How does Exelon manage its exposure to commodity price fluctuations?

Exelon Generation employs a comprehensive hedging strategy using physical and financial derivative contracts (forwards, futures, swaps, options) to mitigate price risk on anticipated energy sales. Additionally, significant percentages of expected generation are hedged for future periods (e.g., 97%-100% for 2010, 87%-90% for 2011, and 62%-65% for 2012) to reduce exposure to market volatility.

What is Exelon's exposure to credit risk from its counterparties?

Exelon is exposed to credit risk from counterparties in derivative contracts, normal purchase/normal sales agreements, and other receivables. As of September 30, 2010, Generation's net credit exposure was $1,102 million, with the majority ($1,036 million) from investment-grade counterparties. The company manages this risk through collateral requirements and monitoring counterparty creditworthiness.

How do regulatory mechanisms protect ComEd and PECO from commodity price risks?

ComEd and PECO benefit from regulatory approvals that allow for cost recovery of electricity procurement. Derivative contracts entered into by these subsidiaries generally qualify for the normal purchase and normal sales exception under accounting guidance, meaning they are not held for speculative trading purposes and their costs are passed through to customers, thus limiting direct impact on the companies' financial positions.

What is the financial impact of a potential decrease in energy prices on Exelon Generation?

For Exelon Generation's unhedged positions, a hypothetical $5 reduction in the annual average Ni-Hub and PJM-West energy price as of September 30, 2010, would result in an estimated decrease in pre-tax net income of approximately $66 million for 2011 and $307 million for 2012. The impact for 2010 is not considered significant.

EXC 10-Q Quarterly Report Q3 FY2010 — Revenue, Net Income, EPS

Summary

This 10-Q filing for Exelon Corporation (EXC) as of September 30, 2010, provides an update on market risk disclosures. The company actively manages its exposure to commodity price, counterparty credit, interest rate, and equity price risks through its Risk Management Committee (RMC). Exelon Generation, a key subsidiary, employs extensive hedging strategies for electricity and fuel to mitigate price fluctuations, with significant percentages of expected generation hedged for 2010, 2011, and 2012. The filing also details proprietary trading activities, which represent a small portion of overall revenue, and outlines fuel procurement strategies, noting potential credit risks with suppliers, particularly for uranium concentrates. Exelon's regulated utility subsidiaries, ComEd and PECO, are largely protected from direct commodity price risk due to regulatory mechanisms allowing for cost recovery. However, they engage in derivative contracts that generally qualify for normal purchase and normal sales exceptions, minimizing their speculative exposure. The company provides detailed information on the mark-to-market values of energy contracts and associated collateral management. Interest rate risk exposure appears minimal, with a hypothetical 10% increase in rates resulting in less than a $1 million pre-tax earnings impact.

Financial Highlights

47 data points

Beta

Revenue

$5.29B

Net Income

$845.00M

0.2% Net Margin

EPS (Diluted)

$1.27

Total Assets

$50.95B

Cash & Equivalents

$2.73B

Free Cash Flow

$945.00M

Financial Statements

Beta

Revenue	$5.29B
Operating Expenses	$3.92B
Operating Income	$1.37B
Interest Expense	$169.00M
Net Income	$845.00M
EPS (Basic)	$1.28
EPS (Diluted)	$1.27
Shares Outstanding (Basic)	662.00M
Shares Outstanding (Diluted)	663.00M

Key Highlights

1Exelon's Risk Management Committee (RMC) oversees strategies to mitigate market risks, including commodity prices, counterparty credit, interest rates, and equity prices.
2Exelon Generation has hedged a substantial portion of its expected generation for 2010 (97%-100%), 2011 (87%-90%), and 2012 (62%-65%) to manage commodity price risk.
3A hypothetical 5% reduction in annual average energy prices (Ni-Hub and PJM-West) could lead to a pre-tax net income decrease of approximately $66 million for 2011 and $307 million for 2012 for Generation's unhedged positions.
4Proprietary trading activities are a small component of Exelon Generation's business, generating $25 million in pre-tax gains for the nine months ended September 30, 2010, with an average daily VaR of $140,000.
5ComEd and PECO have mechanisms for cost recovery, largely insulating them from direct commodity price volatility, with derivative contracts often qualifying for normal purchase/normal sales exceptions.
6As of September 30, 2010, Generation held $1,396 million in cash collateral deposits from counterparties, offsetting $1,395 million against mark-to-market assets and liabilities.
7Interest rate risk is managed through a mix of debt types and potential swaps; a hypothetical 10% increase in variable rates would result in a pre-tax earnings decrease of less than $1 million for Exelon, Generation, and ComEd.

EXELON CORP Quarterly Report for Q3 Ended Sep 30, 2010

Summary

Financial Highlights

Key Highlights

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