Exelon Announces Solid Third Quarter Results; Revises Guidance Range Upward for Full Year 2010 Earnings

Press Release
Source: Exelon Corporation

On Friday October 22, 2010, 8:00 am EDT

CHICAGO–(CHICAGOPRESSRELEASE.COM)–
Exelon Corporation (NYSE:EXC¹ – News²) announced third quarter 2010 consolidated
earnings as follows:

“As we mark the tenth anniversary of Exelon this month, we continue to
deliver substantial value for our shareholders and improve operating
performance across all of our businesses as demonstrated by our strong
third quarter earnings results,” said John W. Rowe, Exelon Chairman and
CEO. “Exelon Generation achieved an impressive nuclear fleet capacity
factor that exceeded 95 percent, and ComEd and PECO provided reliable
performance during a very hot summer. Because our year-to-date results
look to position us in the upper end of our earnings guidance range for
the full year, we are raising the range from $3.80 to $4.10 per share to
$3.95 to $4.10 per share.”

Third Quarter Operating Results

As shown in the table above, Exelon’s adjusted (non-GAAP) operating
earnings increased to $1.11 per share in the third quarter of 2010 from
$0.96 per share in the third quarter of 2009, primarily due to:

• The effects of favorable weather conditions in the service territories
  of Commonwealth Edison Company (ComEd) and PECO Energy Company (PECO);
• The impact at Exelon Generation Company, LLC (Generation) of favorable
  capacity pricing related to the Reliability Pricing Model (RPM) for
  the PJM Interconnection, LLC (PJM) market;
• Reversal in the third quarter of 2009 of previously recorded benefits
  related to an Illinois investment tax credit ruling; and
• Lower income tax expense at Generation due to tax benefits associated
  with an increase in the manufacturing deduction rate.

Higher third quarter 2010 earnings were partially offset by:

• Increased depreciation and amortization expense primarily related to
  the higher scheduled competitive transition charge (CTC) amortization
  expense at PECO and increased depreciation expense across the
  operating companies due to ongoing capital expenditures; and
• Increased nuclear fuel costs at Generation.

2010 Earnings Outlook

Exelon revised its guidance range upward for 2010 adjusted (non-GAAP)
operating earnings from $3.80 to $4.10 per share to $3.95 to $4.10 per
share. Operating earnings guidance is based on the assumption of normal
weather for the balance of the year.

The outlook for 2010 adjusted (non-GAAP) operating earnings for Exelon
and its subsidiaries excludes the following items:

• Mark-to-market adjustments from economic hedging activities
• Unrealized gains and losses from NDT fund investments to the extent
  not offset by contractual accounting as described in the notes to the
  consolidated financial statements
• Significant impairments of assets, including goodwill
• Costs associated with the 2007 Illinois electric rate settlement
  agreement
• Costs associated with ComEd’s 2007 settlement with the City of Chicago
• Costs associated with the retirement of fossil generating units
• Non-cash charge resulting from the passage of Federal health care
  legislation
• Non-cash remeasurement of income tax uncertainties
• External costs associated with Exelon’s proposed acquisition of JDR
• Impairment of certain emissions allowances
• Other unusual items
• Significant changes to GAAP

Third Quarter and Recent Highlights

• John Deere Renewables Acquisition: On August 31, 2010, Exelon
  announced an agreement to acquire JDR, a leading operator and
  developer of wind power, in a transaction that will add 735 operating
  megawatts (MW) of clean, renewable energy to Exelon’s generation
  portfolio. The acquisition, valued at approximately $860 million with
  a provision for up to an additional $40 million upon commencement of
  construction on 230 MW of advanced development projects, is expected
  to provide incremental earnings in 2012 and cash flows in 2013. Under
  the terms of the agreement, Exelon will acquire JDR’s 735 MW of
  installed, operating wind capacity spread across 36 projects in eight
  states. Approximately 75 percent of the operating portfolio is already
  sold under long-term power purchase arrangements. As part of the
  acquisition, Exelon also has the opportunity to pursue 1,200 MW of new
  wind projects that are in various stages of development. Exelon
  expects to close the transaction with JDR in the fourth quarter of
  2010.
• Nuclear Operations: Generation’s nuclear fleet, including its
  owned output from the Salem Generating Station, produced 35,751
  gigawatt-hours (GWh) in the third quarter of 2010, compared with
  35,684 GWh in the third quarter of 2009. The Exelon-operated nuclear
  plants achieved a 95.4 percent capacity factor for the third quarter
  of 2010 compared with 94.7 percent for the third quarter of 2009. The
  Exelon-operated nuclear plants began one scheduled refueling outage in
  the third quarter of 2010, compared with beginning two scheduled
  refueling outages in the third quarter of 2009. When Peach Bottom Unit
  2 was shut down for a scheduled refueling outage on September 12,
  2010, the unit marked a second consecutive breaker-to-breaker run
  (continuous operation between refueling outages) of 692 days since its
  last refueling outage in 2008. The number of refueling outage days
  totaled 19 in the third quarter of 2010 versus 36 days in the third
  quarter of 2009. The number of non-refueling outage days at the
  Exelon-operated plants totaled 19 days in the third quarter of 2010
  compared with 21 days in the third quarter of 2009.
• Fossil and Hydro Operations: The equivalent demand forced
  outage rate for Generation’s fossil fleet was 1.8 percent in the third
  quarter of 2010, compared with 10.6 percent in the third quarter of
  2009. The improvement was largely due to the impact of extended
  maintenance outages in 2009. The equivalent availability factor for
  the hydroelectric facilities was 94.4 percent in the third quarter of
  2010, compared with 97.1 percent in the third quarter of 2009, due to
  a planned outage in 2010 for a generator overhaul at Conowingo.
• Hedging Update: Exelon’s hedging program involves the hedging
  of commodity risk for Exelon’s expected generation, typically on a
  ratable basis over a three-year period. Expected generation represents
  the amount of energy estimated to be generated or purchased through
  owned or contracted-for capacity. The proportion of expected
  generation hedged as of September 30, 2010 is 97 to 100 percent for
  2010, 87 to 90 percent for 2011 and 62 to 65 percent for 2012. The
  primary objectives of Exelon’s hedging program are to manage market
  risks and protect the value of its generation and its investment grade
  balance sheet while preserving its ability to participate in improving
  long-term market fundamentals.
• Zion Nuclear Station Decommissioning: On September 1, 2010,
  Exelon completed the transactions related to its agreement with
  EnergySolutions Inc., a nuclear services company, to begin the
  decommissioning of the Zion Station, which ceased operation in 1998.
  In the first-of-its-kind arrangement approved by the Nuclear
  Regulatory Commission, Exelon transferred to EnergySolutions the
  station license and substantially all the assets (other than land)
  associated with the Zion Station, including related NDT funds. The
  Zion Station is located on the shore of Lake Michigan about 40 miles
  north of Chicago. Exelon believes that the accelerated decommissioning
  of the Zion Station will make the land available for other uses
  earlier than originally planned.
• Fossil Plant Retirements Update: On September 7, 2010, PJM
  informed Exelon Power that transmission system upgrades necessary to
  allow Eddystone Generating Station Unit 2 to retire can be completed
  sooner than its original analysis indicated. PJM has determined that
  Eddystone Unit 2 is needed to remain in operation only until May 31,
  2012. Also as announced earlier, Exelon will retire three additional
  fossil-fuel generating units: Cromby Unit 1 and Eddystone Unit 1 on
  May 31, 2011, and Cromby Unit 2 on December 31, 2011.
• Illinois Appellate Court Ruling: On September 30, 2010, the
  Illinois Appellate Court (Court) issued a decision related to appeals
  of the September 2008 rate order (Order) from the Illinois Commerce
  Commission (ICC) approving a $274 million increase in ComEd’s annual
  delivery services revenue requirement. The Court held that when the
  ICC allowed post-test year plant additions to rate base, the ICC
  should have deducted accumulated post-test year depreciation on test
  year plant. In addition, the Court reversed the ICC’s approval of a
  rider (Rider SMP) for ComEd to recover costs for its smart meter pilot
  program. The Court remanded the case to the ICC to implement its
  decision and also consider whether an additional three months of net
  plant investment, beyond what was approved in the Order, should be
  included in rate base. If the Court’s ruling is not reversed following
  further proceedings, ComEd estimates that the impact of the rate
  base/depreciation reserve issues on pre-tax revenue could be up to $77
  million on an annual basis based on the 2008 Order. In addition, the
  loss of Rider SMP reduced pre-tax earnings by $4 million in the third
  quarter of 2010, with a further estimated reduction of $1 million
  expected in the fourth quarter of 2010.

  On October 21,
  2010, ComEd petitioned the Court for a rehearing of its decision
  regarding the post-test year depreciation reserve and Rider SMP.
  Although the timeline is uncertain at this point, ComEd expects the
  Court to follow its normal process. With respect to the Court’s
  finding on Rider SMP, on October 18, ComEd filed a petition with the
  ICC to recover the unrecovered portion of certain operating costs
  associated with the smart meter pilot by transferring these costs into
  its pending general rate case instead of the rider. ComEd has
  requested the ICC to act on its petition within the fourth quarter.

• ComEd Alternative Regulation Filing: On August 31, 2010, ComEd
  announced a filing with the ICC for a pilot program under an
  alternative regulatory structure that would allow for accelerated
  modernization of the distribution system, increased assistance to
  low-income households, and the purchase of state-of-the-art electric
  vehicles to service the electric system. Under the proposal, ComEd
  would be allowed to recover costs of these investments, previously
  approved by the ICC, as they occur and operate under a targeted
  incentive mechanism. All costs would be subject to review two years
  after implementation and would include performance metrics to allow
  customers to share in any costs savings or efficiencies. If approved,
  the new pilot would go into effect on May 31, 2011 after a nine-month
  ICC proceeding and would last two years.
• PECO Energy Procurement: On October 15, 2010, PECO announced
  the results of the fourth and last of planned electricity purchases
  under its Default Service Provider program to serve residential
  customers that have not chosen a competitive electric generation
  supplier beginning January 1, 2011. At that time, the prices PECO and
  its customers pay for electricity will be based on competitive
  electric market pricing, after being capped for more than 10 years.
  When combined with the previous three electricity purchases, the
  average price to compare for PECO’s residential customers is 9.92
  cents per kilowatt hour beginning January 1, 2011. The price to
  compare is the price that customers can use to evaluate offers for
  purchasing their electricity from competitive electric generation
  suppliers.
• PECO Electric and Gas Delivery Rate Cases: On August 31, 2010,
  PECO filed joint settlement petitions for consideration by the
  Pennsylvania Public Utility Commission (PAPUC) that reflect agreements
  reached with all interested parties on the increases in natural gas
  and electric delivery charges beginning January 1, 2011. The
  settlements reflect an increase of $20 million in annual natural gas
  service revenue, which is approximately 46 percent of the $44 million
  originally requested, and a $225 million increase in annual electric
  service revenue, which is approximately 71 percent of the $316 million
  originally requested. The settlements are subject to administrative
  law judge review and PAPUC approval by mid-December 2010. Based on the
  electric delivery rate case settlement and electricity purchases, PECO
  now estimates that total prices for residential electric customers
  will increase about 5 percent on January 1, 2011.

• Financing Activities: On July 27, 2010, ComEd issued $500
  million of 4.00 percent First Mortgage Bonds due August 1, 2020. The
  net proceeds of the bonds were used to refinance maturing first
  mortgage bonds, to make a contribution to its pension funds, and to
  fund other general corporate purposes.

  On September 30,
  2010, Generation issued $550 million of Senior Notes maturing on
  October 1, 2020, with a coupon of 4.00 percent and $350 million of
  Senior Notes maturing on October 1, 2041, with a coupon of 5.75
  percent. Generation will use the net proceeds from the sale to fund a
  portion of the purchase price Generation will pay for its pending
  acquisition of JDR, fees and expenses related to that acquisition, and
  for general corporate purposes.

OPERATING COMPANY RESULTS

Generation consists of owned and contracted electric generating
facilities, wholesale energy marketing operations and competitive retail
sales operations.

Third quarter 2010 net income was $605 million compared with $657
million in the third quarter of 2009. Third quarter 2010 net income
included (all after tax) mark-to-market gains of $99 million from
economic hedging activities before the elimination of intercompany
transactions, unrealized gains of $60 million related to NDT fund
investments, a charge of $35 million associated with the impairment of
certain emissions allowances, costs of $14 million associated with the
retirement of certain fossil generating units, a charge of $3 million
for costs associated with the 2007 Illinois electric rate settlement and
a charge of $1 million for external costs associated with the proposed
acquisition of JDR. Third quarter 2009 net income included (all after
tax), unrealized gains of $87 million related to NDT fund investments,
mark-to-market gains of $77 million from economic hedging activities
before the elimination of intercompany transactions, costs of $36
million associated with the early retirement of long-term debt, income
of $32 million resulting from a reduction in the decommissioning
obligation, costs of $9 million associated with the 2007 Illinois
electric rate settlement and income of $2 million from the true-up of
2009 costs incurred for severance. Excluding the effects of these items,
Generation’s net income in the third quarter of 2010 decreased $5
million compared with the same quarter last year primarily due to:

• Lower energy gross margin largely due to lower energy prices under the
  power purchase agreement with PECO and higher nuclear fuel costs; and
• Increased depreciation expense.

The decrease in net income was partially offset by:

• The impact on energy gross margin of favorable capacity pricing
  related to RPM; and
• Lower income tax expense due to tax benefits associated with an
  increase in the manufacturing deduction rate.

Generation’s average realized margin on all electric sales, including
sales to affiliates and excluding trading activity, was $35.11 per MWh
in the third quarter of 2010 compared with $36.32 per MWh in the third
quarter of 2009.

ComEd consists of the electricity transmission and distribution
operations in northern Illinois.

ComEd recorded net income of $121 million in the third quarter of 2010,
compared with net income of $46 million in the third quarter of 2009.
Third quarter net income in 2009 included costs of $2 million after tax
associated with the 2007 Illinois electric rate settlement. Excluding
the effects of this item, ComEd’s net income in the third quarter of
2010 was up $73 million from the same quarter last year primarily
reflecting:

• The effects of favorable weather conditions; and
• Reversal in the third quarter of 2009 of previously recorded benefits
  related to an Illinois investment tax credit ruling.

The increase in net income was partially offset by higher storm costs.

In the third quarter of 2010, cooling degree-days in the ComEd service
territory were up 107 percent relative to the same period in 2009 and
were 37 percent above normal. ComEd’s total retail electric deliveries
increased by 16 percent quarter over quarter, with gains in deliveries
across all major customer classes, primarily driven by the effects of
favorable weather conditions.

Weather-normalized retail electric deliveries increased by 1.1 percent
from the third quarter of 2009, primarily reflecting customer growth and
an increase in deliveries to the large commercial and industrial class.
For ComEd, weather had a favorable after-tax effect of $44 million on
third quarter 2010 earnings relative to 2009 and a favorable after-tax
effect of $19 million relative to normal weather that is incorporated in
Exelon’s earnings guidance.

PECO consists of the electricity transmission and distribution
operations and the retail natural gas distribution business in
southeastern Pennsylvania.

PECO’s net income in the third quarter of 2010 was $127 million, up from
$92 million in the third quarter of 2009. Third quarter net income in
2009 included income of $1 million from the true-up of costs incurred
for severance. Excluding the effects of this item, PECO’s net income in
the third quarter of 2010 was up $36 million from the same quarter last
year reflecting:

• Increased CTC revenue to ensure full recovery in 2010 of stranded
  costs, which resulted in lower energy prices paid to Generation under
  the power purchase agreement;
• The effects of favorable weather conditions; and
• Lower interest expense on long-term debt.

The increase in net income was partially offset by:

• Higher CTC amortization, which was in accordance with PECO’s 1998
  Restructuring Settlement with the PAPUC; and
• Higher operating and maintenance expense.

In the third quarter of 2010, cooling degree-days in the PECO service
territory were up 37 percent from 2009 and were 29 percent above normal.
Total retail electric deliveries were up 9 percent from last year,
reflecting an increase in deliveries across all major customer classes,
primarily driven by the effects of favorable weather conditions.

Weather-normalized retail electric deliveries increased by 0.5 percent
from the third quarter of 2009, primarily reflecting increased
residential deliveries. For PECO, weather had a favorable after-tax
effect of $32 million on third quarter 2010 earnings relative to 2009
and a favorable after-tax effect of $20 million relative to normal
weather that is incorporated in Exelon’s earnings guidance.

Adjusted (non-GAAP) Operating Earnings

Adjusted (non-GAAP) operating earnings, which generally exclude
significant one-time charges or credits that are not normally associated
with ongoing operations, mark-to-market adjustments from economic
hedging activities and unrealized gains and losses from NDT fund
investments, are provided as a supplement to results reported in
accordance with GAAP. Management uses such adjusted (non-GAAP) operating
earnings measures internally to evaluate the company’s performance and
manage its operations. Reconciliation of GAAP to adjusted (non-GAAP)
operating earnings for historical periods is attached. Additional
earnings release attachments, which include the reconciliations on pages
7 and 8, are posted on Exelon’s Web site: www.exeloncorp.com³
and have been furnished to the Securities and Exchange Commission on
Form 8-K on October 22, 2010.

Conference call information: Exelon has scheduled a conference
call for 11:00 AM ET (10:00 AM CT) on October 22, 2010. The call-in
number in the U.S. and Canada is 866-503-0696, and the international
call-in number is 973-935-8753. If requested, the conference ID number
is 15729584. Media representatives are invited to participate on a
listen-only basis. The call will be web-cast and archived on Exelon’s
Web site: www.exeloncorp.com⁴.
(Please select the Investors page.)

Telephone replays will be available until November 5. The U.S. and
Canada call-in number for replays is 800-642-1687, and the international
call-in number is 706-645-9291. The conference ID number is 15729584.

Forward Looking Statements

This press release 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 to differ materially from these forward-looking
statements include those discussed herein as well as those discussed in
(1) Exelon’s 2009 Annual Report on Form 10-K in (a) ITEM 1A. Risk
Factors, (b) ITEM 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations and (c) ITEM 8. Financial Statements
and Supplementary Data: Note 18; (2) Exelon’s Third Quarter 2010
Quarterly Report on Form 10-Q (to be filed on October 22, 2010) in (a)
Part II, Other Information, ITEM 1A. Risk Factors, (b) Part 1, Financial
Information, ITEM 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations and (c) Part I, Financial
Information, ITEM 1. Financial Statements: Note 13 and (3) other factors
discussed in filings with the Securities and Exchange Commission (SEC)
by Exelon Corporation, Commonwealth Edison Company, PECO Energy Company
and Exelon Generation Company, LLC (Companies). Readers are cautioned
not to place undue reliance on these forward-looking statements, which
apply only as of the date of this press release. None of the Companies
undertakes any obligation to publicly release any revision to its
forward-looking statements to reflect events or circumstances after the
date of this press release.

Exelon Corporation is one of the nation’s largest electric utilities
with more than $17 billion in annual revenues. The company has one of
the industry’s largest portfolios of electricity generation capacity,
with a nationwide reach and strong positions in the Midwest and
Mid-Atlantic. Exelon distributes electricity to approximately 5.4
million customers in northern Illinois and southeastern Pennsylvania and
natural gas to approximately 486,000 customers in the Philadelphia area.
Exelon is headquartered in Chicago and trades on the NYSE under the
ticker EXC.

References

1. ^{^} EXC (finance.yahoo.com)
2. ^{^} News (finance.yahoo.com)
3. ^{^} www.exeloncorp.com (cts.businesswire.com)
4. ^{^} www.exeloncorp.com (cts.businesswire.com)