10-QPeriod: Q1 FY2008

EXELON CORP Quarterly Report for Q1 Ended Mar 31, 2008

Filed April 24, 2008For Securities:EXC

Summary

Exelon Corporation (EXC) reported a decrease in net income for the first quarter of 2008 to $581 million ($0.88 per diluted share) from $691 million ($1.02 per diluted share) in the same period of 2007. This decline was primarily attributed to several factors, including the impact of the Illinois settlement agreement, lower nuclear generation output from Exelon Generation Company due to increased outage days, and unfavorable market conditions impacting nuclear decommissioning trust fund investments. The company also experienced increased operating and maintenance expenses, partly due to planned nuclear refueling outages and investments in new nuclear project development. Despite these challenges, Exelon saw some offsets, including increased transmission revenue from ComEd's rate case, favorable weather conditions in ComEd's service territory, and the impact of state income tax settlements. Financially, Exelon's operating cash flow saw an increase, but investing activities used more cash, largely due to higher capital expenditures across its subsidiaries (Generation, ComEd, and PECO). Exelon continued its share repurchase program, repurchasing shares under accelerated repurchase agreements. The company's outlook remains focused on managing operating expenses, capital investments, and navigating regulatory environments, particularly in Illinois and Pennsylvania, with significant attention on energy procurement and environmental strategies.

Key Highlights

  • 1Net income decreased to $581 million ($0.88/share) in Q1 2008 from $691 million ($1.02/share) in Q1 2007.
  • 2Operating revenues decreased by $312 million to $4.517 billion due to various factors including the Illinois settlement, lower nuclear output, and unfavorable weather.
  • 3Operating and maintenance expenses increased by $135 million, primarily driven by higher planned nuclear refueling outage costs.
  • 4Exelon Generation Company saw a significant decline in net income, impacted by increased outages and investment losses in nuclear decommissioning trust funds.
  • 5Commonwealth Edison (ComEd) experienced improved operating income, driven by higher transmission revenue and favorable weather, partially offset by higher interest expenses.
  • 6PECO Energy Company reported a decrease in net income, impacted by lower revenues net of purchased power/fuel, unfavorable weather, and increased allowance for uncollectible accounts.
  • 7Capital expenditures increased across all segments, totaling $897 million for Q1 2008, driven by nuclear fuel acquisition and infrastructure improvements.

Frequently Asked Questions

The decrease in net income was primarily due to the impact of the Illinois settlement agreement, lower nuclear generation output from Exelon Generation Company, increased operating and maintenance expenses including higher nuclear refueling outage costs, and unfavorable market conditions impacting nuclear decommissioning trust fund investments. These factors were partially offset by increased transmission revenue, favorable weather in ComEd's territory, and state income tax settlements.

Exelon Generation Company's net income decreased significantly due to operational and market factors. Commonwealth Edison (ComEd) showed improved operating income driven by higher transmission revenue and favorable weather. PECO Energy Company's net income declined, influenced by lower revenues and increased operating expenses, including a higher allowance for uncollectible accounts.

Exelon's outlook is influenced by ongoing regulatory proceedings in Illinois (delivery service rate case, original cost audit, transmission rate case) and Pennsylvania (gas distribution rate case, alternative energy portfolio standards, default service regulations). The company is also monitoring environmental regulations concerning greenhouse gas emissions and the Clean Water Act, which could impact future operations and investments. Management is actively engaged in these matters and believes its current reserves are adequate, though significant impacts could arise from unfavorable outcomes.

Capital expenditures increased across all segments, totaling $897 million, with significant investments in nuclear fuel and infrastructure upgrades. Exelon continued its share repurchase program, announcing an accelerated share repurchase agreement for $500 million. Debt management included issuing new long-term debt and retiring existing debt by ComEd and PECO.