Exelon 2004 Annual Report Download - page 32

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Discussion of Financial Results – Generation
Results of Operations – Generation
As previously described, effective January 1, 2004, Exelon contributed its interest in Exelon Energy Company to Generation.
Exelon Energy Company was previously reported as a part of the Enterprises segment. For comparative discussion and
analysis, Exelon Energy Company’s results of operations have been included within Generation’s results of operations as if this
transfer had occurred on January 1, 2003.
in millions 2004 2003
Favorable
(Unfavorable)
Variance
Operating revenues $7,938 $8,760 $ (822)
Operating expenses
Purchased power 2,325 3,630 1,305
Fuel 1,845 2,115 270
Operating and maintenance 2,273 1,886 (387)
Impairment of Boston Generating, LLC long-lived assets – 945 945
Depreciation and amortization 294 201 (93)
Taxes other than income 171 121 (50)
Total operating expense 6,908 8,898 1,990
Operating income (loss) 1,030 (138) 1,168
Other income and deductions
Interest expense (167) (89) (78)
Equity in earnings (losses) of unconsolidated affiliates (14) 49 (63)
Other, net 143 (267) 410
Total other income and deductions (38) (307) 269
Income (loss) before income taxes, minority interest, and cumulative effect
of changes in accounting principles 992 (445) 1,437
Income taxes 372 (190) (562)
Income (loss) before minority interest and cumulative effect of changes
in accounting principles 620 (255) 875
Minority interest 21 (4) 25
Income (loss) before cumulative effect of changes in accounting principles 641 (259) 900
Cumulative effect of changes in accounting principles (net of income taxes) 32 108 (76)
Net income (loss) $ 673 $ (151) $ 824
Generation’s net income in 2004 increased from 2003 due to a number of factors. The increase in Generation’s 2004 net
income was driven primarily by charges incurred in 2003 for the impairment of the long-lived assets of Boston Generating of
$945 million (before income taxes) and the impairment and other transaction-related charges of $280 million (before income
taxes) related to Generation’s investment in Sithe. Also, 2004 results were favorably affected by the acquisition of the remaining
50% of AmerGen and an increase in revenue, net of purchased power and fuel expense, primarily due to the decrease in aver-
age realized costs resulting from the increased success in the hedging program of fuel costs in 2004.
Cumulative effect of changes in accounting principles recorded in 2004 included a benefit of $32 million, net of income
taxes, related to the adoption of FIN 46-R and in 2003 included income of $108 million, net of income taxes, related to the
adoption of SFAS No. 143.
30 EXELON CORPORATION AND SUBSIDIARY COMPANIES