increased by 18% over last year's prices, the staggered terms of the auction contracts will result in customers of NJ's largest utility (PSE&G) seeing an annual increase to total bills of 2.8% Only 1/3 of the e
Slide 37: 2005 BGS Auction Results
2005 BGS Auction Results 2003 Auction 2004 Auction 2005 Auction East 32.1 36.9 45.14 West 23 19 20.77 $32 -$33 $36 -$37 $55.70 (36 Month NJ Avg.) $55.25 (36 Month NJ Avg.) $65.90 (36 Month NJ Avg.) $44 -$46 Transmission Ancillary services Load shape Congestion Risk premium Capacity ~ $23 ~ $19 ~ $21
Slide 38: 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 39: 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 40: PJM Overview
PJM Overview Jack Crowley Director, Regulatory Affairs, Power Team Harris Nesbitt Investor Meeting Kennett Square March 31, 2005
Slide 41: PJM Marketplace
PJM is the world's largest competitive wholesale electricity marketplace With the anticipated integration of Dominion Resources, PJM will have a single control area that: Serves 51 million people Has 126,280 megawatts of peak load Has 160,290 megawatts of generating capacity Covers 164,260 square mi
Slide 42: Expanded PJM
ComEd AEP Dayton APS DPL Dominion MetEd PECO PSEG PPL JCPL AECO PENELEC PEPCO BGE DQE Expanded PJM
Slide 43: Markets in PJM
Energy Markets Locational Marginal Clearing Price Market Day-ahead and Real-Time Energy products Energy Market trading hubs facilitate energy transactions Capacity Markets Daily, monthly, multi-month, and annual capacity markets Ancillary Service Markets PJM procures Spinning, Regulation, Reactive,
Slide 44: State of the PJM Market
Independent Market Monitor determined that the PJM markets were competitive in 2004 Transparent market design encourages competitive behavior Average energy prices increased 10.8% in 2004 over 2003 Adjusting for fuel increases, average PJM prices fell 4.2% in 2004 The Independent Market Monitor is c
Slide 45: Existing Capacity Market in PJM
Single product - Unforced Capacity Credit Fungible across entire market footprint Assumes reliability under all operating conditions No differentiation by generation type or location Procured based on single reserve margin applied to peak load (a vertical demand curve) Daily, Monthly, Multi-Month pr
Slide 46: Problems with Current Capacity Construct
Volatile prices - unpredictable behavior Vertical demand curve produces either very low capacity price with small amount of excess supply or very high capacity price with small reductions in available supply Daily market jeopardizes resource adequacy When the new entry capacity price signal is sent,
Slide 47: PJM's Proposed Reliability Pricing Model
Centralized commitment four years forward Annual commitment/annual price for capacity Price set by intersection of supply curve and "sloped" demand curve Locational capacity market Operational Reliability Metrics Comprehensive Market Power Mitigation Plan Reliability Backstop Mechanism Bilateral and
Slide 48: Impacts/Benefits to Exelon
The PJM Market is a well-functioning competitive wholesale market The PJM market facilitates New Jersey/Maryland style load-following auctions Exelon can participate directly in auction or provide underlying supply to other auction participants The PJM market design matches up nicely with Exelon's a
Slide 49: Pennsylvania Regulatory Update
Pennsylvania Regulatory Update Lisa Crutchfield Vice President, PECO Reg. & External Affairs Harris Nesbitt Investor Meeting Kennett Square March 31, 2005
Slide 50: Electric Restructuring & Merger Settlements Unit Rates
4 2.47 0.46 2.47 4.62 5 2.47 0.46 2.44 4.65 6 2.59 0.46 2.7 4.92 7 2.59 0.46 2.7 5.43 8 2.59 0.46 2.7 5.43 9 2.59 0.46 2.7 5.43 10 2.59 0.46 2.7 5.43 Electric Restructuring & Merger Settlements Energy & Capacity CTC Transmission Distribution 9.96¢ ** 10.02¢ 10.02¢ + 6.6% = E/C (2.7%), CTC (2.6%), D
Slide 51: 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 52: Regulatory Issues
Regulatory Issues Exelon/PSEG Merger FERC Transmission Issues Distribution Rate Strategy Compliance with AEPS PA POLR
Slide 53: PA PUC POLR Timeline
PA PUC POLR Timeline Roundtable Announced Roundtables POLR NOPR Issued Milestones: 3/4 - Motion of Comm. Thomas to initiate Roundtables 3/18 - PUC Issues Secretarial Letter and POLR Issues List Milestones: 4/8 - 1st Roundtable FERC PJM NJ BPU MD PSC CAEM 4/21 - 2nd Roundtable-EDC's PECO Energy PPL F
Slide 54: 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%) Penelec (11%) MetEd (9%) [Duquesne (11%)] Interim Order allows for "extending" Post- Transition to 1/1/11. Post-Transition for almost 75% of c
Slide 55: Trading Floor Tour
Trading Floor Tour Walt Kuhn, Director, Power Transactions Harris Nesbitt Investor Meeting Kennett Square March 31, 2005