Fitch Rates Exelon Corp.'s $1.7B Senior Notes 'BBB+'

Business Wire, June 7, 2005

NEW YORK -- Fitch Ratings has assigned a 'BBB ' rating to Exelon Corp.'s (Exelon, or EXC) new $1.7 billion issue of senior notes. The notes are in three tranches, including $400 million 4.45% senior notes due June 15, 2010, $800 million 4.9% senior notes due June 15, 2015, and $500 million 5.625% senior notes due June 1, 2035. The Rating Outlook is Stable. The senior notes will rank equally with Exelon's other senior unsecured obligations. Proceeds from the sale of the notes will be used to repay short-term borrowings incurred to fund Exelon's unfunded pension liability.

The ratings reflect EXC's strong consolidated financial profile, the predictable earnings and cash flow from its two regulated utility businesses, and the moderate merchant exposure of its wholesale generating business. The current ratings and Stable Outlook also consider the credit impact of the pending merger with Public Service Enterprise Group (PSEG, senior unsecured debt rated 'BBB' by Fitch), which is considered neutral for credit quality primarily because of the plan to fund 100% of the acquisition with new shares of EXC common stock. The primary credit concerns are nuclear operating risk associated with EXC's significant reliance on nuclear generation to serve its contractual supply commitments and regulatory uncertainty in Illinois after 2006 when the current transition period and rate freeze expire.

To counter-balance the nuclear risk, regulatory uncertainty, and anticipated merger, Exelon maintains a credit profile that is strong for the rating category and superior to its peer group of parent holding companies. As of March 31, 2005, the ratio of debt to EBITDA was a very healthy 2.4 times (x) and the debt ratio about 48%. These leverage measures already reflect the funding of the pension liability, which was completed earlier this year with the issuance of short-term debt that will be termed out with the new debt issue. Interest coverage measures will decline from current levels upon the recognition of a full year of interest expense on the new financing but will remain strong with the ratio of EBITDA/interest projected to be in excess of 6.5x. After the merger with PSEG, consolidated debt leverage will be higher than at present and interest coverage lower since PSEG is more highly levered than EXC, but both measures will continue to support the current ratings.

On a consolidated basis, the new debt is partly offset by the retirement of $1.2 of billion of debt at Commonwealth Edison ('BBB ' senior unsecured rating by Fitch) in 2004, including $1 billion prior to maturity. The debt retirement was part of a liability management plan to offset declining competitive transition charge (CTC) credits, higher contractual power costs, and post 2006 regulatory uncertainty related to Commonwealth Edison's uncertain supply obligation of the utility after 2006 and the company's plan to file for a rate increase to be effective at the end of the transition period on Jan. 1, 2007. Fitch does not expect that the potential supply obligation will burden Commonwealth Edison with any commodity exposure, since the Illinois Commerce Commission is leaning toward a New Jersey style supply auction to procure power for end use customers. In any event, Commonwealth Edison's affiliation with Exelon Generation Company, LLC (Exelon Generation) alleviates most concerns regarding commodity risk. In addition, Exelon Generation, with its low cost nuclear generation, should be well positioned as either a supplier in the Illinois auction or, if necessary, as a seller into the wholesale market.

Through its wholesale electric generating subsidiary Exelon Generation, Exelon is the single largest owner and operator of nuclear generating facilities in the U.S. Nuclear generation supplied approximately two-thirds of Exelon Generation's generating output in 2004. Nuclear operating risk is mitigated by the diversity of owning 19 units at 11 stations, the company's long generating position, and excellent record as a nuclear operator.

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