10-QPeriod: Q2 FY2008

EXELON CORP Quarterly Report for Q2 Ended Jun 30, 2008

Filed July 23, 2008For Securities:EXC

Summary

Exelon Corporation's Q2 2008 filing shows a mixed financial performance. The company reported a net income of $748 million for the quarter, an increase from $702 million in the same period last year, driven by higher realized prices in Generation's market sales, favorable mark-to-market gains on hedging activities, and increased transmission revenue from ComEd's rate case. However, net income for the first six months of 2008 decreased to $1,329 million from $1,393 million in the prior year. This decline was attributed to several factors including the impact of the Illinois Settlement, unrealized losses on nuclear decommissioning trust fund investments, and increased operating and maintenance expenses across segments, partly offset by gains in trading portfolios and improved generation output. Financially, Exelon continues to manage its capital structure with significant debt issuance and retirement activity across its subsidiaries. The company's outlook acknowledges ongoing regulatory and environmental developments, including rate case proceedings in Illinois and Pennsylvania, and the potential impact of climate change regulations. Despite some headwinds, Exelon's diversified business model, strong operational execution in Generation, and stable regulated utilities (ComEd and PECO) provide a foundation for continued performance, though investors should monitor regulatory outcomes and energy market volatility.

Financial Highlights

26 data points
Beta

Net Income

$748.00M

EPS (Diluted)

$1.13

Cash & Equivalents

$332.00M

Free Cash Flow

$163.00M

Financial Statements
Beta
Operating Expenses$3.19B
Operating Income$1.43B
Interest Expense$180.00M
Net Income$748.00M
EPS (Basic)$1.14
EPS (Diluted)$1.13
Shares Outstanding (Basic)657.00M
Shares Outstanding (Diluted)662.00M

Key Highlights

  • 1Net income for the quarter increased to $748 million from $702 million in Q2 2007, driven by improved Generation segment performance and ComEd's transmission revenue.
  • 2Year-to-date net income decreased to $1,329 million from $1,393 million in the prior year, impacted by unrealized losses on nuclear decommissioning trust funds and increased operating expenses.
  • 3Significant debt management activities were undertaken, including substantial issuances and retirements of long-term debt by ComEd and PECO.
  • 4Exelon's Generation segment saw higher average margins and improved capacity factors due to fewer outage days, though offset by increased operating expenses.
  • 5ComEd's revenue net of purchased power increased due to higher transmission rates and delivery volumes, but was tempered by unfavorable weather and higher operating costs.
  • 6PECO's net income decreased due to higher operating and maintenance expenses, particularly from an increased allowance for uncollectible accounts and higher CTC amortization.
  • 7The company continues to navigate significant regulatory and environmental matters, including rate case proceedings, new environmental initiatives, and the potential impact of climate change legislation.

Frequently Asked Questions

The increase in net income for the quarter was primarily driven by higher realized prices on Generation's market sales, favorable mark-to-market gains on economic hedging activities, increased revenue from certain long options in Generation's proprietary trading portfolio, higher nuclear output at Generation due to fewer outage days, increased transmission revenue from ComEd's rate case, and a tax benefit related to capitalizing overhead costs. These were partially offset by the impact of the Illinois Settlement, unfavorable weather, and increased operating expenses.

The decrease in net income for the first six months of 2008 compared to the prior year was due to several factors including the impact of the Illinois Settlement, unrealized and realized losses on nuclear decommissioning trust fund investments, increased nuclear refueling outage costs, higher operating and maintenance expenses across segments (including site development and storm costs), increased depreciation and amortization expense (particularly at PECO), and income from synthetic fuel-producing facilities in the prior year. These were partially offset by improved Generation segment performance, higher hedging gains, and increased transmission revenue.

Exelon, primarily through its Generation segment, uses a combination of physical contracts and financial derivative contracts (forwards, futures, swaps, and options) to hedge anticipated exposures to commodity price fluctuations. These strategies aim to mitigate the impact of market price volatility on energy sales and fuel purchases. The company also benefits from regulatory mechanisms like ComEd's pass-through of procurement costs and PECO's purchased gas cost clause.

Key matters include ComEd's delivery service rate case and original cost audit in Illinois, PECO's gas distribution rate case in Pennsylvania, and ongoing regulatory reviews of transmission rates and alternative energy portfolio standards. The company is also exposed to potential impacts from environmental regulations, particularly concerning Section 316(b) of the Clean Water Act and greenhouse gas emissions, as well as various litigation matters, including those related to asbestos claims and environmental liabilities.