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Exelon Corp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: July 22, 2010 03:21PM

Exelon Corp. (EXC) filed Quarterly Report for the period ended 2010-06-30. Exelon Corp. has a market cap of $27.71 billion; its shares were traded at around $41.95 with a P/E ratio of 11 and P/S ratio of 1.6. The dividend yield of Exelon Corp. stocks is 5%.

EXC is in the portfolios of HOTCHKIS & WILEY of HOTCHKIS & WILEY Capital Management LLC, Arnold Van Den Berg of Century Management, Brian Rogers of T Rowe Price Equity Income Fund, Jim Simons of Renaissance Technologies LLC, Bruce Kovner of Caxton Associates, Steven Cohen of SAC Capital Advisors, Donald Yacktman of Yacktman Asset Management Co., George Soros of Soros Fund Management LLC, Kenneth Fisher of Fisher Asset Management, LLC.

Highlight of Business Operations:

Generation had letter of credit facilities that expired during the second quarter of 2010, which were used to enhance the credit of variable-rate long-term tax-exempt debt totalling $212 million, with maturities ranging from 2016 — 2034. Generation repurchased the $212 million of tax-exempt debt during June 2010. Generation has the ability to remarket these bonds whenever it determines it to be economically advantageous. See Note 5 of the Combined Notes to the Consolidated Financial Statements for further discussion regarding the Registrants’ variable rate debt.

As of June 30, 2010, ComEd had $789 million available in long-term debt refinancing authority and $1,407 million available in new money long-term debt financing authority from the ICC, and PECO had $1.9 billion in long-term debt financing authority from the PAPUC.

As of June 30, 2010, ComEd and PECO had short-term financing authority from FERC that expires on December 31, 2011 of $2.5 billion and $1.5 billion, respectively.

A portion of Generation’s hedging strategy may be accomplished with fuel products based on assumed correlations between power and fuel prices, which routinely change in the market. Market price risk exposure is the risk of a change in the value of unhedged positions. The forecasted market price risk exposure for Generation’s non-trading portfolio associated with a $5 reduction in the annual average Ni-Hub and PJM-West around-the-clock energy price based on June 30, 2010 market conditions and hedged position would be a decrease in pre-tax net income of approximately $9 million, $92 million and $333 million, respectively, for 2010, 2011 and 2012. Power prices sensitivities are derived by adjusting power price assumptions while keeping all other price inputs constant. Generation expects to actively manage its portfolio to mitigate market price risk exposure for its unhedged position. Actual results could differ depending on the specific timing of, and markets affected by, price changes, as well as future changes in Generation’s portfolio.

Proprietary Trading Activities. Generation also enters into certain energy-related derivatives for proprietary trading purposes. Proprietary trading includes all contracts entered into purely to profit from market price changes as opposed to hedging an exposure and is subject to limits established by Exelon’s RMC. The trading portfolio is subject to a risk management policy that includes stringent risk management limits, including volume, stop loss and Value-at-Risk (VaR) limits to manage exposure to market risk. Additionally, the Exelon risk management group and Exelon’s RMC monitor the financial risks of the proprietary trading activities. The proprietary trading activities, which included physical volumes of 889 GWhs and 1,808 GWhs for the three and six months ended June 30, 2010, respectively, and 2,003 GWhs and 4,334 GWhs for the three and six months ended June 30, 2009, respectively, are a complement to Generation’s energy marketing portfolio but represent a small portion of Generation’s overall revenue from energy marketing activities. Trading portfolio activity for the six months ended June 30, 2010 resulted in pre-tax gains of $25 million due to net mark-to-market gains of $14 million and realized gains of $11 million. Generation uses a 95% confidence interval, one day holding period, one-tailed statistical measure in calculating its VaR. The daily VaR on proprietary trading activity averaged $120,000 of exposure over the last 18 months. Because of the relative size of the proprietary trading portfolio in comparison to Generation’s total gross margin from continuing operations for the six months ended June 30, 2010 of $3,276 million, Generation has not segregated proprietary trading activity in the following tables.

Read the The complete Report

Stocks Discussed: EXC,
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