UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Name of Registrant; State of Incorporation; Address of IRS Employer
Number Principal Executive Offices; and Telephone Number Identification Number
--------------------- ---------------------------------------------------------- ------------------------
1-16169 EXELON CORPORATION 23-2990190
(a Pennsylvania corporation)
10 South Dearborn Street - 37th Floor
P.O. Box 805379
Chicago, Illinois 60680-5379
(312) 394-7398
333-85496 EXELON GENERATION COMPANY, LLC 23-3064219
(a Pennsylvania limited liability company)
300 Exelon Way
Kennett Square, Pennsylvania 19348
(610) 765-8200
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_].
The number of shares outstanding of each registrant's common stock as
of August 1, 2002 was as follows:
Exelon Corporation Common Stock, without par value 322,874,719
Exelon Generation Company, LLC not applicable
TABLE OF CONTENTS
Page No.
Explanatory Note 3
Filing Format 3
Forward-Looking Statements 3
PART I. FINANCIAL INFORMATION 4
ITEM 1. FINANCIAL STATEMENTS 4
Exelon Corporation
Consolidated Statements of Income and Comprehensive Income 5
Consolidated Statements of Cash Flows 6
Consolidated Balance Sheets 7
Exelon Generation Company, LLC
Consolidated Statements of Income and Comprehensive Income 9
Consolidated Statements of Cash Flows 10
Consolidated Balance Sheets 11
Combined Notes to Consolidated Financial Statements 13
PART II. OTHER INFORMATION 38
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 38
SIGNATURES 43
CERTIFICATIONS 45
2
Explanatory Note
This amendment to Exelon Corporation's (Exelon) and Exelon Generation
Company, LLC's (Generation) quarterly report on Form 10-Q for the quarter ended
June 30, 2002 reflects a restatement as a result of a $101 million double
posting of deferred income taxes recorded associated with unrealized losses on
Generation's nuclear decommissioning trust fund securities. Additionally, Exelon
and Generation determined that Other Comprehensive Income should be restated for
the amount of $27 million to reflect Generation's ownership interest in the
Other Comprehensive Income of its equity investments in AmerGen Energy Company,
LLC and Sithe Energies Inc. Earnings per share, net income and cash flow for the
periods are not affected by the restatements. However, Other Comprehensive
Income, which is a component of Shareholders' Equity, is reduced by a total of
$128 million as of December 31, 2001, and by $129 million in the second quarter
of 2002 as a result of the revision. See Note 2. No attempt has been made in
this Form 10-Q/A to modify or update other disclosures as presented in the
original Form 10-Q except as required to reflect the effects of the
restatements.
Filing Format
This combined Form 10-Q is being filed separately by Exelon
Corporation, and Exelon Generation Company, LLC (Registrants). Information
contained herein relating to any individual registrant has been filed by such
registrant on its own behalf. No registrant makes any representation as to
information relating to any other registrant.
Forward-Looking Statements
Except for the historical information contained herein, certain of the
matters discussed in this Report are forward-looking statements that are subject
to risks and uncertainties. The factors that could cause actual results to
differ materially include those discussed herein as well as those listed in Note
9 of Notes to Consolidated Financial Statements, those discussed in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Outlook" in Exelon Corporation's 2001 Annual Report, those discussed
in "Risk Factors" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in Exelon Generation Company, LLC's
Registration Statement on Form S-4, Reg. No. 333-85496 and other factors
discussed in filings with the Securities and Exchange Commission by the
Registrants. Readers are cautioned not to place undue reliance on these
forward-looking statements, which apply only as of the date of this Report. The
Registrants undertake no obligation to publicly release any revision to
forward-looking statements to reflect events or circumstances after the date of
this Report.
3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
4
EXELON CORPORATION
EXELON CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
(in millions, except per share data) 2002 2001 2002 2001
- ----------------------------------------------------------------------------------------------------------------------------------
Restated, see Note 2 Restated, see Note 2
OPERATING REVENUES $ 3,519 $ 3,616 $ 6,876 $ 7,439
OPERATING EXPENSES
Purchased Power 699 754 1,311 1,385
Purchased Power from Unconsolidated Affiliate 60 12 116 22
Fuel 364 409 860 1,098
Operating and Maintenance 1,070 1,134 2,137 2,192
Depreciation and Amortization 332 362 667 740
Taxes Other Than Income 181 153 367 321
- ----------------------------------------------------------------------------------------------------------------------------------
Total Operating Expense 2,706 2,824 5,458 5,758
- ----------------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 813 792 1,418 1,681
- ----------------------------------------------------------------------------------------------------------------------------------
OTHER INCOME AND DEDUCTIONS
Interest Expense (241) (289) (490) (581)
Distributions on Preferred Securities of Subsidiaries (11) (12) (23) (23)
Equity in Earnings of Unconsolidated Affiliates, net 9 7 22 25
Other, net 194 44 222 99
- ----------------------------------------------------------------------------------------------------------------------------------
Total Other Income and Deductions (49) (250) (269) (480)
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES 764 542 1,149 1,201
INCOME TAXES 279 227 427 499
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGES IN
ACCOUNTING PRINCIPLES 485 315 722 702
CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING
PRINCIPLES (net of income taxes of $90 and $8 for the six
months ended June 30, 2002 and 2001, respectively) -- -- (230) 12
- ----------------------------------------------------------------------------------------------------------------------------------
NET INCOME 485 315 492 714
- ----------------------------------------------------------------------------------------------------------------------------------
OTHER COMPREHENSIVE INCOME (LOSS) (net of income taxes)
(Restated, See Note 2.)
SFAS 133 Transition Adjustment -- -- -- 44
Cash Flow Hedge Fair Value Adjustment (21) (28) (78) (43)
Unrealized Gain (Loss) on Marketable Securities, net (72) 31 (87) (72)
Equity in Other Comprehensive Income of
Unconsolidated Affiliates (7) 1 (1) 2
- ----------------------------------------------------------------------------------------------------------------------------------
Total Other Comprehensive Income (Loss) (100) 4 (166) (69)
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL COMPREHENSIVE INCOME $ 385 $ 319 $ 326 $ 645
==================================================================================================================================
AVERAGE SHARES OF COMMON STOCK OUTSTANDING - Basic 322 321 322 320
==================================================================================================================================
AVERAGE SHARES OF COMMON STOCK OUTSTANDING - Diluted 324 324 324 323
EARNINGS PER AVERAGE COMMON SHARE:
BASIC:
Income Before Cumulative Effect of Changes in Accounting
Principles $ 1.50 $ 0.98 $ 2.24 $ 2.19
Cumulative Effect of Changes in Accounting Principles -- -- (0.71) 0.04
- ----------------------------------------------------------------------------------------------------------------------------------
Net Income $ 1.50 $ 0.98 $ 1.53 $ 2.23
==================================================================================================================================
DILUTED:
Income Before Cumulative Effect of Changes in
Accounting Principles $ 1.50 $ 0.97 $ 2.23 $ 2.17
Cumulative Effect of Changes in Accounting Principles -- -- (0.71) 0.04
- ----------------------------------------------------------------------------------------------------------------------------------
Net Income $ 1.50 $ 0.97 $ 1.52 $ 2.21
==================================================================================================================================
DIVIDENDS PER COMMON SHARE $ 0.44 $ 0.42 $ 0.88 $ 0.98
==================================================================================================================================
See Notes to Consolidated Financial Statements
5
EXELON CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30,
(in millions) 2002 2001
- -----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 492 $ 714
Adjustments to Reconcile Net Income to Net Cash Flows
Provided by Operating Activities:
Depreciation and Amortization, including nuclear fuel 848 939
Cumulative Effect of a Change in Accounting Principle (net of income taxes) 230 (12)
Net Gain on Sale of Investments (net of income taxes) (199) --
Provision for Uncollectible Accounts 67 60
Deferred Income Taxes (10) 7
Deferred Energy Costs 49 7
Equity in Earnings of Unconsolidated Affiliates, net (22) (25)
Net Realized Losses on Nuclear Decommissioning Trust Funds 21 24
Other Operating Activities 115 (78)
Changes in Working Capital:
Accounts Receivable (259) 68
Inventories (42) (12)
Accounts Payable, Accrued Expenses and Other Current Liabilities 342 280
Changes in Receivables and Payables to Unconsolidated Affiliates, net 12 --
Other Current Assets (6) (19)
- -----------------------------------------------------------------------------------------------------------------------------
Net Cash Flows provided by Operating Activities 1,638 1,953
- -----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures (1,028) (937)
Acquisition of Generating Plants (443) --
Enterprises Acquisitions, net of cash acquired -- (39)
Proceeds from the Sale of Investment 285 --
Proceeds from Nuclear Decommissioning Trust Funds 889 621
Investment in Nuclear Decommissioning Trust Funds (943) (655)
Note Receivable from Unconsolidated Affiliate (75) --
Other Investing Activities 47 12
- -----------------------------------------------------------------------------------------------------------------------------
Net Cash Flows used in Investing Activities (1,268) (998)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of Long-Term Debt 701 2,058
Retirement of Long-Term Debt (697) (1,153)
Change in Short-Term Debt 110 (949)
Dividends on Common Stock (280) (312)
Change in Restricted Cash (26) (16)
Proceeds from Employee Stock Plans 60 51
Other Financing Activities (10) --
- -----------------------------------------------------------------------------------------------------------------------------
Net Cash Flows used in Financing Activities (142) (321)
INCREASE IN CASH AND CASH EQUIVALENTS 228 634
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 485 526
- -----------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 713 $ 1,160
=============================================================================================================================
SUPPLEMENTAL CASH FLOW INFORMATION
Noncash Investing and Financing Activities:
Regulatory Asset Fair Value Adjustment -- $ 347
See Notes to Consolidated Financial Statements
6
EXELON CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
(in millions) 2002 2001
- ----------------------------------------------------------------------------------------------------------------------------
(Restated) (Restated)
(See Note 2.) (See Note 2.)
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 713 $ 485
Restricted Cash 398 372
Accounts Receivable, net
Customer 1,978 1,687
Other 196 428
Receivable from Unconsolidated Affiliate 107 44
Inventories, at average cost
Fossil Fuel 206 222
Materials and Supplies 308 249
Deferred Income Taxes 76 23
Other 354 272
- ----------------------------------------------------------------------------------------------------------------------------
Total Current Assets 4,336 3,782
- ----------------------------------------------------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT, NET 14,654 13,781
DEFERRED DEBITS AND OTHER ASSETS
Regulatory Assets 6,237 6,423
Nuclear Decommissioning Trust Funds 3,060 3,165
Investments 1,613 1,623
Goodwill, net 4,971 5,335
Other 705 708
- ----------------------------------------------------------------------------------------------------------------------------
Total Deferred Debits and Other Assets 16,586 17,254
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 35,576 $ 34,817
============================================================================================================================
See Notes to Consolidated Financial Statements
7
EXELON CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
(in millions) 2002 2001
- -------------------------------------------------------------------------------------------------------------------------
(Restated) (Restated)
(See Note 2.) (See Note 2.)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes Payable $ 470 $ 360
Long-Term Debt Due within One Year 1,772 1,406
Accounts Payable 1,164 964
Accrued Expenses 1,339 1,182
Other 527 505
- -------------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 5,272 4,417
- -------------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT 12,591 12,879
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred Income Taxes 4,288 4,388
Unamortized Investment Tax Credits 308 316
Nuclear Decommissioning Liability for Retired Plants 1,379 1,353
Pension Obligation 313 334
Non-Pension Postretirement Benefits Obligation 878 847
Spent Nuclear Fuel Obligation 851 843
Other 866 725
- -------------------------------------------------------------------------------------------------------------------------
Total Deferred Credits and Other Liabilities 8,883 8,806
- -------------------------------------------------------------------------------------------------------------------------
PREFERRED SECURITIES OF SUBSIDIARIES 613 613
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common Stock 6,990 6,930
Deferred Compensation (1) (2)
Retained Earnings 1,421 1,200
Accumulated Other Comprehensive Income (Loss) (193) (26)
- -------------------------------------------------------------------------------------------------------------------------
Total Shareholders' Equity 8,217 8,102
- -------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 35,576 $ 34,817
=========================================================================================================================
See Notes to Consolidated Financial Statements
8
EXELON GENERATION COMPANY, LLC
EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
(in millions) 2002 2001 2002 2001
- ------------------------------------------------------------------------------------------------------------------------
Restated, Restated,
see Note 2 see Note 2
OPERATING REVENUES
Operating Revenues $ 606 $ 677 $1,175 $ 1,392
Operating Revenues from Affiliates 953 906 1,845 1,819
- ------------------------------------------------------------------------------------------------------------------------
Total Operating Revenues 1,559 1,583 3,020 3,211
- ------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Purchased Power 634 690 1,186 1,272
Purchased Power from Affiliates 71 31 137 48
Fuel 224 230 433 449
Operating and Maintenance 405 400 833 798
Operating and Maintenance Expense from Affiliates 6 5 11 11
Depreciation and Amortization 65 75 128 167
Taxes Other Than Income 41 39 90 85
- ------------------------------------------------------------------------------------------------------------------------
Total Operating Expense 1,446 1,470 2,818 2,830
- ------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 113 113 202 381
- ------------------------------------------------------------------------------------------------------------------------
OTHER INCOME AND DEDUCTIONS
Interest Expense (10) (17) (27) (35)
Interest Expense from Affiliates (1) (9) (1) (24)
Equity in Earnings of Unconsolidated Affiliates 9 13 32 39
Other, net 24 14 40 18
- ------------------------------------------------------------------------------------------------------------------------
Total Other Income and Deductions 22 1 44 (2)
- ------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT
OF CHANGES IN ACCOUNTING PRINCIPLES 135 114 246 379
- ------------------------------------------------------------------------------------------------------------------------
INCOME TAXES 51 43 96 150
INCOME BEFORE CUMULATIVE EFFECT OF CHANGES IN
ACCOUNTING PRINCIPLES 84 71 150 229
CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPLES -- -- 13 12
NET INCOME 84 71 163 241
- ------------------------------------------------------------------------------------------------------------------------
OTHER COMPREHENSIVE INCOME (LOSS) (net of income taxes)
(Restated, See Note 2.)
Unrealized Gain (Loss) on Marketable Securities (74) 31 (83) (80)
SFAS 133 Transition Adjustment -- -- -- 4
Cash Flow Hedge Fair Value Adjustment 6 (35) (67) (36)
- ------------------------------------------------------------------------------------------------------------------------
Equity in Other Comprehensive Income of Unconsolidated
Affiliates (7) 1 (1) 2
Total Other Comprehensive Income (Loss) (75) (3) (151) (110)
- ------------------------------------------------------------------------------------------------------------------------
TOTAL COMPREHENSIVE INCOME $ 9 $ 68 $ 12 $ 131
========================================================================================================================
See Notes to Consolidated Financial Statements
9
EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30,
(in millions) 2002 2001
- ---------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 163 $ 241
Adjustments to Reconcile Net Income to Net Cash Flows
Provided by Operating Activities:
Depreciation and Amortization, including nuclear fuel 312 366
Cumulative Effect of a Change in Accounting Principle (net of income taxes) (13) (12)
Provision for Uncollectible Accounts 17 3
Deferred Income Taxes (4) (6)
Equity in (Earnings) Losses of Unconsolidated Affiliates (32) (39)
Net Realized Losses on Nuclear Decommissioning Trust Funds 21 24
Other Operating Activities 70 (116)
Changes in Working Capital:
Accounts Receivable (136) 115
Changes in Receivables and Payables to Affiliates, net (93) (161)
Inventories (54) (110)
Accounts Payable, Accrued Expenses and Other Current Liabilities 316 156
Other Current Assets (48) 24
- ---------------------------------------------------------------------------------------------------------------------------
Net Cash Flows provided by Operating Activities 519 485
- ---------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures (475) (301)
Acquisition of Generating Plants (443) --
Proceeds from Nuclear Decommissioning Trust Funds 889 621
Investment in Nuclear Decommissioning Trust Funds (943) (655)
Note Receivable from Affiliate (75) 236
Other Investing Activities (1) --
- ---------------------------------------------------------------------------------------------------------------------------
Net Cash Flows used in Investing Activities (1,048) (99)
CASH FLOWS FROM FINANCING ACTIVITIES
Change in Intercompany Payable, Affiliate 331 (696)
Issuance of Long-Term Debt -- 752
Retirement of Long-Term Debt (2) (2)
Distribution to Member -- (121)
- ---------------------------------------------------------------------------------------------------------------------------
Net Cash Flows provided by (used in) Financing Activities 329 (67)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (200) 319
- ---------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 224 4
- ---------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 24 $ 323
===========================================================================================================================
See Notes to Consolidated Financial Statements
10
EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
(in millions) 2002 2001
- ----------------------------------------------------------------------------------------------------------------------
(Restated) (Restated)
(See Note 2.) (See Note 2.)
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 24 $ 224
Accounts Receivable, net
Customer 503 316
Other 38 150
Receivable from Affiliate 523 444
Inventories, at average cost
Fossil Fuel 135 105
Materials and Supplies 227 202
Deferred Income Taxes 7 --
Other 103 65
- ----------------------------------------------------------------------------------------------------------------------
Total Current Assets 1,560 1,506
- ----------------------------------------------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT, NET 2,650 2,003
DEFERRED DEBITS AND OTHER ASSETS
Nuclear Decommissioning Trust Funds 3,060 3,165
Investments 868 816
Notes Receivable from Affiliates 261 291
Deferred Income Taxes 353 212
Other 223 223
- ----------------------------------------------------------------------------------------------------------------------
Total Deferred Debits and Other Assets 4,765 4,707
- ----------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 8,975 $ 8,216
======================================================================================================================
See Notes to Consolidated Financial Statements
11
EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
(in millions) 2002 2001
- ----------------------------------------------------------------------------------------------------------------------
(Restated) (Restated)
(See Note 2.) (See Note 2.)
LIABILITIES AND MEMBER'S EQUITY
CURRENT LIABILITIES
Long-Term Debt Due within One Year $ 6 $ 4
Accounts Payable 788 585
Accounts Payable to Affiliate 16 105
Notes Payable to Affiliate 331 --
Accrued Expenses 416 303
Deferred Income Taxes -- 7
Other 215 171
- ----------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 1,772 1,175
- ----------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT 1,065 1,021
DEFERRED CREDITS AND OTHER LIABILITIES
Unamortized Investment Tax Credits 230 234
Nuclear Decommissioning Liability for Retired Plants 1,379 1,353
Pension Obligation 102 118
Non-Pension Postretirement Benefits Obligation 396 384
Spent Nuclear Fuel Obligation 851 843
Other 361 280
- ----------------------------------------------------------------------------------------------------------------------
Total Deferred Credits and Other Liabilities 3,319 3,212
- ----------------------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES
MEMBER'S EQUITY
Membership Interest 2,316 2,316
Undistributed Earnings 686 523
Accumulated Other Comprehensive Income (Loss) (183) (31)
- ----------------------------------------------------------------------------------------------------------------------
Total Member's Equity 2,819 2,808
- ----------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND MEMBER'S EQUITY $ 8,975 $ 8,216
======================================================================================================================
See Notes to Consolidated Financial Statements
12
EXELON CORPORATION AND SUBSIDIARY COMPANIES
EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share data, unless otherwise noted)
1. BASIS OF PRESENTATION (Exelon and Generation)
The accompanying consolidated financial statements as of June 30, 2002
and for the three and six months then ended are unaudited, but include all
adjustments that Exelon Corporation (Exelon and Exelon Generation Company, LLC
(Generation) consider necessary for a fair presentation of their respective
financial statements. All adjustments are of a normal, recurring nature, except
as otherwise disclosed. The December 31, 2001 consolidated balance sheet data
were derived from audited financial statements but do not include all
disclosures required by generally accepted accounting principles. Certain
prior-year amounts have been reclassified for comparative purposes. These
reclassifications had no effect on net income or shareholders' or member's
equity. These notes should be read in conjunction with the Notes to Consolidated
Financial Statements of Exelon included in or incorporated by reference in Item
8 of its Annual Report on Form 10-K/A for the year ended December 31, 2001 and
the Notes to Consolidated Financial Statements in Generation's Form S-4
registration statement declared effective on April 24, 2002 by the Securities
and Exchange Commission (SEC), (Generation's Form S-4). See ITEM 6. Exhibits and
Reports on Form 8-K.
2. RESTATEMENT (Exelon and Generation)
In October 2002, Exelon determined that its June 30, 2002 financial statements
required a restatement as a result of a double posting of deferred income taxes
recorded associated with unrealized losses on Generation's nuclear
decommissioning trust fund securities. Additionally, Exelon and Generation
determined that Other Comprehensive Income should be revised to reflect
Generation's ownership interest in the Other Comprehensive Income of its equity
investments in AmerGen Energy Company, LLC and Sithe Energies Inc. Such
asjustments had no effect on either Exelon's or Generation's net income,
earnings per share or cash flows.
The following tables show the items that have been restated on Exelon's and
Generation's Condensed Consolidated Statements of Income and Comprehensive
Income for the three and six months ended June 30, 2002 and June 30, 2001, and
the Condensed Consolidated Balance Sheets as of June 30, 2002 and December 31,
2001, and Note 7, Segment Information:
Exelon
Condensed Consolidated Statements of Income and Comprehensive Income
Three Months Ended June 30, 2002
As Previously As
Reported Restatement Restated
--------------------------------------------------
Equity in Other Comprehensive Income of
Unconsolidated Affiliates $ - $ (7) $ (7)
Total Other Comprehensive Income $ (93) $ (7) $ (100)
Total Comprehensive Income $ 392 $ (7) $ 385
13
Condensed Consolidated Statements of Income and Comprehensive Income
Three Months Ended June 30, 2001
As Previously As
Reported Restatement Restated
--------------------------------------------------
Equity in Other Comprehensive Income of
Unconsolidated Affiliates $ - $ 1 $ 1
Total Other Comprehensive Income $ 3 $ 1 $ 4
Total Comprehensive Income $ 318 $ 1 $ 319
Condensed Consolidated Statements of Income and Comprehensive Income
Six Months Ended June 30, 2002
As Previously As
Reported Restatement Restated
--------------------------------------------------
Equity in Other Comprehensive Income of
Unconsolidated Affiliates $ - $ (1) $ (1)
Total Other Comprehensive Income $ (165) $ (1) $ (166)
Total Comprehensive Income $ 327 $ (1) $ 326
Condensed Consolidated Statements of Income and Comprehensive Income
Six Months Ended June 30, 2001
As Previously As
Reported Restatement Restated
--------------------------------------------------
Equity in Other Comprehensive Income of
Unconsolidated Affiliates $ - $ 2 $ 2
Total Other Comprehensive Income $ (71) $ 2 $ (69)
Total Comprehensive Income $ 643 $ 2 $ 645
Condensed Consolidated Balance Sheets at December 31, 2001
As Previously As
Reported Restatement Restated
--------------------------------------------------
Investments $ 1,666 $ (43) $ 1,623
Total Deferred Debits and Other Assets $ 17,297 $ (43) $ 17,254
Total Assets $ 34,860 $ (43) $ 34,817
Deferred Income Taxes $ 4,303 $ 85 $ 4,388
Total Deferred Credits and Other Liabilities $ 8,721 $ 85 $ 8,806
Accumulated Other Comprehensive Income $ 102 $ (128) $ (26)
Total Shareholders' Equity $ 8,230 $ (128) $ 8,102
Total Liabilities and Shareholders' Equity $ 34,860 $ (43) $ 34,817
14
Condensed Consolidated Balance Sheets at June 30, 2002
As Previously As
Reported Restatement Restated
--------------------------------------------------
Investments $ 1,658 $ (45) $ 1,613
Total Deferred Debits and Other Assets $ 16,631 $ (45) $ 16,586
Total Assets $ 35,621 $ (45) $ 35,576
Deferred Income Taxes $ 4,204 $ 84 $ 4,288
Total Deferred Credits and Other Liabilities $ 8,799 $ 84 $ 8,883
Accumulated Other Comprehensive Income $ (64) $ (129) $ (193)
Total Shareholders' Equity $ 8,346 $ (129) $ 8,217
Total Liabilities and Shareholders' Equity $ 35,621 $ (45) $ 35,576
Note 7 Segment Note
As Previously As
Reported Restatement Restated
at December 31, 2001 --------------------------------------------------
Total Assets - Generation $ 8,344 $ (128) $ 8,216
Total Assets - Corporate and
Intersegment Eliminations $ (1,735) $ 85 $ (1,650)
Total Assets - Consolidated $34,860 $ (43) $ 34,817
As Previously As
Reported Restatement Restated
at June 30, 2002 --------------------------------------------------
Total Assets - Generation $ 9,104 $ (129) $ 8,975
Total Assets - Corporate and
Intersegment Eliminations $ (1,688) $ 84 $ (1,604)
Total Assets - Consolidated $ 35,621 $ (45) $ 35,576
Generation
Condensed Consolidated Statements of Income and Comprehensive Income
Three Months Ended June 30, 2002
As Previously As
Reported Restatement Restated
--------------------------------------------------
Equity in Other Comprehensive Income of
Unconsolidated Affiliates $ - $ (7) $ (7)
Total Other Comprehensive Income $ (68) $ (7) $ (75)
Total Comprehensive Income $ 16 $ (7) $ 9
15
Condensed Consolidated Statements of Income and Comprehensive Income
Three Months Ended June 30, 2001
As Previously As
Reported Restatement Restated
--------------------------------------------------
Equity in Other Comprehensive Income of
Unconsolidated Affiliates $ - $ 1 $ 1
Total Other Comprehensive Income $ (4) $ 1 $ (3)
Total Comprehensive Income $ 67 $ 1 $ 68
Condensed Consolidated Statements of Income and Comprehensive Income
Six Months Ended June 30, 2002
As Previously As
Reported Restatement Restated
--------------------------------------------------
Equity in Other Comprehensive Income of
Unconsolidated Affiliates $ - $ (1) $ (1)
Total Other Comprehensive Income $ (150) $ (1) $ (151)
Total Comprehensive Income $ 13 $ (1) $ 12
Condensed Consolidated Statements of Income and Comprehensive Income
Six Months Ended June 30, 2001
As Previously As
Reported Restatement Restated
--------------------------------------------------
Equity in Other Comprehensive Income of
Unconsolidated Affiliates $ - $ 2 $ 2
Total Other Comprehensive Income $ (112) $ 2 $ (110)
Total Comprehensive Income $ 129 $ 2 $ 131
Condensed Consolidated Balance Sheets at December 31, 2001
As Previously As
Reported Restatement Restated
--------------------------------------------------
Investments $ 859 $ (43) $ 816
Deferred Income Taxes $ 297 $ (85) $ 212
Total Deferred Debits and Other Assets $ 4,835 $ (128) $ 4,707
Total Assets $ 8,344 $ (128) $ 8,216
Accumulated Other Comprehensive Income $ 97 $ (128) $ (31)
Total Member's Equity $ 2,936 $ (128) $ 2,808
Total Liabilities and Member's Equity $ 8,344 $ (128) $ 8,216
Condensed Consolidated Balance Sheets at June 30, 2002
As Previously As
Reported Restatement Restated
--------------------------------------------------
Investments $ 913 $ (45) $ 868
Deferred Income Taxes $ 437 $ (84) $ 353
Total Deferred Debits and Other Assets $ 4,894 $ (129) $ 4,765
Total Assets $ 9,104 $ (129) $ 8,975
Accumulated Other Comprehensive Income $ (54) $ (129) $ (183)
Total Member's Equity $ 2,948 $ (129) $ 2,819
Total Liabilities and Member's Equity $ 9,104 $ (129) $ 8,975
16
3. ADOPTION OF NEW ACCOUNTING PRINCIPLES (Exelon and
Generation)
SFAS No. 141 and SFAS No. 142
In 2001, the Financial Accounting Standard Board (FASB) issued
Statement of Accounting Standard (SFAS) No. 141, "Business Combinations" (SFAS
No. 141), which requires that all business combinations be accounted for under
the purchase method of accounting and establishes criteria for the separate
recognition of intangible assets acquired in business combinations. SFAS No. 141
is effective for business combinations initiated after June 30, 2001. In
addition, SFAS No. 141 requires that unamortized negative goodwill related to
pre-July 1, 2001 purchases be recognized as a change in accounting principle
concurrent with the adoption of SFAS No. 142, "Goodwill and Other Intangible
Assets" (SFAS No. 142). At December 31, 2001, AmerGen Energy Company, LLC
(AmerGen), an equity-method investee of Generation, had $43 million of negative
goodwill, net of accumulated amortization, recorded on its balance sheet. Upon
AmerGen's adoption of SFAS No. 141 in January 2002, Generation recognized its
proportionate share of income of $22 million ($13 million, net of income taxes)
as a cumulative effect of a change in accounting principle.
Exelon, ComEd, PECO and Generation adopted SFAS No. 142 as of January
1, 2002. SFAS No. 142 establishes new accounting and reporting standards for
goodwill and intangible assets. Other than goodwill, Exelon does not have
significant other intangible assets recorded on its consolidated balance sheets.
Under SFAS No. 142, goodwill is no longer subject to amortization, however,
goodwill is subject to an assessment for impairment using a two-step fair value
based test, the first step of which must be performed at least annually, or more
frequently if events or circumstances indicate that goodwill might be impaired.
The first step compares the fair value of a reporting unit to its carrying
amount, including goodwill. If the carrying amount of the reporting unit exceeds
its fair value, the second step is performed. The second step compares the
carrying amount of the goodwill to the fair value of the goodwill. If the fair
value of goodwill is less than the carrying amount, an impairment loss is
reported as a reduction to goodwill and a charge to operating expense, except at
the transition date, when the loss is reflected as a cumulative effect of a
change in accounting principle.
As of December 31, 2001, Exelon's Consolidated Balance Sheets reflected
approximately $5.3 billion in goodwill net of accumulated amortization,
including $4.9 billion of net goodwill related to the October 20, 2000 merger of
Unicom Corporation (Unicom), the former parent company of ComEd, and PECO Energy
Company (PECO) recorded on the Consolidated Balance Sheet of Commonwealth Edison
Company (ComEd), with the remainder related to acquisitions by Exelon
Enterprises Company, LLC (Enterprises). The first step of the transitional
impairment analysis indicated that ComEd's goodwill was not impaired but that an
impairment did exist with respect to goodwill recorded in Enterprises' reporting
units. Exelon's infrastructure services business (InfraSource), the energy
services business (Exelon Services) and the competitive retail energy sales
business (Exelon Energy) were determined to be those reporting units of
Enterprises that had goodwill allocated to them. The second step of the
analysis, which compared the fair value of each of Enterprises' reporting units'
17
goodwill to the carrying value at December 31, 2001, indicated a total goodwill
impairment of $357 million ($243 million, net of income taxes and minority
interest). The fair value of the Enterprises' reporting units was determined
using discounted cash flow models reflecting the expected range of future cash
flow outcomes related to each of the Enterprises reporting units over the life
of the model. These cash flows were discounted to 2002 using a risk-adjusted
discount rate. The impairment was recorded as a cumulative effect of a change in
accounting principle in the first quarter of 2002.
The changes in the carrying amount of goodwill by reportable segment
(see Note 7 for further discussion of reportable segments) for the six months
ended June 30, 2002 are as follows:
Energy
Delivery Enterprises Total
- ----------------------------------------------------------------------------------------------------------------------
Balance as of January 1, 2002 $ 4,902 $ 433 $ 5,335
Impairment losses -- (357) (357)
Settlement of pre-merger income tax contingency (7) -- (7)
- ----------------------------------------------------------------------------------------------------------------------
Balance as of June 30, 2002 $ 4,895 $ 76 $ 4,971
- ----------------------------------------------------------------------------------------------------------------------
The June 30, 2002, Energy Delivery goodwill relates to ComEd and the
remaining Enterprises goodwill relates to the InfraSource and Exelon Services
reporting units. Consistent with SFAS No. 142, the remaining goodwill will be
reviewed for impairment on an annual basis or more frequently if significant
events occur that could indicate an impairment exists.
The components of the net transitional impairment loss recognized in
the first quarter of 2002 as a cumulative effect of a change in accounting
principle are as follows:
Exelon
- ----------------------------------------------------------------------------------------------------------------------
Enterprises goodwill impairment (net of income taxes of $103 million) $ (254)
Minority interest (net of income taxes of $4 million) 11
Elimination of AmerGen negative goodwill (net of income taxes of $9 million) 13
- ----------------------------------------------------------------------------------------------------------------------
Total cumulative effect of a change in accounting principle $ (230)
- ----------------------------------------------------------------------------------------------------------------------
Generation
- ----------------------------------------------------------------------------------------------------------------------
Elimination of AmerGen negative goodwill (net of income taxes of $9 million)
recorded as cumulative effect of a change in accounting principle $ 13
- ----------------------------------------------------------------------------------------------------------------------
18
The following tables set forth Exelon's net income and earnings per
common share and ComEd's net income for the three and six months ended June 30,
2002 and 2001, respectively, adjusted to exclude 2001 amortization expense
related to goodwill that is no longer being amortized.
Exelon
Three Months Ended June 30, Six Months Ended June 30,
2002 2001 2002 2001
- ----------------------------------------------------------------------------------------------------------------------
Reported income before cumulative effect
of changes in accounting principles $ 485 $ 315 $ 722 $ 702
Cumulative effect of changes in
- ----------------------------------------------------------------------------------------------------------------------
accounting principles -- -- (230) 12
- ----------------------------------------------------------------------------------------------------------------------
Reported net income 485 315 492 714
Goodwill amortization -- 38 -- 77
- ----------------------------------------------------------------------------------------------------------------------
Adjusted net income $ 485 $ 353 $ 492 $ 791
- ----------------------------------------------------------------------------------------------------------------------
Basic earnings per common share:
Reported income before cumulative effect
of changes in accounting principles $ 1.50 $ 0.98 $ 2.24 $ 2.19
Cumulative effect of changes in
- ----------------------------------------------------------------------------------------------------------------------
accounting principles -- -- (0.71) 0.04
- ----------------------------------------------------------------------------------------------------------------------
Reported net income 1.50 0.98 1.53 2.23
Goodwill amortization -- 0.12 -- 0.24
- ----------------------------------------------------------------------------------------------------------------------
Adjusted net income $ 1.50 $ 1.10 $ 1.53 $ 2.47
- ----------------------------------------------------------------------------------------------------------------------
Diluted earnings per common share:
Reported income before cumulative effect
of changes in accounting principles $ 1.50 $ 0.97 $ 2.23 $ 2.17
Cumulative effect of changes in
- ----------------------------------------------------------------------------------------------------------------------
accounting principles -- -- (0.71) 0.04
- ----------------------------------------------------------------------------------------------------------------------
Reported net income 1.50 0.97 1.52 2.21
Goodwill amortization -- 0.12 -- 0.24
- ----------------------------------------------------------------------------------------------------------------------
Adjusted net income $ 1.50 $ 1.09 $ 1.52 $ 2.45
- ----------------------------------------------------------------------------------------------------------------------
ComEd
Three Months Ended June 30, Six Months Ended June 30,
2002 2001 2002 2001
- ----------------------------------------------------------------------------------------------------------------------
Reported net income $ 231 $ 182 $ 360 $ 329
Goodwill amortization -- 32 -- 64
- ----------------------------------------------------------------------------------------------------------------------
Adjusted net income $ 231 $ 214 $ 360 $ 393
- ----------------------------------------------------------------------------------------------------------------------
Generation
The cessation of the amortization of negative goodwill of AmerGen on
January 1, 2002 did not have a material impact on Generation's reported net
income for the three or six months ended June 30, 2002.
19
EITF Issue 02-3
Exelon and Generation early adopted the provision of Emerging Issues
Task Force (EITF) Issue 02-3 "Accounting for Contracts Involved in Energy
Trading and Risk Management Activities" (EITF 02-3) issued by the FASB EITF in
June 2002 that requires revenues and energy costs related to energy trading
contracts to be presented on a net basis in the income statement. Prior to the
second quarter of 2002, revenues from trading activity were presented in Revenue
and the energy costs related to energy trading were presented as either
Purchased Power or Fuel expense on Exelon and Generation's Consolidated
Statements of Income. For comparative purposes, energy costs related to energy
trading have been reclassified in prior periods to revenue to conform with the
net basis of presentation required by EITF 02-3. For the three and six months
ended June 30, 2001, $30 million of purchased power expense and $5 million of
fuel expense was reclassified and reflected as a reduction to revenue. The three
months ended March 31, 2002 included $504 million of purchased power expense and
$9 million of fuel expense that has been reclassified and reflected as a
reduction to revenue in the six months ended June 30, 2002.
SFAS No. 144
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" (SFAS No. 144). Exelon, ComEd, PECO
and Generation adopted SFAS No. 144 on January 1, 2002. SFAS No. 144 establishes
accounting and reporting standards for both the impairment and disposal of
long-lived assets. SFAS No. 144 is effective for fiscal years beginning after
December 15, 2001 and its provisions are generally applied prospectively. The
adoption of this statement had no effect on Exelon's reported financial
positions, results of operations or cash flows.
SFAS No. 133
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities" (SFAS No. 133) applies to all derivative instruments and requires
that such instruments be recorded on the balance sheet either as an asset or a
liability measured at their fair value through earnings, with special accounting
permitted for certain qualifying hedges. On January 1, 2001, Exelon, ComEd,
PECO, and Generation adopted SFAS No. 133. Generation recognized a non-cash gain
of $12 million, net of income taxes, in earnings and deferred a non-cash gain of
$4 million, net of income taxes, in accumulated other comprehensive income and
PECO deferred a non-cash gain of $40 million, net of income taxes, in
accumulated other comprehensive income.
4. ACQUISITIONS AND DISPOSITIONS (Exelon and Generation)
Acquisition of Generating Plants from TXU
On April 25, 2002, Generation acquired two natural-gas and oil-fired plants from
TXU Corp. (TXU) for an aggregate purchase price of $443 million. The purchase
included the 893-megawatt Mountain Creek Steam Electric Station in Dallas and
the 1,441-megawatt Handley Steam Electric Station in Fort Worth. The transaction
included a power purchase agreement for TXU to purchase power during the months
of May through September from 2002 through 2006. During the periods covered by
the power purchase agreement, TXU will make fixed capacity payments and will
provide fuel to Exelon in return for exclusive rights to the energy and capacity
of the generation plants. Substantially all of the purchase price has been
allocated to property, plant, and equipment pending final valuation of plant
assets.
20
Sale of AT&T Wireless
On April 1, 2002, Enterprises sold its 49% interest in AT&T Wireless
PCS of Philadelphia, LLC to a subsidiary of AT&T Wireless Services for $285
million in cash. Enterprises recorded an after-tax gain of $116 million in
other, net on the $84 million investment, which was reflected in Deferred Debits
and Other Assets on Exelon's Consolidated Balance Sheets.
Sithe New England Holdings, LLC Acquisition
On June 26, 2002, Generation agreed to purchase Sithe New England
Holdings, LLC, (Sithe New England) a subsidiary of Sithe Energies Inc. (Sithe),
and related power marketing operations in exchange for a $543 million note plus
the assumption of non-recourse debt, estimated to be approximately $1.2 billion
at the transaction closing date. The parties are seeking Federal Energy
Regulatory Commission (FERC) and other required approvals of the purchase by
October 31, 2002. Exelon has negotiated closing conditions that allow Exelon to
terminate the purchase if the conditions are not satisfied. If approved, and if
the closing conditions are satisfied, the transaction could be completed in
November 2002.
The purchase involves approximately 4,471 MWs of generation capacity,
consisting of 2,050 MWs in operation and 2,421 MWs under construction, which
will increase Generation's net assets by approximately $1.7 billion when the
transaction closes. Sithe New England's generation facilities are located
primarily in Massachusetts, but are also located in Maine.
Generation is a 49.9% owner of Sithe and accounts for the investment as
an unconsolidated equity investment. The Sithe New England purchase will not
affect the accounting for Sithe as an equity investment. Additionally,
Generation is subject to a Put and Call Agreement (PCA) that gives Generation
the right to purchase (Call) the remaining 50.1% of Sithe, and gives the other
Sithe shareholders the right to sell (Put) their interest to Generation. If the
Put option is exercised, Generation has the obligation to complete the purchase.
The PCA provides that the Put and Call options become exercisable as of December
18, 2002. The Sithe New England purchase is a separate transaction from the PCA
that is intended to enable Generation to acquire only the Sithe assets that fit
Generation's strategy, accelerate the realization of synergies, and reduce the
amount of debt needed to finance the transaction.
See ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations - Exelon Corporation - for further discussion of the
PCA.
5. REGULATORY ISSUES (Exelon)
On April 1, 2002, the Illinois Commerce Commission (ICC) issued an
interim order in ComEd's Delivery Services Rate Case. The interim order is
subject to an audit of test year expenditures that is anticipated to be
completed by the end of 2002 with a final order to be issued in 2003. The order
sets new delivery rates for residential customers choosing a new retail electric
supplier. The new rates became effective May 1, 2002 when residential customers
were eligible to choose their supplier of electricity. Traditional bundled rates
21
paid by customers that retain ComEd as their electricity supplier are not
affected by this order. Bundled rates will remain frozen through 2006, as a
result of the June 6, 2002 amendments to the Illinois Restructuring Act that
extended the freeze on bundled rates for an additional two years. Delivery
service rates for non-residential customers are not affected by the order. The
potential revenue impact of the interim order is not expected to be material in
2002.
As permitted by the Pennsylvania Electric Competition Act, the
Pennsylvania Department of Revenue has calculated a 2002 Revenue Neutral
Reconciliation (RNR) adjustment to the gross receipts tax rate in order to
neutralize the impact of electric restructuring on its tax revenues. In January
2002, the Pennsylvania Public Utility Commission (PUC) approved the RNR
adjustment to the gross receipts tax rate collected from customers. Effective
January 1, 2002, PECO implemented the change in the gross receipts tax rate. The
RNR adjustment is under appeal. The RNR adjustment increases the gross receipts
tax rate, which will increase PECO's annual revenues and tax obligations by
approximately $50 million in 2002.
6. EARNINGS PER SHARE (Exelon)
Diluted earnings per share are calculated by dividing net income by the
weighted average number of shares of common stock outstanding, including shares
issuable upon exercise of stock options outstanding under Exelon's stock option
plans considered to be common stock equivalents. The following table shows the
effect of these stock options on the weighted average number of shares
outstanding used in calculating diluted earnings per share (in millions):
Three Months Ended June 30, Six Months Ended June 30,
2002 2001 2002 2001
- ----------------------------------------------------------------------------------------------------------------------
Average common shares outstanding 322 321 322 320
Assumed exercise of stock options 2 3 2 3
- ----------------------------------------------------------------------------------------------------------------------
Average diluted common shares outstanding 324 324 324 323
- ----------------------------------------------------------------------------------------------------------------------
Stock options not included in average common shares used in calculating
diluted earnings per share due to their antidilutive effect were three million
for the three and six months ended June 30, 2002 and one million for the three
and six months ended June 30, 2001.
22
7. SEGMENT INFORMATION (Exelon)
Exelon operates in three business segments: energy delivery, generation
and enterprises. Energy delivery consists of the operations of ComEd and PECO.
Beginning in 2002, Exelon evaluates the performance of its business segments on
the basis of net income. Exelon's segment information for the three months and
six months ended June 30, 2002 as compared to the same periods in 2001 and at
June 30, 2002 and December 31, 2001 are as follows:
Three Months Ended June 30, 2002 as compared to Three Months Ended June 30, 2001
Corporate and
Energy Intersegment
Delivery Generation Enterprises Eliminations Consolidated
- -------------------------------------------------------------------------------------------------------------------
Revenues:
2002 $ 2,476 $ 1,559 $ 476 $ (992) $ 3,519
2001 2,436 1,583 546 (949) 3,616
Intersegment Revenues:
2002 $ 15 $ 953 $ 24 $ (992) $ --
2001 16 906 27 (949) --
Net Income:
2002 $ 322 $ 84 $ 83 $ (4) $ 485
2001 264 71 (5) (15) 315
- -------------------------------------------------------------------------------------------------------------------
Six Months Ended June 30, 2002 as compared to Six Months Ended June 30, 2001
Corporate and
Energy Intersegment
Delivery Generation Enterprises Eliminations Consolidated
- --------------------------------------------------------------------------------------------------------------------
Revenues:
2002 $ 4,811 $ 3,020 $ 966 $(1,921) $ 6,876
2001 4,933 3,211 1,213 (1,918) 7,439
Intersegment Revenues:
2002 $ 29 $ 1,845 $ 47 $(1,921) $ --
2001 59 1,819 40 (1,918) --
Net Income:
2002 $ 538 $ 163 $(188) $ (21) $ 492
2001 530 241 (30) (27) 714
- --------------------------------------------------------------------------------------------------------------------
Total Assets:
June 30, 2002 $ 26,915 $ 8,975 $1,290 $(1,604) $ 35,576
December 31, 2001 26,461 8,216 1,790 (1,650) 34,817
- --------------------------------------------------------------------------------------------------------------------
23
8. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES (Exelon and Generation)
During the three and six months ended June 30, 2002 and 2001, Exelon
recorded net gains/(losses) in other comprehensive income relating to
mark-to-market (MTM) adjustments of contracts designated as cash flow hedges as
follows:
ComEd PECO Generation Enterprises Exelon
- -----------------------------------------------------------------------------------------------------------------------------
Three months ended June 30, 2002 $(13) $(7) $ 15 $ (3) $ (8)
Three months ended June 30, 2001 -- 15 (61) (2) (48)
Six months ended June 30, 2002 (6) (1) (107) 14 (100)
Six months ended June 30, 2001 -- 8 (62) 2 (52)
- -----------------------------------------------------------------------------------------------------------------------------
During the three months ended June 30, 2002 and 2001, and the six
months ended June 30, 2002 and 2001, Generation recognized net MTM gains on
non-trading energy derivative contracts not designated as cash flow hedges, in
operating revenues as follows:
2002 2001
- -----------------------------------------------------------------------------------------------------------------------------
Three months ended June 30, $ 4 $ 5
Six months ended June 30, 10 22
- -----------------------------------------------------------------------------------------------------------------------------
During the three months ended June 30, 2002 and 2001 and the six months
ended June 30, 2002 and 2001, no amounts were reclassified from accumulated
other comprehensive income into earnings as a result of forecasted energy
commodity transactions no longer being probable.
During the three months ended June 30, 2002 and 2001, and the six
months ended June 30, 2002 and 2001, Generation recognized net MTM losses on
energy trading contracts, in operating revenues as follows:
2002 2001
- -----------------------------------------------------------------------------------------------------------------------------
Three months ended June 30, $ (9) $ (6)
Six months ended June 30, (13) (6)
- -----------------------------------------------------------------------------------------------------------------------------
During the three months ended June 30, 2002 and 2001 and the six months
ended June 30, 2002 and 2001, PECO reclassified other income in the Consolidated
Statements of Income and Comprehensive Income, as a result of the discontinuance
of cash flow hedges related to certain forecasted financing transactions that
were no longer probable of occurring as follows:
2002 2001
- -----------------------------------------------------------------------------------------------------------------------------
Three months ended June 30, $ -- $ --
Six months ended June 30, -- 6
- -----------------------------------------------------------------------------------------------------------------------------
As of June 30, 2002, deferred net gains on derivative instruments
accumulated in other comprehensive income are expected to be reclassified to
earnings during the next twelve months are as follows:
ComEd PECO Generation Enterprises Exelon
- -----------------------------------------------------------------------------------------------------------------------------
Gains Expected to be Reclassified $ 1 $ 15 $ -- $ 2 $ 18
- -----------------------------------------------------------------------------------------------------------------------------
24
Amounts in accumulated other comprehensive income related to interest
rate cash flow hedges are reclassified into earnings when the forecasted
interest payment occurs. Amounts in accumulated other comprehensive income
related to energy commodity cash flows are reclassified into earnings when the
forecasted purchase or sale of the energy commodity occurs.
Generation classifies investments in the trust accounts for
decommissioning nuclear plants as available-for-sale. The following tables show
the fair values, gross unrealized gains and losses and amortized cost bases for
the securities held in these trust accounts.
June 30, 2002
------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
- -----------------------------------------------------------------------------------------------------------------------------
Equity securities $ 1,677 $ 115 $ (406) $ 1,386
Debt securities
Government obligations 994 39 (1) 1,032
Other debt securities 641 18 (17) 642
- -----------------------------------------------------------------------------------------------------------------------------
Total debt securities 1,635 57 (18) 1,674
- -----------------------------------------------------------------------------------------------------------------------------
Total available-for-sale securities $ 3,312 $ 172 $ (424) $ 3,060
=============================================================================================================================
Unrealized gains and losses are recognized in Accumulated Depreciation
and Accumulated Other Comprehensive Income in Generation's Consolidated Balance
Sheet.
For the three months ended June 30, 2002, proceeds from the sale of
decommissioning trust investments and gross realized gains and losses on those
sales were $309 million, $13 million and $24 million, respectively. For the six
months ended June 30, 2002, proceeds from the sale of decommissioning trust
investments and gross realized gains and losses on those sales were $889
million, $31 million and $56 million, respectively.
Net realized losses of $4 million were recognized in Accumulated
Depreciation in Generation's Consolidated Balance Sheets at June 30, 2002 and
$21 million of net realized losses were recognized in Other Income and
Deductions in Generation's Consolidated Statements of Income and Comprehensive
Income for the six months ended June 30, 2002. The available-for-sale securities
held at June 30, 2002 have an average maturity of eight to ten years. The cost
of these securities was determined on the basis of specific identification.
25
9. COMMITMENTS AND CONTINGENCIES (Exelon and Generation)
For information regarding capital commitments, nuclear decommissioning
and spent fuel storage, see the Commitments and Contingencies Note in the
Consolidated Financial Statements of Exelon, ComEd and PECO for the year ended
December 31, 2001 and Generation's S-4 dated April 24, 2002.
Environmental Liabilities
Exelon has identified 72 sites where former manufactured gas plant
(MGP) activities have or may have resulted in actual site contamination. As of
June 30, 2002, Exelon had accrued $139 million for environmental investigation
and remediation costs that currently can be reasonably estimated, including $115
million for MGP investigation and remediation.
ComEd had accrued $96 million (discounted) as of June 30, 2002, for
environmental investigation and remediation costs that currently can be
reasonably estimated. This reserve included $90 million for MGP investigation
and remediation. ComEd is currently experiencing delays in the ongoing
remediation of an MGP site in Oak Park, Illinois, and is evaluating the impact
of those delays on the cost to complete the project. The impact of the delays is
currently uncertain, but could increase the environmental reserve in the future.
PECO had accrued $34 million (undiscounted) as of June 30, 2002, for
environmental investigation and remediation costs that currently can be
reasonably estimated, including $25 million for MGP investigation and
remediation.
Generation had accrued $9 million (undiscounted) as of June 30, 2002,
for environmental investigation and remediation cost, none of which relates to
MGP investigation and remediation.
Exelon, ComEd, PECO and Generation cannot predict the extent to which
they will incur other significant liabilities for additional investigation and
remediation costs at these or additional sites identified by environmental
agencies or others, or whether such costs may be recoverable from third parties.
26
Energy Commitments
Exelon and Generation had long-term commitments relating to the net
purchase and sale of energy, capacity and transmission rights from unaffiliated
utilities, including Midwest Generation LLC (Midwest Generation), and others,
including AmerGen, as expressed in the following table:
Power Only Purchases from
Net Capacity Power Only ------------------------- Transmission
Purchases (1) Sales AmerGen Non-Affiliates Rights Purchases
- ----------------------------------------------------------------------------------------------------------------------
2002 $ 634 $ 2,111 $ 127 $ 1,659 $ 72
2003 692 1,491 247 588 108
2004 859 822 301 200 89
2005 389 244 227 78 83
2006 352 120 227 66 2
Thereafter 4,120 23 2,045 272 --
- ----------------------------------------------------------------------------------------------------------------------
Total $ 7,046 $ 4,811 $ 3,174 $ 2,863 $ 354
======================================================================================================================
<FN>
(1) Net Capacity Purchases includes Midwest Generation commitments as of July
1, 2002. On July 1, 2002, Generation notified Midwest Generation of the
exercise of its call options under the existing Coal Generation Purchase
Power Agreement. Generation exercised options on 1,265 MWs of capacity and
did not exercise options on 2,684 MWs of capacity. In 2003, Generation will
take 1,696 MWs of non-option capacity and 1,265 MWs of option capacity
under the existing contract. Net Capacity Purchases also includes capacity
sales to TXU under the purchase power agreement entered into in connection
with the purchase of two generating plants in April 2002, which states that
TXU will purchase the plant output from May through September from 2002
through 2006. The combined capacity of the two plants is 2,334 MWs.
</FN>
In connection with the 2001 corporate restructuring, ComEd entered into
a purchase power agreement (PPA) with Generation. Under the terms of the PPA,
Generation has agreed to supply all of ComEd's load requirements through 2004.
Prices for this energy vary depending upon the time of day and month of
delivery. During 2005 and 2006, ComEd's PPA is a partial requirements agreement
under which ComEd will purchase all of its required energy and capacity from
Generation, up to the available capacity of the nuclear generating plants
formerly owned by ComEd and transferred to Generation. Under the terms of the
PPA, Generation is responsible for obtaining any required transmission service.
The PPA also specifies that prior to 2005, ComEd and Generation will jointly
determine and agree on a market-based price for energy delivered under the PPA
for 2005 and 2006. In the event that the parties cannot agree to market-based
prices for 2005 and 2006 prior to July 1, 2004, ComEd has the option of
terminating the PPA effective December 31, 2004. ComEd will obtain any
additional supply required from market sources in 2005 and 2006, and subsequent
to 2006, will obtain all of its supply from market sources, which could include
Generation.
In connection with the 2001 corporate restructuring, PECO entered into
a PPA with Generation. Under the terms of the PPA, PECO obtains substantially
all of its electric supply from Generation through 2010. Also, under the
restructuring, PECO assigned its rights and obligations under various PPAs and
fuel supply agreements to Generation. Generation supplies power to PECO from the
transferred generation assets, assigned PPAs and other market sources.
27
Under terms of the 2001 corporate restructuring, ComEd remits to
Generation any amounts collected from customers for nuclear decommissioning.
Under an agreement effective September 2001, PECO remits to Generation any
amounts collected from customers for nuclear decommissioning.
Litigation
Exelon
Securities Litigation. Between May 8 and June 14, 2002, a total of six
nearly identical class action lawsuits were filed in the Federal District Court
in Chicago asserting securities claims on behalf of Exelon investors during
April to September 2001. The complaints allege that Exelon violated Federal
securities laws by issuing a series of materially false and misleading
statements relating to its 2001 earnings expectations during the Class Period.
On May 30 and July 2, 2002, the Court granted Exelon's agreed-upon motions to
consolidate the pending cases into one lawsuit, and stayed discovery
indefinitely. A lead plaintiff has not been selected. Exelon believes the
lawsuit is without merit and is vigorously contesting this matter.
ComEd
Chicago Franchise. In March 1999, ComEd reached a settlement agreement
with the City of Chicago (Chicago) to end the arbitration proceeding between
ComEd and Chicago regarding the January 1, 1992 franchise agreement. As part of
the settlement agreement, ComEd and Chicago agreed to a revised combination of
ongoing work under the franchise agreement and new initiatives that will result
in defined transmission and distribution expenditures by ComEd to improve
electric services in Chicago. The settlement agreement provides that ComEd would
be subject to liquidated damages if the projects are not completed by various
dates, unless it was prevented from doing so by events beyond its reasonable
control. In addition, ComEd and Chicago established an Energy Reliability and
Capacity Account, into which ComEd deposited $25 million during each of the
years 1999 through 2001 and has conditionally agreed to deposit $25 million at
the end of 2002, to help ensure an adequate and reliable electric supply for
Chicago.
FERC Municipal Request for Refund. Three of ComEd's wholesale municipal
customers filed a complaint and request for refund with the FERC alleging that
ComEd failed to properly adjust its rates, as provided for under the terms of
the electric service contracts with the municipal customers and to track certain
refunds made to ComEd's retail customers in the years 1992 through 1994. In the
third quarter of 1998, FERC granted the complaint and directed that refunds be
made, with interest. ComEd filed a request for rehearing. On April 30, 2001,
FERC issued an order granting rehearing in which it determined that its 1998
order had been erroneous and that no refunds were due from ComEd to the
municipal customers. On June 29, 2001, FERC denied the customers' requests for
rehearing of the order granting rehearing. In August 2001, each of the three
wholesale municipal customers appealed the April 30, 2001 FERC order to the
Federal circuit court, which consolidated the appeals for the purposes of
briefing and decision. In November 2001, the court suspended briefing pending
court-initiated settlement discussions.
Retail Rate Law. In 1996, several developers of non-utility generating
facilities filed litigation against various Illinois officials claiming that the
enforcement against those facilities of an amendment to Illinois law removing
the entitlement of those facilities to state-subsidized payments for electricity
28
sold to ComEd after March 15, 1996 violated their rights under the Federal and
state constitutions. The developers also filed suit against ComEd for a
declaratory judgment that their rights under their contracts with ComEd were not
affected by the amendment. On August 4, 1999, the Illinois Appellate Court held
that the developers' claims against the state were premature, and the Illinois
Supreme Court denied leave to appeal that ruling. Developers of both facilities
have since filed amended complaints repeating their allegations that ComEd
breached the contracts in question and requesting damages for such breach
reflecting the state-subsidized rate to which the developers claim they were
entitled under their contracts. These matters are in the discovery phase.
Certain of the plaintiffs have produced an expert report claiming approximately
$175 million in damages, a quantification ComEd vigorously disputes. Virtually
all parties have filed motions for summary judgment. ComEd is contesting each
case and has filed its motion for summary judgment arguing that, as a matter of
law, it did not breach any of the contracts.
Service Interruptions. In August 1999, three class action lawsuits were
filed against ComEd, and subsequently consolidated, in the Circuit Court of Cook
County, Illinois seeking damages for personal injuries, property damage and
economic losses related to a series of service interruptions that occurred in
the summer of 1999. The combined effect of these interruptions resulted in over
168,000 customers losing service for more than four hours. Conditional class
certification was approved by the court for the sole purpose of exploring
settlement talks. ComEd filed a motion to dismiss the complaints. On April 24,
2001, the court dismissed four of the five counts of the consolidated complaint
without prejudice and the sole remaining count was dismissed in part. On June 1,
2001, the plaintiffs filed a second amended consolidated complaint and ComEd has
filed an answer. A portion of any settlement or verdict may be covered by
insurance; discussions with the carrier are ongoing.
Enron. As a result of Enron Corp.'s bankruptcy proceeding, ComEd has
potential monetary exposure for 366 of its customer accounts that were served by
Enron Energy Services (EES) as a billing agent. EES has rejected its contracts
with these accounts, with the exception of approximately 100 accounts for which
EES retains its billing agency. ComEd is working to ensure that customers know
what amounts are owed to ComEd on accounts for which EES has been removed as
billing agent, and has obtained updated billing addresses for these accounts.
With regard to the accounts for which EES retains its billing agency, ComEd's
total amount outstanding is not material. Because that amount is owed to ComEd
by individual customers, it is not part of the bankrupt Enron's estate. The ICC
has rescinded EES's authority to act as an alternative retail energy supplier in
Illinois. However, EES never served as a supplier, as opposed to a billing
agent, to any of ComEd's retail accounts.
ComEd and Generation
Godley Park District Litigation. On April 18, 2001, the Godley Park
District filed suit in Will County Circuit Court against ComEd and Generation
alleging that oil spills at Braidwood Station have contaminated the Park
District's water supply. The complaint sought actual damages, punitive damages
of $100 million and statutory penalties. The court dismissed all counts seeking
punitive damages and statutory penalties, and the plaintiff has filed an amended
complaint before the court. The amended complaint added counts under the
Illinois Public Utility Act (PUA), which provides for statutory penalties and
allows recovery of attorneys fees. On April 20, 2002, the Court denied ComEd and
Generation's motion to dismiss the additional counts under the PUA. ComEd and
Generation are contesting the liability and damages sought by the plaintiff.
29
Generation
Cotter Corporation Litigation. During 1989 and 1991, actions were
brought in Federal and state courts in Colorado against ComEd and its
subsidiary, Cotter Corporation (Cotter), seeking unspecified damages and
injunctive relief based on allegations that Cotter permitted radioactive and
other hazardous material to be released from its mill into areas owned or
occupied by the plaintiffs, resulting in property damage and potential adverse
health effects. In 1994, a Federal jury returned nominal dollar verdicts against
Cotter on eight plaintiffs' claims in the 1989 cases, which verdicts were upheld
on appeal. The remaining claims in the 1989 actions were settled or dismissed.
In 1998, a jury verdict was rendered against Cotter in favor of 14 of the
plaintiffs in the 1991 cases, totaling approximately $6 million in compensatory
and punitive damages, interest and medical monitoring. On appeal, the Tenth
Circuit Court of Appeals reversed the jury verdict, and remanded the case for
new trial. These plaintiffs' cases were consolidated with the remaining 26
plaintiffs' cases, which had not been tried. The consolidated trial was
completed on June 28, 2001. The jury returned a verdict against Cotter and
awarded $16.3 million in various damages. On November 20, 2001, the District
Court entered an amended final judgment that included an award of both
pre-judgment and post-judgment interests, costs, and medical monitoring expenses
that total $43.3 million. This matter is being appealed by Cotter in the Tenth
Circuit Court of Appeals. Cotter will vigorously contest the award.
In November 2000, another trial involving a separate sub-group of 13
plaintiffs, seeking $19 million in damages plus interest was completed in
federal district court in Denver. The jury awarded nominal damages of $42,500 to
11 of 13 plaintiffs, but awarded no damages for any personal injury or health
claims, other than requiring Cotter to perform periodic medical monitoring at
minimal cost. Cotter and the plaintiffs both appealed the verdict to the Tenth
Circuit Court of Appeals.
On February 18, 2000, ComEd sold Cotter to an unaffiliated third party.
As part of the sale, ComEd agreed to indemnify Cotter for any liability incurred
by Cotter as a result of these actions, as well as any liability arising in
connection with the West Lake Landfill discussed in the next paragraph. In
connection with Exelon's 2001 corporate restructuring, the responsibility to
indemnify Cotter for any liability related to these matters was transferred by
ComEd to Generation.
The United States Environmental Protection Agency (EPA) has advised
Cotter that it is potentially liable in connection with radiological
contamination at a site known as the West Lake Landfill in Missouri. Cotter is
alleged to have disposed of approximately 39,000 tons of soils mixed with 8,700
tons of leached barium sulfate at the site. Cotter, along with three other
companies identified by the EPA as potentially responsible parties (PRPs), is
reviewing a draft feasibility study that recommends capping the site. The PRPs
are also engaged in discussions with the State of Missouri and the EPA. The
estimated costs of remediation for the site are $10 to $15 million. Once a final
feasibility study is complete and a remedy selected, it is expected that the
30
PRPs will agree on an allocation of responsibility for the costs. Until an
agreement is reached, Exelon cannot predict its share of the costs.
Real Estate Tax Appeals. Generation is involved in tax appeals
regarding a number of its nuclear facilities, Limerick Generating Station
(Montgomery County, PA), Peach Bottom Atomic Power Station (York County, PA),
Quad Cities Station (Rock Island County, IL), and one of its fossil facilities,
Eddystone (Delaware County, PA). Generation is also involved in the tax appeal
for Three Mile Island (Dauphin County, PA) through AmerGen. Generation does not
believe the outcome of these matters will have a material adverse effect on
Generation's results of operations or financial condition.
General
Exelon, ComEd, PECO and Generation are involved in various other
litigation matters. The ultimate outcome of such matters, as well as the matters
discussed above, while uncertain, are not expected to have a material adverse
effect on its respective financial condition or results of operations.
10. MERGER-RELATED COSTS (Exelon and Generation)
In association with the Merger, Exelon recorded certain reserves for
restructuring costs. The reserves associated with PECO were charged to expense,
while the reserves associated with Unicom were recorded as part of the
application of purchase accounting and did not affect results of operations.
Merger-related costs charged to expense in 2000 were $276 million,
consisting of $124 million for PECO employee costs and $152 million of direct
incremental costs. Direct incremental costs represent expenses directly
associated with completing the Merger, including professional fees, regulatory
approval and settlement costs, and settlement of compensation arrangements.
Employee costs represent estimated severance costs and pension and
postretirement benefits provided under Exelon's merger separation plans for
eligible employees who are expected to be involuntarily terminated before
December 2002 due to integration activities of the merged companies.
The purchase price allocation as of December 31, 2000 included a
liability of $307 million for Unicom employee costs and liabilities of
approximately $39 million for estimated costs of exiting various business
activities of former Unicom activities that were not compatible with the
strategic business direction of Exelon.
31
During 2001, Exelon finalized its plans for consolidation of functions,
including negotiation of an agreement with the International Brotherhood of
Electrical Workers Local 15 regarding severance benefits to union employees and
recorded adjustments to the purchase price allocation as follows:
Original 2001 Adjusted
Estimate Adjustments Liabilities
- --------------------------------------------------------------------------------------------------------------------------
Employee severance payments $ 128 $ 33 $ 161 (a)
Relocation and other benefits 21 9 30 (a)
- --------------------------------------------------------------------------------------------------------------------------
Employee severance payments and relocation and other benefits 149 42 191
Actuarially determined pension and postretirement costs 158 (11) 147 (b)
- --------------------------------------------------------------------------------------------------------------------------
Total Unicom - Employee Cost $ 307 $ 31 $ 338
==========================================================================================================================
<FN>
(a) The increase is a result of the identification in 2001 of additional
positions to be eliminated.
(b) The reduction results from lower estimated pension and post retirement
welfare benefits reflecting revised actuarial estimates.
</FN>
The following table provides a reconciliation of the reserve for
employee severance and relocation costs associated with the merger:
- --------------------------------------------------------------------------------------------------------------------------
Employee severance and relocation reserve as of October 20, 2000 $ 149
Additional reserve 42
- --------------------------------------------------------------------------------------------------------------------------
Adjusted employee severance and relocation reserve 191
Payments to employees (October 2000-March 2002) (92)
Payments to employees (April 2002-June 2002) (33)
- --------------------------------------------------------------------------------------------------------------------------
Employee severance and relocation reserve as of June 30, 2002 $ 66
==========================================================================================================================
Additional employee severance costs of $48 million primarily related to
PECO employees were charged to expense in 2001. Exelon anticipates that a total
of $281 million of employee costs will be funded from pension and postretirement
benefit plans.
As part of the January 2001 corporate restructuring, portions of the
employee severance and restructuring reserve were transferred from ComEd to
Generation, Enterprises and Exelon Business Services Company (BSC).
Approximately $37 million and $15 million of the employee severance and
relocation reserve as of June 30, 2002 relates to ComEd and Generation,
respectively, and is reflected on the Consolidated Balance Sheets of those
entities.
Approximately 3,300 Unicom and PECO positions have been identified to
be eliminated as a result of the merger. Exelon has terminated 2,255 employees
as of June 30, 2002 of which 510 were terminated in the second quarter of 2002.
The remaining positions are expected to be eliminated by the end of 2002.
11. LONG-TERM DEBT (Exelon)
On June 13, 2002, ComEd issued $200 million of 6.15% First Mortgage
Bonds, due March 15, 2012. The $200 million bond issuance was a refinancing of
the $200 million of 8.5% First Mortgage Bonds redeemed on July 15, 2002 at a
redemption price of 103.915% of the principal amount.
32
In connection with the issuance of the $200 million of First Mortgage
Bonds, ComEd settled a forward starting interest rate swap in the notional
amount of $75 million resulting in a $1 million loss recorded in other
comprehensive income, which is being amortized over the expected remaining life
of the related debt.
On April 15, 2002, ComEd issued $100 million of Illinois Development
Finance Authority floating-rate Pollution Control Revenue Refunding Bonds,
Series 2002. The $100 million bond issuance was used to redeem $100 million of
7.25% Illinois Development Finance Authority Pollution Control Revenue Refunding
Bonds, Series 1991.
On March 13, 2002, ComEd issued $400 million of 6.15% First Mortgage
Bonds, due March 15, 2012. This $400 million bond issuance refinanced other
First Mortgage Bonds. In connection with the issuance of $400 million of First
Mortgage Bonds, ComEd settled forward starting interest rate swaps in the
aggregate notional amount of $375 million resulting in a $9 million loss
recorded in other comprehensive income, which is being amortized over the
expected remaining life of the related debt.
On March 21, 2002, ComEd redeemed $200 million of 8.625% First Mortgage
Bonds at the redemption price of 103.84% of the principal amount. These bonds
had a maturity date of February 1, 2022.
During the six months ended June 30, 2002, ComEd recorded prepayment
premiums of $9 million, partially offset by net unamortized premiums, discounts
and debt issuance expenses of $2 million, associated with the early retirement
of debt in 2002 that have been deferred by ComEd in regulatory assets and will
be amortized to interest expense over the life of the related new debt issuance
consistent with regulatory recovery.
12. SALE OF ACCOUNTS RECEIVABLE (Exelon)
PECO is party to an agreement, which expires in November 2005, with a
financial institution under which it can sell or finance with limited recourse
an undivided interest, adjusted daily, in up to $225 million of designated
accounts receivable. As of June 30, 2002, PECO had sold a $225 million interest
in accounts receivable, consisting of a $170 million interest in accounts
receivable that PECO accounted for as a sale under SFAS No. 140, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,
a Replacement of FASB Statement No. 125" and a $55 million interest in
special-agreement accounts receivable which were accounted for as a long-term
note payable. PECO retains the servicing responsibility for these receivables.
The agreement requires PECO to maintain the $225 million interest, which, if not
met, requires cash, which would otherwise be received by PECO under this
program, to be held in escrow until the requirement is met. At June 30, 2002,
PECO met this requirement.
33
13. RELATED-PARTY TRANSACTIONS (Exelon and Generation)
Exelon and Generation
In February 2002, Generation entered into an agreement to loan AmerGen
up to $75 million at an interest rate equal to the 1-month London Interbank
Offering Rate plus 2.25%. As of June 30, 2002, $75 million had been loaned to
AmerGen. In July 2002, the loan agreement and the loan were increased to $100
million and the maturity date was extended to July 1, 2003.
Generation has entered into PPAs dated December 18, 2001 and November
22, 1999 with AmerGen. Under the 2001 PPA, Generation has agreed to purchase
from AmerGen all the energy from Unit No. 1 at Three Mile Island Nuclear Station
from January 1, 2002 through December 31, 2014. Under the 1999 PPA, Generation
has agreed to purchase from AmerGen all of the residual energy from Clinton
Nuclear Power Station (Clinton), through December 31, 2002. Currently, the
residual output approximates 25% of the total output of Clinton. For the three
months ended June 30, 2002 and 2001, and for the six months ended June 30, 2002
and 2001, the amount of purchased power recorded in Purchased Power in Exelon's
and Generation's Consolidated Statements of Income and Comprehensive Income is
$60 million and $12 million and $116 million and $22 million, respectively. As
of June 30, 2002 and December 31, 2001, Generation had a payable of $27 million
and $3 million, respectively, resulting from these PPAs.
Under a service agreement dated March 1, 1999, Generation provides
AmerGen with certain operation and support services to the nuclear facilities
owned by AmerGen. This service agreement has an indefinite term and may be
terminated by Generation or AmerGen on 90 days notice. Generation is compensated
for these services in an amount agreed to in the work order, but not less than
the higher of fully allocated costs for performing the services or the market
price. For the three months ended June 30, 2002 and 2001, the amount charged to
AmerGen for these services was $16 million. For the six months ended June 30,
2002 and 2001, the amount charged to AmerGen for these services was $30 million
and $32 million, respectively. As of June 30, 2002 and December 31, 2001,
Generation had a receivable of $61 million and $47 million, respectively,
resulting from these services.
Generation
Generation had a short-term receivable of $59 million at June 30, 2002
and December 31, 2001, and a long-term receivable of $260 million and $291
million at June 30, 2002 and December 31, 2001, respectively, from ComEd
primarily representing ComEd's legal requirements to remit collections of
nuclear decommissioning costs from customers to Generation resulting from the
restructuring. These receivables from ComEd were included in Current Assets and
Deferred Debits and Other Assets, respectively, on Generation's Consolidated
Balance Sheets.
Effective January 1, 2001, Generation entered into PPAs with ComEd and
PECO. Intercompany power sales pursuant to the PPAs for the three months ended
June 30, 2002 and 2001 were $893 million, including decommissioning revenue of
$3 million, and $849 million, including decommissioning revenue of $3 million,
respectively. For the six months ended June 30, 2002 and June 30, 2001 these
intercompany power sales were $1,728 million, including decommissioning revenue
of $6 million, and $1,701 million, including decommissioning revenue of $6
million, respectively. At June 30, 2002 and December 31, 2001, there was a $351
34
million and $273 million receivable, respectively, for the PPAs as well as other
services provided which is included in Current Assets on Generation's
Consolidated Balance Sheets.
Generation sells power to Exelon Energy. Power sales for the three
months ended June 30, 2002 and 2001 were $60 million and $57 million,
respectively, and for the six months ended June 30, 2002 and 2001 were $117
million and $118 million, respectively. At June 30, 2002 and December 31, 2001,
there was a $21 million and $15 million receivable, respectively.
Generation purchases power from AmerGen under PPAs as discussed in the
Exelon and Generation section of this note. Additionally, Generation purchases
power from PECO for Generation's own use, buys back excess power from Exelon
Energy and purchases transmission and ancillary services from ComEd. These
purchases, including AmerGen, for the three months ended June 30, 2002 and 2001
were $75 million and $42 million, respectively, and for the six months ended
June 30, 2002 and 2001 were $147 million and $60 million, respectively. At June
30, 2002 and December 31, 2001, there was a payable for these power purchases of
$35 million and $26 million, respectively.
Generation receives a variety of corporate support services from BSC,
including legal, human resources, financial and information technology services.
Such services, provided at cost including applicable overhead, for the three
months ended June 30, 2002 and June 30, 2001 were $16 million and $22 million,
respectively, and $30 million and $35 million for the six months ended June 30,
2002 and June 30, 2001, respectively, and were included in Operating and
Maintenance (O&M) expense on Generation's Consolidated Statements of Income and
Comprehensive Income. At June 30, 2002 and December 31, 2001, there was an $8
million and an $18 million payable, respectively, to BSC for services provided
which is included in Current Liabilities on Generation's Consolidated Balance
Sheets.
In order to facilitate payment processing, ComEd processes certain
invoice payments on behalf of Generation and BSC. Payables at June 30, 2002 and
December 31, 2001 to ComEd for such services totaled $8 million and $21 million,
respectively, and were included in Current Liabilities on Generation's
Consolidated Balance Sheets.
In relation to the acquisition of two generating plants from TXU in
April of 2002, Generation had a $331 million payable to Exelon at June 30, 2002.
Interest expense related to this payable was $1 million for the three months and
six months ended June 30, 2002.
In relation to the December 18, 2001 acquisition of 49.9% of Sithe
common stock, Generation had a $700 million payable to Exelon, which was repaid
in the second quarter of 2001. Interest expense related to this payable for the
three and six months ended June 30, 2001 was $8 million and $23 million,
respectively.
14. NEW ACCOUNTING PRONOUNCEMENTS (Exelon and Generation)
In June 2001, the FASB issued SFAS No. 143, "Asset Retirement
Obligations" (SFAS No. 143). In April 2002, the FASB issued SFAS No. 145, "
35
Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No.
13, and Technical Corrections" (SFAS No. 145). In July 2002, the FASB issued
SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities"
(SFAS No. 146).
SFAS No. 143 provides accounting requirements for retirement
obligations associated with tangible long-lived assets. Exelon expects to adopt
SFAS No. 143 on January 1, 2003. Retirement obligations associated with
long-lived assets included within the scope of SFAS No. 143 are those for which
there is a legal obligation to settle under existing or enacted law, statute,
written or oral contract or by legal construction under the doctrine of
promissory estoppel. Adoption of SFAS No. 143 will change the accounting for the
decommissioning of Exelon's nuclear generating plants as well as certain other
long-lived assets.
Currently, Generation records the obligation for decommissioning
ratably over the lives of the plants. The January 1, 2003 adoption of SFAS No.
143 will require a cumulative effect adjustment effective the date of adoption
to adjust plant assets and decommissioning liabilities to the values they would
have been had this standard been employed from the in-service dates of the
plants.
As it relates to nuclear decommissioning, the effect of this cumulative
adjustment will be to change the decommissioning liability to reflect the fair
value of the decommissioning obligation at the balance sheet date. Additionally,
the standard will require the accrual of an asset related to the decommissioning
obligation, which will be amortized over the remaining lives of the plants. The
net difference between the asset recognized and the liability recorded upon
adoption of SFAS No. 143 will be charged to earnings and recognized as a
cumulative effect, net of expected regulatory recovery. The decommissioning
liability to be recorded represents an obligation for the future decommissioning
of the plants, and as a result accretion expense will be accrued on this
liability until such time as the obligation is satisfied.
Exelon, ComEd, PECO and Generation are in the process of evaluating the
impact of SFAS No. 143 on their financial statements, and cannot determine the
ultimate impact of adoption at this time, however, the cumulative effect could
be material to earnings. Additionally, although over the life of the plant the
charges to earnings for the depreciation of the asset and the interest on the
liability will be equal to the amounts currently recognized as decommissioning
expense, the timing of those charges will change and in the near-term period
subsequent to adoption, the depreciation of the asset and the interest on the
liability could result in an increase in expense.
SFAS No. 145 eliminates SFAS No. 4 "Reporting Gains and Losses from
Extinguishment of Debt" (SFAS No. 4) and thus allows for only those gains or
losses on the extinguishment of debt that meet the criteria of extraordinary
items to be treated as such in the financial statements. SFAS No. 145 also
amends Statement of Financial Accounting Standards No. 13, "Accounting for
Leases" (SFAS No. 13) to require sale-leaseback accounting for certain lease
modifications that have economic effects that are similar to sale-leaseback
transactions. The provisions of this statement relating to the rescission of
SFAS No. 4 are effective for fiscal years beginning after May 15, 2002, the
provisions of this statement relating to the amendment of SFAS No. 13 are
effective for transactions occurring after May 15, 2002, and all other
36
provisions of this Statement are effective for financial statements issued on or
after May 15, 2002. Exelon, ComEd, PECO and Generation are in the process of
evaluating the impact of SFAS No. 145 on their financial statements, and do not
expect the impact to be material.
SFAS No. 146 requires that the liability for costs associated with exit
or disposal activities be recognized when incurred, rather than at the date of a
commitment to an exit or disposal plan. SFAS No. 146 is to be applied
prospectively to exit or disposal activities initiated after December 31, 2002.
15. CHANGE IN ACCOUNTING ESTIMATE (Exelon and Generation)
Effective April 1, 2001, Generation changed its accounting estimates
related to the depreciation and decommissioning of certain generating stations.
The estimated service lives were extended by 20 years for three nuclear
stations, by periods of up to 20 years for certain fossil stations and by 50
years for a pumped storage station. Effective July 1, 2001, the estimated
service lives were extended by 20 years for the remainder of Exelon's operating
nuclear stations. These changes were based on engineering and economic
feasibility studies performed by Generation considering, among other things,
future capital and maintenance expenditures at these plants. As a result of the
change, net income for the three months and six months ended June 30, 2002
increased $25 million ($16 million, net of income taxes) and $60 million ($36
million, net of income taxes), respectively.
Effective April 1, 2002, ComEd changed its accounting estimate related
to the allowance for uncollectible accounts. This change was based on an
independently prepared evaluation of the risk profile of ComEd's customer
accounts receivable. As a result of the new evaluation, the allowance for
uncollectible accounts reserve was reduced by $11 million in the second quarter
of 2002.
16. SUBSEQUENT EVENTS
On July 1, 2002, Exelon Generation notified Midwest Generation of the
exercise of its call options under the existing Coal Generation Purchase Power
Agreement. Exelon Generation exercised options on 1,265 MWs of capacity and did
not exercise options on 2,684 MWs of capacity. In 2003, Exelon Generation will
take 1,696 MWs of non-option capacity and 1,265 MWs of option capacity under the
existing contract.
37
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
99.1 - Certification Pursuant to Section 1350 of Chapter 63 of Title
18 United States Code (Sarbanes - Oxley Act of 2002) as to the
Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 2002, by John W. Rowe for Exelon Corporation.
99.2 - Certification Pursuant to Section 1350 of Chapter 63 of Title
18 United States Code (Sarbanes - Oxley Act of 2002) as to the
Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 2002, by Ruth Ann M. Gillis for Exelon Corporation.
99.3 - Certification Pursuant to Section 1350 of Chapter 63 of Title
18 United States Code (Sarbanes - Oxley Act of 2002) as to the
Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 2002, by Oliver D. Kingsley for Exelon Generation
Company, LLC.
99.4 - Certification Pursuant to Section 1350 of Chapter 63 of Title
18 United States Code (Sarbanes - Oxley Act of 2002) as to the
Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 2002, by Ruth Ann M. Gillis for Exelon Generation
Company, LLC.
99.5 - Management's Discussion and Analysis of Financial Condition
and Results of Operations and Index to Financial Statements of
Exelon Generation Company, LLC, filed by Exelon Generation
Company, LLC with the Securities Exchange Commission on April
24, 2002 on Registration Statement Form S-4 (File No.
333-85496).
38
(b) Reports on Form 8-K:
Exelon filed Current Reports on Form 8-K during the three months ended
June 30, 2002 regarding the following items:
Date of Earliest
Event Reported Description of Item Reported
- -----------------------------------------------------------------------------------------------------------------------------------
April 2, 2002 "ITEM 5. OTHER EVENTS" regarding an interim order in Commonwealth Edison's Delivery Services
Rate Case.
April 4, 2002 "ITEM 5. OTHER EVENTS" regarding the announcement that an indirect subsidiary of Exelon filed
for protection under Chapter 11 of the Bankruptcy Code.
April 10, 2002 "ITEM 9. REGULATION FD DISCLOSURE" regarding a presentation by representatives of Power Team,
Generation's Power Marketing Organization, to Capital Group Companies. The exhibit includes the
slides used during the presentation.
April 19, 2002 "ITEM 5. OTHER EVENTS and REGULATION FD DISCLOSURE" regarding the announcement that Ruth Ann M.
Gillis, Senior Vice President and Chief Financial Officer, will become Senior Vice President and
President, Exelon Business Services Company.
April 22, 2002 "ITEM 5. OTHER EVENTS" reporting Exelon's first quarter 2002 earnings results. Exelon also
announced that Nicholas DeBenedictis was elected to the board of directors of Exelon
Corporation. "ITEM 9. REGULATION FD DISCLOSURE" regarding highlights of the Exelon First Quarter
Earnings Conference Call.
May 2, 2002 "ITEM 5. OTHER EVENTS" regarding the announcement of the completion of the purchase of two TXU
Corp. power plants.
May 14, 2002 "ITEM 9. REGULATION FD DISCLOSURE" regarding a presentation by Ruth Ann M. Gillis, Senior Vice
President and CFO of Exelon Corporation, to investors at the Salomon Smith Barney Power &
Merchant Energy 2002 Conference. The exhibits include the slides used and copies of the
materials made available to investors attending the conference.
May 17, 2002 "ITEM 5. OTHER EVENTS" regarding Commonwealth Edison's resolution of a FERC reporting issue with
Illinois Regulators.
39
May 22, 2002 "ITEM 5. OTHER EVENTS" regarding Exelon's affirmation of Power Team's delivery-based trading
strategy.
May 22, 2002 "ITEM 9. REGULATION FD DISCLOSURE" representatives of Exelon Corporation attended the Edison
Electric Institute's International Finance Conference held in New York. The exhibits include the
materials made available at the conference.
May 23, 2002 "ITEM 5. OTHER EVENTS" regarding Exelon's response to FERC that Power Team did not engage in any
of the strategies put forth in the Enron Corp. (Enron) memos referred to in FERC's data request.
A copy of Exelon's response to the FERC data request was included as an exhibit.
June 10, 2002 "ITEM 5. OTHER EVENTS" regarding Exelon's reaffirmation of the company's earnings outlook for
2002 and the announcement that it will host an investor conference.
June 12, 2002 "ITEM 9. REGULATION FD DISCLOSURE" John W. Rowe, President and CEO of Exelon, made a
presentation to investors at the Deutsche Bank Electric and Power Conference. The exhibits
include the presentation slides and other materials made available at the conference.
June 20, 2002 "ITEM 9. REGULATION FD DISCLOSURE" senior officers of Exelon made presentations at the Exelon
Investor Conference in New York City. The exhibits include the presentation slides and other
materials made available at the conference.
June 20, 2002 "ITEM 9. REGULATION FD DISCLOSURE" regarding additional information management provided during
Exelon's Investor Conference in New York on June 20, 2002.
June 27, 2002 "ITEM 5. OTHER EVENTS" a note to Exelon's financial community regarding Exelon Generation's
agreement to purchase Sithe New England Holdings, LLC.
- ------------------------------------------------------------------------------------------------------------------------------------
Generation filed Current Reports on Form 8-K during the three months
ended June 30, 2002 regarding the following items:
Date of Earliest
Event Reported Description of Item Reported
- ------------------------------------------------------------------------------------------------------------------------------------
May 2, 2002 "ITEM 5. OTHER EVENTS" regarding the announcement of the completion of the purchase of two TXU
Corp. power plants.
40
May 14, 2002 "ITEM 9. REGULATION FD DISCLOSURE" regarding a presentation by Ruth Ann M. Gillis, Senior Vice
President and CFO of Exelon Corporation, to investors at the Salomon Smith Barney Power &
Merchant Energy 2002 Conference. The exhibits include the slides used and copies of the
materials made available to investors attending the conference.
May 22, 2002 "ITEM 5. OTHER EVENTS" regarding Exelon's affirmation of Power Team's delivery-based trading
strategy.
May 22, 2002 "ITEM 9. REGULATION FD DISCLOSURE" representatives of Exelon Corporation attended the Edison
Electric Institute's International Finance Conference held in New York. The exhibits include the
materials made available at the conference.
May 23, 2002 "ITEM 5. OTHER EVENTS" regarding Exelon's response to FERC that Power Team did not engage in any
of the strategies put forth in the Enron memos referred to in FERC's data request. A copy of
Exelon's response to the FERC data request was included as an exhibit.
June 12, 2002 "ITEM 9. REGULATION FD DISCLOSURE" John W. Rowe, President and CEO of Exelon, made a
presentation to investors at the Deutsche Bank Electric and Power Conference. The exhibits
include the presentation slides and other materials made available at the conference.
June 20, 2002 "ITEM 9. REGULATION FD DISCLOSURE" senior officers of Exelon made presentations at the Exelon
Investor Conference in New York City. The exhibits include the presentation slides and other
materials made available at the conference.
June 20, 2002 "ITEM 9. REGULATION FD DISCLOSURE" regarding additional information management provided during
Exelon's Investor Conference in New York on June 20, 2002.
June 27, 2002 "ITEM 5. OTHER EVENTS" a note to Exelon's financial community regarding Exelon Generation's
agreement to purchase Sithe New England Holdings, LLC.
- ------------------------------------------------------------------------------------------------------------------------------------
41
SIGNATURES
Pursuant to requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EXELON CORPORATION
/s/ John W. Rowe
---------------------------------
JOHN W. ROWE
Chairman of the Board and Chief Executive Officer
/s/ Ruth Ann M. Gillis
---------------------------------
RUTH ANN M. GILLIS
Senior Vice President and Chief Financial Officer
/s/ Matthew F. Hilzinger
---------------------------------
MATTHEW F. HILZINGER
Vice President and Corporate Controller
(Principal Accounting Officer)
October 30, 2002
42
SIGNATURES
Pursuant to requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EXELON GENERATION COMPANY, LLC
/s/ Oliver D. Kingsley Jr.
---------------------------------
OLIVER D. KINGSLEY JR.
CEO and President
/s/ Ruth Ann M. Gillis
---------------------------------
RUTH ANN M. GILLIS
Senior Vice President and Chief Financial Officer
Exelon Corporation
(Principal Financial Officer)
October 30, 2002
43
CERTIFICATIONS
- -------------------------------------------------------------------------------
Certification Pursuant to Rule 13a-14 and 15d-14 of the Securities and
Exchange Act of 1934
I, John W. Rowe certify that:
1. I have reviewed this amended quarterly report on Form 10-Q/A of Exelon
Corporation;
2. Based on my knowledge, this amended quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
amended quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this amended quarterly report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this amended
quarterly report;
Date: October 30, 2002
/s/ John W. Rowe
-----------------------------------
John W. Rowe
Chairman of the Board and Chief Executive Officer
44
Certification Pursuant to Rule 13a-14 and 15d-14 of the Securities and
Exchange Act of 1934
- -------------------------------------------------------------------------------
I, Ruth Ann M. Gillis certify that:
1. I have reviewed this amended quarterly report on Form 10-Q/A of Exelon
Corporation;
2. Based on my knowledge, this amended quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
amended quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this amended quarterly report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this amended
quarterly report;
Date: October 30, 2002
/s/ Ruth Ann M. Gillis
-----------------------------------
Ruth Ann M. Gillis
Senior Vice President and Chief Financial Officer
45
Certification Pursuant to Rule 13a-14 and 15d-14 of the Securities and
Exchange Act of 1934
- -------------------------------------------------------------------------------
I, Oliver D. Kingsley Jr. certify that:
1. I have reviewed this amended quarterly report on Form 10-Q/A of Exelon
Generation Company, LLC;
2. Based on my knowledge, this amended quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
amended quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this amended quarterly report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this amended
quarterly report;
Date: October 30, 2002
/s/ Oliver D. Kingsley Jr.
-----------------------------------
Oliver D. Kingsley Jr.
Chief Executive Officer and President
46
Certification Pursuant to Rule 13a-14 and 15d-14 of the Securities and
Exchange Act of 1934
- -------------------------------------------------------------------------------
I, Ruth Ann M. Gillis certify that:
1. I have reviewed this amended quarterly report on Form 10-Q/A of Exelon
Generation Company, LLC;
2. Based on my knowledge, this amended quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
amended quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this amended quarterly report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this amended
quarterly report;
Date: October 30, 2002
/s/ Ruth Ann M. Gillis
-----------------------------------
Ruth Ann M. Gillis
Senior Vice President and Chief Financial Officer
Exelon Corporation
47