Summary
Exelon Corporation announced on August 30, 2006, via an 8-K filing, that it will record significant asset impairment charges in the third quarter of 2006. The primary driver for these charges is the unfavorable outcome of Commonwealth Edison Company's (ComEd) rate case with the Illinois Commerce Commission (ICC). The ICC's order significantly reduced the proposed revenue increase and disallowed rate base treatment for certain assets, leading to a substantial goodwill impairment. Additionally, Exelon will write off capitalized costs associated with its planned merger with Public Service Enterprise Group Incorporated (PSEG). This decision stems from management's assessment that the probability of the merger's completion is no longer "more likely than not" due to the status of regulatory proceedings. These events are expected to have a material impact on Exelon's financial results for the third quarter of 2006.
Key Highlights
- 1Exelon will record approximately $741 million (after-tax) in goodwill impairment charges related to Commonwealth Edison Company (ComEd).
- 2The goodwill impairment is a result of an unfavorable ruling in ComEd's rate case by the Illinois Commerce Commission (ICC).
- 3The ICC approved a delivery services revenue increase of only $8 million for ComEd, significantly below the requested $317 million.
- 4ComEd's prepaid pension asset ($639 million) was disallowed for rate base treatment, impacting future returns, though not resulting in an immediate write-off.
- 5Exelon will write off approximately $55 million ($35 million after-tax) in capitalized merger costs associated with the planned merger with PSEG.
- 6The PSEG merger's probability of completion is no longer considered 'more likely than not' due to regulatory settlement discussions.