ComEd 2003 Annual Report Download - page 60

58 Management’s Discussion and Analysis of Financial Condition and Results of Operations
EXELON CORPORATION AND SUBSIDIARY COMPANIES
Financing activities exclude the non-cash issuance of a
$534 million note to Sithe for the November 1, 2002 acqui-
sition of Exelon New England, which was subsequently in-
creased to $536 million.
Credit Issues
Exelon Credit Facility
Exelon meets its short-term liquidity requirements primarily
through the issuance of commercial paper by Exelon corpo-
rate holding company (Exelon Corporate) and by ComEd,
PECO and Generation. In October 2003, Exelon, ComEd, PECO
and Generation replaced their $1.5 billion bank unsecured
revolving credit facility with a $750 million 364-day un-
secured revolving credit agreement and a $750 million three-
year unsecured revolving credit agreement with a group of
banks. Both revolving credit agreements are used principally
to support the commercial paper programs at Exelon,
ComEd, PECO and Generation and to issue letters of credit.
The 364-day agreement includes a term-out option provision
that allows a borrower to extend the maturity of revolving
credit borrowings outstanding at the end of the 364-day
period for one year.
At December 31, 2003, aggregate sublimits under the
credit agreements were $1.0 billion, $100 million, $150 mil-
lion and $250 million for Exelon Corporate, ComEd, PECO,
and Generation, respectively. Sublimits under the credit
agreements can change upon written notification to the
bank group. Exelon Corporate, ComEd, PECO and Generation
had approximately $955 million, $80 million, $148 million
and $170 million of unused bank commitments under the
credit agreements, respectively, at December 31, 2003. At
December 31, 2003, commercial paper outstanding was $280
million and $46 million at Exelon Corporate and PECO, re-
spectively. ComEd and Generation did not have any
commercial paper outstanding at December 31, 2003. Inter-
est rates on the advances under the credit facility are based
on either the London Interbank Offering Rate (LIBOR) or
prime plus an adder based on the credit rating of the bor-
rower as well as the total outstanding amounts under the
agreement at the time of borrowing. The maximum adder
would be 175 basis points.
The credit agreements require Exelon Corporate, ComEd,
PECO and Generation to maintain a minimum cash from
operations to interest expense ratio for the twelve-month
period ended on the last day of any quarter. The ratios ex-
clude revenues and interest expenses attributable to
securitization debt, certain changes in working capital, dis-
tributions on preferred securities of subsidiaries and, in the
case of Exelon Corporate and Generation, revenues from Ex-
elon New England and interest on the debt of Exelon New
England’s project subsidiaries. Exelon Corporate is measured
at the Exelon consolidated level. At December 31, 2003,
Exelon Corporate, ComEd, PECO and Generation were in
compliance with the credit agreement thresholds. The
following table summarizes the minimum thresholds re-
flected in the credit agreement for the twelve-month period
ended December 31, 2003:
Exelon
Corporate ComEd PECO Generation
Credit agreement
threshold 2.65 to 1 2.25 to 1 2.25 to 1 3.25 to 1
At December 31, 2003, our capital structure consisted of 62%
of long-term debt, including long-term debt to financing
trusts, 35% common equity, 3% notes payable and less than
1% preferred securities of subsidiaries. Total debt included
$6.2 billion owed to unconsolidated affiliates of ComEd and
PECO that qualify as special purpose entities under FIN No.
46-R. These special purpose entities were created for the sole
purpose of issuing debt obligations to securitize intangible
transition property and CTCs of Energy Delivery or manda-
torily redeemable preferred securities. See Note 1 of the
Notes to Consolidated Financial Statements for further in-
formation regarding FIN No. 46-R.
Boston Generating Project Debt
Boston Generating has a $1.25 billion credit facility (Boston
Generating Facility), which was entered into primarily to fi-
nance the development and construction of the Mystic 8 and
9 and Fore River generating facilities. Approximately $1.0 bil-
lion of debt was outstanding under the credit facility at De-
cember 31, 2003, all of which was reflected in our
Consolidated Balance Sheet as a current liability due to cer-
tain events of default described below. The Boston Generat-
ing Facility is non-recourse to us and an event of default
under the Boston Generating Facility does not constitute an
event of default under any other of our debt instruments or
the debt instruments of our subsidiaries.
The Boston Generating Facility required that all of the
projects achieve “Project Completion,” as defined in the
Boston Generating Facility (Project Completion) by July 12,
2003. Project Completion was not achieved by July 12, 2003,
resulting in an event of default under the Boston Generating
Facility. Mystic 8 and 9 and Fore River have begun commer-
cial operation, although they have not yet achieved Project
Completion.
We have commenced the process of an orderly transition
out of the ownership of Boston Generating and the Mystic 8
and 9 and Fore River generating projects. Our decision to
transition out of the projects was made as a result of our
evaluation of the projects and discussions with the lenders