Exelon 2010 Annual Report Download - page 6

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FINANCIAL PERFORMANCE
The Exelon team performed superbly despite the unfavorable
market conditions that existed in 2010. Our GAAP earnings were
$3.87 per diluted share, compared to $4.09 in 2009. On an adjusted
(non-GAAP) basis, our operating earnings were $4.06 per diluted
share, handily beating our original expectations, but lower than
the $4.12 per diluted share that we earned in 2009. The difference
was largely due to lower market prices for electricity, caused by
low natural gas prices and reduced demand, and higher nuclear
fuel costs. Those negative factors were offset to a large extent by
increases in the capacity revenues we earned on our generating
units as part of PJM.
“ We delivered the highest average operating net
income in the industry over the past three years
and, as of the end of 2010, offered a 5 percent
dividend yield.”
However, Exelon’s share price on Dec. 31, 2010, was $41.64, down
14.8 percent from the year-end 2009 price of $48.87. Our stock
performance frustrates me as much as it does you. Exelon’s stock
price is correlated to the forward prices of natural gas. Spot gas
prices have dropped 70 percent, and forward prices 50 percent,
since their peak in mid-2008. These natural gas prices along with
electricity demand are the principal drivers of the wholesale market
price of electricity, which in turn drives the earnings of our largest
subsidiary, Exelon Generation. Demand for electricity is returning
very slowly to pre-recession levels. Despite these market conditions,
we delivered the highest average operating net income in the
industry over the past three years and, as of the end of 2010,
offered a 5 percent dividend yield, better than the 4.5 percent and
4.7 percent averages offered by our competitive integrated and
regulated peers respectively. We retain more upside than either
group from an increase in natural gas or power prices and the
coming economic recovery. Since the merger that created Exelon, our
total return – measured as stock price appreciation plus reinvested
dividends – has been 97.5 percent. This compares to total returns
of 73.1 percent and 9 percent for the Philadelphia Utility Index and
S&P 500 respectively.
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