10-QPeriod: Q1 FY2005

EXELON CORP Quarterly Report for Q1 Ended Mar 31, 2005

Filed April 26, 2005For Securities:EXC

Summary

Exelon Corporation reported a significant increase in diluted earnings per share for the first quarter of 2005, rising to $0.77 from $0.62 in the prior year period. This improvement was primarily driven by higher net income at its Generation segment, bolstered by favorable mark-to-market adjustments and a gain from the sale of its investment in Sithe Energies. The company also benefited from reduced losses related to discontinued operations. Despite the overall earnings improvement, the Energy Delivery segment experienced a decrease in net income due to higher purchased power costs, though this was partially offset by debt retirement savings. Exelon continued to execute its investment strategy by divesting non-core assets and pursuing strategic growth opportunities, most notably the proposed merger with Public Service Enterprise Group (PSEG), which is undergoing significant regulatory review across multiple jurisdictions. The company also secured a $2 billion term loan to fund pension contributions.

Key Highlights

  • 1Diluted EPS increased to $0.77 from $0.62 year-over-year, driven by Generation segment performance.
  • 2The proposed merger with PSEG is actively progressing through various regulatory approval processes.
  • 3Exelon completed the sale of its investment in Sithe Energies, resulting in a net gain and debt reduction.
  • 4The Generation segment saw improved net income due to mark-to-market adjustments and asset sales.
  • 5Energy Delivery segment income decreased due to higher purchased power costs, impacting ComEd and PECO.
  • 6The company secured a $2 billion term loan to fund significant pension contributions.
  • 7Regulatory developments, including SECA rates and Illinois procurement filings, are ongoing and subject to potential impact on financial results.

Frequently Asked Questions

The increase in diluted earnings per share to $0.77 from $0.62 was primarily driven by improved net income at the Generation segment. This was due to favorable mark-to-market adjustments, higher revenue from pricing changes in the purchase power agreement with ComEd, and a gain from the sale of the Sithe Energies investment. Reduced losses from discontinued operations also contributed positively.

Exelon entered into a merger agreement with PSEG in December 2004. In the first quarter of 2005, Exelon filed numerous petitions and applications for approval with various federal and state regulatory bodies. While approval has been received from the Connecticut Siting Council, many other significant regulatory reviews and hearings are ongoing. The closing of the merger is contingent upon receiving all required approvals, including shareholder votes.

Exelon completed the sale of its investment in Sithe Energies on January 31, 2005. This transaction resulted in a net gain of $21 million (before income taxes), deconsolidated approximately $820 million of debt from Exelon's balance sheet, and released Exelon from approximately $125 million of credit support. Exelon also recorded $53 million in liabilities related to certain indemnifications.

The Energy Delivery segment experienced a decrease in net income primarily due to higher purchased power costs, particularly at ComEd due to updated pricing in its purchase power agreement with Generation. This was partially offset by interest savings from debt retirements. Regulatory developments like the transition to SECA rates and ongoing Illinois procurement filings also present ongoing considerations.