10-QPeriod: Q3 FY2007

EXELON CORP Quarterly Report for Q3 Ended Sep 30, 2007

Filed October 26, 2007For Securities:EXC

Summary

Exelon Corporation (EXC) reported a net income of $780 million for the third quarter of 2007, a significant turnaround from a net loss of $44 million in the same period of 2006. This improvement was driven by several factors, including a substantial $776 million goodwill impairment charge recognized in the prior year, higher average margins in Generation's wholesale market sales, and improved nuclear output. The company also benefited from increased transmission revenues at ComEd and favorable weather conditions across its service territories. Financially, Exelon's operating revenues saw a notable increase, largely due to higher wholesale market sales by Generation and regulatory rate changes impacting ComEd and PECO. However, this was partially offset by decreased energy margins at ComEd following the end of its regulatory transition period and the implementation of market-based rates. The company also committed to approximately $800 million in rate relief programs in Illinois as part of a settlement agreement to address customer concerns over rising electricity bills. Exelon continued its share repurchase program, including an accelerated share repurchase agreement initiated in September 2007. Overall, Exelon demonstrated a strong operational and financial recovery in the third quarter of 2007, driven by operational efficiencies and favorable market conditions, while also addressing regulatory and customer concerns through settlement agreements.

Key Highlights

  • 1Exelon reported a net income of $780 million for Q3 2007, compared to a net loss of $44 million in Q3 2006.
  • 2Operating revenues increased to $5.03 billion in Q3 2007 from $4.40 billion in Q3 2006, driven by improved wholesale market sales and regulatory rate changes.
  • 3ComEd's net income significantly improved to $65 million in Q3 2007 from a net loss of $506 million in Q3 2006, largely due to the absence of a large goodwill impairment charge from the prior year.
  • 4PECO reported a net income of $168 million in Q3 2007, up from $134 million in Q3 2006, benefiting from higher electric revenues and lower operating expenses.
  • 5Exelon Generation contributed positively with a net income of $548 million in Q3 2007, up from $394 million in Q3 2006, driven by higher margins and improved operational performance.
  • 6The company is making significant contributions to Illinois customer rate relief programs as part of a settlement agreement totaling approximately $800 million over four years.
  • 7Exelon initiated an accelerated share repurchase program for $1.25 billion in September 2007, demonstrating a commitment to returning value to shareholders.

Frequently Asked Questions

Exelon reported a net income of $780 million for the third quarter of 2007, a substantial improvement from a net loss of $44 million in the third quarter of 2006. This turnaround was significantly influenced by the absence of a large goodwill impairment charge recorded in 2006 and improved operating performance.

Operating revenues increased primarily due to higher wholesale and retail electric sales by Exelon Generation, improved transmission revenues at ComEd, and regulatory rate changes that benefited ComEd and PECO. The end of the ComEd PPA and higher market prices also contributed positively.

The Illinois settlement agreement, reflected in the Settlement Legislation, was reached to address customer concerns about rising electricity bills. Under this agreement, Exelon committed to contributing approximately $800 million over four years towards rate relief programs for Illinois customers and funding the Illinois Power Agency. This settlement also resolved various litigation and regulatory proceedings related to power procurement.

Exelon continued its share repurchase program and initiated an accelerated share repurchase (ASR) program in September 2007 to repurchase $1.25 billion of its common stock. This reflects the company's strategy to return value to shareholders when higher value-added growth opportunities are not available.