Exelon 2003 Annual Report Download - page 61

59Management’s Discussion and Analysis of Financial Condition and Results of Operations
EXELON CORPORATION AND SUBSIDIARY COMPANIES
under the Boston Generating Facility. We anticipate that this
transition will occur in 2004.
Generation Revolving Credit Facilities
On September 29, 2003, Generation closed on an $850 mil-
lion revolving credit facility that replaced a $550 million re-
volving credit facility that had originally closed on June 13,
2003. Generation used the facility to make the first payment
to Sithe relating to the $536 million note that was used to
purchase Exelon New England. This note was restructured in
June 2003 to provide for a payment of $210 million of the
principal on June 16, 2003, payment of $236 million of the
principal on the earlier of December 1, 2003 or upon a
change of control of Generation, and payment of the
remaining principal on the earlier of December 1, 2004, upon
reaching certain Sithe liquidity requirements, or upon a
change of control of Generation. Generation paid $446 mil-
lion on the note to Sithe in 2003. Generation terminated the
$850 million revolving credit facility on December 22, 2003.
Intercompany Money Pool
To provide an additional short-term borrowing option that
will generally be more favorable to the borrowing partic-
ipants than the cost of external financing, we operate an
intercompany money pool. Participation in the money pool is
subject to authorization by our corporate treasurer. ComEd
and its subsidiary, Commonwealth Edison of Indiana, Inc.
(ComEd of Indiana), PECO, Generation and BSC may partic-
ipate in the money pool as lenders and borrowers, and Ex-
elon Corporate may participate as a lender. Funding of, and
borrowings from, the money pool are predicated on whether
the contributions and borrowings result in economic bene-
fits. Interest on borrowings is based on short-term market
rates of interest, or, if from an external source, specific bor-
rowing rates. During 2003, ComEd and PECO had various
contributions to the money pool, and Generation and BSC
had various loans from the money pool as described in the
attached table:
Maximum
Invested
Maximum
Borrowed
December 31, 2003
Contributed
(Borrowed)
ComEd $483 $ – $ 405
PECO 59 – –
Generation – 395 (301)
BSC – 104 (104)
Security Ratings
Our access to the capital markets, including the commercial
paper market, and our financing costs in those markets de-
pend on the securities ratings of the entity that is accessing
the capital markets. In the fourth quarter of 2003, Standard
& Poor’s Ratings Services affirmed our corporate credit rat-
ings but revised its outlook to negative from stable. None of
our borrowings is subject to default or prepayment as a re-
sult of a downgrading of securities ratings although such
a downgrading could increase fees and interest charges
under our two $750 million credit agreements and certain
other credit facilities.
The following table shows our securities ratings at December 31, 2003:
Securities
Moody’s
Investors Service
Standard & Poors
Corporation
Fitch Investors
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
Transition bonds (a) Aaa AAA AAA
PECO Senior secured debt A2 A A
Commercial paper P1 A2 F1
Transition bonds (b) Aaa AAA AAA
Generation Senior unsecured debt Baa1 A- BBB+
Commercial paper P2 A2 F2
(a) Issued by ComEd Transitional Funding Trust, an unconsolidated affiliate of ComEd.
(b) Issued by PECO Energy Transition Trust, an unconsolidated affiliate of PECO.
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.
As part of the normal course of business, we routinely
enter into physical or financially settled contracts for the
purchase and sale of capacity, energy, fuels and emissions
allowances. These contracts either contain express provi-
sions or otherwise permit our counterparties and us to
demand adequate assurance of future performance when
there are reasonable grounds for doing so. In accordance
with the contracts and applicable contracts law, if Exelon or
Generation is downgraded by a credit rating agency, espe-
cially if such downgrade is to a level below investment grade,
it is possible that a counterparty would attempt to rely on
such a downgrade as a basis for making a demand for ad-