Summary
Exelon Corporation (EXC) announced on January 3, 2011, a significant impact from recent federal tax legislation that allows for 100% bonus depreciation on qualified property placed in service between September 8, 2010, and January 1, 2012. This legislation is expected to generate approximately $1 billion in cash for Exelon through accelerated depreciation benefits over 2010-2012. As a direct consequence of these accelerated cash benefits, Exelon's board authorized substantial pension plan contributions totaling $2.1 billion in the first quarter of 2011. This includes an $800 million contribution previously planned for 2011. The funding for these contributions will come from a combination of operating cash flow, tax benefits from bonus depreciation, and tax benefits derived from the pension contributions themselves. These actions are anticipated to materially improve the pension plan's funded status.
Key Highlights
- 1Federal tax legislation enacted allows for 100% bonus depreciation on qualified property placed in service from Sept 8, 2010, to Jan 1, 2012.
- 2This tax provision is expected to generate approximately $1 billion in cash for Exelon through accelerated depreciation.
- 3The company's board authorized a $2.1 billion pension plan contribution for Q1 2011.
- 4The pension contribution includes $800 million previously expected for 2011 and is funded by operations, bonus depreciation tax benefits, and pension contribution tax benefits.
- 5The pension contributions are projected to increase the plan's funded status from approximately 77% to 89% by the end of 2011.
- 6The net impact of the tax legislation and pension contributions is expected to reduce 2010 earnings by approximately $0.05 per share and 2011 earnings by approximately $0.03 per share.
- 7Exelon may incur debt to fund a portion of the pension contributions pending the receipt of actual cash tax benefits.