Exelon 2003 Annual Report Download - page 59

57Management’s Discussion and Analysis of Financial Condition and Results of Operations
EXELON CORPORATION AND SUBSIDIARY COMPANIES
Internally generated cash flow in 2004 is expected to meet
capital requirements excluding acquisitions. Our proposed
capital expenditures and other investments are subject to
periodic review and revision to reflect changes in economic
conditions and other factors.
Investing activities in 2003 exclude the non-cash issu-
ance of a $238 million note payable for the November 2003
investment in two synthetic fuel-producing facilities. Exelon
expects this investment to provide more than $200 million
of net cash benefits from 2003 through 2008, with peak net
cash of approximately $80 million in 2007. The cash flow
impact in 2003 was not material.
Energy Delivery
Energy Delivery’s estimated capital expenditures for 2004
reflect the continuation of efforts to improve the reliability
of its transmission and distribution systems and capital
additions to support new business and customer growth.
Approximately 47% of the budgeted 2004 expenditures is for
growth and the remainder is for additions to or upgrades of
existing facilities. We anticipate that Energy Delivery’s capi-
tal expenditures will be funded by internally generated
funds, borrowings, and the issuance of debt or preferred
securities or capital contributions made by us.
Generation
On November 25, 2003, Generation, Reservoir, and Sithe
completed a series of transactions resulting in Generation
and Reservoir each indirectly owning a 50% interest in Sithe.
See Contractual Obligations and Off-Balance Sheet
Arrangements—Variable-Interest Entities below for further
information regarding this transaction. In December 2003,
Generation purchased the 50% interest in AmerGen held by
British Energy plc for $240 million, net of cash acquired of
$36 million. The acquisition was funded with cash provided
by operations.
In April 2002, Generation purchased two natural-gas and
oil-fired generating plants from TXU for $443 million. The
purchase was funded with commercial paper, which Exelon
issued and Generation repaid with cash flows from oper-
ations. Investing activities in 2002 also include the No-
vember 1, 2002 purchase of Exelon New England, which
resulted in a use of cash of $2 million, net of $12 million of
cash acquired. The remainder of the purchase was financed
with a $534 million note payable to Sithe, which was sub-
sequently increased to $536 million. At December 31, 2003,
Generation has repaid $446 million of the note payable to
Sithe, leaving a balance of $90 million, which is payable on
the earlier of December 1, 2004, certain liquidity needs, or a
change of control.
Generation’s capital expenditures for 2003 reflected the
construction of three Boston Generating facilities with ca-
pacity of 2,288 MWs of energy, additions to and upgrades of
existing facilities (including nuclear refueling outages), and
nuclear fuel. During 2003, Boston Generating received $92
million of liquidated damages from Raytheon Company
(Raytheon) as a result of Raytheon not meeting the expected
completion date and certain contractual performance cri-
teria in connection with Raytheon’s construction of Boston
Generating’s Mystic 8 and 9 and Fore River generating facili-
ties. We project that Generation’s capital expenditures in
2004 will be higher than they were in 2003, and the majority
of these expenditures will be used for additions and up-
grades to existing facilities, nuclear fuel and increases in
capacity at existing plants. Generation is planning on ten
nuclear refueling outages in 2004, compared to eight during
2003. However, we project that the total capital ex-
penditures for nuclear refueling outages will decrease in
2004 from 2003 by $18 million. We anticipate that Gen-
eration’s capital expenditures will be funded by internally
generated funds, Generation’s borrowings or capital con-
tributions from us.
Enterprises
In September 2003, Enterprises sold the electric construction
and services, underground and telecom businesses of Infra-
Source for cash of $175 million, net of transaction costs and
cash transferred to the buyer upon sale. In April 2002, Enter-
prises sold its 49% interest in AT&T Wireless for $285 million
in cash.
Enterprises’ capital expenditures were $14 million in
2003. Enterprises’ capital expenditures for 2003 were
primarily for additions to or upgrades of existing facilities.
We project that Enterprises’ capital expenditures for 2004
will be approximately $1 million.
Cash Flows from Financing Activities
Cash flows used in financing activities for the years ended
December 31, 2003 and 2002 were $1.2 billion and $1.1 billion,
respectively. See Note 11—Long-Term Debt of the Notes to
Consolidated Financial Statements for further information
regarding the 2003 debt issuances and retirements. See Note
24—Subsequent Events of the Notes to Consolidated Finan-
cial Statements for further information regarding 2004 re-
demptions of debt.
The 2003 cash dividend payments on common stock
were $620 million as compared to $563 million in 2002. On
January 28, 2003, the Exelon Board of Directors increased the
quarterly dividend on Exelon’s common stock to $0.46 per
share. On July 29, 2003, the Exelon Board of Directors in-
creased the quarterly dividend to $0.50 per share. On Jan-
uary 27, 2004, the Exelon Board of Directors approved a 10%
increase in the quarterly dividend rate to $0.55 per share and
approved a 2-for-1 stock split contingent upon receipt of all
required regulatory approvals. Payment of future dividends
is subject to approval and declaration by the Board.