ComEd 2015 Annual Report Download - page 90

Table of Contents
ComEd, PECO and BGE anticipate making significant future investments in smart meter technology, transmission projects, gas infrastructure,
and electric system improvement projects, providing greater reliability and improved service for our customers and a stable return for the company.
Generation’s competitive businesses create value for customers by providing innovative solutions and reliable, clean and affordable energy.
Generation’s electricity generation strategy is to pursue opportunities that provide generation to load matching to reduce earnings volatility.
Generation leverages its energy generation portfolio to deliver energy to both wholesale and retail customers. Generation’s customer facing
activities foster development and delivery of other innovative energy-related products and services for its customers. Generation operates in well-
developed energy markets and employs an integrated hedging strategy to manage commodity price volatility. Its generation fleet, including its
nuclear plants which consistently operate at high capacity factors, also provide geographic and supply source diversity. These factors help
Generation mitigate the current challenging conditions in competitive energy markets.
Exelon’s financial priorities are to maintain investment grade credit metrics at each of Exelon, Generation, ComEd, PECO and BGE, to
maintain optimal capital structure and to return value to Exelon’s shareholders with an attractive dividend throughout the energy commodity market
cycle and through stable earnings growth. Exelon’s Board of Directors approved a revised dividend policy. The approved policy would raise our
dividend 2.5% each year for the next three years, beginning with the June 2016 dividend. The Board will take formal action to declare the next
dividend in the second quarter.
Various market, financial, and other factors could affect the Registrants’ success in pursuing their strategies. Exelon continues to assess
infrastructure, operational, commercial, policy, and legal solutions to these issues. See ITEM 1A. RISK FACTORS for additional information
regarding market and financial factors.
Continually optimizing the cost structure is a key component of Exelon’s financial strategy. Through a recent focused cost management
program the company has committed to reducing operation and maintenance expenses and capital costs by $350 million, of which approximately
35% of run-rate savings are expected to be achieved by the end of 2016 and fully realized in 2018. Savings will be allocated approximately 75%,
14%, 6% and 6% to Generation, ComEd, PECO and BGE, respectively. Exelon anticipates the earnings per share savings impact on EPS will be
within $0.13 to $0.18 from 2018 forward.
Proposed Merger with Pepco Holdings, Inc. (Exelon)
On April 29, 2014, Exelon and Pepco Holdings, Inc. (PHI) signed an agreement and plan of merger (as subsequently amended and restated
as of July 18, 2014, the Merger Agreement) to combine the two companies in an all cash transaction. The resulting company will retain the Exelon
name. Under the Merger Agreement, PHI’s shareholders will receive $27.25 of cash in exchange for each share of PHI common stock. Based on
the outstanding shares of PHI’s common stock as of December 31, 2015, PHI shareholders would receive $6.9 billion in total cash. In addition, in
connection with the Merger Agreement, Exelon entered into a subscription agreement under which it has purchased $180 million of a class of
nonvoting, nonconvertible and nontransferable preferred securities of PHI. The preferred securities are included in Other non-current assets on
Exelon’s Consolidated Balance Sheet. PHI has the right to redeem the preferred securities at its option for the purchase price paid plus accrued
dividends, if any.
On November 2, 2015, Exelon and PHI each filed a new Notification and Report Form with the DOJ under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (HSR Act) due to the expiration of the original filing. The HSR Act waiting period expired on December 2, 2015, and the
HSR Act no longer precludes completion of the merger.
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Source: BALTIMORE GAS & ELECTRIC CO, 10-K, February 10, 2016 Powered by Morningstar® Document Research℠
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