Exelon
Annual Report 2009

Plain-text annual report

The paper utilized for the printing of this report is certified by the Forest Stewardship Council, which promotes environmentally appropriate, socially beneficial and economically viable management of the world’s forests. All the paper utilized in the production of this annual report was manufactured by Mohawk Fine Papers and contains 30% post-consumer recycled fiber. Mohawk Fine Papers purchases enough Green-e certified renewable energy certificates (RECs) to match 100% of the electricity used in its operations. Mohawk has provided the calculations below on use of 33,000 pounds of paper. E The savings derived from using this paper in lieu of virgin fiber paper is equivalent to: 95 trees preserved for the future 274 lbs. waterborne waste not created 40,372 gallons wastewater flow saved 4,467 lbs. solid waste not generated 8,795 lbs. net greenhouse gases prevented 67,320,000 BTUs energy not consumed The savings derived from choosing a paper manufactured using wind-generated electricity: This amount of wind-generated electricity is equivalent to: 14,883 lbs. air emissions not generated 16 barrels crude oil unused 1 cars off the road for one year 1,012 trees planted Exelon Corporation P.O. Box 805398 Chicago, IL 60680-5398 www.exeloncorp.com ©2010 Exelon Sustainable Performance Exelon Corporation 2009 Summary Annual Report 01 02 08 09 10 12 14 16 18 20 21 22 Introduction Letter to Shareholders Exelon’s Vision Statement Our Goals and Values Our Financial Discipline Our Operational Excellence Our Environmental Leadership Our Superior Talent Exelon at a Glance Executive Committee Board of Directors Financial Section On the cover: PECO has been displaying messages atop its headquarters since July 4, 1976. Since that time, the company has saluted local community and non-profit organizations with more than 18,000 messages. On July 4, 2009, PECO unveiled its new Crown Lights, which comprise 2 million energy-efficient LED lights. Forward-Looking Statements This report 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 2009 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; and (2) other factors discusssed in Exelon’s filings with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which apply only as of the date of this report. Exelon does not undertake any obligation to publicly release any revision to its forward-looking statements to reflect events or circumstances after the date of this report. corporate profile Exelon Corporation is one of the nation’s largest electric utilities with approximately $17 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 northern Illinois and southeastern Pennsylvania and natural gas to approximately 485,000 customers in the Philadelphia area. Exelon is headquartered in Chicago and trades on the NYSE under the ticker EXC. Shareholder Inquiries Exelon Corporation has appointed BNY Mellon Shareowner Services as its transfer agent, stock registrar, dividend disbursing agent and dividend reinvestment agent. Should you have questions concerning your registered shareholder account or the payment or reinvestment of your dividends, or if you wish to make a stock transaction or stock transfer, you may call shareholder services at BNY Mellon at the toll-free number shown to the left or access their website at www.bnymellon.com/shareowner/isd. Morgan Stanley Smith Barney administers the Employee Stock Purchase Plan (ESPP) and employee stock options. Should you have any questions concerning your employee plan shares or wish to make a transaction, you may call the toll-free numbers shown to the left or access their web site at www.benefitaccess.com. The Company had approximately 135,000 holders of record of its common stock as of Dec. 31, 2009. The 2009 Form 10-K Annual Report to the Securities and Exchange Commission was filed on Feb. 5, 2010. To obtain a copy without charge, write to Bruce G. Wilson, Senior Vice President, Deputy General Counsel, and Corporate Secretary, Exelon Corporation, Post Office Box 805398, Chicago, Illinois 60680-5398. The Company maintains a telephone information service, which enables investors to obtain currently available information on financial performance, company news and to access shareholder services at BNY Mellon. To use this service, please call our toll-free number, 1.866.530.8108. investor and general information Corporate Headquarters Exelon Corporation P.O. Box 805398 Chicago, IL 60680-5398 Transfer Agent BNY Mellon 800.626.8729 Employee Stock Purchase Plan 877.582.5113 Employee Stock Options 888.609.3534 Investor Relations Voice Mailbox 312.394.2345 Independent Public Accountants PricewaterhouseCoopers LLP Web site www.exeloncorp.com Stock Ticker EXC x i h p a r g o h t i L : g n i t n i r p / u W n o R : s o t o h p e e t t i m m o C e v i t u c e x E d n a O E C / n a h C s o m A : s o t o h p / . p r o C n o l e x E , h s e r a K d r a w o H : r o t i d e / o g a c i h C , n g i s e D s h p a r g a r a P : n g i s e d / n o l e x E 0 1 0 2 © Eighteen months ago, both presidential candidates were committed to a cap-and-trade system to address the risks of climate change. Now, that issue is caught in economic and political turmoil. So what do we really know about energy policy? We know that our energy supplies must continue to become cleaner and greener, and we know that they must become more secure. Our program, Exelon 2020, remains uniquely adapted to achieving these goals in a cost-effective way. Beyond what Exelon is doing, or can do, this nation needs a comprehensive energy policy that gives us cleaner energy, greater security and more durable jobs, and does so at the lowest possible cost: > We must reduce air pollution and the risk of climate change > We must improve our energy efficiency > We must pursue renewables and clean coal > We must build the next generation nuclear fleet > And we must do these things in a cost-effective way through the discipline and innovation of competitive markets John W. Rowe, Chairman and Chief Executive Officer To Our Shareholders In 2009, our economy struggled through one of the worst recessions in memory. Though signs of recovery have begun to appear, Exelon was challenged by the nation’s economic weakness – as was nearly every major corporation. In our case, weak demand for electricity, depressed power and commodity prices, and unfavorable weather were the headwinds into which we sailed. 2 John W. Rowe Chairman and Chief Executive Officer We were very successful in controlling the elements we can control: our operations, costs and human capital. As for the elements we could not control – the power markets, economy, weather and politics – we have been strategic, thoughtful and disciplined. While 2009 was not as good as we once hoped it would be, our results demonstrate Exelon’s ability to build sustainable performance. OUR FINANCIAL PERFORMANCE Our operating (non-GAAP) earnings* were $4.12 per diluted share, near the middle of the initial guidance range we issued in late 2008 and above the revised range we offered in October 2009. The Exelon team performed exceptionally well given the adverse economic forces that we faced. Our GAAP earnings were $4.09 per diluted share compared to $4.13 in 2008. Exelon’s stock market valuation continues to be higher than that of any other U.S. utility. Our year-end market capitalization of $32.2 billion made us 20% larger than our next closest competitor. And since the merger that created Exelon, our total return – measured as stock price appreciation plus reinvested dividends – was 120.6%. This compares to total returns of 63.8% and -5.3% for the Philadelphia Utility Index and S&P 500, respectively. Nevertheless, Exelon’s share price on December 31 was $48.87, down 12.1% from the year-end 2008 price of $55.61. In contrast, the Philadelphia Utility Index increased 4.9% in 2009 and the S&P 500 increased 23.5%. This performance disappoints me as much as it does you, and we have experienced further declines in the new year. The earnings of our largest subsidiary, Exelon Generation, are driven by electricity demand and the prices of coal and natural gas, all of which declined largely as a result of the recession. Exelon’s future earnings and share price appreciation are dependent to a large extent on those factors. But as growth returns, markets tighten and various forms of regulation impact our competitors, Exelon will be a superior investment. Our achievements garnered the attention of a variety of stakeholders. We were one of three corporations to be named by Forbes as one of “America’s Best Companies.” We were ranked seventh on BusinessWeek’s “Top 50” companies, and Electric Light & Power named Exelon its “Utility of the Year.” For the fourth straight year, we were named to the Dow Jones Sustainability North America Index in recognition of * For a reconciliation of adjusted (non-GAAP) operating earnings to GAAP (accounting principles generally accepted in the United States), see Exelon’s fourth quarter earnings release issued January 22, 2010, posted on the Investor Relations page at www.exeloncorp.com and included in the 8-K filed with the SEC on that date. 3 our economic, social and environmental performance. In a year that found many in need, our employees continued to demonstrate dedication to the communities we serve. Exelon’s “Energy for the Community” program – through which our employees donated over 57,000 hours of their time – was recognized for the second year in a row by VolunteerMatch as the Corporate Volunteer Program of the Year. Diversity Edge magazine named us a top 10 company for diverse graduates, and GI Jobs magazine recognized us as a top 50 military friendly employer. Our achievements, financial and otherwise, are due to the hard work and focus of our employees amidst potential distractions. I am deeply appreciative of their efforts. OUR OPERATING PERFORMANCE There is no better example of sustainable performance than our operating results. Our first priority is always safety, and I am very glad to report that Exelon turned in top-quartile safety performance in 2009. Our nuclear fleet, led by Chip Pardee and Mike Pacilio, again ran at world-class levels. The fleet recorded a capacity factor of 93.6%, the seventh straight year over 93%. We received license renewals for the reactors at Oyster Creek and Three Mile Island, allowing them to generate zero-emissions electricity for an additional 20 years. And we expanded the generating capacity of the fleet by approximately 70 megawatts through component replacements at Quad Cities, Dresden and Peach Bottom Stations, the first of a wave of capacity uprates at our plants. Exelon Power also performed well under the guidance of Doyle Beneby. The commercial availability of our fossil units was 93.7%, exceeding last year’s mark of 89.1%. Falling electricity demand and declining wholesale electricity prices pose a significant hurdle for our fossil units, particularly the older and less efficient coal plants in Pennsylvania. As a result, we announced in December our intention to permanently retire Cromby Station and the coal units at Eddystone Station. This decision will create between $165 million and $200 million in present value savings in the form of avoided expense and capital expenditures. The hydro facilities performed exceptionally once again, and Power added the 10-megawatt City Solar facility on the South Side of Chicago. In a year when power prices plummeted compared to the prior year, the value of Power Team’s risk management was apparent. The contracts executed and overseen by Ken Cornew, Joe Glace and their teams to hedge wholesale electricity price risk held average realized margins at Exelon Generation 4 almost flat to those in 2008, despite power prices 40% lower. Those hedges contributed to the $5.8 billion in cash from operations (non-GAAP) generated across the businesses and helped us to return $1.4 billion to shareholders through our dividend. Both PECO and ComEd continued to deliver superior operating and financial performance. Outage frequency at both companies and outage duration at ComEd were the lowest ever recorded. Customer satisfaction for both companies was also at or near record levels. While ComEd and PECO escaped the excessive heat and powerful summer storms seen in years past, the improved performance metrics are evidence that the reliability investments made by both companies are paying off. Denis O’Brien and Craig Adams at PECO and Anne Pramaggiore and Terry Donnelly at ComEd are to be commended for these accomplishments. Both delivery companies maintained their financial health through careful management of costs. PECO reduced expenses below 2008 levels, allowing it to increase its net income despite declining demand. At ComEd, Frank Clark’s diligent commitment to managing expenses, increasing revenues and improving efficiency resulted in an increase in the earned return-on-equity (ROE) from 5.5% in 2008 to 8.5% in 2009. ComEd is targeting an ROE of at least 10.0% in 2010. The weak economy required even more financial discipline than usual. A company-wide effort led by Chris Crane enabled us to not only meet our commitment to keep operating and maintenance expenses flat to 2008 levels but also to realize an additional $200 million in savings. In 2009, we completed a restructuring effort that involved the elimination of roughly 500 positions. That process was difficult for me and for our employees, but it was necessary and created much-needed efficiencies. Our focus on costs will continue in 2010. We also took steps to substantially increase our financial flexibility. The Finance group, led by Bill Von Hoene and Matt Hilzinger, took advantage of favorable interest rates to refinance $1.2 billion in debt maturing in 2011 and used $350 million in cash on hand to make a discretionary pension contribution that will decrease expected 2011 mandatory contributions by $1 billion. The Exelon Business Services Company (BSC) provided top-quality legal, information technology, supply and human resource services to the operating companies while realizing significant cost savings. Ruth Ann Gillis, Andrea Zopp, Dan Hill, Bridget Reidy, Sonny Garg and their groups performed superbly and were essential in helping to keep the lights on and the gas flowing. 5 SUSTAINING OUR PERFORMANCE We are constantly looking for ways to grow the market value of your company. At this time last year, we believed the best means to that end was the acquisition of NRG Energy, Inc. Despite offering what we viewed as a fair price for NRG, we were unable to convince its management and shareholders to support our acquisition offer. Many analysts and investors told us the price it would take to close the deal. That price would have sapped the value from the acquisition, and your board and I chose to walk away rather than overpay. In the months since, the relative valuation of the two companies has validated that decision. While I am frustrated that we did not prevail, my focus today is what it has always been – shareholder value. And the NRG transaction was far from our only option for creating sustained value for you. We are pursuing five opportunities: • First, Exelon offers the industry’s most compelling plan to bring new nuclear generation to market. Our uprate projects – up to 1,500 megawatts, 70 of which came online last year – would bring the equivalent of one new nuclear reactor online by 2017. They would come at half the cost of a new plant and with less risk because of the opportunity to defer expansion if power prices do not support it. • Second, PECO’s and ComEd’s investments in smart grid infrastructure will help modernize the delivery system while providing attractive regulated returns. The two companies plan to spend up to $725 million on advanced metering smart grid infrastructure in the coming years. PECO was one of six utilities selected to receive a $200 million federal stimulus grant. ComEd is moving forward with a pilot program on Chicago’s West Side and adjacent suburbs. • Third, we created the Exelon Transmission Company (ETC) to meet the growing need to invest in our transmission infrastructure and improve reliability, reduce congestion and move renewable energy to the country’s population centers. ETC gives us a means to operate outside our traditional footprint. It will benefit from Ian McLean’s years of experience in power markets and regional transmission organizations, Betsy Moler’s understanding of the regulatory process from her time as the head of FERC and the knowledge of dozens of transmission employees throughout the company. • Fourth, no company in our industry is better positioned to benefit from the economic recovery. Exelon Generation’s nuclear fleet remains the lowest-cost producer in the industry. It will create considerable value as the prices of natural gas and coal recover and electricity demand picks up. 6 • Fifth, no company in our industry is better positioned to prosper in a carbon-constrained world. Exelon has improved the performance of our nuclear fleet and increased its capacity. We have divested or proposed to close relatively inefficient fossil-fired plants. We have developed a unique resource plan in Exelon 2020 that would effectively eliminate our carbon footprint. As of 2009, we were on track to achieve that goal and had accomplished one-third of it—removing the equivalent of the carbon dioxide (CO2) emissions of 1 million cars. Exelon has been a leading voice supporting an efficient U.S. response to the challenges created by climate change. Accordingly, we have supported the creation of a cap-and-trade mechanism for controlling CO2 emissions. In this way, market forces would drive suppliers and customers to adopt the lowest-cost responses to reduce CO2 emissions. The outcome of climate legislation remains uncertain, but what is certain is that we are inexorably moving towards a lower-carbon society. If Congress does not act to limit carbon emissions, the EPA is determined to do so, both through its carbon regulation powers and through its other authorities with respect to air pollution. Thanks to foresight and planning, Exelon and you, our shareholders, stand to benefit from either outcome. Today’s Exelon is the combination of two large utility companies and one commodity-based generating company. The current economic and commodity environments make it a difficult time to be either – a fact reflected in our 2010 earnings forecast. We are confronted with great uncertainties about how the future will unfold. But our performance in 2009 demonstrates our ability to deliver value to our customers, employees, the communities we serve and you – our investors – in tough times as well as good ones. That is what we mean by sustainable performance. And it is what we strive for in our quest to become the best group of electric generation and electric and gas delivery companies in the United States. John W. Rowe Chairman and Chief Executive Officer Exelon Corporation March 8, 2010 7 Our Vision Exelon will be the best group of electric generation and electric and gas delivery companies in the United States –providing superior value for our customers, employees, investors and the communities we serve. Exelon City Solar, the largest urban solar power plant in the United States, is a 10-megawatt installation located on a 41-acre brownfield in Chicago’s West Pullman neighborhood. Its 32,292 solar photovoltaic panels generate 14,000 megawatt-hours of clean, reliable electricity per year. The facility was built in 2009 and began operating in early 2010. our goals > Keep the lights on and the gas flowing > Run the nuclear fleet at world-class levels > Capitalize on environmental leadership and clean nuclear energy > Create a challenging and rewarding workplace > Enhance the value of our generation > Build value through disciplined financial management our values Safety – for our employees, our customers and our communities Integrity – the highest ethical standards in what we say and what we do Diversity – in ethnicity, gender, experience and thought Respect – trust and teamwork through open and honest communication Accountability – for our commitments, actions and results Continuous improvement– stretch goals and measured results Limerick Generating Station is a nuclear power plant built on a 600-acre site located about 20 miles northwest of Philadelphia in Montgomery County. Both of Limerick’s units are boiling water reactors that together can produce enough clean, greenhouse gas emission-free energy to power more than 2 million average American homes. 10 Our Financial Discipline 2009 was again a year in which Exelon demonstrated its industry-leading financial discipline, cash flow and risk management practices. In June, the company announced an aggressive cost reduction program in the face of the economic challenges confronting our entire economy and reflecting the commodity-driven nature of Exelon Generation’s revenues. The company significantly exceeded its 2009 cost reduction goals by reducing positions and increasing efficiencies. The hedging program managed by Power Team was again at the forefront of Exelon’s ability to ensure stable cash flows despite historically low commodity and power prices. These efforts and others allowed Exelon to return approximately $1.4 billion in dividend payments to shareholders while beating our cash goals by about $700 million. We further demonstrated our discipline by walking away from our proposed acquisition of NRG Energy, Inc. We seek long-term value, but not at any price. 11 Our Operational Excellence The employees of Exelon kept the lights on and the gas flowing by delivering best-in-class performance in our generation, delivery and service companies. With the nuclear fleet performing at an industry-leading 93.6 percent capacity factor and our fossil plants performing at their highest levels since we began tracking their performance, our Generation group produced approximately 150 thousand gigawatts of power at the industry’s lowest carbon intensity. ComEd and PECO, our distribution utilities, enjoyed similar successes, with ComEd enjoying its best-ever safety performance while setting several performance records in terms of decreasing customer interruptions per month and the average duration of outages experienced by customers. PECO invested approximately $400 million in infrastructure improvements and new facilities last year and enjoyed its third-best year for outage frequencies. And Exelon Business Services Company again provided excellent services to our operating companies. Our Finance team completed its two-year Financial Transformation Implementation Program on time and on budget. Human Resources and Communications executed the complex details to accomplish major organizational change, and Supply continued its efforts to promote a more diverse supplier base throughout the Exelon family of companies while at the same time realizing $150 million in savings from renegotiated contracts. 12 In 2008, ComEd opened a state-of-the-art substation in Chicago’s West Loop. This was part of an eight-year, $350 million project that also created multiple sources of supply for other downtown Chicago substations and substantially improved reliability for downtown businesses and neighborhoods. ComEd serves 3.8 million customers in a retail service area of 11,300 square miles. 13 Conowingo is a 570-megawatt hydroelectric power plant located on the Susquehanna River in northern Maryland. Exelon wishes to maintain this virtually emissions-free generating capacity and its electrical output, and on March 12, 2009, filed a Notification of Intent with the Federal Energy Regulatory Commission to relicense Conowingo beyond its September 2014 expiration. 14 Our Environmental Leadership Exelon continued to make strong progress on Exelon 2020: a low-carbon roadmap. Less than one year after our original announcement of what is now our business and environmental plan, we announced greenhouse gas emissions reductions of over 35 percent under the U.S. Environmental Protection Agency’s Climate Leaders program. We are now one-third of the way to our 2020 goal of effectively eliminating our carbon footprint. Exelon was for the fourth consecutive year named to the Dow Jones Sustainability North America Index and redoubled advocacy efforts on climate legislation, with frequent visits to Capitol Hill and testimony before key Congressional committees. Exelon Business Services Company led the way toward a 16 percent reduction in energy use across our commercial facilities. During 2009, the U.S. Department of Energy annouced its intent to award PECO $200 million in matching grant funds under the Smart Grid Investment Program. ComEd completed year one of its consumer Smart Ideas energy efficiency program and launched its Smart Grid pilot. Exelon Nuclear announced a nuclear uprate program to expand its existing reactor fleet by up to 1,500 megawatts (MW) of new zero-emissions output and brought 70 MW on line in 2009. Exelon Power’s Chicago City Solar plant, a 10-MW facility, began operations on a former industrial site in Chicago’s West Pullman neighborhood. The plant is the largest urban solar installation in the nation. 15 Our Superior Talent The sustainable performance reported in these pages is thanks to the hard work, dedication and diligence of our 19,300 employees, who keep the lights on and the gas flowing 24 hours a day, seven days a week. While much has changed since 2008, both in the global economy and in our workforce, we have not wavered from our commitment to diversity and inclusion. With the additional focus of Exelon’s Diverse Supplier Enablement program, we are bringing our diversity and inclusion efforts to new levels of success inside and outside the company, involving community banks and minority-owned businesses at a higher level than at any point in our history. That level of excellence extends beyond the tasks involved in generating, transmitting and delivering power. Exelon’s “Energy for the Community” volunteer program was named Corporate Volunteer Program of the Year by VolunteerMatch, the second consecutive year our employees have earned this honor, thanks to their 57,000 hours of volunteering in 2009. 16 At PECO’s Transmission System Operations center in Philadelphia, operators keep close watch on the regional electric grid. PECO will spend more than $500 million on maintenance, system performance and capacity expansion projects in 2010 to maintain its reliable service to PECO customers. PECO serves 1.6 million electric customers and 485,000 natural gas customers. 17 Exelon at a Glance comed ComEd set all-time bests for fewest customer interruptions and average outage duration in 2009. ComEd customers experienced 1.2 million fewer interruptions than in 2008 and service on average was restored nearly 50 minutes faster. ComEd also continued its strong safety culture by achieving the company’s best safety performance record ever. In response to the economic downturn, ComEd reduced non-GAAP operating and maintenance expenses by more than $80 million from 2008 spending levels through cost management and efficiency initiatives. Capital expenditures in 2009 were reduced by $99 million from 2008 levels by recalibrating new business spend and system investment to align with decreased system demand. The Illinois Commerce Commission (ICC) unanimously approved the deployment of 131,000 smart meters to assess how Smart Grid technology can enhance service, help customers make informed decisions about energy use and contribute to reduced carbon emissions. ComEd’s environmental programs exceeded first-year targets with more than 160 gigawatt-hours of energy savings. These programs are on track to make ComEd an industry leader in electricity savings through energy efficiency. ComEd created an Operational Strategy and Business Intelligence organization that drove productivity and efficiency through a number of initiatives, including an enhanced service suspension model and revenue protection efforts. In July, Illinois Governor Pat Quinn signed assistance legislation that included a provision for utilities to recover actual uncollectible account expenses on an annual basis through a rider adjustment mechanism. On February 2, 2010, the ICC issued an order approving ComEd’s proposed tariffs, with minor modifications. With the ICC’s approval of the tariff, ComEd will begin collecting past due amounts in April 2010. ComEd provides service to approximately 3.8 million customers in northern Illinois. peco PECO’s continued focus on operational excellence led to record performance in 2009. Additionally, PECO achieved key milestones on regulatory fronts in the transition to competitive market pricing for generation, supported the Exelon 2020 environmental initiative and met its financial goals. 18 In operations, PECO reduced customer interruptions of electric service by 6.5 percent, experienced the fewest substation bus outages ever, and achieved the company’s best reliability performance ever (as measured by IEEE SAIFI). As part of $388 million in capital investments, PECO increased its distribution system automation, completed its Tunnel electric substation serving University City, began work on a new $55 million transmission substation in Worcester, Pa., and completed nearly 110 infrastructure improvements on its gas delivery system. Furthermore, PECO reduced its bad debt expense by $97 million compared with 2008. Also notable was a new five-year labor agreement reached with IBEW Local 614. PECO also continued to demonstrate its leadership to its regional community and the environment and raised its customer satisfaction score higher than the four previous years. In support of Exelon 2020, PECO exceeded its targets for reduction of greenhouse gases, expanded its fleet of cleaner, alternative-fueled vehicles, and made significant energy efficiency improvements at five service centers. PECO’s smart grid proposal was one of only six in the nation to receive approval of a $200 million federal stimulus grant. The company began to buy wholesale energy as part of the transition to competitive markets beginning in 2011 and secured renewable energy credits to comply with Pennsylvania’s Alternative Energy Portfolio Standard. The Pennsylvania Public Utility Commission also approved the company’s four-year “Smart Ideas” package of energy efficiency/ demand response programs to help consumers reduce peak demand and overall energy consumption. exelon generation Exelon Nuclear, the nation’s largest operator of commercial nuclear reactors, performed at world-class levels in 2009. The company’s 8,700 nuclear professionals implemented industry best practices to ensure safe, reliable operation throughout the fleet. Exelon Nuclear’s 10 generating stations with 17 reactors in the Midwest and Mid-Atlantic regions achieved an average capacity factor of 93.6 percent in 2009, the seventh consecutive year capacity factor exceeded 93 percent, and produced just over 131.3 million megawatt-hours of electricity. Exelon’s Three Mile Island Unit 1 set a new world record for Pressurized Water Reactors with a 705 day continuous run. The organization also improved its industrial safety record by 33 percent. In 2009, Exelon Nuclear contributed to Exelon 2020: a low-carbon roadmap through equipment upgrades at its Quad Cities, Dresden and Peach Bottom nuclear stations. Combined, these improvements added approximately 70 megawatts of zero-emissions electricity to the grid. The organization maintained Environmental ISO 14001 certifications at its 10 sites and achieved LEED Silver certification for a new administration building at Clinton Station. The Oyster Creek and Three Mile Island reactors received 20-year operating license extensions from the Nuclear Regulatory Commission. Exelon Nuclear also announced its intent to apply for a 20-year license extension for its Limerick Generating Station. Exelon Power’s fleet of fossil and hydroelectric units in Illinois, Maryland, Massachusetts, Pennsylvania and Texas provided over 10 million megawatt hours of reliable generation in 2009. With 105 units at 23 different sites, Exelon Power’s fleet consists of approximately 8,000 megawatts of base load, intermediate and peak power generation. In 2009, Exelon Power’s fleet reported record performance levels in unit availability, delivering on the commitment of continuous improvement and performance optimization. Exelon Power is committed to its role as an environmental leader. Efforts in 2009 included the dedication of the LEED Silver certified Renewable Energy Education Center at Fairless Hills, the second-largest landfill gas generating station in the U.S., which provides an opportunity for students and visitors to experience how electricity is produced through various alternative renewable fuels; the construction of a fish passageway at Black Rock Dam on the Schuylkill River as part of a river-wide effort to restore American Shad to the Schuylkill River by enabling their migration; and the opening of a new fishing wharf at the Conowingo Dam, which is accessible to those with disabilities and increases the ability of visitors to enjoy fishing and the ecosystem of the Lower Susquehanna River. Exelon Power Team is the wholesale power marketing division of Exelon. Its role is to manage the risk and maximize the economic value associated with Exelon’s electric generating facilities, power purchase agreements, fuel requirements, emission credits, transmission contracts and load obligations. Power Team’s wholesale marketing and transaction efforts are focused on the competitive electricity markets in several regions of the United States: the Mid-Atlantic, the Midwest, the Northeast, the Southwest and Texas. Power Team’s trade floor and headquarters are located in Kennett Square, Pa. Exelon Energy is the retail marketing arm of Exelon. It markets electricity to customers in Illinois and Pennsylvania, and natural gas to customers in Illinois, Michigan and Ohio. Exelon Energy provides a valuable retail channel-to-market for Exelon’s generation, while providing customers innovative products that can help manage risk and earn the most from the competitive energy environment. Exelon Energy’s locally-based sales representatives have a wealth of experience in energy products and services and bring a depth of knowledge to the retail energy markets it serves. exelon business services company Exelon Business Services Company, LLC (BSC), is a direct, wholly-owned subsidiary of Exelon Corporation providing quality products and services in a cost-effective manner to all Exelon companies. There are thirteen BSC practice areas: Audit and Controls, Commercial Operations Group (which includes accounts payable and payroll), Communications and Public Affairs, Corporate Strategy and Exelon 2020, Corporate Security, Corporate Development, Finance, Government Affairs and Public Policy, Human Resources, Information Technology, Legal and Governance, Real Estate and Supply. BSC’s approximately 2,200 employees in northern Illinois, Pennsylvania and other Exelon business locations deliver value by providing coordinated, cost-efficient high- quality services and developing enterprise-wide and organization-specific solutions. In 2009, BSC initiated cost-reduction actions including budget and position reductions. Service level commitments were met or exceeded across BSC even with far-reaching cost management initiatives. Of particular note was the Supply organization’s Rapid Resourcing effort, which resulted in $150 million in value to Exelon and its companies. exelon transmission company Formed in October 2009, Exelon Transmission Company is a wholly-owned subsidiary of Exelon that aims to capitalize on the growing national market for new transmission capacity. U.S. companies are projected to spend $60 billion to $100 billion on transmission development by 2020. Exelon Transmission Company will partner with utilities, transmission developers, renewable developers, regulators and others to build the next generation of reliable electric transmission in the United States. Drawing on Exelon’s deep experience, broad resources and strategic Illinois footprint, Exelon Transmission Company’s new transmission projects will improve reliability, reduce congestion and facilitate movement of low-carbon energy to markets nationwide. 19 Executive Committee John W. Rowe Chairman and Chief Executive Officer Christopher M. Crane President and Chief Operating Officer, Exelon and President and Chief Operating Officer, Exelon Generation Ian P. McLean Executive Vice President, Exelon and CEO, Exelon Transmission Company William A. Von Hoene, Jr. Executive Vice President, Finance and Legal, Exelon Frank M. Clark Chairman and Chief Executive Officer, ComEd Ruth Ann M. Gillis Executive Vice President and Chief Administrative and Diversity Officer, Exelon and President, Exelon Business Services Company Elizabeth A. Moler Executive Vice President, Government Affairs and Public Policy, Exelon Andrea L. Zopp Executive Vice President and General Counsel, Exelon Kenneth W. Cornew Senior Vice President, Exelon and President, Power Team Matthew F. Hilzinger Senior Vice President and Chief Financial Officer, Exelon Denis P. O’Brien Executive Vice President, Exelon and President and CEO, PECO 20   Board of Directors John W. Rowe Chairman and Chief Executive Officer Bruce DeMars Admiral (Retired), United States Navy Paul L. Joskow President, Alfred P. Sloan Foundation Thomas J. Ridge Former Secretary, Department of Homeland Security, Former Governor of Pennsylvania John A. Canning, Jr. Chairman, Madison Dearborn Partners, LLC Nelson A. Diaz Of Counsel, Cozen O’Connor Richard W. Mies President and Chief Executive Officer The Mies Group, Ltd. Admiral (Retired), United States Navy John W. Rogers, Jr. Chairman and Chief Executive Officer Ariel Investments, LLC M. Walter D’Alessio Vice Chairman, NorthMarq Capital, Inc. Sue L. Gin Chairman and Chief Executive Officer, Flying Food Group, LLC John M. Palms, Ph.D. Distinguished President Emeritus, University of South Carolina Stephen D. Steinour Chairman, President and Chief Executive Officer, Huntington Bancshares Incorporated Nicholas DeBenedictis Chairman, Chief Executive Officer and President Aqua America, Inc. Rosemarie B. Greco Senior Advisor to the Governor of Pennsylvania, Health Care Reform William C. Richardson, Ph.D. President and Chief Executive Officer Emeritus, W. K. Kellogg Foundation Don Thompson  President and Chief Operating Officer McDonald’s Corporation 21 Financial Section 23 25 26 28 29 30 31 32 Summary of Earnings and Financial Condition Stock Performance Graph Discussion of Financial Results – Exelon Discussion of Financial Results – by Business Segment Discussion of Financial Results – Generation Discussion of Financial Results – ComEd Discussion of Financial Results – PECO Condensed Consolidated Financial Statements: > Consolidated Statements of Operations > Consolidated Statements of Cash Flows > Consolidated Balance Sheets > Consolidated Statements of Changes in Shareholders’ Equity > Consolidated Statements of Comprehensive Income 40 Management’s Report on Internal Control Over Financial Reporting in millions, except for per share data Statement of Operations data: Operating revenues Operating income Income from continuing operations Income from discontinued operations Income before cumulative effect of changes in accounting principles Cumulative effect of changes in accounting principles (net of income taxes) Net income (a) Earnings per average common share (diluted): Income from continuing operations Income from discontinued operations Cumulative effect of changes in accounting principles (net of income taxes) Net income Dividends per common share Average shares of common stock outstanding – diluted Summary Annual Report Summary of Earnings and Financial Condition 2009 2008 For the Years Ended December 31, 2005 2006 2007 $ $ $ $ $ $ 17,318 4,750 2,706 1 2,707 – 2,707 4.09 – – 4.09 2.10 662 $ $ $ $ $ $ 18,859 5,299 2,717 20 2,737 – 2,737 4.10 0.03 – 4.13 2.03 662 $ $ $ $ $ $ 18,916 4,668 2,726 10 2,736 – 2,736 4.03 0.02 – 4.05 1.76 676 $ $ $ $ $ $ 15,655 3,521 1,590 2 1,592 – 1,592 2.35 – – 2.35 1.60 676 $ $ $ $ $ $ 15,357 2,724 951 14 965 (42) 923 1.40 0.02 (0.06) 1.36 1.60 676 (a) The changes between 2007 and 2006, and 2006 and 2005, were primarily due to the impact of the goodwill impairment charges of $776 million and $1.2 billion in 2006 and 2005, respectively. 23 Summary Annual Report Summary of Earnings and Financial Condition in millions Balance Sheet data: Current assets Property, plant and equipment, net Noncurrent regulatory assets Goodwill (a) Other deferred debits and other assets Total assets Current liabilities Long-term debt, including long-term debt to financing trusts Noncurrent regulatory liabilities Other deferred credits and other liabilities Minority interest Preferred securities of subsidiary Shareholders’ equity Total liabilities and shareholders’ equity 2009 2008(c) 2007(b),(c) 2006(b),(c) 2005(b),(c) December 31, $ 5,441 27,341 4,872 2,625 8,901 $ 49,180 4,238 $ 11,385 3,492 17,338 – 87 12,640 $ 49,180 $ 5,130 25,813 5,940 2,625 8,038 $ 47,546 3,811 $ 12,592 2,520 17,489 – 87 11,047 $ 47,546 $ 4,416 24,153 5,133 2,625 8,760 $ 45,087 5,466 $ 11,965 3,301 14,131 – 87 10,137 $ 45,087 $ 4,130 22,775 5,808 2,694 7,933 $ 43,340 4,871 $ 11,911 3,025 13,439 – 87 10,007 $ 43,340 $ 3,808 21,981 4,734 3,475 7,858 $ 41,856 5,759 $ 11,760 2,518 12,606 1 87 9,125 $ 41,856 (a) The changes between 2006 and 2005 were primarily due to the impact of the goodwill impairment charge of $776 million in 2006. (b) Exelon and Generation retrospectively reclassified certain assets and liabilities in accordance with the applicable authoritative guidance for offsetting amounts related to qualifying derivative contracts. (c) Exelon and Generation retrospectively reclassified certain asset and liabilities with respect to option premiums into the mark-to-market net asset and liability accounts to conform to the current year presentation. 24 The performance graph below illustrates a five year comparison of cumulative total returns based on an initial investment of $100 in Exelon Corporation common stock, as compared with the Standard & Poor’s (S&P) 500 Stock Index and the S&P Utility Index for the period 2005 through 2009. This performance chart assumes: • $100 invested on December 31, 2004, in Exelon Corporation common stock, in the S&P 500 Stock Index and in the S&P Utility Index; and • All dividends are reinvested. Stock Performance Graph Comparison of Five-Year Cumulative Return $250 $200 $150 $100 $0 4 0 / 2 1 5 0 / 3 5 0 / 6 5 0 / 9 5 0 / 2 1 6 0 / 3 6 0 / 6 6 0 / 9 6 0 / 2 1 7 0 / 3 7 0 / 6 7 0 / 9 7 0 / 2 1 8 0 / 3 8 0 / 6 8 0 / 9 8 0 / 2 1 9 0 / 3 9 0 / 6 9 0 / 9 9 0 / 2 1 Exelon Corporation S&P 500 S&P Utilities Exelon Corporation S&P 500 S&P Utilities 2004 $ 100.00 100.00 100.00 $ 2005 124.43 104.90 116.71 $ 2006 148.97 121.43 141.18 Value of Investment at December 31, 2009 2008 2007 $ 201.20 128.09 168.47 $ 141.09 80.77 119.73 $ 129.42 102.08 133.88 25 Discussion of Financial Results - Exelon Results of Operations (Dollars in millions, except for per share data, unless otherwise noted) Operating revenues Operating expenses Purchased power and fuel Operating and maintenance Operating and maintenance for regulatory required programs Depreciation and amortization Taxes other than income Total operating expenses Operating income Other income and deductions Interest expense Interest expense to affiliates, net Equity in losses of unconsolidated affiliates Other, net Total other income and deductions Income from continuing operations before income taxes Income taxes Income from continuing operations Income from discontinued operations, net of income taxes Net income Diluted earnings per share 2009 2008 Favorable (Unfavorable) Variance $ 17,318 $ 18,859 $ (1,541) 5,281 4,612 63 1,834 778 12,568 4,750 (654) (77) (27) 426 (332) 4,418 1,712 2,706 1 2,707 4.09 $ $ 6,582 4,538 28 1,634 778 13,560 5,299 (699) (133) (26) (407) (1,265) 4,034 1,317 2,717 20 2,737 4.13 $ $ 1,301 (74) (35) (200) – 992 (549) 45 56 (1) 833 933 384 (395) (11) (19) (30) (0.04) $ $ Exelon’s net income was $2,707 million in 2009 as compared to $2,737 million in 2008, and diluted earnings per average common share were $4.09 in 2009 as compared to $4.13 in 2008. All amounts presented below are before the impact of income tax. Exelon’s 2009 results were significantly affected by lower revenue net of purchased power and fuel expense at Generation of $411 million. This decrease was primarily due to reduced net mark-to-market gains from its hedging activities of $271 million and unfavorable portfolio and market conditions of $206 million. Additionally, Generation experienced higher nuclear fuel costs of $74 million. Partially offsetting these decreases were lower costs associated with the Illinois Settlement of $123 million. ComEd experienced higher revenue net of purchased power expense of $155 million despite unfavorable weather conditions and reduced load. Distribution pricing increased ComEd’s operating revenues by $214 million primarily due to the ICC’s September 2008 order in the 2007 distribution rate case. This increase was partially offset by the impact of current economic conditions and unfavorable weather, which reduced ComEd’s load resulting in lower revenue net of purchased power expense of $40 million and $45 million, respectively. 26 Discussion of Financial Results - Exelon PECO had a slight increase of $16 million in its revenue net of purchased power and fuel expense primarily due to increased gas distribution rates effective January 1, 2009, resulting from the settlement of 2008 rate case, which provided $77 million of additional revenues in 2009. PECO’s increased revenues also reflected the impact of lower electric distribution rates in 2008 of $22 million primarily due to the refund of the 2007 Pennsylvania Public Realty Tax Act settlement (which was completely offset in charges recorded in taxes other than income). Similar to ComEd, these increases were partially offset by the impact of current economic conditions and unfavorable weather, which reduced PECO’s load resulting in lower revenue net of purchased power and fuel expense of $69 million and $21 million, respectively. Exelon’s 2009 results were also affected by higher operating and maintenance expense at Generation. In March 2009, Generation re-evaluated the fair value of the Handley and Mountain Creek stations due to the continued decline in forward energy prices, which resulted in a $223 million impairment charge. In December 2009, Generation announced that it had notified PJM of its intention to permanently retire four fossil-fired generation units in Pennsylvania because they are no longer economic to operate and are not required to meet demand for electricity in the region. In connection with the announced retirements, Generation recorded a charge of $24 million related to exit costs as well as $32 million of accelerated depreciation. Additionally, Exelon’s pension and other postretirement benefits expense increased by $160 million in 2009 due to lower than expected pension and postretirement plan asset returns in 2008. There was also a scheduled increase in Competitive Transition Charge (CTC) amortization expense at PECO of $90 million in accordance with its 1998 restructuring settlement and increased depreciation of $69 million across the Registrants due to ongoing capital expenditures. In response to current market and economic conditions, Exelon implemented a cost savings program in 2009. This initiative included job reductions, for which Exelon recorded a $34 million charge related to severance expenses, and a $350 million discretionary contribution to Exelon’s largest pension fund, which is expected to reduce pension expense over the next ten years. PECO generated additional cost savings through enhancements to credit processes and increased collection and termination activities initiated in 2008, which reduced uncollectible accounts expense by $97 million. In addition, ComEd’s and PECO’s incremental storm-related costs decreased operating and maintenance expense by $40 million and $9 million, respectively. Exelon’s interest expense decreased by $140 million primarily due to lower outstanding debt at ComEd and PECO and lower interest rates on Generation’s Spent Nuclear Fuel obligation. Additionally, Exelon was able to capitalize on favorable capital market conditions in its refinancing of $1.2 billion of debt at Exelon and Generation originally scheduled to mature in 2011. Although this debt offering resulted in $120 million in debt extinguishment costs, it decreased Exelon’s average cost of debt while also extending the maturities of the debt. Exelon’s 2009 results were also significantly affected by nuclear decommissioning trust fund (NDT) realized and unrealized gains of $256 million in 2009 compared to realized and unrealized losses of $308 million in 2008 for the former AmerGen nuclear generating units and portions of the Peach Bottom nuclear generating units (Non-Regulatory Agreement Units) as a result of improved market performance. Finally, Exelon reassessed anticipated apportionment of its income, resulting in a change in state deferred income tax rates, and ComEd remeasured income tax uncertainties related to its 1999 sale of fossil generating assets. These two actions resulted in an aggregate non cash gain of $83 million. 27 Discussion of Financial Results - by Business Segment Results of Operations by Business Segment The comparisons of 2009 and 2008 operating results and other statistical information set forth below include intercompany transactions, which are eliminated in Exelon’s consolidated financial statements. Net Income (Loss) from Continuing Operations by Business Segment Generation ComEd PECO Other (a) Total (a) Other primarily includes corporate operations, Exelon Business Service Company, LLC (BSC), investments in synthetic fuel-producing facilities and intersegment eliminations. Net Income (Loss) by Business Segment Generation ComEd PECO Other (a) Total (a) Other primarily includes corporate operations, BSC, investments in synthetic fuel-producing facilities and intersegment eliminations. 2009 2,122 374 353 (143) 2,706 2009 2,122 374 353 (142) 2,707 $ $ $ $ $ $ $ $ Favorable (Unfavorable) Variance $ $ (136) 173 28 (76) (11) 2008 2,258 201 325 (67) 2,717 Favorable (Unfavorable) Variance $ $ (156) 173 28 (75) (30) 2008 2,278 201 325 (67) 2,737 28 Results of Operations – Generation (Dollars in millions) Operating revenues Purchased power and fuel expense Revenue net of purchased power and fuel expense Other operating expenses Operating and maintenance Depreciation and amortization Taxes other than income Total operating expenses Operating income Other income and deductions Interest expense Equity in losses of unconsolidated affiliates Other, net Total other income and deductions Income from continuing operations before income taxes Income taxes Income from continuing operations Discontinued operations Gain on disposal of discontinued operations Income from discontinued operations Net income Discussion of Financial Results - Generation Favorable (Unfavorable) Variance $ $ (1,051) 640 (211) (221) (59) (8) (288) (699) 23 (2) 845 866 167 (303) (136) (20) (20) (156) $ 2008 10,754 3,572 7,182 2,717 274 197 3,188 3,994 (136) (1) (469) (606) 3,388 1,130 2,258 20 20 2,278 $ 2009 9,703 2,392 6,771 2,938 333 205 3,476 3,295 (113) (3) 376 260 3,555 1,433 2,122 – – 2,122 $ $ Generation’s 2009 results compared to 2008 were significantly affected by lower revenue net of purchased power and fuel expense primarily due to unfavorable portfolio and market conditions, including decreased net mark-to-market gains from its hedging activities, and revenue from certain long options in Generation’s proprietary trading portfolio recorded in 2008. Additionally, Generation’s revenue net of purchased power and fuel expense was affected by gains related to the settlement of uranium supply agreements in 2008 and higher nuclear fuel costs in 2009 due to rising nuclear fuel prices. The decrease in Generation’s revenues net of purchased power and fuel expense was partially offset by lower costs related to the Illinois Settlement. Generation’s 2009 results compared to 2008 were further affected by higher operating and maintenance expenses. Higher operating and maintenance expense was primarily due to a $223 million charge associated with the impairment of the Handley and Mountain Creek stations and costs associated with the announced shut-down of three coal-fired and one dual fossil-fired generation unit in Pennsylvania. These actions were a direct result of current and future expected market conditions. Market conditions also contributed to lower than expected pension and postretirement plan asset returns in 2008, which resulted in higher pension and other postretirement benefits expense in 2009. Operating and maintenance expense increases were partially offset by the favorable results of Exelon’s companywide cost savings initiative and lower nuclear refueling outage costs. Additionally, due to a significant rebound in the financial markets, Generation experienced strong performance in its NDT funds in 2009. As a result, Generation’s earnings improved as its NDTs of the Non-Regulatory Agreement Units had significant net realized and unrealized gains in 2009 compared to significant net realized and unrealized losses in 2008. 29 Discussion of Financial Results - ComEd Results of Operations – ComEd (Dollars in millions) Operating revenues Purchased power expense Revenue net of purchased power expense Other operating expenses Operating and maintenance Operating and maintenance for regulatory required programs Depreciation and amortization Taxes other than income Total other operating expenses Operating income Other income and deductions Interest expense, net Equity in losses of unconsolidated affiliates Other, net Total other income and deductions Income before income taxes Income taxes Net income 2009 5,774 3,065 2,709 1,028 63 494 281 1,866 843 (319) – 79 (240) 603 229 374 $ $ 2008 6,136 3,582 2,554 1,097 28 464 298 1,887 667 (348) (8) 18 (338) 329 128 201 $ $ Favorable (Unfavorable) Variance $ $ (362) 517 155 69 (35) (30) 17 21 176 29 8 61 98 274 (101) 173 The increase in ComEd’s net income was driven primarily by higher revenue net of purchased power expense, reflecting increased distribution rates effective September 16, 2008, partially offset by a decline in electric deliveries, primarily resulting from unfavorable weather conditions and reduced load in 2009. In addition, ComEd’s increase in net income reflects lower operating and maintenance expenses, lower interest expense, and higher interest income related to the 2009 remeasurement of uncertain income tax positions. The reduction in operating and maintenance expense reflects Exelon’s company-wide cost savings initiative in 2009. The initiative included job reductions, for which ComEd recorded a charge for severance expense as a cost to achieve these savings. ComEd also benefited from decreased storm expenses. Operation and maintenance expense reflect increased pension and other postretirement benefits expense due to lower than expected pension and postretirement plan asset returns in 2008. In the September 2008 rate case ruling, the ICC mandated fixed asset disallowances while allowing certain regulatory assets, which were recorded as a net one-time charge in 2008. Depreciation and amortization expenses increased due to higher plant balances and new depreciation rates effective January 1, 2009. ComEd experienced a decrease in interest expense primarily due to lower outstanding debt in 2009. ComEd also recorded higher interest income related to the remeasurement in 2009 of uncertain income tax positions. 30 Results of Operations – PECO (Dollars in millions) Operating revenues Purchased power expense and fuel expense Revenue net of purchased power expense and fuel expense Other operating expenses Operating and maintenance Depreciation and amortization Taxes other than income Total other operating expenses Operating income Other income and deductions Interest expense, net Equity in losses of unconsolidated affiliates Other, net Total other income and deductions Income before income taxes Income taxes Net income Preferred stock dividends Net income on common stock Discussion of Financial Results - PECO 2009 5,311 2,746 2,565 640 952 276 1,868 697 (187) (24) 13 (198) 499 146 353 4 349 $ $ 2008 5,567 3,018 2,549 731 854 265 1,850 699 (226) (16) 18 (224) 475 150 325 4 321 $ $ Favorable (Unfavorable) Variance $ $ (256) 272 16 91 (98) (11) (18) (2) 39 (8) (5) 26 24 4 28 – 28 The increase in net income was driven primarily by increased operating revenue net of purchased power and fuel expense and decreased interest expense, which was partially offset by increased operating expenses. The increase in revenue net of purchased power and fuel expense was primarily related to increased gas distribution rates effective January 1, 2009, which were partially offset by reduced electric delivery volume and unfavorable weather conditions. PECO’s operating expenses increased as a result of increased scheduled CTC amortization expense and pension and other postretirement benefits expense due to lower than expected pension and postretirement plan asset returns in 2008. The increased operating expenses were partially offset by decreased allowance for uncollectible accounts expense. PECO also experienced a decrease in gross receipts tax expense primarily due to a rate reduction. 31 Consolidated Statements of Operations Exelon Corporation and Subsidiary Companies (in millions, except for per share data) Operating revenues Operating expenses Purchased power Fuel Operating and maintenance Operating and maintenance for regulatory required programs Depreciation and amortization Taxes other than income Total operating expenses Operating income Other income and deductions Interest expense Interest expense to affiliates, net Equity in losses of unconsolidated affiliates Other, net Total other income and deductions Income from continuing operations before income taxes Income taxes Income from continuing operations Discontinued operations Income (loss) from discontinued operations (net of taxes of $0, $1 and $3,respectively) Gain on disposal of discontinued operations (net of taxes of $0, $14 and $2,respectively) Income from discontinued operations Net income For the Years Ended December 31, 2007 2008 2009 $ 17,318 $ 18,859 $ 18,916 3,215 2,066 4,612 63 1,834 778 12,568 4,750 (654) (77) (27) 426 (332) 4,418 1,712 2,706 1 – 1 2,707 $ 4,270 2,312 4,538 28 1,634 778 13,560 5,299 (699) (133) (26) (407) (1,265) 4,034 1,317 2,717 (1) 21 20 2,737 $ 5,282 2,360 4,289 – 1,520 797 14,248 4,668 (647) (203) (106) 460 (496) 4,172 1,446 2,726 6 4 10 2,736 $ 32 (in millions, except for per share data) Average shares of common stock outstanding Basic Diluted Earnings per average common share – basic: Income from continuing operations Income from discontinued operations Net income Earnings per average common share – diluted: Income from continuing operations Income from discontinued operations Net income Dividends per common share Consolidated Statements of Operations Exelon Corporation and Subsidiary Companies For the Years Ended December 31, 2007 2008 2009 659 662 4.10 – 4.10 4.09 – 4.09 2.10 $ $ $ $ $ 658 662 4.13 0.03 4.16 4.10 0.03 4.13 2.03 $ $ $ $ $ 670 676 4.06 0.02 4.08 4.03 0.02 4.05 1.76 $ $ $ $ $ The information in the Consolidated Statements of Operations shown above is a replication of the information in the Consolidated Statements of Operations in Exelon’s 2009 Form 10-K. For complete consolidated financial statements, including notes, please refer to pages 152 through 342 of Exelon’s 2009 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 63 through 130 of Exelon’s 2009 Form 10-K filed with the SEC. 33 Consolidated Statements of Cash Flows Exelon Corporation and Subsidiary Companies (in millions) Cash flows from operating activities Net income Adjustments to reconcile net income to net cash flows provided by operating activities: Depreciation, amortization and accretion, including nuclear fuel amortization Impairment of long-lived assets Deferred income taxes and amortization of investment tax credits Net fair value changes related to derivatives Net realized and unrealized (gains) losses on nuclear decommissioning trust fund investments Other non-cash operating activities Changes in assets and liabilities: Accounts receivable Inventories Accounts payable, accrued expenses and other current liabilities Option premiums (paid) received, net Counterparty collateral received (posted), net Income taxes Pension and non-pension postretirement benefit contributions Other assets and liabilities Net cash flows provided by operating activities Cash flows from investing activities Capital expenditures Proceeds from nuclear decommissioning trust fund sales Investment in nuclear decommissioning trust funds Proceeds from sales of investments Purchases of investments Change in restricted cash Other investing activities Net cash flows used in investing activities 34 For the Years Ended December 31, 2007 2008 2009 $ 2,707 $ 2,737 $ 2,736 2,601 223 756 (95) (207) 652 234 51 (254) (40) 196 (29) (588) (113) 6,094 (3,273) 22,905 (23,144) 41 (28) 35 6 (3,458) 2,308 – 374 (515) 363 870 67 (109) (44) (124) 1,027 (38) (230) (135) 6,551 (3,117) 17,202 (17,487) – – 29 (5) (3,378) 2,183 – (104) 102 (70) 734 (585) 9 146 27 (516) 160 (204) (122) 4,496 (2,674) 7,312 (7,527) 95 – (45) (70) (2,909) (in millions) Cash flows from financing activities Change in short-term debt Issuance of long-term debt Retirement of long-term debt Retirement of long-term debt to financing affiliates Dividends paid on common stock Proceeds from employee stock plans Purchase of treasury stock Purchase of forward contract in relation to certain treasury stock Other financing activities Net cash flows used in financing activities Increase in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Consolidated Statements of Cash Flows Exelon Corporation and Subsidiary Companies For the Years Ended December 31, 2007 2008 2009 (56) 1,987 (1,773) (709) (1,385) 42 – – (3) (1,897) 739 1,271 2,010 (405) 2,265 (1,398) (1,038) (1,335) 130 (436) (64) 68 (2,213) 960 311 1,271 311 1,621 (262) (1,020) (1,180) 215 (1,208) (79) 102 (1,500) 87 224 311 $ $ $ 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 2009 Form 10-K. For complete consolidated financial statements, including notes, please refer to pages 152 through 342 of Exelon’s 2009 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 63 through 130 of Exelon’s 2009 Form 10-K filed with the SEC. 35 Consolidated Statements of Balance Sheets Exelon Corporation and Subsidiary Companies (in millions) Assets Current assets Cash and cash equivalents Restricted cash and investments Accounts receivable, net Customer Other Mark-to-market derivative assets Inventories, net, at average cost Fossil fuel Materials and supplies Other Total current assets Property, plant and equipment, net Deferred debits and other assets Regulatory assets Nuclear decommissioning trust funds Investments Investments in affiliates Goodwill Mark-to-market derivative assets Other Total deferred debits and other assets Total assets 2009 December 31, 2008 $ 2,010 40 $ 1,563 486 376 198 559 209 5,441 27,341 1,271 75 1,928 324 480 315 528 209 5,130 25,813 4,872 6,669 704 20 2,625 649 859 16,398 $ 49,180 5,940 5,500 670 45 2,625 679 1,144 16,603 $ 47,546 The information in the Consolidated Balance Sheets shown above is a replication of the information in the Consolidated Balance Sheets in Exelon’s 2009 Form 10-K. For complete consolidated financial statements, including notes, please refer to pages 152 through 342 of Exelon’s 2009 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 63 through 130 of Exelon’s 2009 Form 10-K filed with the SEC. 36 Consolidated Statements of Balance Sheets Exelon Corporation and Subsidiary Companies (in millions) Liabilities and shareholders’ equity Current liabilities Short-term borrowings Long-term debt due within one year Long-term debt to PECO Energy Transition Trust due within one year Accounts payable Mark-to-market derivative liabilities Accrued expenses Deferred income taxes Other Total current liabilities Long-term debt Long-term debt due to PECO Energy Transition Trust Long-term debt to other financing trusts Deferred credits and other liabilities Deferred income taxes and unamortized investment tax credits Asset retirement obligations Pension obligations Non-pension postretirement benefit obligations Spent nuclear fuel obligation Regulatory liabilities Mark-to-market derivative liabilities Other Total deferred credits and other liabilities Total liabilities Commitments and contingencies Preferred securities of subsidiary Shareholders’ equity Common stock (No par value, 2,000 shares authorized, 660 and 658 shares outstanding at December 31, 2009 and 2008, respectively) Treasury stock, at cost (35 and 35 shares held at December 31, 2009 and 2008, respectively) Retained earnings Accumulated other comprehensive loss, net Total shareholders’ equity Total liabilities and shareholders’ equity 2009 December 31, 2008 $ 155 639 415 1,345 198 923 152 411 4,238 10,995 – 390 5,750 3,434 3,625 2,180 1,017 3,492 23 1,309 20,830 36,453 $ 211 29 319 1,416 212 1,151 77 396 3,811 11,397 805 390 4,939 3,734 4,111 2,255 1,015 2,520 23 1,412 20,009 36,412 87 87 8,923 (2,328) 8,134 (2,089) 12,640 $ 49,180 8,816 (2,338) 6,820 (2,251) 11,047 $47,546 The information in the Consolidated Balance Sheets shown above is a replication of the information in the Consolidated Balance Sheets in Exelon’s 2009 Form 10-K. For complete consolidated financial statements, including notes, please refer to pages 152 through 342 of Exelon’s 2009 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 63 through 130 of Exelon’s 2009 Form 10-K filed with the SEC. 37 Consolidated Statements of Changes in Shareholders’ Equity Exelon Corporation and Subsidiary Companies (Dollars in millions, shares in thousands) Balance, December 31, 2006 Net income Long-term incentive plan activity Employee stock purchase plan issuances Common stock purchases Common stock dividends declared Adoption of accounting for uncertain tax positions Other comprehensive loss, net of income taxes of $(290) Balance, December 31, 2007 Net income Long-term incentive plan activity Employee stock purchase plan issuances Common stock purchases Common stock dividends declared Adoption of the fair value option for financial assets and liabilities, net of income taxes of $286 Other comprehensive loss, net of income taxes of $(354) Balance, December 31, 2008 Net income Long-term incentive plan activity Common stock dividends Other comprehensive income, net of income taxes of $119 Balance, December 31, 2009 Issues Shares Common Stock Treasury Stock Accumulated Other Retained Comprehensive Loss Earnings Total Shareholders’ Equity 682,474 – 6,455 254 – – – – 689,183 – 3,452 318 – – – – 692,953 – 1,612 – – 694,565 $ $ $ $ 8,314 – 328 16 (79) – – – 8,579 – 217 19 1 – – – 8,816 – 107 – – 8,923 $ $ $ $ (630) – – – (1,208) – – – (1,838) – – – (500) – – – (2,338) – 10 – – (2,328) $ $ 3,426 2,736 – – – (1,219) (13) – 4,930 2,737 – – – (1,007) 160 – $ 6,820 2,707 (5) (1,388) – 8,134 $ $ $ (1,103) – – – – – – (431) (1,534) – – – – – $ (160) (557) (2,251) – – – 162 $ (2,089) $ $ $ $ 10,007 2,736 328 16 (1,287) (1,219) (13) (431) 10,137 2,737 217 19 (499) (1,007) – (557) 11,047 2,707 112 (1,388) 162 12,640 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 2009 Form 10-K. For complete consolidated financial statements, including notes, please refer to pages 152 through 342 of Exelon’s 2009 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 63 through 130 of Exelon’s 2009 Form 10-K filed with the SEC. 38 Consolidated Statements of Comprehensive Income Exelon Corporation and Subsidiary Companies (in millions) Net income Other comprehensive income (loss) Pension and non-pension postretirement benefit plans: Prior service benefit reclassified to periodic benefit cost, net of income taxes of $(6), $(6) and $(4), respectively Actuarial loss reclassified to periodic cost, net of income taxes of $74, $52 and $57, respectively Transition obligation reclassified to periodic cost, net of income taxes of $2, $2 and $2, respectively Pension and non-pension postretirement benefit plan valuation, net of income taxes of $47, $(959) and $1, respectively Change in unrealized (loss) gain on cash flow hedges, net of income taxes of $(2), $563 and $(345), respectively Change in unrealized (loss) gain on marketable securities, net of income taxes of $3, $(6) and $(1), respectively Other comprehensive income (loss) Comprehensive income For the Years Ended December 31, 2007 2008 2009 $ 2,707 $ 2,737 $ 2,736 (13) 93 3 86 (12) 5 162 2,869 (9) 60 3 (1,459) 855 (7) (557) 2,180 $ $ (9) 74 3 19 (513) (5) (431) 2.305 $ The information in the Consolidated Statements of Comprehensive Income shown above is a replication of the information in the Consolidated Statements of Comprehensive Income in Exelon’s 2009 Form 10-K. For complete consolidated financial statements, including notes, please refer to pages 152 through 342 of Exelon’s 2009 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 63 through 130 of Exelon’s 2009 Form 10-K filed with the SEC. 39 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, projections 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, 2009. In making this assessment, management used the criteria in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, Exelon’s management concluded that, as of December 31, 2009, Exelon’s internal control over financial reporting was effective. The effectiveness of the Company’s internal control over financial reporting as of December 31, 2009, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report. February 5, 2010 Information Derived from 2009 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 63 through 342 of our Form 10-K annual report for the year ended December 31, 2009. That annual report was filed with the Securities and Exchange Commission on February 5, 2010, 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 5, 2010, 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, 2009, and 2008 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2009, in conformity with accounting principles generally accepted in the United States of America. Furthermore, they expressed an unqualified opinion that Exelon maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, 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 page 156 of our 2009 Form 10-K. Certifications The CEO of Exelon has made the required annual certifications for 2009 to the New York Stock Exchange and the Philadelphia Stock Exchange that Exelon is in compliance with the listing standards of those exchanges. 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 2009 Form 10-K. 40 01 02 08 09 10 12 14 16 18 20 21 22 Introduction Letter to Shareholders Exelon’s Vision Statement Our Goals and Values Our Financial Discipline Our Operational Excellence Our Environmental Leadership Our Superior Talent Exelon at a Glance Executive Committee Board of Directors Financial Section On the cover: PECO has been displaying messages atop its headquarters since July 4, 1976. Since that time, the company has saluted local community and non-profit organizations with more than 18,000 messages. On July 4, 2009, PECO unveiled its new Crown Lights, which comprise 2 million energy-efficient LED lights. Forward-Looking Statements This report 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 2009 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; and (2) other factors discusssed in Exelon’s filings with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which apply only as of the date of this report. Exelon does not undertake any obligation to publicly release any revision to its forward-looking statements to reflect events or circumstances after the date of this report. corporate profile Exelon Corporation is one of the nation’s largest electric utilities with approximately $17 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 northern Illinois and southeastern Pennsylvania and natural gas to approximately 485,000 customers in the Philadelphia area. Exelon is headquartered in Chicago and trades on the NYSE under the ticker EXC. Shareholder Inquiries Exelon Corporation has appointed BNY Mellon Shareowner Services as its transfer agent, stock registrar, dividend disbursing agent and dividend reinvestment agent. Should you have questions concerning your registered shareholder account or the payment or reinvestment of your dividends, or if you wish to make a stock transaction or stock transfer, you may call shareholder services at BNY Mellon at the toll-free number shown to the left or access their website at www.bnymellon.com/shareowner/isd. Morgan Stanley Smith Barney administers the Employee Stock Purchase Plan (ESPP) and employee stock options. Should you have any questions concerning your employee plan shares or wish to make a transaction, you may call the toll-free numbers shown to the left or access their web site at www.benefitaccess.com. The Company had approximately 135,000 holders of record of its common stock as of Dec. 31, 2009. The 2009 Form 10-K Annual Report to the Securities and Exchange Commission was filed on Feb. 5, 2010. To obtain a copy without charge, write to Bruce G. Wilson, Senior Vice President, Deputy General Counsel, and Corporate Secretary, Exelon Corporation, Post Office Box 805398, Chicago, Illinois 60680-5398. The Company maintains a telephone information service, which enables investors to obtain currently available information on financial performance, company news and to access shareholder services at BNY Mellon. To use this service, please call our toll-free number, 1.866.530.8108. investor and general information Corporate Headquarters Exelon Corporation P.O. Box 805398 Chicago, IL 60680-5398 Transfer Agent BNY Mellon 800.626.8729 Employee Stock Purchase Plan 877.582.5113 Employee Stock Options 888.609.3534 Investor Relations Voice Mailbox 312.394.2345 Independent Public Accountants PricewaterhouseCoopers LLP Web site www.exeloncorp.com Stock Ticker EXC x i h p a r g o h t i L : g n i t n i r p / u W n o R : s o t o h p e e t t i m m o C e v i t u c e x E d n a O E C / n a h C s o m A : s o t o h p / . p r o C n o l e x E , h s e r a K d r a w o H : r o t i d e / o g a c i h C , n g i s e D s h p a r g a r a P : n g i s e d / n o l e x E 0 1 0 2 © The paper utilized for the printing of this report is certified by the Forest Stewardship Council, which promotes environmentally appropriate, socially beneficial and economically viable management of the world’s forests. All the paper utilized in the production of this annual report was manufactured by Mohawk Fine Papers and contains 30% post-consumer recycled fiber. Mohawk Fine Papers purchases enough Green-e certified renewable energy certificates (RECs) to match 100% of the electricity used in its operations. Mohawk has provided the calculations below on use of 33,000 pounds of paper. E The savings derived from using this paper in lieu of virgin fiber paper is equivalent to: 95 trees preserved for the future 274 lbs. waterborne waste not created 40,372 gallons wastewater flow saved 4,467 lbs. solid waste not generated 8,795 lbs. net greenhouse gases prevented 67,320,000 BTUs energy not consumed The savings derived from choosing a paper manufactured using wind-generated electricity: This amount of wind-generated electricity is equivalent to: 14,883 lbs. air emissions not generated 16 barrels crude oil unused 1 cars off the road for one year 1,012 trees planted Exelon Corporation P.O. Box 805398 Chicago, IL 60680-5398 www.exeloncorp.com ©2010 Exelon Sustainable Performance Exelon Corporation 2009 Summary Annual Report 

Continue reading text version or see original annual report in PDF format above