Exelon Annual Report 2004

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FY2004 Annual Report · Exelon

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realizing the promise
Exelon Corporation 04 Summary Annual Report

Introduction

Letter to Shareholders

Realizing our Commitment to Customers

Realizing our Commitment to Competition

Realizing our Obligation to the Environment

Realizing our Commitment to Employees

Realizing our Commitment to Shareholders

Exelon at a Glance

Strategy and Policy Committee

Board of Directors

Financial Section

By almost any measure, we are better positioned

today than last year, or the year before.

Our success is the product of unrelenting effort,
clear vision, and a determination to keep the promises
we make. If we keep our commitments, perform at
world-class levels, and exercise disciplined financial
management, Exelon can become the best and most
consistently profitable electricity and gas company
in the United States.

We do not claim to have achieved our goal. But we like
our chances. And we will not rest until we do.

Exelon – pursuing the vision, realizing the promise.

John W. Rowe
Chairman, President and CEO

To our shareholders

Exelon continued to build its financial record in 2004. Thanks to operating
improvements, load growth, and higher wholesale prices, 2004 adjusted
(non-GAAP) operating earnings were $1,859 million, or $2.78 per diluted
share. This constitutes an increase of 6.5 percent over comparable per
share earnings in 2003.* In the four years of its existence, Exelon’s
operating earnings have grown by an average of 7.8 percent per year.
I am especially pleased that our 2004 GAAP earnings were also $2.78 per
diluted share, an increase of more than 100 percent over 2003 GAAP
earnings. Our consolidated GAAP earnings reflect several events, including
earnings from investments in synthetic fuel-producing facilities, losses
associated with debt retirements, severance and severance-related
charges, accounting changes, charges associated with our investments
in Boston Generating and Sithe, and costs associated with the proposed
merger with PSEG. In 2004, we had none of the large write-offs that
marred 2003 performance.

*For a reconciliation of adjusted (non GAAP) operating earnings to GAAP (accounting principles generally accepted in the United States) earnings, see Exelon’s fourth quarter
earnings release, issued January 25, 2005, posted on the Investor Relations page at www.exeloncorp.com and included in the 8-K filed with the SEC on that date.

This financial performance has made Exelon the most highly valued utility

in the nation, with a year-end capitalization of $29.3 billion, and has rewarded

you, our shareholders, with one of the best overall returns in the industry.

Adjusted for the 2-for-1 stock split completed in May, our overall stock price

rose by 33 percent over the course of the year, from $33.18 on December 31, 2003

to $44.07 on December 31, 2004. Exelon’s total return for 2004, measured

by stock appreciation and assuming dividends are reinvested, exceeded

37 percent. In contrast, the 2004 total return of the companies that comprise

the Philadelphia Utility Index was 26 percent, the total return of the S&P

Electrics was 24 percent and the total return of the S&P 500 was 11 percent.

More significantly, from the completion of the Unicom/PECO merger in

October 2000 to the end of 2004, Exelon’s total return has exceeded 70 percent.

In contrast, the total average return for a comparable investment in companies

included in the Philadelphia Utility Index would have been 21 percent, and

for the S&P 500 would have been a loss of 7 percent.

The Exelon Board of Directors raised the dividend rate on three separate

occasions last year. In January, we raised the annual dividend rate from $1.00

to $1.10, a 10 percent increase. In July, the Board again voted to increase the

dividend, this time by 12 cents annually to $1.22 per share. The Board also

approved a policy targeting dividend payout at 50 to 60 percent of ongoing

earnings. In October, with increasing confidence in earnings and cash flow

improvements, the Board raised the annual rate yet again to $1.60 per share,

an increase of 31 percent. Exelon now has a fully competitive dividend.

Our performance demonstrates that we are realizing the promise of the

PECO/Unicom merger. In the early 1990s, both PECO and ComEd were high-

cost, urban utilities with histories of expensive nuclear plants and troubled

nuclear operations. Today, as Exelon affiliates, they are part of one of the

most successful utilities in the country, with a solidly performing nuclear

fleet that is the largest in the country, a dramatically strengthened balance

sheet, and rates that have moderated. Improved nuclear operations are now

holding wholesale rates lower than they otherwise would be in both ComEd

and PECO’s territories.

Our performance likewise sets our expectation for the promise that can be

realized from our recently announced merger with Public Service Enterprise

Group. PSEG is a natural partner for Exelon. The two companies enjoy compli-

mentary assets, geography and strategies, and already have a history of

partnership. When finally approved by a long list of federal and state agencies,

the merger will create the nation’s largest utility holding company, with

more than $70 billion in total assets, and serving more than 7 million electric

customers and 2 million gas customers in three major metropolitan areas.

More importantly, it will result in a stronger company, one built on Exelon’s

nuclear prowess and strong balance sheet, and PSEG’s expertise in distribution

operations and experience with retail auctions.

We are not there yet.
But we make progress
every day. And I will not
rest until it is so.

For the very first time, we will create an integrated U.S. electric system with

the scope and scale of European and Japanese companies – a company that

can successfully compete in the emerging national market.

The key to our success – past, present and future – is our total commitment

to the Exelon Vision Statement, and our unrelenting effort to implement it.

Exelon can only provide reliable service to our customers, exceptional value

to you, our shareholders, and become the best and most consistently profitable

electric and gas company in the nation, if we live up to our commitments,

perform at world-class levels and continue to build value through disciplined

financial management.

We are not there yet. But we make progress every day. And I will not rest

until it is so.

unrelenting effort

We are a low-cost wholesale provider in a growing and increasingly competi-

tive wholesale market. You are all familiar with the remarkable job that our

nuclear team – management and employees – have done in reviving our

nuclear program. The average annual nuclear capacity factor has increased

from 47 percent at ComEd in 1997 to 93+ percent for the entire fleet in 2004.

Nuclear production costs have decreased from $26.80/MWh at ComEd in

1997 to $12.43/MWh fleet-wide in 2004. Under John Young and Chris Crane’s

careful leadership, our nuclear capacity factor during the critical summer

months actually exceeded 97 percent, while our non-nuclear generating

facilities reached record levels of commercial availability.

We have succeeded despite volatile wholesale markets. Under Ian McLean’s

watchful eye, we made money when markets were down, and we are making

more money now that the markets are recovering. Given our strength as a low-

cost generator, we are able to optimize the financial value of the commodity

we generate by actively managing our exposure to economic and commodity

price cycles. Our record has been one of solid risk management, commercial

responsiveness and the successful matching of physical assets to load.

We have successfully cut costs across our entire business. The Exelon Way,

our ongoing effort to simultaneously improve performance and wring out

unnecessary operation and maintenance, and capital expense across our

entire business, met our announced goal of $300 million of total program,

after-tax cash savings during 2004. Jack Skolds, Frank Clark, Denis O’Brien

and Ruth Ann Gillis have been engaged in an all-out effort to bring The

Exelon Way to our energy delivery business by adapting and applying the

nuclear management model to the wires business by the end of this year.

We are focused on the fundamentals of productivity improvement, cost

management and operational excellence. Similarly, Pam Strobel and her

team have captured significant savings in Business Services through

aggressive management of IT and the Supply Chain.

We have steadily improved our balance sheet. Bob Shapard and Barry Mitchell

have overseen the retirement of over $1.2 billion of long-term debt and

preferred stock in 2004, as well as over $700 million in transition debt. We

also made substantial progress in efforts to strengthen ComEd’s balance sheet.

As a consequence, debt as a percentage of total capitalization continues

to decrease, interest coverage continues to strengthen, cash flow continues

to improve and shareholders’ equity increased by over $900 million in 2004.

We also have liquidated most of our unprofitable business ventures.

Thanks to the efforts of George Gilmore and his team, we completed the

sale of substantially all remaining Enterprises businesses. Moreover, we

completed the sale of Boston Generating back to its lenders, which eliminated

approximately $1.0 billion of outstanding debt from our balance sheet, and

completed the sale of most of the remaining Sithe assets to Dynegy at the

end of January 2005.

And finally, we are determined to more effectively engage our employees

in this ongoing effort to make Exelon the best electricity and gas company

in the country. We recognize that our efforts to improve productivity and

financial performance have placed great demands upon our workforce. We

do understand the stress caused by doing more with less. Our employees

participate in a generous compensation system, one that includes annual

bonuses tied to earnings and operating performance. They also enjoy one of

the most competitive benefit programs in the nation, including pension plans

that are being greatly strengthened by almost $2.0 billion in contributions

made possible by our improved financial condition. But if we are to enlist

their active participation, we must also offer them greater consideration,

and more consistent respect, even as we seek to change the work culture.

Gary Snodgrass and his HR team are constantly looking for ways to improve

employee engagement, to give our employees not only a stake, but even

more important a sense of pride, in all that we have accomplished.

making competition work

We remain deeply committed to competitive wholesale markets. Thanks to

the tireless efforts of Betsy Moler and her team, ComEd has now successfully

joined PECO in PJM, the foremost regional transmission organization in the

country. Every month, PJM member companies do in excess of 1 million

wholesale transactions, making PJM the largest market of its kind in the world.

Joining PJM has dramatically enhanced competitive opportunities for our

midwestern generation resources, deepening our trading opportunities and

increasing our control over production costs.

Our PJM membership also has facilitated the development of an effective

procurement strategy for our Illinois residential customers. In 2003, Exelon

attempted to extend Exelon Generation’s role as the sole source provider for

ComEd’s regulated residential customers. That proposal did not succeed, in

part, because competitors and consumer advocates wanted to ensure that

We do not foresee a
clean, or simple future.
But we would not
trade our platform
with any other utility.

residential customers received electricity at prices that more directly

reflected the wholesale price of power. After an extensive stakeholder

process, the Illinois Commerce Commission staff and many stakeholders

have now recommended an auction process, similar to that employed in

New Jersey, to accomplish that result. Our participation in the larger PJM

market makes that auction far more effective for our customers.

And we continue our effort to develop an effective environmental strategy.

Our nuclear fleet should be seen as a great asset in a time of tightening

environmental requirements. While we are the fourth largest generator

nationwide, among our peer group we rank dead last in total CO2 emissions,

dead last in total NOX emissions, and next to last in SO2 emissions. The

significance of our low emissions profile can only grow as policy makers

worldwide take action to address clean air and global climate issues. Yet

because of the government’s continuing delays in resolving the high-level

waste issue, nuclear is too often discounted as a future generation source.

I am pleased to report that the National Commission on Energy Policy, which

I co-chaired, recognized the important role that nuclear can play in addressing

both future energy and environmental needs in its recently published report

“Ending the Energy Stalemate: A Bipartisan Strategy to Meet America’s

Energy Challenges.”

leading the way

As we look to the future, we know many things. We know that fundamental

utility obligations remain imperative – this is still a business about providing

real service, with real assets, to real customers. We know that maintaining

our position as a low-cost provider will remain critically important. We know

that public officials will continue to demand that electricity be supplied with

high reliability at an acceptable price. We know that wholesale competition

continues to grow, and that the benefits of wholesale competition are

becoming more and more evident. And we know that ours is a mature

industry, one where growth can best be assured by increased productivity

and continued consolidation.

There are also many things that we cannot know. There are now three

competing models for the industry playing in various regions of the country,

and we do not know which, if any, will define retail business in the future.

The states in which we do business continue to support wholesale competi-

tion and are working constructively to marry wholesale competition with

regulated retail service. Other states, however, have retained or are returning

to monopolistic franchises, or integrated resource management, where

regulators make the initial decision of what the utility should buy. At least

for the foreseeable future, the state of competition will vary from state to

state and from year to year.

We have developed a robust platform for dealing with both the knowns and

the unknowns of this business. We have written-off most of the cost of our

nuclear fleet, while dramatically improving its performance and reducing

its operating costs. We have placed that fleet in a market-based generation

company that operates in competitive states. We have sold the ComEd coal

fleet, thereby creating a competitive market in Northern Illinois. By joining

ComEd with PECO in PJM, we have ensured that both our retail affiliates, and

much of our generation business, operate in a common, highly successful

competitive market.

We are dramatically extending our platform through the recently announced

PSEG merger. Acquiring PSEG satisfies both our near-term financial criteria

and our longer term strategic objectives. Once completed, the merger will

afford us greater scope, scale and cost synergies. It will assure greater diversity

of regulation and markets. Most importantly, it has the potential to deliver

years of continued growth, much as the original PECO/Unicom merger has

done. My sincere thanks to Randy Mehrberg and his Exelon team for their

efforts in putting this deal together, to Jim Ferland and the PSEG management

team for their hard work and courage, and to the Boards of both companies

for both their questions and confidence.

We do not foresee a clean, or simple future. But we would not trade our

platform with any other utility. We are Exelon, one company, with one vision,

striving to deliver exceptional service to our customers, and extraordinary

value to our shareholders.

John W. Rowe
Chairman, President and CEO
Exelon Corporation
April 4, 2005

This communication is not a solicitation of a proxy from any security holder of Exelon Corporation or
Public Service Enterprise Group Incorporated. Exelon has filed a Registration Statement on Form S-4
with the SEC (Registration No. 333-122704) containing a preliminary joint proxy statement/prospectus
regarding the proposed transaction involving Exelon Corporation and Public Service Enterprise
Group Incorporated. We urge investors and security holders to read the definitive joint proxy
statement/prospectus regarding the proposed transaction and any other relevant documents
when they become available, because they will contain important information about Exelon, PSEG
and the proposed merger. Investors and security holders will be able to obtain these materials
(when they are available) and other documents filed with the SEC free of charge at the SEC's
website www.sec.gov. In addition, a copy of the definitive joint proxy statement/prospectus
(when it becomes available) may be obtained free of charge from Exelon Shareholder Services,
10 South Dearborn Street, P.O. Box 805398, Chicago, Illinois 60680-5398, or from PSEG, Investor
Relations, 80 Park Plaza, P.O. Box 1171, Newark, New Jersey 07101-1171.

The respective directors and executive officers of Exelon and PSEG and other persons may be
deemed to be participants in the solicitation of proxies in respect of the proposed transaction.
Information regarding Exelon’s and PSEG’s directors and executive officers and other participants
in the solicitation and a description of their direct and indirect interests, by security holdings or
otherwise, is available in the preliminary joint proxy statement/prospectus contained in the
above-referenced Registration Statement on Form S-4.

Exelon strives to build exceptional value –
by becoming the best and most consistently profitable
electricity and gas company in the United States.

To succeed, we must…

> Live up to our commitments

> Perform at world-class levels

> Build value through disciplined financial management

we promise to keep the lights on >

today

tomorrow

Realizing our commitment to customers…

This is still a business about delivering real service, from real assets,
to real customers.

Exelon is a recognized nuclear and financial leader. We have the largest
and one of the better performing nuclear fleets in the country. We have
shown outstanding financial discipline. We have invested over $3 billion
in recent years in new transmission and distribution infrastructure, and
we are working every day to apply the lessons learned in nuclear and
finance to our distribution business. We still have much to do, but every
day we get better.

Exelon will be recognized as a public service leader, the nation’s foremost
electric and gas utility. While competition has changed the way we price
our generation product, it will never change our fundamental commitment
to reliable delivery service. Millions of customers depend upon us every
day, and every day we will work to improve our productivity, improve our
service, and improve our customer satisfaction.

5.2m

Each of our 5.2 million customers

looks to us for reliable service

today

Realizing our commitment to competition...

Continuous improvement and world-class performance are the keys
to success in emerging competitive markets.

Exelon is a leading proponent of regional competition. We remember
the days when cost-plus ratemaking led to increasing rates, deteriorating
service, and economic disadvantage in the regions we served. Now, we
strive every day to reduce our production costs, improve our service, and
realize world-class performance. As a consequence, average rates in our
service territories have moderated and even decreased compared to other
urban areas, and our shareholders enjoy one of the best total returns
in the industry. Competition works.

tomorrow

Exelon will be the first truly national utility. As the benefits of competition
become more apparent, wholesale competition will grow in other regions,
and Exelon will be well positioned to grow with it. Our low-cost nuclear
fleet, our financial discipline and our commitment to continuous
improvement will be an advantage for us in the emerging national market.

1st Q

Relentlessly pursue top quartile

performance in everything we do

< we promise to compete for your business

we promise to be good stewards >

today

tomorrow

Realizing our obligation to the environment...

In a world increasingly concerned about global climate change, nuclear
power will play a pivotal role.

Exelon is a good safety and environmental steward. Our accident rate in
nuclear and our OSHA recordables in Exelon Energy Delivery are among
the best in the industry. And although we rank fourth in overall generation,
our large nuclear fleet means we rank last among our peer group in
NOX emissions, last in CO2 emissions, and next to last in SO2 emissions.

Exelon will be in the forefront of industry efforts to combat global
warming. According to the National Commission on Energy Policy, the
crucial challenge of capping and ultimately reducing greenhouse gas
emissions will be considerably more difficult without nuclear. The
successful relicensing of our existing fleet, and the successful licensing
of advanced nuclear designs through the NuStart consortium, will aid
in reducing future greenhouse gas emissions, as well as our reliance on
foreign energy sources.

100%

Our goal: 100 percent compliance,

100 percent of the time

today

tomorrow

Realizing our commitment to employees...

To do more with less, employees must have a stake and a sense of pride
in what is being accomplished.

Exelon is engaged in an all-out effort to extend our nuclear success
to other parts of our business through The Exelon Way. Our goal is to
optimize the work we do, and the way we do it, and build a unified, high-
performance organization. We recognize, however, that enlisting the
enthusiasm and creativity of our employees is critical to our success. We
must listen and communicate better, and show respect most of all.

Exelon will redefine what it means to work for a utility. Just as industry
restructuring has created new opportunities for the company as a whole,
it has created new incentives for our employees as well. In a competitive
world, a successful company provides a challenging and diverse work
environment that develops and encourages employees to be their best.
It is also a place where employees are committed to improving productivity,
service and customer relations.

17,300

Engaging our entire workforce

< we promise to build a high-performance culture

we promise to keep working until we are the finest

electric and gas company in the country >

John Rowe and Jim Ferland at PSEG headquarters.

today

tomorrow

Realizing our commitment to shareholders...

The faces may change, but the Vision remains. Exelon is one Company,
with one Vision – to be the finest electric and gas company in the country.

Exelon is one of the most successful utilities in country, with the largest
nuclear fleet, a strong balance sheet, and the largest market cap in the
industry. It is also one of the most profitable, with a total return over the
past four years exceeding 70 percent. We have delivered extraordinary
value to our shareholders.

Exelon has the potential to set the standard for the industry. Our
impending merger with PSEG will afford us greater scope, scale and
cost synergies, and has the potential to deliver growth for years to come.
By combining Exelon’s nuclear and balance sheet prowess with PSEG’s
strong distribution performance and auction savvy, we have a rare
opportunity to create the finest electric and gas company in the nation.

no.1

Our goal: exceptional service,

extraordinary value

Exelon at a Glance

exelon energy delivery

exelon generation

Exelon Energy Delivery (EED) has the largest electric
customer base in the nation, serving approximately
5.2 million electric and 460,000 natural gas customer
accounts. With nearly 7,700 employees, EED distributes
approximately 125,000 gigawatt-hours of electricity
annually to customers via 55,900 circuit miles of
overhead lines and 48,300 cable miles of underground
lines. PECO Energy also provides approximately 87,000
million cubic feet of natural gas annually through
11,800 gas pipeline miles.

Operationally, 2004 was another challenging year as
hundreds of crews in both markets battled Mother Nature’s
fury, from snow storms in the winter to wind storms
in the spring and fall. In addition to keeping power on
in Northern Illinois and Philadelphia, EED Operations
employees made headlines with their generous support
of struggling hurricane-ravaged utilities in Florida. As
well, EED leadership changes were made to streamline the
organization, gain efficiencies and improve performance
across ComEd and PECO.

Through a multi-pronged approach, EED is fulfilling
promises to keep the lights on and the gas flowing that
were made in an advertising campaign shown locally in
both Chicago and Philadelphia. EED established more
than 300 common processes and procedures, including a
common Safety Rulebook. EED’s physical infrastructure
also benefited from several initiatives, including improve-
ments to the work management process and accelerating
the schedule for capacity work originally planned for 2005.
Cable faults were significantly reduced, worst-performing
feeders were replaced and hundreds of preventive mainte-
nance and upgrade measures were introduced. Operations
tackled the backlog in new businesses and took measures
to prevent any delays from happening in 2005, including
the introduction of Fix It Now (FIN) teams that will help
EED manage emergent work all year long. EED also
revamped its key leadership in several vital areas of the
company, including Customer & Marketing Services and
the Work Management Department, to ensure that its
focus is on the customer first.

In 2004, Exelon Generation worked to further integrate
its business units, tailoring them to be most profitable
during shifting market conditions.

Exelon Nuclear, with approximately 6,600 employees,
operates the largest commercial nuclear fleet in the
nation and the third largest in the world. Exelon Nuclear
represents approximately 20 percent of the U.S. nuclear
industry’s power capacity and about 3 percent of all U.S.
power generation. Through its focus on safe operations
and reliable production, Exelon Nuclear is a leader in the
nuclear power industry. In 2004, Exelon Nuclear achieved
two significant accomplishments. The nuclear fleet set
a best ever fleet capacity factor record of 97.3 percent
during the summer months of June through August.
Exelon Nuclear also obtained the Nuclear Regulatory
Commission’s approval for 20-year operating license
renewals for both Dresden and Quad Cities Stations.

Exelon Power, with approximately 650 employees,
operates the company’s fossil and hydroelectric fleet
of generating assets. With plants in Illinois, Maryland,
Massachusetts, Pennsylvania and Texas, Exelon Power
is capable of supplying approximately 8,000 megawatts
of safe, efficient, and environmentally responsible power
generation. Exelon Power’s fleet of assets complements
Exelon Nuclear’s base load units by providing reliable base
load, intermediate and peak generation while providing
Power Team with a diverse portfolio to remain flexible
in the continually changing electric-utility industry.

Exelon Power Team is the wholesale power marketing
division that focuses on optimizing the value of Exelon’s
generating portfolio while providing bulk physical power
to Exelon Energy Delivery (ComEd and PECO); Exelon
Energy, the corporation's retail energy marketing entity in
the Midwest; and other wholesale customers. Power Team
also purchases fuel for Exelon Power. Since its formation
in 1994, Power Team has had a perfect record of supplying
its customers with the product they need, when they
need it most.

exelon business services company

exelon enterprises

We have exited essentially all of our Enterprises
businesses to focus on our core utility business.

Exelon’s Business Services Company (BSC) is a direct,
wholly owned subsidiary of Exelon Corporation. With
approximately 2,000 employees, including nearly 450
employees solely providing service to ComEd and PECO,
BSC provides Exelon with overall corporate governance
services, utility-specific governance of Exelon Energy
Delivery’s shared functions, and traditional shared
services including information technology, supply
management, legal services, payroll, accounts payable
and employee benefits administration.

As a shared services organization, BSC delivers value
to Exelon’s business units and optimizes solutions for
the company as a whole. By leveraging economies of
scale, adopting best practices and implementing process
improvements, BSC provides efficiencies and cost savings in
keeping with The Exelon Way, positioning Exelon for growth.

Financially and operationally, 2004 was a banner year for
BSC. The business unit surpassed aggressive Exelon Way
savings targets from centralization of Exelon’s supply and
IT functions. It leveraged technology to improve processes,
standardized practices and managed performance across
its functions to increase overall effectiveness. To bring
more rigor to standardization efforts across BSC, the
business unit adopted the management model concept
that has been so successful at Exelon Nuclear.

One major element of The Exelon Way program was the
reorganization and consolidation of ComEd and PECO
operating functions to achieve efficiencies, economies
of scale and best practices throughout Exelon’s
utility businesses. As a result of this reorganization,
approximately 450 employees were transferred into the
services company to provide executive and centralized
management services to both ComEd and PECO. Their
focus will continue to be the standardization of utility
processes across both companies and the achievement
of synergies through consolidation of common functions.

In 2005, BSC will focus on enhancing its partnerships
with Exelon business units, employees and suppliers, as it
continues to refine and standardize operations. Its overall
goal is to provide exceptional service and unparalleled value
in supporting Exelon’s quest for world-class performance.

Strategy and Policy Committee

S. Gary Snodgrass
Executive Vice President and Chief Human Resources Officer

Elizabeth A. Moler
Executive Vice President, Government and Environmental Affairs
and Public Policy

John F. Young
Executive Vice President, Exelon and President, Exelon Generation Company

Ian P. McLean
Executive Vice President, Exelon and President, Power Team

* Oliver D. Kingsley, Jr. retired on November 1, 2004. During his 7 years with Exelon,
Oliver transformed the performance of the company’s nuclear fleet, and was
instrumental in developing the next generation of Exelon’s operational leadership.
We are grateful to Oliver for his extraordinary contributions.

pictured left to right

Robert S. Shapard
Executive Vice President and Chief Financial Officer

John W. Rowe
Chairman, President and Chief Executive Officer

Frank M. Clark
Executive Vice President & Chief of Staff, Exelon, and President, ComEd

Randall E. Mehrberg
Executive Vice President and General Counsel

Oliver D. Kingsley, Jr.*
President and Chief Operating Officer, Exelon Corporation

Pamela B. Strobel
Executive Vice President and Chief Administrative Officer, Exelon,
and President, Exelon Business Services Company

John L. Skolds
Executive Vice President, Exelon and President, Exelon Energy Delivery

John M. Palms, Ph.D.
Distinguished President Emeritus, University of South Carolina

Edgar D. Jannotta
Chairman, William Blair & Company, LLC

Edward A. Brennan
Retired Chairman and Chief Executive Officer, Sears, Roebuck and Co.

Richard L. Thomas
Retired Chairman, First Chicago NBD Corporation

Board of Directors

pictured left to right

John W. Rogers, Jr.
Chairman and Chief Executive Officer, Ariel Capital Management, LLC

Nicholas DeBenedictis
Chairman, President and Chief Executive Officer, Aqua America, Inc.

Rosemarie B. Greco
Director, Office of Health Care Reform, Commonwealth of Pennsylvania

John W. Rowe
Chairman, President and Chief Executive Officer, Exelon Corporation

G. Fred DiBona, Jr.*
President and Chief Executive Officer, Independence Blue Cross

M. Walter D’Alessio
Vice Chairman, NorthMarq Capital, Inc.

Ronald Rubin
Chairman and Chief Executive Officer, Pennsylvania Real Estate Investment Trust

Sue L. Gin
Chairman and Chief Executive Officer, Flying Food Group, LLC

Nelson A. Diaz
Partner, Blank, Rome, LLP

Bruce DeMars
Admiral (Retired), United States Navy

* Fred DiBona passed away on January 11, 2005. A tremendous asset to Exelon’s
board, Fred brought profound judgment and a delightful sense of humor to
board deliberations. He was a good friend, and will be missed.

Financial Section

25
26

Summary of Earnings and Financial Condition
Discussion of Financial Results – Exelon

Discussion of Financial Results – by Business Segment

Condensed Consolidated Financial Statements:

> Consolidated Statements of Income

> Consolidated Statements of Cash Flows

> Consolidated Balance Sheets

> Consolidated Statements of Changes in Shareholders’ Equity

> Consolidated Statements of Comprehensive Income

Management’s Report on Internal Control Over Financial Reporting

Summary of Earnings and Financial Condition

Results for 2000 reflect the effects of the merger of Exelon, Unicom and PECO on October 20, 2000. That merger was

accounted for using the purchase method of accounting with PECO as the acquiring company. Accordingly, financial results

for 2000 consist of PECO’s results for 2000 and Unicom’s results after October 20, 2000.

in millions, except for per share data

Statement of Income data:

Operating revenues

Operating income

Income before cumulative effect of changes

2004

2003

For the Years Ended December 31,
2000
2001

2002

$14,515

$15,812

$14,955

$14,918

$ 7,499

3,433

2,277

3,299

3,362

1,527

in accounting principles

$ 1,841

793

$ 1,670

$ 1,416

562

Cumulative effect of changes in accounting principles

(net of income taxes)

Net income

Earnings per average common share (diluted):

Income before cumulative effect of changes

112

(230)

$ 1,864

905

$ 1,440

$ 1,428

586

in accounting principles

2.75

1.21

2.57

2.19

1.38

Cumulative effect of changes in accounting principles

(net of income taxes)

Net income

Dividends per common share

Average shares of common stock outstanding – diluted

0.03

2.78

1.26

669

0.17

1.38

0.96

657

(0.35)

2.22

0.88

649

0.02

2.21

0.91

645

0.06

1.44

0.46

408

in millions

Balance Sheet data:

Current assets

Property, plant and equipment, net

Noncurrent regulatory assets

Goodwill

Other deferred debits and other assets

Total assets

Current liabilities

Long-term debt, including long-term debt to financing trusts (a)

Regulatory liabilities

Other deferred credits and other liabilities

Minority interest

Preferred securities of subsidiaries (a)

Shareholders’ equity

2004

2003

2002

2001

December 31,
2000

$ 3,926

$ 4,561

$ 4,125

$ 3,735

$ 4,151

21,482

20,630

17,957

14,665

15,914

4,790

4,705

7,867

5,226

4,719

6,800

5,546

4,992

5,249

5,774

5,335

5,460

6,045

5,186

5,378

$42,770

$41,936

$37,869

$34,969

$36,674

$ 4,882

$ 5,720

$ 5,874

$ 4,370

$ 4,993

12,148

2,204

13,984

13,489

1,891

12,246

–

13,127

12,879

12,958

486

9,968

595

225

8,749

613

1,888

8,959

630

9,423

8,503

7,742

8,102

7,215

Total liabilities and shareholders’ equity

$42,770

$41,936

$37,869

$34,969

$36,674

(a) The mandatorily redeemable preferred securities of ComEd and PECO were reclassified as long-term debt to financing trusts in 2003 in accordance with FIN 46-R

(revised December 2003), “Consolidation of Variable Interest Entities” (FIN 46-R) and FIN 46, “Consolidation of Variable Interest Entities” (FIN 46).

EXELON CORPORATION AND SUBSIDIARY COMPANIES

Discussion of Financial Results – Exelon

Results of Operations

in millions, except for per share data

Operating revenues

Purchased power and fuel expense

Impairment of Boston Generating, LLC long-lived assets

Operating and maintenance expense

Depreciation and amortization expense

Operating income

Other income and deductions

Income before income taxes, minority interest and cumulative effect

of changes in accounting principles

Income taxes

Income before cumulative effect of changes in accounting principles

Net income

Diluted earnings per share

2004

2003

$14,515

$15,812

5,082

–

3,976

1,305

3,433

6,375

945

4,508

1,126

2,277

(921)

(1,148)

2,512

692

1,841

1,864

2.78

1,129

331

793

905

1.38

Favorable
(Unfavorable)
Variance

$(1,297)

1,293

945

532

(179)

1,156

227

1,383

(361)

1,048

959

1.40

Net Income. Net income for 2004 reflects income of $32 million, net of income taxes, for the adoption of FIN 46-R, partially offset

by a loss of $9 million, net of income taxes, related to the adoption of Emerging Issues Task Force (EITF) Issue No. 03-16,

“Accounting for Investments in Limited Liability Companies” (EITF 03-16). Net income for 2003 reflects income of $112 million,

net of income taxes, for the adoption of SFAS No. 143, “Accounting for Asset Retirement Obligations” (SFAS No. 143). See

Note 1 of Exelon’s Notes to Consolidated Financial Statements within its 2004 Form 10-K for further information regarding the

adoptions of FIN 46-R, EITF 03-16 and SFAS No. 143.

Operating Revenues. Operating revenues decreased primarily due to decreased revenues at Enterprises due to the sale of the

majority of its businesses since the third quarter of 2003, the sale of Boston Generating and Generation’s adoption of EITF No.

03-11, “Reporting Realized Gains and Losses on Derivative Instruments That Are Subject

to FASB Statement No. 133,

‘Accounting for Derivative Instruments and Hedging Activities,’ and Not ‘Held for Trading Purposes’ as Defined in EITF Issue

No. 02-3, ‘Issues Involved in Accounting for Derivative Contracts Held for Trading Purposes and Contracts Involved in Energy

Trading and Risk Management Activities’” (EITF 03-11) in the first quarter of 2004, which changed the presentation of certain

power transactions and decreased 2004 operating revenues by $980 million. The adoption of EITF 03-11 had no impact on net

income. Operating revenues were favorably affected by Generation’s acquisition of the remaining 50% of AmerGen and the

consolidation of Sithe. Operating revenues were also favorably affected by Energy Delivery’s increased volume growth and

transmission revenues collected from PJM, partially offset by unfavorable weather conditions and customer choice initiatives.

Purchased Power and Fuel Expense. Purchased power and fuel expense decreased primarily due to Generation’s adoption of

EITF 03-11 during 2004 which resulted in a decrease in purchased power expense and fuel expense of $980 million. In addi-

tion, purchased power decreased due to Generation’s acquisition of the remaining 50% of AmerGen in December 2003, which

was only partially offset by an increase in fuel expense, and the sale of Boston Generating. Purchased power represented 24%

of Generation’s total supply in 2004 compared to 37% in 2003. Purchased power also decreased due to Energy Delivery’s

unfavorable weather conditions and customer choice initiatives, partially offset by volume growth and transmission costs paid

to PJM.

Impairment of the Long-Lived Assets of Boston Generating. Generation recorded a $945 million charge (before income taxes)

during 2003 to impair the long-lived assets of Boston Generating.

EXELON CORPORATION AND SUBSIDIARY COMPANIES

Discussion of Financial Results – Exelon

(continued)

Operating and Maintenance Expense. Operating and maintenance expense decreased primarily as a result of decreased

expenses at Enterprises due to the sale of the majority of its businesses since the third quarter of 2003 and decreased

severance and severance-related expenses, partially offset by increased expenses at Generation due to the acquisition of the

remaining 50% of AmerGen and the consolidation of Sithe. Operating and maintenance expense increased $65 million due to

investments in synthetic fuel-producing facilities made in the fourth quarter of 2003 and the third quarter of 2004.

Depreciation and Amortization Expense. The increase in depreciation and amortization expense was primarily due to additional

plant placed in service at Energy Delivery and Generation, the acquisition of the remaining 50% in AmerGen in December

2003, the consolidation of Sithe and the recording and subsequent impairment of an asset retirement cost (ARC) at Generation

in 2004. See Note 14 of Exelon’s Notes to Consolidated Financial Statements within its 2004 Form 10-K for additional

information. The increase also resulted from increased amortization expense due to investments made in the fourth quarter of

2003 and the third quarter of 2004 in synthetic fuel-producing facilities and increased competitive transition charge amortization

at PECO. These increases were partially offset by reduced depreciation and amortization expense at Enterprises due to the

sale of a majority of its businesses since the third quarter of 2003.

Operating Income. Exclusive of the changes in operating revenues, purchased power and fuel expense, the impairment of

Boston Generating’s long-lived assets, operating and maintenance expense and depreciation and amortization expense

discussed above, the change in operating income was primarily the result of increased taxes other than income in 2004 as

compared to 2003, primarily due to the reduction of certain real estate tax accruals at PECO and Generation during 2003.

Other Income and Deductions. Other income and deductions reflects interest expense of $905 million, equity in losses of

unconsolidated affiliates of $153 million, debt retirement charges of $130 million (before income taxes) recorded at ComEd in

2004 associated with an accelerated liability management plan, impairment charges of $255 million (before income taxes)

recorded during 2003 related to Generation’s investment in Sithe, an $85 million gain (before income taxes) on the 2004 sale of

Boston Generating and a $35 million aggregate net gain on the sale of investments and assets of Thermal in 2004 (before in-

come taxes and net of debt prepayment penalties). Equity in earnings of unconsolidated affiliates decreased by $186 million

due to the acquisition of the remaining 50% of AmerGen in December 2003, the deconsolidation of certain financing trusts dur-

ing 2003 and investments in synthetic fuel-producing facilities made in the fourth quarter of 2003 and the third quarter of 2004.

Effective Income Tax Rate. The effective income tax rate was 27.5% for 2004 compared to 29.3% for 2003. The decrease in the

effective rate was primarily attributable to investments in synthetic fuel-producing facilities made in the fourth quarter of 2003

and the third quarter of 2004.

EXELON CORPORATION AND SUBSIDIARY COMPANIES

Discussion of Financial Results – by Business Segment

Results of Operations by Business Segment

The comparisons of 2004 and 2003 operating results set forth below include intercompany transactions, which are eliminated in

Exelon’s consolidated financial statements.

Transfer of Exelon Energy Company from Enterprises to Generation. Effective January 1, 2004, Enterprises’ competitive retail

sales business, Exelon Energy Company, was transferred to Generation. The 2003 information related to the Enterprises and

Generation segments discussed below has been adjusted to reflect

the transfer of Exelon Energy Company from the

Enterprises segment to the Generation segment. Exelon Energy Company’s 2003 results were as follows:

in millions

Total revenues

Intersegment revenues

Operating revenue and purchased power from affiliates

Depreciation and amortization

Operating expenses

Interest expense

Loss before income taxes

Income taxes

Net loss

Income (Loss) Before Cumulative Effect of Changes in Accounting Principles by Business Segment

$834

209

857

(29)

(11)

(18)

2004

2003

Favorable
(Unfavorable)
Variance

$1,128

$1,170

$ (42)

641

(13)

(259)

(117)

(1)

900

104

$1,841

$ 793

$1,048

2004

2003

$1,128

$1,175

673

(22)

(151)

(118)

(1)

$1,864

$ 905

Favorable
(Unfavorable)
Variance

$ (47)

824

$959

in millions

Energy Delivery

Generation

Enterprises

Corporate

Total

Net Income (Loss) by Business Segment

in millions

Energy Delivery

Generation

Enterprises

Corporate

Total

EXELON CORPORATION AND SUBSIDIARY COMPANIES

Discussion of Financial Results – Energy Delivery

Results of Operations – Energy Delivery

in millions

Operating revenues

Operating expenses

Purchased power and fuel expense

Operating and maintenance

Depreciation and amortization

Taxes other than income

Total operating expense

Operating income

Other income and deductions

Interest expense

Distributions on mandatorily redeemable preferred securities

Equity in losses of unconsolidated affiliates

Other, net

Total other income and deductions

Income before income taxes and cumulative effect of a change

in accounting principle

Income taxes

Income before cumulative effect of a change in accounting principle

Cumulative effect of a change in accounting principle

2004

2003

Favorable
(Unfavorable)
Variance

$10,290

$10,202

$ 88

4,760

1,444

928

527

7,659

2,631

(672)

(3)

(44)

(78)

4,597

1,669

873

440

7,579

2,623

(747)

(39)

–

(797)

(735)

1,834

706

1,128

–

1,888

718

1,170

(163)

225

(55)

(87)

(80)

(44)

(129)

(62)

(54)

(42)

(5)

Net income

$ 1,128

$ 1,175

$ (47)

Energy Delivery’s net income in 2004 decreased primarily due to costs associated with ComEd’s accelerated retirement of

long-term debt, reflected in other income and deductions – other, net, offset in part by lower interest expense. Operating

income, while reflecting various changes in operating revenues and expenses, was relatively unchanged between periods.

EXELON CORPORATION AND SUBSIDIARY COMPANIES

Discussion of Financial Results – Generation

Results of Operations – Generation

As previously described, effective January 1, 2004, Exelon contributed its interest in Exelon Energy Company to Generation.

Exelon Energy Company was previously reported as a part of the Enterprises segment. For comparative discussion and

analysis, Exelon Energy Company’s results of operations have been included within Generation’s results of operations as if this

transfer had occurred on January 1, 2003.

2004

2003

Favorable
(Unfavorable)
Variance

$7,938

$8,760

$ (822)

2,325

1,845

2,273

–

294

171

6,908

1,030

(167)

(14)

143

3,630

2,115

1,886

945

201

121

8,898

(138)

(89)

(267)

1,305

270

(387)

945

(93)

(50)

1,990

1,168

(78)

(63)

410

269

1,437

(562)

875

900

(76)

in millions

Operating revenues
Operating expenses

Purchased power

Fuel

Operating and maintenance

Impairment of Boston Generating, LLC long-lived assets

Depreciation and amortization

Taxes other than income

Total operating expense

Operating income (loss)

Other income and deductions

Interest expense

Equity in earnings (losses) of unconsolidated affiliates

Other, net

Total other income and deductions

(38)

(307)

Income (loss) before income taxes, minority interest, and cumulative effect

of changes in accounting principles

Income taxes

Income (loss) before minority interest and cumulative effect of changes

in accounting principles

Minority interest

Income (loss) before cumulative effect of changes in accounting principles

Cumulative effect of changes in accounting principles (net of income taxes)

992

372

620

641

(445)

(190)

(255)

(4)

(259)

108

Net income (loss)

$ 673

$ (151)

$ 824

Generation’s net income in 2004 increased from 2003 due to a number of factors. The increase in Generation’s 2004 net

income was driven primarily by charges incurred in 2003 for the impairment of the long-lived assets of Boston Generating of

$945 million (before income taxes) and the impairment and other transaction-related charges of $280 million (before income

taxes) related to Generation’s investment in Sithe. Also, 2004 results were favorably affected by the acquisition of the remaining

50% of AmerGen and an increase in revenue, net of purchased power and fuel expense, primarily due to the decrease in aver-

age realized costs resulting from the increased success in the hedging program of fuel costs in 2004.

Cumulative effect of changes in accounting principles recorded in 2004 included a benefit of $32 million, net of income

taxes, related to the adoption of FIN 46-R and in 2003 included income of $108 million, net of income taxes, related to the

adoption of SFAS No. 143.

EXELON CORPORATION AND SUBSIDIARY COMPANIES

Discussion of Financial Results – Enterprises

Results of Operations – Enterprises

As previously described, effective January 1, 2004, Enterprises contributed its interest

in Exelon Energy Company to

Generation. Exelon Energy Company was previously reported as a part of the Enterprises segment. For comparative discussion

and analysis, the results of Exelon Energy Company have been excluded from Enterprises’ 2003 results of operations dis-

cussed below.

in millions

Operating revenues

Operating and maintenance expense

Operating loss

Loss before income taxes, minority interest and cumulative effect

of changes in accounting principles

Loss before cumulative effect of changes in accounting principles

Net loss

2004

$155

211

(62)

(7)

(13)

(22)

2003

$ 923

1,027

(139)

(187)

(117)

(118)

Favorable
(Unfavorable)
Variance

$(768)

816

180

104

The decrease in Enterprises’ net loss before cumulative effect of changes in accounting principles in 2004 was primarily due to

a decrease in operating and maintenance expense, partially offset by a decrease in operating revenues. Depreciation and

amortization expense decreased $23 million before income taxes from 2003 to 2004 primarily as a result of the sale of the

majority of property, plant and equipment since September 2003. In 2004, Enterprises recorded impairment charges of invest-

ments of $15 million before income taxes due to other-than-temporary declines in value, partially offset by 2003 charges for

impairment of investments of $46 million before income taxes and a net impairment of other assets of $8 million before income

taxes. The adoption of EITF 03-16 increased the 2004 net loss by $9 million. The adoption of SFAS No. 143 increased the 2003

net loss by $1 million, net of income taxes.

EXELON CORPORATION AND SUBSIDIARY COMPANIES

Exelon Corporation

Consolidated Statements of Income

in millions, except per share data

Operating revenues

Operating expenses

Purchased power

Purchased power from AmerGen Energy Company, LLC

Fuel

Impairment of Boston Generating, LLC long-lived assets

Operating and maintenance

Depreciation and amortization

Taxes other than income

Total operating expenses

Operating income

Other income and deductions

Interest expense

Interest expense to affiliates

Distributions on preferred securities of subsidiaries

Equity in earnings (losses) of unconsolidated affiliates
Other, net

Total other income and deductions

Income before income taxes, minority interest and cumulative effect

of changes in accounting principles

Income taxes

Income before minority interest and cumulative effect of changes

in accounting principles

Minority interest

Income before cumulative effect of changes in accounting principles

Cumulative effect of changes in accounting principles (net of income taxes of

$17, $69 and $(90) in 2004, 2003 and 2002, respectively)

Net income

Average shares of common stock outstanding

Basic

Diluted

Earnings per average common share – basic:

Income before cumulative effect of changes in accounting principles

Cumulative effect of changes in accounting principles

Net income

Earnings per average common share – diluted:

Income before cumulative effect of changes in accounting principles

Cumulative effect of changes in accounting principles

Net income

Dividends per common share

For the Years Ended December 31,
2002
2003

2004

$14,515

$15,812

$14,955

2,727

–

2,355

–

3,976

1,305

719

3,459

382

2,534

945

4,508

1,126

581

3,262

273

1,727

–

4,345

1,340

709

11,082

13,535

11,656

3,433

2,277

3,299

(548)

(357)

(3)

(153)
140

(921)

2,512

692

1,820

1,841

$ 1,864

661

669

(869)

(12)

(39)

33
(261)

(1,148)

1,129

331

798

(5)

793

112

905

651

657

(964)

(2)

(45)

80
304

(627)

2,672

998

1,674

(4)

1,670

(230)

$ 1,440

645

649

2.79

0.03

1.22

0.17

2.59

(0.36)

2.82

1.39

2.23

2.75

0.03

2.78

1.26

1.21

0.17

1.38

0.96

2.57

(0.35)

2.22

0.88

The information in the Consolidated Statements of Income shown above is a replication of the information in the Consolidated Statements of Income in Exelon’s 2004 Form
10-K. For complete consolidated financial statements, including notes, please refer to pages 134 through 224 of Exelon’s 2004 Form 10-K filed with the Securities and
Exchange Commission (SEC). See also management’s discussion and analysis of financial condition and results of operation, which includes a discussion of critical
accounting policies and estimates, on pages 46 through 130 of Exelon’s 2004 Form 10-K filed with the SEC.

EXELON CORPORATION AND SUBSIDIARY COMPANIES

Exelon Corporation

Consolidated Statements of Cash Flows

in millions
Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash flows provided by operating activities:

For the Years Ended December 31,
2002
2003
2004

$ 1,864

905

$ 1,440

Depreciation, amortization and accretion, including nuclear fuel
Other decommissioning-related activities
Cumulative effect of changes in accounting principles (net of income taxes)
Impairment of investments
Impairment of goodwill and other long-lived assets
Deferred income taxes and amortization of investment tax credits
Provision for uncollectible accounts
Equity in (earnings) losses of unconsolidated affiliates
(Gains) losses on sales of investments and wholly owned subsidiaries
Net realized (gains) losses on nuclear decommissioning trust funds
Other non-cash operating activities
Changes in assets and liabilities

Accounts receivables
Inventories
Other current assets
Accounts payable, accrued expenses and other current liabilities
Income taxes
Net realized and unrealized mark-to-market and hedging transactions
Pension and non-pension postretirement benefits obligations
Other noncurrent assets and liabilities
Net cash flows provided by operating activities
Cash flows from investing activities

Capital expenditures
Proceeds from liquidated damages
Proceeds from nuclear decommissioning trust fund sales
Investment in nuclear decommissioning trust funds
Collection of other notes receivable
Proceeds from sales of investments and wholly owned subsidiaries
Proceeds from sales of long-lived assets
Acquisitions of businesses, net of cash acquired
Investments in synthetic fuel-producing facilities
Change in restricted cash
Net cash increase from consolidation of Sithe Energies, Inc.
Other investing activities

Net cash flows used in investing activities
Cash flows from financing activities

Issuance of long-term debt
Retirement of long-term debt
Issuance of long-term debt to financing affiliates
Retirement of long-term debt to financing affiliates
Change in short-term debt
Issuance of mandatorily redeemable preferred securities
Retirement of mandatorily redeemable preferred securities
Payment on acquisition note payable to Sithe Energies, Inc.
Retirement of preferred stock
Dividends paid on common stock
Proceeds from employee stock plans
Purchase of treasury stock
Contribution from minority interest of consolidated subsidiary
Other financing activities

Net cash flows used in financing activities
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents, including cash held for sale
Cash classified as held for sale on the consolidated balance sheet
Cash and cash equivalents at end of period

1,933
169
(23)
10
1
202
87
153
(162)
(72)
(24)

(123)
(60)
79
173
293
49
(270)
119
4,398

(1,921)
–
2,320
(2,587)
59
329
52
–
(56)
55
19
(6)
(1,736)

232
(1,629)
–
(728)
164
–
–
(27)
–
(831)
240
(82)
–
34
(2,627)
35
493
528
–
528

1,681
37
(112)
309
990
(36)
94
(33)
25
16
18

102
(54)
(68)
(74)
(271)
(10)
(144)
9
3,384

(1,954)
92
2,341
(2,564)
35
263
10
(272)
–
(92)
–
32
(2,109)

3,015
(2,922)
103
–
(355)
200
(250)
(446)
(50)
(620)
181
–
–
(96)
(1,240)
35
469
504
11
493

1,701
–
230
41
–
278
129
(80)
(199)
32
101

(357)
(37)
45
43
288
18
(165)
134
3,642

(2,150)
–
1,612
(1,824)
(35)
287

(445)
–
(24)
–
17
(2,562)

1,223
(2,134)
–
–
321
–
(18)
–
–
(563)
75
–
43
(43)
(1,096)
(16)
485
469
–
469

The information in the Consolidated Statements of Cash Flows shown above is a replication of the information in the Consolidated Statements of Cash Flows in Exelon’s
2004 Form 10-K. For complete consolidated financial statements, including notes, please refer to pages 134 through 224 of Exelon’s 2004 Form 10-K filed with the SEC.
See also management’s discussion and analysis of financial condition and results of operation, which includes a discussion of critical accounting policies and estimates,
on pages 46 through 130 of Exelon’s 2004 Form 10-K filed with the SEC.

EXELON CORPORATION AND SUBSIDIARY COMPANIES

Exelon Corporation

Consolidated Balance Sheets

in millions

Assets

Current assets

Cash and cash equivalents

Restricted cash and investments

Accounts receivable, net

Customer

Other

Mark-to-market derivative assets

Inventories, at average cost

Fossil fuel

Materials and supplies

Notes receivable from affiliate

Deferred income taxes

Assets held for sale

Other

Total current assets

Property, plant and equipment, net

Deferred debits and other assets

Regulatory assets

Nuclear decommissioning trust funds

Investments

Goodwill

Mark-to-market derivative assets

Other

Total deferred debits and other assets

Total assets

December 31,
2003

2004

528

493

1,649

1,567

409

403

230

312

–

296

3,926

676

337

212

310

122

242

413

4,561

21,482

20,630

4,790

5,262

804

4,705

383

1,418

5,226

4,721

955

4,719

133

991

17,362

16,745

$42,770

$41,936

The information in the Consolidated Balance Sheets shown above is a replication of the information in the Consolidated Balance Sheets in Exelon’s 2004 Form 10-K. For
complete consolidated financial statements, including notes, please refer to pages 134 through 224 of Exelon’s 2004 Form 10-K filed with the SEC. See also manage-
ment’s discussion and analysis of financial condition and results of operation, which includes a discussion of critical accounting policies and estimates, on pages 46
through 130 of Exelon’s 2004 Form 10-K filed with the SEC.

EXELON CORPORATION AND SUBSIDIARY COMPANIES

in millions

Liabilities and shareholders’ equity

Current liabilities

Commercial paper

Note payable to Sithe Energies, Inc.

Long-term debt due within one year

Long-term debt to ComEd Transitional Funding Trust and PECO Energy Transitional Trust

due within one year

Accounts payable

Mark-to-market derivative liabilities

Accrued expenses

Liabilities held for sale

Other

Total current liabilities

Long-term debt

Long-term debt due to ComEd Transitional Funding Trust and PECO Energy Transitional Trust

Long-term debt to other financing trusts

Deferred credits and other liabilities

Deferred income taxes

Unamortized investment tax credits

Asset retirement obligations

Pension obligations

Non-pension postretirement benefits obligations

Spent nuclear fuel obligation

Regulatory liabilities

Mark-to-market derivative liabilities

Other

Total deferred credits and other liabilities

Total liabilities

Commitments and contingencies

Minority interest of consolidated subsidiaries

Preferred securities of subsidiaries

Shareholders’ equity

Common stock (No par value, 1,200 shares authorized, 666.7 and 656.4 shares outstanding

at December 31, 2004 and 2003, respectively)

Treasury stock, at cost (2.5 shares held at December 31, 2004)

Retained earnings

Accumulated other comprehensive loss

Total shareholders’ equity

Total liabilities and shareholders’ equity

Exelon Corporation

Consolidated Balance Sheets

December 31,
2003

2004

490

326

–

427

486

1,255

598

1,143

–

483

4,882

7,292

4,311

545

4,488

275

3,981

1,993

1,065

878

2,204

323

981

1,385

470

1,238

584

1,260

306

5,720

7,889

5,055

545

4,320

288

2,997

1,668

1,053

867

1,891

141

912

16,188

33,218

14,137

33,346

–

7,598

(82)

3,353

(1,446)

9,423

7,292

–

2,320

(1,109)

8,503

$42,770

$41,936

EXELON CORPORATION AND SUBSIDIARY COMPANIES

Exelon Corporation

Consolidated Statements of Changes in Shareholders’ Equity

Dollars in millions, shares in thousands

Issued
Shares

Common
Stock

Treasury
Stock

Deferred
Compensation

Retained
Earnings

Accumulated
Other
Comprehensive
Loss

Total
Shareholders’
Equity

Balance, December 31, 2001

642,014 $6,961

$ –

$(2) $1,169

(26)

Net income

Long-term incentive plan activity

Employee stock purchase plan issuances

Amortization of deferred compensation

Common stock dividends declared

Other comprehensive loss, net of

income taxes of $(850)

–

4,098

514

–

Balance, December 31, 2002

646,626

7,059

Net income

Long-term incentive plan activity

Employee stock purchase plan issuances

Amortization of deferred compensation

Common stock dividends declared

Redemption premium on PECO preferred stock

Other comprehensive income, net of

income taxes of $217

–

9,322

418

–

222

–

Balance, December 31, 2003

656,366

7,292

Net income

Long-term incentive plan activity

Employee stock purchase plan issuances

–

10,013

309

–

296

–

Common stock purchases

Common stock dividends declared

Adjustments to accumulated other

comprehensive loss due to the

consolidation of Sithe

Other comprehensive loss, net of

income taxes of $(190)

–

(82)

–

$8,102

1,440

(567)

–

(1,332)

(1,358)

(1,332)

7,742

–

249

(1,109)

–

905

222

(625)

(2)

249

8,503

1,864

296

(82)

(831)

–

(6)

(331)

–

1,440

–

(567)

–

(1)

2,042

905

–

(625)

(2)

–

2,320

1,864

–

(831)

–

Balance, December 31, 2004

666,688 $7,598

$(82)

$ – $3,353

$(1,446)

$9,423

The information in the Consolidated Statements of Changes in Shareholders’ Equity shown above is a replication of the information in the Consolidated Statements of
Changes in Shareholders’ Equity in Exelon’s 2004 Form 10-K. For complete consolidated financial statements, including notes, please refer to pages 134 through 224 of
Exelon’s 2004 Form 10-K filed with the SEC. See also management’s discussion and analysis of financial condition and results of operation, which includes a discussion
of critical accounting policies and estimates, on pages 46 through 130 of Exelon’s 2004 Form 10-K filed with the SEC.

EXELON CORPORATION AND SUBSIDIARY COMPANIES

in millions

Net income

Other comprehensive income (loss)

Consolidated Statements of Comprehensive Income

Exelon Corporation

For the Years Ended December 31,
2002
2003
2004

$1,864

$ 905

$ 1,440

Minimum pension liability, net of income taxes of $(228), $16 and $(597), respectively

(392)

SFAS No. 143 transition adjustment, net of income taxes of $167

Change in net unrealized gain (loss) on cash-flow hedges, net of

income taxes of $6, $5 and $(129), respectively

Foreign currency translation adjustment, net of income taxes of $1, $0 and $0, respectively

Unrealized gain (loss) on marketable securities, net of income taxes of

$31, $29 and $(124), respectively

Total other comprehensive income (loss)

Total comprehensive income

–

(331)

168

249

(1,007)

–

(193)

–

(132)

(1,332)

$1,533

$1,154

108

The information in the Consolidated Statements of Comprehensive Income shown above is a replication of the information in the Consolidated Statements of Compre-
hensive Income in Exelon’s 2004 Form 10-K. For complete consolidated financial statements, including notes, please refer to pages 134 through 224 of Exelon’s 2004
Form 10-K filed with the SEC . See also management’s discussion and analysis of financial condition and results of operation, which includes a discussion of critical
accounting policies and estimates, on pages 46 through 130 of Exelon’s 2004 Form 10-K filed with the SEC.

EXELON CORPORATION AND SUBSIDIARY COMPANIES

Management’s Report on Internal Control Over Financial Reporting

The management of Exelon Corporation (Exelon) is responsible for establishing and maintaining adequate internal control over

financial reporting. Exelon’s internal control over financial reporting is a process designed to provide reasonable assurance

regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance

with accounting principles generally accepted in the United States of America.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, pro-

jections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate

because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Exelon’s management conducted an assessment of the effectiveness of Exelon’s internal control over financial reporting as of

December 31, 2004. In making this assessment, management used the criteria in Internal Control – Integrated Framework

issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, Exelon’s

management concluded that, as of December 31, 2004, Exelon’s internal control over financial reporting was effective.

February 22, 2005

Information Derived from 2004 Form 10-K

We have presented a condensed discussion of financial results, excerpts from our consolidated financial statements and a

copy of our Management’s Report on Internal Control Over Financial Reporting in this summary annual report. A complete

discussion of our financial results and our complete consolidated financial statements, including notes, appears on pages 46

through 224 of our Form 10-K annual report for the year ended December 31, 2004. That annual report was filed with the

Securities and Exchange Commission on February 23, 2005 and can be viewed and retrieved through the Commission’s web

site at www.sec.gov or our web site at www.exeloncorp.com.

Our independent registered public accounting firm, PricewaterhouseCoopers LLP, issued a report dated February 22, 2005 on

their integrated audit of our consolidated financial statements and our internal controls over financial reporting. In their report

they expressed an unqualified opinion that those consolidated financial statements present fairly, in all material respects, the

financial position of Exelon Corporation and its subsidiaries at December 31, 2004 and 2003 and the results of their operations

and their cash flows for each of the three years in the period ended December 31, 2004 in conformity with accounting

principles generally accepted in the United States of America. They also expressed an unqualified opinion that Exelon’s

assessment, included in Management’s Report on Internal Controls Over Financial Reporting, that Exelon maintained effective

internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control – Integrated

Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all

material respects. Furthermore, they expressed an unqualified opinion that Exelon maintained, in all material respects, effective

internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control – Integrated

Framework issued by the COSO. The full text of PricewaterhouseCoopers LLP’s report can be found on pages 132 and 133 of

our 2004 Form 10-K.

Certifications

The CEO of Exelon has made the required annual certification to the New York Stock Exchange (NYSE) that Exelon is in com-

pliance with the NYSE’s listing standards. The CEO and CFO have filed with the SEC all required certifications under section

302 of the Sarbanes-Oxley Act of 2002. These certifications are filed as Exhibits 31-1 and 31-2 to Exelon’s 2004 10-K.

EXELON CORPORATION AND SUBSIDIARY COMPANIES

corporate profile

Exelon Corporation is one of the nation’s largest electric utilities with approximately 5.2 million customers and more
than $14 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 5.2 million customers in northern Illinois and Pennsylvania and gas to more than 460,000 customers
in the Philadelphia area. Exelon is headquartered in Chicago and trades on the NYSE under the ticker symbol EXC.

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investor and general information

Corporate Headquarters
Exelon Corporation
P.O. Box 805398
Chicago, IL 60680-5398

Independent Public Accountants
PricewaterhouseCoopers LLP

Website
www.exeloncorp.com

New York Stock Exchange Listing
EXC

Shareholder Inquiries
EquiServe Trust Company, N.A., is Dividend Disbursing Agent, Dividend
Reinvestment Agent and Transfer Agent for all classes of Exelon Corporation Stock.

Should you have questions or requests concerning your account, payment of
dividends, the dividend reinvestment plan or transfer of stock, you may call
toll-free, 1.866.530.8108. You may also mail your inquiry to Exelon Corporation c/o
EquiServe Trust Company, N.A., Post Office Box 43069, Providence, RI 02940-3069.
If you prefer, EquiServe provides walk-in service to Exelon shareholders at
One North State Street, Eleventh Floor, Chicago, Illinois.

The Company had approximately 167,000 holders of record of its common stock
as of December 31, 2004.

The 2004 Form 10-K Annual Report to the Securities and Exchange Commission
was filed on February 23, 2005. To obtain a copy without charge, write to
Katherine K. Combs, Vice President and Corporate Secretary, Exelon Corporation,
Post Office Box 805398, Chicago, Illinois 60680-5398.

The Company maintains a telephone information service, which enables share-
holders to obtain currently available information on financial performance,
company news and shareholder services. To use this service, please call our
toll-free number, 1.866.530.8108.

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Forward Looking Statements
Exelon’s 2004 Annual Report to Shareholders contains certain forward-looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995. These statements are based on management’s current expectations and are subject to uncertainty and changes in circumstances.
Actual results may vary materially from the expectations contained herein. The forward-looking statements herein include statements about benefits
of the proposed merger of Exelon and PSEG, integrated plans, and expected synergies, anticipated future financial and operating performance and
results of Exelon, including estimates for growth. Economic, business, competitive and/or regulatory factors affecting Exelon’s businesses generally
could cause actual results to differ materially from those described herein. For a discussion of the factors that could cause actual results to differ
materially, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations–Business Outlook and the Challenges
In Managing Our Business” in Exelon’s 2004 Form 10-K, “Risk Factors” in Exelon’s Registration Statement on Form S-4, Reg. No. 333-122704, and
Exelon’s other filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this document. Neither Exelon nor PSEG undertakes any obligation to publicly release any revisions
to these forward-looking statements to reflect events or circumstances after the date of the Annual Report.

Exelon Corporation
P.O. Box 805398
Chicago, IL 60680-5398
www.exeloncorp.com