Exelon Announces Third Quarter Results;Narrows Full Year 2009 Earnings Guidance

Exelon Corporation (NYSE: EXC) today announced that its third quarter 2009 consolidated earnings prepared in accordance with GAAP were $757 million, or $1.14 per diluted share, compared with earnings of $700 million, or $1.06 per diluted share, in the third quarter of 2008.

Exelon’s adjusted (non-GAAP) operating earnings for the third quarter of 2009 were $633 million, or $0.96 per diluted share, compared with $706 million, or $1.07 per diluted share, for the same period in 2008.

“We are achieving our financial commitments despite difficult weather, economic and market conditions,” said John W. Rowe, Exelon’s chairman and CEO. “We continue to deliver cost savings and solid operations as shown by a 94.7 percent nuclear capacity factor for the third quarter and reliable utility performance through the critical summer months. We remain committed to achieving full year 2009 operating earnings within the guidance range we issued last fall and are narrowing that range to $4.00 to $4.10 per share.”

The decrease in third quarter 2009 adjusted (non-GAAP) operating earnings to $0.96 per share from $1.07 per share in third quarter 2008 was primarily due to:

• Lower energy gross margins at Exelon Generation Company, LLC (Generation) largely due to unfavorable portfolio and market conditions;
• Higher costs at Generation associated with a higher number of scheduled nuclear refueling outage days;
• Reversal of benefits recorded in the first quarter of 2009 related to an Illinois investment tax credit ruling;
• Reduced load at Commonwealth Edison Company (ComEd) and PECO Energy Company (PECO), primarily driven by the impact of unfavorable weather conditions and current economic conditions; and
• Increased depreciation and amortization expense primarily related to the higher scheduled competitive transition charge (CTC) amortization at PECO and increased depreciation across the operating companies due to ongoing capital expenditures.

Lower third quarter 2009 earnings were partially offset by:

• Increased electric distribution revenue at ComEd resulting from the September 2008 distribution rate case order; and
• Decreased operating and maintenance expense largely due to savings achieved through the ongoing cost management initiative and lower uncollectible accounts expense at PECO, partially offset by increased pension and other postretirement benefits (OPEB) expense.

Adjusted (non-GAAP) operating earnings for the third quarter of 2009 do not include the following items (after-tax) that were included in reported GAAP earnings:

• Unrealized gains of $87 million, or $0.13 per diluted share, related to nuclear decommissioning trust (NDT) fund investments;
• Mark-to-market gains of $77 million, or $0.12 per diluted share, primarily from Generation’s economic hedging activities;
• Costs totaling $58 million, or $0.09 per diluted share, associated with early debt retirements;
• Income of $32 million, or $0.05 per diluted share, resulting from the reduction in Generation’s decommissioning obligations;
• Costs of $11 million, or $0.02 per diluted share, associated with the 2007 Illinois electric rate settlement agreement;
• External costs of $6 million, or $0.01 per diluted share, related to Exelon’s terminated offer to acquire NRG Energy, Inc. (NRG); and
• Income of $3 million for the true-up of severance costs as a result of headcount reductions associated with Exelon’s cost management program.

Adjusted (non-GAAP) operating earnings for the third quarter of 2008 did not include the following items (after-tax) that were included in reported GAAP earnings:

• Mark-to-market gains of $65 million, or $0.10 per diluted share, primarily from Generation’s economic hedging activities;
• Costs of $26 million, or $0.04 per diluted share, associated with the 2007 Illinois electric rate settlement agreement;
• Unrealized losses of $60 million, or $0.09 per diluted share, related to NDT fund investments; and
• Income of $15 million, or $0.02 per diluted share, resulting from the reduction in Generation’s decommissioning obligations.

2009 Earnings Outlook

Exelon narrowed its guidance range for 2009 adjusted (non-GAAP) operating earnings to $4.00 to $4.10 per share from $4.00 to $4.30 per share. Operating earnings guidance is based on the assumption of normal weather for the remainder of the year.

The outlook for 2009 adjusted (non-GAAP) operating earnings for Exelon and its subsidiaries excludes the following items:

• Mark-to-market adjustments from economic hedging activities
• Unrealized gains and losses from NDT fund investments primarily related to the Clinton, Oyster Creek and Three Mile Island nuclear plants (the former AmerGen units)
• Significant impairments of assets, including goodwill
• Changes in decommissioning obligation estimates
• Costs associated with the 2007 Illinois electric rate settlement agreement
• Costs associated with ComEd’s 2007 settlement with the City of Chicago
• Costs incurred for employee severance related to the cost reduction program announced in June 2009
• Costs associated with early debt retirements
• External costs associated with the terminated offer to acquire NRG
• Non-cash remeasurement of income tax uncertainties and reassessment of state deferred income taxes
• Other unusual items
• Significant future changes to GAAP

Third Quarter and Recent Highlights

• Nuclear Operations: Generation’s nuclear fleet, including its owned output from the Salem Generating Station, produced 35,684 gigawatt-hours (GWh) in the third quarter of 2009, compared with 36,451 GWh in the third quarter of 2008. The Exelon-operated nuclear plants achieved a 94.7 percent capacity factor for the third quarter of 2009 compared with 97.2 percent for the third quarter of 2008. The Exelon-operated nuclear plants began two scheduled refueling outages in the third quarter of 2009, compared with beginning one scheduled refueling outage in the third quarter of 2008. The number of refueling outage days totaled 36 and 17, respectively, in the third quarter of 2009 and 2008. Also contributing to lower total nuclear output was a higher number of non-refueling outage days at the Exelon-operated plants, which totaled 21 days in the third quarter of 2009, compared to 8 days in the third quarter of 2008.

• Fossil and Hydro Operations: Generation’s fossil fleet commercial availability was 87.0 percent in the third quarter of 2009, compared with 95.1 percent in the third quarter of 2008, primarily reflecting the impact of extended maintenance outages in 2009. The equivalent availability factor for the hydroelectric facilities was 97.1 percent in the third quarter of 2009, compared with 90.9 percent in the third quarter of 2008, primarily due to an extended planned outage in 2008 to overhaul one of the Conowingo units.

• Three Mile Island (TMI) Unit 1 Nuclear Plant License Extension: On October 22, 2009, the Nuclear Regulatory Commission approved a 20-year operating license extension until April 19, 2034 for the TMI Unit 1 Generating Station. TMI Unit 1 began operating in 1974.

• Hedging Update: Exelon’s hedging program involves the hedging of commodity risk for Exelon’s expected generation, typically on a ratable basis over a three-year period. Expected generation represents the amount of energy estimated to be generated or purchased through owned or contracted-for capacity. The proportion of expected generation hedged as of September 30, 2009 is 98-100 percent for 2009, 88-91 percent for 2010 and 63-66 percent for 2011. The primary objective of Exelon’s hedging program is to manage market risks and protect the value of its generation and its investment grade balance sheet while preserving its ability to participate in improving long-term market fundamentals.

• ComEd Smart Meter/Smart Grid Plan: On June 1, 2009, ComEd filed a petition with the Illinois Commerce Commission (ICC) recommending a one-year Advanced Metering Infrastructure (AMI) pilot program. Current plans call for the deployment of approximately 131,000 smart meters in 10 suburban communities and in the City of Chicago, and will include tests of customers’ responses to alternative pricing plans, in-home displays and Home Area Network control systems. ComEd requested recovery of and a return on its investment through a rider beginning in 2010. On October 14, 2009, the ICC approved ComEd’s AMI pilot program and rider with minor modifications.
  
  
  
  On August 4, 2009, ComEd announced it filed an application with the U.S. Department of Energy (DOE) for $175 million in matching funds made available under the American Recovery and Reinvestment Act of 2009. The matching funds would enable an expansion of the company’s AMI pilot, from approximately 131,000 customers to 310,000 customers, and additional investments in Smart Grid technologies. The DOE is expected to select projects for funding later this year.
  
  
  
  On September 2, 2009, ComEd submitted a petition to the ICC requesting recovery of the remaining costs of the stimulus projects after receiving the matching funds from the DOE.

• Illinois Uncollectibles Recovery Rider: On August 9, 2009, Illinois Governor Pat Quinn signed legislation that includes assistance to low-income customers to manage their energy bills. In addition, the legislation includes a provision for utilities to recover their actual uncollectible accounts expenses through a rider adjustment mechanism. The rider would minimize regulatory lag during times when uncollectible accounts expenses are increasing beyond what is recovered through base rates and provide credits when lower than what is covered in base rates. On September 8, 2009, ComEd filed a proposed tariff with the ICC to implement this rider. An ICC decision is expected in the first quarter of 2010.

• PECO Smart Meter/Smart Grid Plan: PECO is planning to spend up to approximately $650 million on its smart meter and smart grid infrastructure. On August 14, 2009, PECO filed its $550 million Smart Meter Procurement and Installation Plan with the Pennsylvania Public Utility Commission (PAPUC) in accordance with the requirements of Pennsylvania Act 129. PECO is requesting PAPUC approval to install more than 1.6 million smart meters and deploy advanced communication networks over a 15-year period. The first phase of the plan includes the procurement and deployment of automated meter infrastructure and initial deployment of 100,000 smart meters over the next three years.
  
  
  
  On August 6, 2009, PECO filed with the DOE its application seeking $200 million in American Recovery and Reinvestment Act grant funds under the Smart Grid Investment Grant Program. PECO’s “Smart Future Greater Philadelphia” project will increase the number of smart meters initially installed to 600,000, accelerate universal meter deployment by five years and increase Smart Grid investments up to approximately $100 million over the next three years.

• PECO Energy Procurement: On September 23, 2009, the PAPUC approved the results of PECO’s second competitive procurement request for proposal (RFP) for residential customers and its initial generation supply procurement for the small and medium commercial classes. The September procurements for the residential class included full requirements fixed-price contracts for 17-month and 29-month periods beginning January 1, 2011, and forward purchase block contracts to procure electric generation for the 12-month period beginning January 1, 2011. The procurements for the small and medium commercial classes included full requirements fixed-price contracts for the 17-month period beginning January 1, 2011.
  
  
  
  The June and September procurements combined accounted for approximately 49 percent of the total full requirements electricity needed for PECO’s residential customers beginning in 2011 at an average retail price of 9.41 cents per kilowatt-hour (kWh), about a 4 percent increase compared to current prices. The September procurement accounted for approximately 24 percent and 16 percent of the full requirement fixed-price product for PECO’s small and medium commercial customers, respectively, at an average blended retail price of 9.79 cents per kWh. PECO’s next supply purchases for the residential and the small and medium commercial classes will take place in May 2010.

• Pension Contribution: On September 9, 2009, Exelon announced that it was making a $350 million discretionary pension contribution allocated to the 2008 plan year, taking advantage of Federal pension funding relief provided by the Worker, Retiree and Employer Recovery Act of 2008 that allows use of average expected returns to establish asset values for determining funding requirements. The U.S. Treasury Department also has provided some funding relief through options in selecting the interest rates used for funding. The discretionary pension contribution – funded with cash from operations in excess of Exelon’s original 2009 plan – and Exelon’s pension funding elections will lower near-term mandatory pension contributions, which should increase future financial flexibility.

• Financing Activities: On September 23, 2009, Generation issued $600 million of Senior Notes maturing on October 1, 2019, with a coupon of 5.20 percent and $900 million of Senior Notes maturing on October 1, 2039, with a coupon of 6.25 percent. Generation used the net proceeds from the sale (1) to pay approximately $622 million of principal, premium and accrued interest in connection with the purchase of approximately $555 million in aggregate principal amount of its 6.95 percent Notes due June 15, 2011 pursuant to Generation’s cash tender offer announced on September 16, 2009, (2) for a $432 million distribution to Exelon Corporation to fund its purchase of approximately $387 million in aggregate principal amount of its 6.75 percent Senior Notes due May 1, 2011 pursuant to its cash tender offer announced on September 16, 2009, and (3) to fund Generation’s repurchase of $307 million of pollution-control bonds in early September. On September 23, 2009, Exelon Corporation and Generation called the remaining bonds that were not tendered pursuant to their tender offers, according to the terms of the respective bond issues. These bonds are obligated to be tendered today under the terms of the bonds and the call notices. Through these debt repurchase and refinancing activities, Exelon was able to capitalize on favorable market conditions, resulting in lower interest expense and an extended debt maturity profile.

• Credit Rating Actions: Following the termination of Exelon’s proposed offer for NRG on July 21, 2009, the rating agencies took the following actions.
  
  
  
  On July 21, 2009, Fitch Ratings, Ltd. removed Exelon and Generation from Ratings Watch Negative. The ratings for Exelon and Generation were affirmed and each entity was assigned a Stable Ratings Outlook.
  
  
  
  On July 22, 2009, Standard & Poor’s Ratings Services (S&P) affirmed its corporate credit rating on Exelon, Generation and PECO of “BBB” and removed their ratings from CreditWatch Negative. In addition, S&P raised the corporate credit rating of ComEd to “BBB” from “BBB-”, raised its debt and preferred stock ratings and removed its ratings from CreditWatch Negative. An S&P research report cited “improvement in both ComEd’s business risk profile and its financial measures”. The outlook for ratings of all the Exelon entities is stable.
  
  
  
  On July 23, 2009, Moody’s Investors Service (Moody’s) confirmed the ratings of Exelon and Generation and assigned a stable outlook. Moody’s also confirmed the long-term debt rating of PECO but downgraded its short-term rating to “P-2” from “P-1” and changed the outlook on PECO’s long-term debt to negative.
  
  
  
  On August 3, 2009, Moody’s changed its credit rating methodology, widening the notching between most senior secured debt ratings and senior unsecured debt ratings of investment grade regulated utilities. As a result, Moody’s upgraded ComEd’s senior secured debt rating to “Baa1” from “Baa2”.

OPERATING COMPANY RESULTS

Generation consists of owned and contracted electric generating facilities, wholesale energy marketing operations and competitive retail sales operations.

Third quarter 2009 net income was $657 million compared with $635 million in the third quarter of 2008. Third quarter 2009 net income included (all after tax) costs of $9 million associated with the 2007 Illinois electric rate settlement, mark-to-market gains of $77 million from economic hedging activities before the elimination of intercompany transactions, unrealized gains of $87 million related to NDT fund investments, income of $32 million resulting from the reduction in decommissioning obligations primarily related to the former AmerGen nuclear plants, income of $2 million from the true-up of 2009 costs incurred for severance, and costs of $36 million associated with the early retirement of long-term debt. Third quarter 2008 net income included (all after tax) costs of $25 million associated with the 2007 Illinois electric rate settlement, mark-to-market gains of $96 million from economic hedging activities before the elimination of intercompany transactions, unrealized losses of $60 million related to NDT fund investments primarily related to the former AmerGen nuclear plants, and income of $15 million resulting from the reduction in decommissioning obligations primarily related to the former AmerGen nuclear plants. Excluding the impact of these items, Generation’s net income in the third quarter of 2009 decreased $105 million compared with the same quarter last year primarily due to:

• Lower energy gross margins, largely due to unfavorable portfolio and market conditions, decreased nuclear output as a result of a higher number of refueling and non-refueling outage days and higher nuclear fuel costs; and
• Higher costs related to a higher number of scheduled nuclear refueling outage days and increased pension and OPEB expense.

The decrease in net income was partially offset by:

• Establishment of a reserve in 2008 related to Generation’s accounts receivable from Lehman Brothers Holdings Inc. due to its bankruptcy filing; and
• Savings achieved through the cost management initiative.

Generation’s average realized margin on all electric sales, including sales to affiliates and excluding trading activity, was $36.32 per MWh in the third quarter of 2009 compared with $36.54 per MWh in the third quarter of 2008.

ComEd consists of the electricity transmission and distribution operations in northern Illinois.

ComEd recorded net income of $46 million in the third quarter of 2009, compared with net income of $33 million in the third quarter of 2008. Third quarter net income in 2009 and 2008 included costs of $2 million and $1 million after tax, respectively, associated with the Illinois electric rate settlement. Excluding the impact of these items, ComEd’s net income in the third quarter of 2009 increased $14 million from the same quarter last year primarily due to:

• Increased distribution revenue due to the September 2008 distribution rate case order;
• Lower operating and maintenance expense, which primarily reflected savings achieved through the cost management initiative and the impact of decreased storm costs, partially offset by increased pension and OPEB expense; and
• Discrete disallowances recorded in 2008, net of allowed regulatory assets, mandated by the September 2008 rate case order.

The increase in net income was partially offset by:

• Reversal of an Illinois investment tax credit ruling – this benefit previously was recorded in the first quarter of 2009; and
• Reduced load, primarily driven by the impact of unfavorable weather conditions and current economic conditions.

In the third quarter of 2009, cooling degree-days in the ComEd service territory were down 34.2 percent relative to the same period in 2008, and were 34.0 percent below normal. This reflected the Chicago area’s coolest summer weather in 17 years. ComEd’s total retail kilowatt-hour (kWh) deliveries decreased by 9.8 percent quarter over quarter, with declines in deliveries to all major customer classes. In addition, the number of residential customers being served in the ComEd region decreased 0.5 percent from the third quarter of 2008.

Weather-normalized retail kWh deliveries decreased by 3.8 percent from the third quarter of 2008. For ComEd, weather had an unfavorable after-tax impact of $18 million on third quarter 2009 earnings relative to 2008 and an unfavorable after-tax impact of $24 million relative to normal weather that was incorporated in earnings guidance.

PECO consists of the electricity transmission and distribution operations and the retail natural gas distribution business in southeastern Pennsylvania.

PECO’s net income in the third quarter of 2009 was $92 million, up from $90 million in the third quarter of 2008. This increase was primarily due to:

• Lower uncollectible accounts expense.

The increase in net income was partially offset by:

• Reduced load, primarily driven by the impact of current economic conditions and unfavorable weather conditions; and
• Higher CTC amortization, which was in accordance with PECO’s 1998 restructuring settlement with the PAPUC. As expected, the increase in amortization expense exceeded the increase in CTC revenues.

In the third quarter of 2009, cooling degree-days in the PECO service territory were down 6.2 percent from 2008, and were 5.9 percent below normal. Total retail kWh deliveries were down 5.6 percent from last year, reflecting a decline in deliveries across all customer classes, primarily driven by the impact of current economic conditions and unfavorable weather conditions. The number of residential electric customers being served in the PECO region decreased 0.4 percent from the third quarter of 2008.

Weather-normalized retail kWh deliveries decreased by 3.9 percent from the third quarter of 2008, primarily reflecting decreased residential and large commercial and industrial deliveries. For PECO, weather had an unfavorable after-tax impact of $9 million on third quarter 2009 earnings relative to 2008 and an unfavorable after-tax impact of $19 million relative to normal weather that was incorporated in earnings guidance.

Adjusted (non-GAAP) Operating Earnings

Adjusted (non-GAAP) operating earnings, which generally exclude significant one-time charges or credits that are not normally associated with ongoing operations, mark-to-market adjustments from economic hedging activities and unrealized gains and losses from NDT fund investments, are provided as a supplement to results reported in accordance with GAAP. Management uses such adjusted (non-GAAP) operating earnings measures internally to evaluate the company’s performance and manage its operations. Reconciliation of GAAP to adjusted (non-GAAP) operating earnings for historical periods is attached. Additional earnings release attachments, which include the reconciliation on page 7, are posted on Exelon’s Web site: www.exeloncorp.com and have been filed with the Securities and Exchange Commission on Form 8-K on October 23, 2009.

Conference call information: Exelon has scheduled a conference call for 10:30 AM ET (9:30 AM CT) on October 23, 2009. The call-in number in the U.S. and Canada is 800-690-3108, and the international call-in number is 973-935-8753. If requested, the conference ID number is 32242270. Media representatives are invited to participate on a listen-only basis. The call will be web-cast and archived on Exelon’s Web site: www.exeloncorp.com. (Please select the Investor Relations page.)

Telephone replays will be available until November 6. The U.S. and Canada call-in number for replays is 800-642-1687, and the international call-in number is 706-645-9291. The conference ID number is 32242270.

Forward Looking Statements

This press release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, that are subject to risks and uncertainties. The factors that could cause actual results to differ materially from these forward-looking statements include those discussed herein as well as those discussed in (1) Exelon’s 2008 Annual Report on Form 10-K in (a) ITEM 1A. Risk Factors, (b) ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and (c) ITEM 8. Financial Statements and Supplementary Data: Note 18; (2) Exelon’s Third Quarter 2009 Quarterly Report on Form 10-Q (to be filed on October 23, 2009) in (a) Part II, Other Information, ITEM 1A. Risk Factors and (b) Part I, Financial Information, ITEM 1. Financial Statements: Note 14; and (3) other factors discussed in filings with the Securities and Exchange Commission (SEC) by Exelon Corporation, Commonwealth Edison Company, PECO Energy Company and Exelon Generation Company, LLC (Companies). Readers are cautioned not to place undue reliance on these forward-looking statements, which apply only as of the date of this press release. None of the Companies undertakes any obligation to publicly release any revision to its forward-looking statements to reflect events or circumstances after the date of this press release.

Exelon Corporation is one of the nation’s largest electric utilities with approximately 5.4 million customers and $19 billion in annual revenues. The company has one of the industry’s largest portfolios of electricity generation capacity, with a nationwide reach and strong positions in the Midwest and Mid-Atlantic. Exelon distributes electricity to approximately 5.4 million customers in Illinois and Pennsylvania and natural gas to approximately 485,000 customers in southeastern Pennsylvania. Exelon is headquartered in Chicago and trades on the NYSE under the ticker EXC.