Exelon 2002 Annual Report Download - page 55

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For 2002, the average interest rate on notes payable was
approximately 1.88%.Certain of the credit agreements to which
Exelon Corporate, ComEd, PECO and Generation are parties
require them to maintain a cash from operations to interest
expense ratio for the twelve-month period ended on the last
day of any quarter. The ratios exclude revenues and interest
expenses attributed to securitization debt, certain changes in
working capital, distributions on preferred securities of sub-
sidiaries and in the case of Exelon Corporate and Generation,
interest on Sithe New England’s debt.Exelon Corporate is meas-
ured at the Exelon consolidated level. The following table sum-
marizes the threshold reflected in the credit agreement that
the ratio cannot be less than for the twelve-month period
ended December 31, 2002:
Credit Agreement Threshold
Exelon Corporate 2.65 to 1
ComEd 2.25 to 2
PECO 2.25 to 1
Generation 3.25 to 1
At December 31, 2002, we were in compliance with the credit
agreement thresholds.
At December 31,2002,our capital structure consisted of 60%
of long-term debt, 32% common equity, 5% notes payable and
3% preferred securities of subsidiaries. Total debt included $6.2
billion of securitization debt constituting obligations of certain
consolidated special purpose entities, representing 26% of cap-
italization. These consolidated special purpose entities were
created for the sole purpose of issuing debt obligations to
securitize intangible transition property and CTC’s of Energy
Delivery. Shareholders’ equity was reduced by $1 billion in 2002
due to the recording of a minimum pension liability.
To provide an additional short-term borrowing option that
will generally be more favorable to the borrowing participants
than the cost of external financing, we operate an intercom-
pany utility-money pool. Participation in the money pool is sub-
ject to authorization by Exelon’s corporate treasurer.ComEd and
its subsidiary, Commonwealth Edison Company of Indiana, Inc.,
PECO, Generation and BSC may participate in the money pool
as lenders and borrowers, and Exelon Corporate as a lender.
Contributions to and permitted borrowings from the money
pool are based on whether the contributions and borrowings
result in economic benefits to all the participants. Interest on
borrowings is based on short-term market rates of interest,or,if
from an external source,specific borrowing rates.There were no
material money pool transactions in 2002.
Our access to the capital markets,including the commercial
paper market,and our financing costs in those markets depend
on the securities ratings of the entity that is accessing the cap-
ital markets. None of our borrowings are subject to default or
prepayment as a result of a downgrading of securities ratings
although such a downgrading could increase fees and interest
charges under our $1.5 billion credit facility, and certain other
credit facilities. From time to time, we enter into energy com-
modity and other contracts that require the maintenance of
investment grade ratings.Failure to maintain investment grade
ratings would allow counterparties to certain energy commod-
ity contracts to terminate the contracts and settle the transac-
tions on a net present value basis.The following table shows our
securities ratings at December 31, 2002:
Management’s Discussion and Analysis of Financial Condition and Results of Operations
exelon corporation and subsidiary companies
Moody’s Standard & Poors Fitch Investors
Securities Investors Service Corporation Service, Inc.
Exelon Senior unsecured debt Baa2 BBB+ BBB+
Commercial paper P2 A2 F2
ComEd Senior secured debt A3 A- A-
Commercial paper P2 A2 F2
PECO Senior secured debt A2 A A
Commercial paper P1 A2 F1
Generation Senior unsecured debt Baa1 A- BBB+
Commercial paper P2 A2 F2
A security rating is not a recommendation to buy,sell or hold
securities and may be subject to revision or withdrawal at any
time by the assigning rating agency.
We obtained an order from the SEC under PUHCA authoriz-
ing through March 31, 2004, financing transactions, including
the issuance of common stock, preferred securities, long-term
debt and short-term debt in an aggregate amount not to
exceed $4 billion. As of December 31,2002, there was $1.8 billion
of financing authority remaining under the SEC order. Our
request for an additional $4 billion in financing authorization is
pending with the SEC. The current order limits our short-term
debt outstanding to $3 billion of the $4 billion total financing