Exelon Corporation · NASDAQ:EXC
Exelon — American Gas Association Financial Forum 2006
52 slides from Exelon's conference presentation, May 5, 2006
Slide 1: American Gas Association Financial Forum Discussion Materials
American Gas Association Financial Forum Scottsdale, Arizona May 7 - 9, 2006 Exelon Corporation Public Service Enterprise Group Discussion Materials
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: Company Representatives
Company Representatives William McNeil Director - Regulatory Strategies Com Ed Joyce Carson VP - Investor Relations Exelon Corporation Marybeth Flater Manager - Investor Relations Exelon Corporation Pete Cistaro VP - Gas Delivery Public Service Electric & Gas Co. Dan Cregg Director - Financial Repor
Slide 4: Key Messages
Continued strong stand-alone performance at both Exelon and PSEG Value-added, operationally-driven merger Progressing towards close in third quarter 2006 Uniquely positioned generation business Large, low-cost, low-emissions, exceptionally well-run nuclear fleet Upside from end of below-market contr
Slide 5: PSEG Overview
PSEG Overview Electric Customers: 2.1M Gas Customers: 1.7M Nuclear Capacity: 3,494 MW Total Capacity: 13,846 MW Traditional T&D Leveraged Leases 2006E Operating Earnings(1)(2): $875M - $950M 2006 EPS Guidance:(1)(2) $3.45 - $3.75 Assets (as of 12/31/05): $ 29.8B Domestic/Int'l Energy Regional Wholes
Slide 6: Year to Date Results - 1st Quarter 2006
2005 2006 0.99 0.96 0.8 activity 1.17 0.81 negative activity 0.18 0.03 0.15 Power Hope Creek Operations $.12 Recontracting & Higher Margins $.10 BGSS ($.11) MTM ($.09) New Assets ($.02) O&M ($.01) Additional Shares ($.02) $/Share Holdings Prior year gains Eagle Point, MPC, SEGS ($.13) Taxes ($.05) T
Slide 7: PSEG Stand-Alone 2006 Earnings Guidance
2005 Actual Markets Operations New Assets Leases Other 2006 Guidance 2007 2008 West 890 890 1049 1010 966 914 0 0 0 Seminole 159 48 87 33 17 918 1000 1100 NDT 35 Weather Driven by Power Recontracting at Higher Commodity Prices $3.45 to $3.75** $3.65* PSEG Stand-Alone 2006 Earnings Guidance More than
Slide 8: PJM Pricing Environment
NYMEX Natural Gas PJM West RTC Henry Hub $/MBTU PJM West RTC $/Mwh PJM Pricing Environment Electricity and Natural Gas Forward Price Movements 2003 - 2007
Slide 9: BGS Auction Results
BGS Auction Results Transmission Ancillary services Load shape Congestion Risk premium Capacity RTC Forward Energy Cost RTC = round the clock Full Requirements 2003 Auction 2004 Auction 2005 Auction 2006 Auction East 34 37 45.14 67.7 West 21.59 18.05 20.77 34.51 $33 - $34 $36 - $37 $55.59 (34 Month
Slide 10: Significant Forward Hedging of Nuclear and Coal
Significant Forward Hedging of Nuclear and Coal Percentages based on PSEG Power asset ownership as of March 31, 2006 > 95% 85 - 95% 65 - 80% 2006 2007 2008 % Hedged
Slide 11: PSE&G Regulatory Filings
PSE&G Regulatory Filings Excess Depreciation Credit $64M annual credit expired December 31, 2005 BPU Order Issued February 7, 2006 PSE&G to file 1Q 2006 actual results by June 15, 2006 $5M monthly impact on earnings and cash flow Gas Base Rate Case Current rates in effect since January 2002 $133 M r
Slide 12: PSE&G Revenue & Sales
Residential Commercial Industrial Other Sales 14039 24155 6282 377 Residential Commercial Industrial Other Revenue 1644 2055 332 436 Residential Commercial Industrial Other 1453 699 463 1 Residential Commercial Industrial Other 1168 659 461 132 Electric Gas PSE&G Revenue & Sales
Slide 13: PSE&G's Gas Delivery System
PSE&G's Gas Delivery System PSE&G Gas Delivery By Others
Slide 14: PSE&G's Gas Delivery Overview
9th Largest Gas LDC in the U.S. 1.7 million gas customers 2,250 square mile franchise territory 2,003 employees (338 MAST, 1,665 Union) 3 Division Headquarters Northern: Oakland, Oradell, Clifton, Orange Central: Jersey City, Harrison, Summit Southern: Plainfield, New Brunswick, Trenton, Burlington,
Slide 15: PSE&G Gas Delivery Organization
Gas System Operations Center Monitor gas pipeline meter stations Five Interstate Pipelines serve NJ Monitor & operate remote control regulators Prepare daily system load estimates & coordinate gas deliveries Respond to pipeline and system emergencies Engineer & install pipes New construction Replace
Slide 16: PSE&G Appliance Service Operation
PSE&G Appliance Service Operation First responder on all leak reports 99.7% within 1 hour Provide diagnostics for gas equipment and appliances Perform meter active/inactive orders Install, maintain, remove & replace meters and regulators APSO (Appliance Parts Service Order - charged repair services)
Slide 17: Gas Residential Bill Comparisons
Gas Residential Bill Comparisons
Slide 18: PSE&G Electric System
PSE&G Electric System Transmission Distribution
Slide 19: PSE&G's Electric Delivery 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 d o n C o .. M o r r i s C o .. B e r g e n C o .. E s s e x C o .. H u d s o n C o .. U n i o n C o .. M i d d l e s e x C o .. M e r c e r C o .. M o n m o u t h C o .. O c e a n C o .. B u r l i n g t o n C o .. C a m d e n C o .. S u s s e
Slide 20: Electric Residential Bill Comparisons
Electric Residential Bill Comparisons
Slide 21: New Jersey BGS Auction Structure
20,000 4,000 8,000 12,000 16,000 2002 2003 2004 2005 2006 2007 2008 2002 FP Auction 1 Year 170 Tranches 2003 FP Auction 10 months 104 Tranches 2003 FP Auction 34 months 51 Tranches 2004 FP Auction - 1 Yr. 50 Tranches 2004 FP Auction - 3 Years 51 Tranches 2006 FP Auction Load 54 Tranches 2005 FP Auct
Slide 22: Exelon Overview
Exelon Overview Exelon. 7
Slide 23: Exelon Overview
Exelon Overview (1) At 12/31/05; includes long-term contracts and investments in two facilities in Mexico of 230 MWs Note: See presentation appendix for adjusted (non-GAAP) operating reconciliations to GAAP Pennsylvania Utility Illinois Utility Nuclear Generation Fossil Generation Power Marketing Nu
Slide 24: Meeting the Financial Challenge
Note: See presentation appendix for reconciliation of adjusted (non-GAAP) operating EPS to GAAP EPS 1Q 2006 Highlights: ICC approved ComEd energy procurement case Unfavorable weather Timing-related items Higher generation margins Increased nuclear capacity factor Year-to-date Results: 10% Annual Gro
Slide 25: Exelon's EPS Drivers: 2004 - 2007
2004A 2005A 2006 Estimate 2007 East 2.78 3.09 3 0.24 $2.78 $3.10 $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 Rate + Load Growth
Slide 26: Generation Market Opportunity
2006E 2007E 2008E 2009E 2010E 2011E PECO 40000 40000 40000 40000 40000 0 ComEd 80000 0 0 0 0 0 Market 80000 135000 135000 135000 135000 175000 Market sales PECO fixed price contract ~$50/MWhr ComEd fixed price contract ~$35/MWhr GWhrs Notes: Approximate 25,000 GWhr projected decrease in supply after
Slide 27: Composition of Operating EPS
2002 2003 2004 2005 2006E* 2007E* Generation 0.58 0.78 0.93 1.57 1.67 3.21 ComEd 1.13 1.18 1.16 0.77 0.78 0.5 PECO 0.7 0.65 0.69 0.76 0.7 0.65 A further shift in relative earnings contribution from Energy Delivery to Generation will occur in 2007 when ComEd becomes a pure wires company and Generatio
Slide 28: Illinois Regulatory/Legislative Timeline
2004 & Q1-Q2 2005 8/31/05: Distribution case filed 2/25/05: Procurement case filed Rates frozen since 1997 and subsequently reduced 20%. Expected increase with ComEd's mitigation proposal will bring residential rates no higher than 1995 level over 3 years. New rates effective January 1, 2007. 12/16/
Slide 29: EEG Merger Overview
EEG Merger Overview Exelon. © PSEG
Slide 30: A "Powerful" Combination
A "Powerful" Combination EEG: 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 Expertise in BGS a
Slide 31: The Nation's Premier Utility Company
Generation numbers include long-term contracts Excludes any impact of purchase accounting (3) Income from Continuing Operations Combined The Nation's Premier Utility Company
Slide 32: Market Concentration Mitigation
Market Concentration Mitigation 7/1/05 - FERC issued merger approval order Working with DOJ and NJ BPU 4,000 MW Fossil Divestiture Must complete within 12 months of merger closing Peaking: 1,200 MW High Mid Merit: 900 MW CCGT: 1,200 MW Coal: 700 MW Merrill Lynch advising on sale 2,600 MW Nuclear Vir
Slide 33: $500 Million of Synergies Beyond Year 1
Corporate, Business Services 0.28 Trading 0.13 Fossil 0.1 Nuclear 0.29 Nuclear Production 0.2 20% ~$70m 29% ~$100m 28% ~$100m Trading Genco Corp/ Fossil Corporate, Business Services Nuclear Production Improvements Corp/BSC 0.63 Utility 0.37 43% ~$65m T&D Operations 57% ~$85m Corporate, Business Serv
Slide 34: 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 Policy Act of 2005 do not apply Department of Justice Hart-Scott-Rodino review The
Slide 35: 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, PAPUC, ICC* Regulatory Filings 2/4/05 File Joint Proxy Statement 2/10/05 Work to Secure Regulatory Approvals (FERC, DOJ, ICC*, PA PUC, NJ BPU, and others) Develop Transition Impleme
Slide 36: EE&G Value Proposition
Unmatched scale and scope through merger Strong balance sheet and financial discipline Stable growth delivery business with improving operations Exceptional generation business uniquely positioned to benefit from: improving power market fundamentals continuing excellence in operations increasing env
Slide 37: Appendix - Additional Information
Appendix - Additional Information
Slide 38: Our Regional Positions
11,300 MW 5,291 MW 16,591 MW 8,772 MW Midwest Owned Generation: Contracted Gen: Total Generation: ComEd PPA Avg Load: 2,299 MW 2,900 MW 5,199 MW ERCOT/South Owned Generation: Contracted Gen: Total Generation: 10,958 MW 4,414 MW Mid-Atlantic Owned Generation:: PECO PPA Avg Load: 25,099 MW 8,191 MW 33
Slide 39: Expected EPS Drivers
Expected EPS Drivers Guidance: $3.00 - $3.30 Notes: For reconciliation to GAAP reported EPS, see 4Q 05 earnings release attachments within Exhibit 99 of Form 8-K filed 1/25/06. 2006 Adjusted (non-GAAP) Operating EPS - Stand-alone 2005A Weather Generating RNF Load Growth O&M Outages Amort. / Depr. In
Slide 40: Exelon's Balance Sheet is Strong
Exelon Consolidated: FFO / Interest 6.1x BBB 4.5x - 6.5x FFO / Debt 31% 30% - 45% Debt Ratio 51%(3) Generation: FFO / Interest 12.7x BBB+ 5.5x - 7.5x FFO / Debt 92% 40% - 55% Debt Ratio 31% ComEd: FFO / Interest 3.9x A- 3.5x - 4.2x FFO / Debt 18% 20% - 28% Debt Ratio 37%(3) PECO: FFO / Interest 5.8x
Slide 41: End of Illinois Transition Period
ComEd becomes a pure wires business Returns determined through traditional regulatory processes Received Illinois Commerce Commission (ICC) approval of reverse auction with energy cost pass through - - Rate increase expected on delivery services tariff (DST) Exelon Generation gets a market price for
Slide 42: ComEd Energy Procurement Plan
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 43: Generation Cost Comparison by Technology
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 44: Exelon Power Performance - Reliability
Targeted capital investment and sound operating fundamentals driving fleet efficiency and reliability Market-driven investments in plant improvements that increase unit profitability Material condition improvement resulting in improved unit reliability, heat rate and capacity Capitalizing on market
Slide 45: 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, Ele
Slide 46: Nuclear Performance - Cost
Exelon capitalizes on its nuclear cost advantage Consistent improvement in production cost Industry leader in production cost by a substantial margin The size and scale of the fleet enables low-cost generation Exelon's low-cost nuclear generation is a competitive advantage Data source: Electric Util
Slide 47: Nuclear Performance - Fuel Costs
2004 2005 2006 2007 2008 2009 2010 Contracted 10700 8991 6923 8456 7342 3629 2520 Flexibilities 1810 3517 1707 1571 186 70 Demand 8437 11587 8472 10027 7528 9196 7393 Uranium market prices have increased, but Exelon is managing its portfolio Reduced uranium consumption by 25% Contracting strategy pr
Slide 48: GAAP EPS Reconciliation 2000-2002
GAAP EPS Reconciliation 2000-2002
Slide 49: GAAP EPS Reconciliation 2003-2005
GAAP EPS Reconciliation 2003-2005
Slide 50: GAAP EPS Reconciliation 1Q 2006/2005
GAAP EPS Reconciliation 1Q 2006/2005 Three Months Ended March 31, 2006 and 2005:
Slide 51: 2006 Exelon Earnings Guidance
2006 Exelon Earnings Guidance Exelon's outlook for 2006 adjusted (non-GAAP) operating earnings excludes mark-to-market adjustments from non-trading activities, income resulting from investments in synthetic fuel-producing facilities, significant impairments of intangible assets, certain severance co
Slide 52: Re-Fill Storage Peak Usage C&I Customers on BGSS Tariff Tariff
Re-Fill Storage Peak Usage C&I Customers on BGSS Tariff Tariff
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