What were Exelon's key financial results in 2007?

Exelon reported a net income of $2.74 billion in 2007, a significant increase from $1.59 billion in 2006. Diluted earnings per share also increased to $4.05 in 2007 from $2.35 in 2006. This improvement was driven by several factors, including the absence of goodwill impairment charges that impacted prior years, higher average margins on Generation's wholesale market sales following the end of a below-market PPA with ComEd, increased transmission revenues at ComEd, and favorable weather conditions.

What are the major risks highlighted in the filing for Exelon and its subsidiaries?

The filing highlights significant risks for Exelon and its subsidiaries, including the highly regulated nature of their businesses where fundamental changes in regulation could disrupt plans and adversely affect operations. Other key risks include increasing operating costs due to inflation and rising medical benefit costs, potential decreases in the value of decommissioning trust funds and benefit plan assets due to market performance (including exposure to subprime mortgage-related assets), limitations on the holding company's ability to pay dividends, potential higher costs and penalties related to mandatory reliability standards, and substantial costs for environmental compliance. Additionally, the company faces risks from war, terrorism, natural disasters, and changes in taxation.

How did the Illinois Settlement Legislation impact Exelon?

The Illinois Settlement Legislation, enacted in August 2007, is a significant development. It provides approximately $1 billion in rate relief to Illinois electric customers and requires several changes to the electric industry in Illinois. For Exelon, it resolved extensive discussions and litigation related to higher electric bills. It involves voluntary contributions from utilities and generators to rate relief programs and the new Illinois Power Agency. While providing rate relief, it also establishes a new competitive process for electricity procurement for ComEd and mandates increases in energy efficiency and renewable energy standards. Exelon views this legislation as a positive step towards greater stability and certainty in its Illinois operations.

What is Exelon's approach to managing market risks?

Exelon is exposed to market risks from commodity prices, counterparty credit, interest rates, and equity prices. The company's Risk Management Committee approves policies for risk assessment, control, and monitoring. Generation, in particular, faces commodity price risk and manages it through hedging activities using derivative and non-derivative contracts. ComEd and PECO have largely transferred their near-term commodity price risks to Generation through PPAs and financial swap contracts, and ComEd's procurement costs are generally recoverable through rates, mitigating some of this risk.

EXC 10-K FY2007 Annual Report — Revenue, Net Income, EPS

Summary

Exelon Corporation's (EXC) 2007 10-K filing highlights a strong financial performance, with net income increasing significantly to $2.74 billion, driven by factors such as the absence of goodwill impairment charges seen in prior years, improved margins from Exelon Generation, and increased transmission revenues at ComEd. The company also successfully navigated regulatory landscapes, notably with the Illinois Settlement Legislation aimed at providing rate relief to customers while stabilizing the company's operating environment. Despite favorable results, the report underscores numerous risks, including the highly regulated nature of the business, potential for adverse regulatory changes, inflationary pressures on operating costs, and the impact of capital market volatility on trust funds. Exelon continues to manage its capital structure through debt issuance and share repurchases, while also investing in capital expenditures across its generation, transmission, and distribution segments. The company's outlook for 2008 and beyond is cautiously optimistic, contingent on continued regulatory stability and effective management of market price risks.

Key Highlights

1Net income increased to $2.74 billion in 2007, a significant improvement from $1.59 billion in 2006, driven by factors like the absence of prior year goodwill impairment charges and improved generation margins.

2The Illinois Settlement Legislation enacted in August 2007 is expected to provide rate relief to customers and stability for Exelon's Illinois operations by addressing concerns over higher electric bills.

3Exelon met its capital resource requirements through internally generated cash flows and external financing, issuing $746 million, $725 million, and $175 million of long-term debt for Generation, ComEd, and PECO, respectively.

4The company continued its share repurchase program, authorizing a new program for up to $500 million in December 2007, in addition to a $1.25 billion accelerated share repurchase arrangement initiated in September 2007.

5Exelon's Generation segment reported higher revenue, net of purchased power and fuel expenses, driven by improved margins due to the expiration of below-market PPAs and scheduled rate increases.

6ComEd's net income turned positive in 2007 at $165 million, compared to a net loss of $112 million in 2006, benefiting from a goodwill impairment charge reversal in the prior year and increased transmission revenues.

7PECO's net income increased to $507 million in 2007, up from $441 million in 2006, primarily due to higher operating revenues net of purchased power and fuel expenses, reflecting favorable weather and increased usage.

EXELON CORP Annual Report, Year Ended Dec 31, 2007

Summary

Key Highlights

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