10-KPeriod: FY2008

EXELON CORP Annual Report, Year Ended Dec 31, 2008

Filed February 6, 2009For Securities:EXC

Summary

Exelon Corporation's (EXC) 2008 10-K filing highlights significant risks and uncertainties stemming from the global financial crisis. The company emphasizes the "national and world-wide financial crisis" as a primary risk factor, noting its potential to disrupt capital and credit markets, increase commodity market volatility, and impact liquidity. This instability could affect Exelon's ability to meet financial commitments, its hedging effectiveness, and the competitiveness of energy markets, ultimately impacting financial condition, results of operations, and cash flows, including the ability to pay dividends or fund growth projects. Furthermore, Exelon operates in a highly regulated environment, with "fundamental changes in regulation" posing a significant risk to business plans and financial results. The filing also points to the potential negative impact of market performance and other changes on decommissioning trust funds and benefit plan assets, which could necessitate significant additional funding. Exelon is also navigating the proposed acquisition of NRG Energy, Inc., which introduces integration challenges, increased indebtedness, and potential unknown liabilities. Investors should be aware of these multifaceted risks as Exelon manages its operations amidst economic and regulatory challenges.

Financial Highlights

50 data points
Beta

Revenue

$18.86B

Net Income

$2.74B

14.5% Net Margin

EPS (Diluted)

$4.13

Total Assets

$47.82B

Cash & Equivalents

$1.27B

Free Cash Flow

$3.43B

Financial Statements
Beta
Revenue$18.86B
Operating Expenses$13.56B
Operating Income$5.30B
Interest Expense$699.00M
Net Income$2.74B
EPS (Basic)$4.16
EPS (Diluted)$4.13
Shares Outstanding (Basic)658.00M
Shares Outstanding (Diluted)662.00M

Key Highlights

  • 1The company is significantly exposed to risks related to the "national and world-wide financial crisis," which could disrupt capital markets, increase commodity volatility, and negatively affect liquidity, financial condition, and cash flows.
  • 2Exelon's businesses are highly regulated, and fundamental changes in regulation could adversely impact operations and financial results.
  • 3Market performance and economic downturns in 2008 have impacted the value of employee benefit plan trusts and nuclear decommissioning trust funds, increasing potential funding requirements.
  • 4The company is in the process of a proposed acquisition of NRG Energy, Inc., which carries integration risks, increased indebtedness, and potential unknown liabilities.
  • 5Exelon's ability to pay dividends may be limited by the financial performance and dividend policies of its operating subsidiaries.
  • 6Significant costs could be incurred to fulfill obligations related to environmental matters and compliance with mandatory reliability standards.
  • 7The company is subject to the risk of increasing costs, including rising medical benefit costs, which could negatively impact operating results.

Frequently Asked Questions

Exelon's primary financial risks in 2008 are directly linked to the "national and world-wide financial crisis." This crisis poses risks through potential disruptions in capital and credit markets, increased volatility in commodity markets, and impacts on liquidity. These factors could adversely affect the company's ability to meet financial commitments, its hedging strategies, the competitiveness of energy markets, and ultimately its financial condition, results of operations, and cash flows, including its ability to pay dividends and fund growth projects.

Exelon's businesses are highly regulated. The filing indicates that fundamental changes in regulation could disrupt business plans and adversely affect operations and financial results. Specifically, there are pressures on regulators and legislators to address consumer concerns about energy prices, leading to calls for re-regulation, elimination of marginal pricing, imposition of generation taxes, or other measures that could reduce earnings for Exelon's generation business.

Exelon announced a proposal to acquire NRG in October 2008 and launched an exchange offer in November 2008. As of the filing date (February 6, 2009), NRG remained opposed to the acquisition. The transaction is subject to various conditions, and there can be no assurance that it will be completed on the terms stated in the exchange offer. If completed, Exelon anticipates increased indebtedness and potential challenges in realizing expected synergies and integrating NRG's business.

The performance of capital markets significantly affected the values of assets held in trust for nuclear plant decommissioning and for Exelon's pension and postretirement benefit plans. During 2008, the market value of employee benefit plan assets declined by approximately 26%. This reduction, combined with other factors, significantly increased the plans' unfunded status by approximately $3.9 billion, which is expected to lead to higher benefit costs and required funding contributions in future years. Similarly, declines in the market value of nuclear decommissioning trust funds may increase funding requirements.