Exelon 2014 Annual Report Download - page 40

PECO
As of January 31, 2015, there were 170,478,507 outstanding shares of common stock, without par value, of PECO, all of which were
indirectly held by Exelon.
BGE
As of January 31, 2015, there were 1,000 outstanding shares of common stock, without par value, of BGE, all of which were
indirectly held by Exelon.
Dividends
Under applicable Federal law, Generation, ComEd, PECO and BGE can pay dividends only from retained, undistributed or current
earnings. A significant loss recorded at Generation, ComEd, PECO or BGE may limit the dividends that these companies can
distribute to Exelon.
The Federal Power Act declares it to be unlawful for any officer or director of any public utility “to participate in the making or paying
of any dividends of such public utility from any funds properly included in capital account.” What constitutes “funds properly included
in capital account” is undefined in the Federal Power Act or the related regulations; however, FERC has consistently interpreted the
provision to allow dividends to be paid as long as (1) the source of the dividends is clearly disclosed, (2) the dividend is not
excessive and (3) there is no self-dealing on the part of corporate officials. While these restrictions may limit the absolute amount of
dividends that a particular subsidiary may pay, Exelon does not believe these limitations are materially limiting because, under these
limitations, the subsidiaries are allowed to pay dividends sufficient to meet Exelon’s actual cash needs.
Under Illinois law, ComEd may not pay any dividend on its stock unless, among other things, “[its] earnings and earned surplus are
sufficient to declare and pay same after provision is made for reasonable and proper reserves,” or unless it has specific authorization
from the ICC. ComEd has also agreed in connection with a financing arranged through ComEd Financing III that ComEd will not
declare dividends on any shares of its capital stock in the event that: (1) it exercises its right to extend the interest payment periods
on the subordinated debt securities issued to ComEd Financing III; (2) it defaults on its guarantee of the payment of distributions on
the preferred trust securities of ComEd Financing III; or (3) an event of default occurs under the Indenture under which the
subordinated debt securities are issued. No such event has occurred.
PECO has agreed in connection with financings arranged through PEC L.P. and PECO Trust IV that PECO will not declare
dividends on any shares of its capital stock in the event that: (1) it exercises its right to extend the interest payment periods on the
subordinated debentures which were issued to PEC L.P. or PECO Trust IV; (2) it defaults on its guarantee of the payment of
distributions on the Series D Preferred Securities of PEC L.P. or the preferred trust securities of PECO Trust IV; or (3) an event of
default occurs under the Indenture under which the subordinated debentures are issued. No such event has occurred.
BGE is subject to certain dividend restrictions established by the MDPSC. First, in connection with the Constellation merger, BGE
was prohibited from paying a dividend on its common shares through the end of 2014. Second, BGE is prohibited from paying a
dividend on its common shares if (a) after the dividend payment, BGE’s equity ratio would be below 48% as calculated pursuant to
the MDPSC’s ratemaking precedents or (b) BGE’s senior unsecured credit rating is rated by two of the three major credit rating
agencies below investment grade. Finally, BGE must notify the MDPSC that it intends to declare a dividend on its common shares at
least 30 days before such a dividend is paid and notify the MDPSC that BGE’s equity ratio is at least 48% within five business days
after dividend payment. There are no other limitations on BGE paying common stock dividends unless: (1) BGE elects to defer
interest payments on the 6.20% Deferrable Interest Subordinated Debentures due 2043, and any deferred interest remains unpaid;
or (2) any dividends (and any redemption payments) due on BGE’s preference stock have not been paid.
At December 31, 2014, Exelon had retained earnings of $10,910 million, including Generation’s undistributed earnings of $3,803
million, ComEd’s retained earnings of $851 million consisting of retained earnings appropriated for future dividends of $2,490 million,
partially offset by $(1,639) million of unappropriated retained deficits, PECO’s retained earnings of $681 million, and BGE’s retained
earnings of $1,203 million.
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