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Exelon Corporation (EXC)

Q3 2010 Earnings Call

October 22, 2010; 11:00 am ET


John Rowe - Chairman & Chief Executive Officer

Matthew Hilzinger - Senior Vice President & Chief Financial Officer.

Stacie Frank - Investor Relations


Greg Gordon – Morgan Stanley

Jonathan Arnold - Deutsche Bank

Paul Patterson – Glenrock Associates

Hugh Wynne – Sanford Bernstein

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» Exelon Q2 2010 Earnings Call Transcript
» Exelon Corporation Q1 2010 Earnings Call Transcript
» Exelon Corp. Q4 2009 Earnings Call Transcript

Good morning, my name is Dorothy, and I will be your conference operator today. At this time, I would like to welcome everyone to the Exelon Third Quarter Earnings Review Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session (Operator Instructions). Thank you, I will now turn the conference over to Stacie Frank, Vice President of Investor Relations. Ms. Frank, you may begin.

Stacie Frank

Thank you, Dorothy, and good morning everyone. Welcome to Exelon’s Third Quarter 2010 Earnings Conference Call. Thank you for joining us today. We issued our earnings release this morning. If you have not received it, the release is available on the Exelon website at


Before we begin today’s discussion, let me remind you that the earnings release and other matters we will discuss in today’s call contain forward-looking statements and estimates that are subject to various risks and uncertainties, as well as adjusted non-GAAP operating earnings. Please refer to today’s 8-K and our other filings for a discussion of factors that may cause results to differ from management’s projections, forecasts and expectations, and for a reconciliation of operating to GAAP earnings.

Leading the call today are John Rowe, Exelon’s Chairman and Chief Executive Officer and Matthew Hilzinger, Exelon’s Senior Vice President and Chief Financial Officer. They are joined by other members of Exelon’s senior management team who will be available to answer your questions.

We scheduled 60 minutes for the call this morning. I will now turn the call over to John Rowe, Exelon’s CEO.

John Rowe

Good morning everyone. We are delighted to report that we had another good quarter, another quarter that beats consensus at least until some of you change that consensus earlier this week.

Before I get to the quarter in some of the areas I want to comment on specifically, I would like to spend just a minute refracting. This is the 10


anniversary of Exelon’s creation. The merger ComEd and PECO remains the largest and most successful merger in the recent history of the utility industry.

Over that 10 years, our total shareholder return has been 107% compared to the S&P 500, which is only 2% and the Philadelphia Utility Index at 76%. We have increased dividend by almost 250% from $0.85 per share in 2001 to $2.10 per share this year. We have improved the operational performance of our nuclear fleet to capacity factors which has consistently averaged over 93% in recent years.

Both ComEd and PECO have improved their reliability record and ComEd has significantly improved its safety record to more or less catch up with PECO’s. We have generated strong earnings and cash flows and continue to do so during a cyclical trough in the commodity market.

We have exhibited financial discipline to maintain investment-grade bond rates even while the power markets are weak. The hedging approach of Power Team has created close to $3 billion in incremental value over the past two years to have commodity prices have suffered from. Now, all of this history of course, but we think we have created that history while building what is absolutely the best platform for future upside in our business, and we think most of you agree with that.

Turning to the quarter, as you saw in our announcement this morning, we recorded operating earnings of $1.11 per share. Our nuclear fleet obtained a capacity factor of over 95% for the quarter. We were helped by a warm summer in both Chicago and Philadelphia, which contributed [inaudible] of favorability versus normal weather.

With constant attention to cost control and constant efforts to lock in, attractive hedge prices helped as well. Our year-to-date results put us in a strong position for the full year. We are again adjusting our operating earnings guidance range currently at $3.80 to $4.10 and raising it to the upper half of that range or $3.95 to $4.10 per share. Hard work with a little good fortune has brought us a long way since the estimates we had back at the beginning of the year.

On the last quarterly earnings call, I outlined in detail one of the key elements of our value proposition. We think we have more cleaner, lower carbon, lower air pollution power than anyone else in our industry. And we continue to believe that that power will be rewarded by better prices as EPA tightens its environmental regulations, and as the combination of both tight environmental regulations and low gas prices effect the energy and capacity markets across PJM.

Let there be no doubt, EPA continues to move forward. Indeed, it is required to do so by orders of the Federal Courts including The United States Supreme Court. At the celebration of the 40


anniversary of the Clean Air Act last month, administrator Lisa Jackson reiterated her commitment to move forward with hazardous air pollution rules on schedule. The common period for EPA’s Transport Rule expired on October 1, clearing the way for EPA to move forward with developing its final rules on nitrogen oxides and sulfur oxides.

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