ComEd 2015 Annual Report Download - page 99

Table of Contents
load following products, and options. Equivalent sales represent all hedging products, such as wholesale and retail sales of power, options and
swaps. Generation has been and will continue to be proactive in using hedging strategies to mitigate commodity price risk in subsequent years as
well.
Generation procures oil and natural gas through long-term and short-term contracts and spot-market purchases. Nuclear fuel is obtained
predominantly through long-term uranium concentrate supply contracts, contracted conversion services, contracted enrichment services, or a
combination thereof, and contracted fuel fabrication services. The supply markets for uranium concentrates and certain nuclear fuel services, coal,
oil and natural gas are subject to price fluctuations and availability restrictions. Supply market conditions may make Generation’s procurement
contracts subject to credit risk related to the potential non-performance of counterparties to deliver the contracted commodity or service at the
contracted prices. Approximately 50% of Generation’s uranium concentrate requirements from 2016 through 2020 are supplied by three producers.
In the event of non-performance by these or other suppliers, Generation believes that replacement uranium concentrates can be obtained, although
at prices that may be unfavorable when compared to the prices under the current supply agreements. Non-performance by these counterparties
could have a material adverse impact on Exelon’s and Generation’s results of operations, cash flows and financial position.
ComEd, PECO and BGE mitigate commodity price risk through regulatory mechanisms that allow them to recover procurement costs from
retail customers.
Growth Opportunities
Management continually evaluates growth opportunities aligned with Exelon’s businesses, assets and markets, leveraging Exelon’s
expertise in those areas and offering sustainable returns.
Regulated Energy Businesses
The proposed merger with PHI provides an opportunity to accelerate Exelon’s regulated growth to provide stable cash flows, earnings
accretion, and dividend support. Additionally, ComEd, PECO and BGE anticipate investing approximately $18 billion over the next five years in
electric and natural gas infrastructure improvements and modernization projects, including smart meter and smart grid initiatives, storm hardening,
advanced reliability technologies, and transmission projects, which is projected to result in an increase to current rate base of approximately $8
billion by the end of 2020. ComEd, PECO and BGE invest in rate base where beneficial to customers and the community by increasing reliability
and the service experience or otherwise meeting customer needs. These investments are made prudently and at the lowest reasonable cost to
customers.
See Note 3—Regulatory Matters of the Combined Notes to Consolidated Financial Statements for additional information on the Smart Meter
and Smart Grid Initiatives and infrastructure development and enhancement programs.
Competitive Energy Businesses
Generation continually assesses the optimal structure and composition of our generation assets as well as explores wholesale and retail
opportunities within the power and gas sectors. Generation’s long-term growth strategy is to prioritize investments in long-term contracted
generation across multiple technologies and identify and capitalize on opportunities that provide generation to load matching as a means to provide
stable earnings, while identifying emerging technologies where strategic investments provide the option for significant future growth or influence in
market development. As of December 31, 2015, Generation has currently approved plans to invest a total of approximately $2 billion in 2016
through 2018 on capital growth projects (primarily new plant construction and distributed generation).
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Source: BALTIMORE GAS & ELECTRIC CO, 10-K, February 10, 2016 Powered by Morningstar® Document Research℠
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