Good morning ladies and gentlemen. My name is Pam and I will be your conference operator today. At this time, I would like to welcome everyone to the Exelon First Quarter Earnings Release Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. (Operator Instructions). Thank you. It is now my pleasure to turn the floor over to your host, JaCee Burnes, Director of Investor Relation. Ma'am, you may begin your conference.

Thank you, Pam. Good morning and welcome to Exelon's first quarter 2007 earnings review and conference call update. Thank you for joining us today. We issued our earnings release this morning. If you haven't received it, the release is available on the Exelon website, at www.exeloncorp.com, or you can call [Dianne Sullivan] at 312-394-5738, and she will fax or e-mail the release to you. This call is being recorded and will be available through May the 9th by dialing 877-519-4471. The international call-in number is 973-341-3080, the confirmation code is 8629052. In addition, the call will be archived on the Exelon website. Before we begin today's discussion, let me remind you that the earnings release and other matters discussed in today's call contain forward-looking statements and estimates that are subject to various risks and uncertainties. Please refer to our SEC filings for discussion of factors that may cause results to differ from management's projections, forecasts and expectations. In our release and during this call, we will discuss adjusted non-GAAP operating earnings that exclude the earnings impact of mark-to-market adjustments from economic hedging activity; investments in synthetic fuel-producing facilities; certain costs associated with the terminated merger with PSEG for 2006 only; significant impairments of intangible assets, including goodwill; significant changes in decommissioning obligation estimates; severance and severance-related charges for 2006 only; and other unusual items, including any future changes to GAAP. We believe these adjusted operating earnings are representative of the underlying operational results of the company. In today's earnings release, we've provided a reconciliation between reported GAAP earnings and adjusted non-GAAP operating earnings. With me today are John Rowe, our Chairman, President and CEO; John Young, Exelon's Executive Vice President Finance and Markets and Chief Financial Officer; and other members of Exelon and ComEd's Senior Management Team, who will be available to answer your questions. Today's call will focus on first quarter 2007 financial and operational results, our outlook on the remainder of 2007 and an update on key issues facing the company. We have scheduled an hour for this call. We will spend about 30 minutes on prepared remarks and use the remaining time for Q&A. In order to effectively manage this call, we would appreciate it if you would limit yourself to only question. I will now turn the call over to John Young, who will begin with a discussion of Exelon's financial results. John?

Thank you, JaCee. Good morning everyone. Exelon announced first quarter 2007 adjusted non-GAAP operating earnings of $722 million or $1.07 per diluted share, a significant increase from the first quarter of 2006 operating earnings of $420 million, or $0.62 per diluted share. On a GAAP basis Exelon reported consolidated earnings of $691 million or $1.02 per share for the first quarter of 2007. The main difference between GAAP and non-GAAP operating earnings during the quarter, was a $0.10 mark-to-market loss primarily from Exelon Generation's economic hedging activities. For a complete reconciliation of GAAP and non-GAAP earnings, please see page six of the table of our company earnings release. Before I discuss the earnings drivers by individual operating company, I want to highlight an important milestone in our business, the expected change in Exelon's composition of earnings. Beginning January 1 of this year, Exelon became phenomenally a generation company with ComEd completing this transition to a wired-only business. ComEd now has a distribution component of value under state regulatory jurisdictions, and the transmission component of value, under FERC jurisdictions. PECO's transition will occur in 2011. Going forward, Exelon Generation will be the primary contributor of value for Exelon. Turning now to the earnings drivers. Exelon's strong performance for the quarter was driven by increased earnings in Exelon Generation and PECO, offset by an expected decrease at ComEd. Exelon Generation contributed $0.91 of operating earnings per diluted Exelon share for the first quarter of 2007, compared to the $0.43 for the same period in 2006. Major drivers of generation's operating earnings growth were higher wholesale margins as a result of the end of the ComEd PPA, contractual price increases associated with the PECO PPA, the outstanding performance of our nuclear fleet, which resulted an increased generation output for the quarter, and the…

Thanks John. Good morning everyone. I would like to quickly add my perspective to the first quarter operating and financial results, discuss the climate change issue a bit, and then discuss its implication for competition including regulation. As John has told you in the press release. We had a very strong first quarter excluding any costs from legislation or settlement in Illinois with year-over-year operating earnings, up from $0.62 in the first quarter of 2006 to $1.07 in the first quarter of this year. Some will be quick to attribute our results to the end of the Illinois rate case, others will be quicker to criticize it for that. That is of course part of the story, but the remainder of the story is our continued focus on the basics of this business. Improving operating performance, disciplined financial management and sound approaches to regulation. Prices in Illinois have returned to something approaching the national average and about where they were 10 years ago, and we have guarded this strong image. Our operating and financial performance continues to be anything, but average. In the nuclear area, Chris Crane, Jeff Burdick and their team continue to (inaudible) genuine Exelon. Their record 96.4% capacity factor for the quarter compares to 91% a year ago and had a significant contribution to these earnings. Chris and his team achieved a superior result, while maintaining a terrific safety record including the employee safety. In the fossil area Mark Schiavoni and his team continue to extract exceptional performance from our fossil and hydro fleet. They achieved a 92.8% availability factor for our fossil unit and 99.1% equivalent availability for our hydro unit, comparing to 93% and 97% in the third quarter of '06. In [oil, Kevin Corneau] with the power team continue to convert operating performance in…

Thank you. (Operator Instructions). We will pause for just a moment to compile the Q&A roster. Thank you. Your first question is coming from Greg Gordon with Citigroup.

Thanks, good morning.

Good morning Greg.

Good morning.

By the way I do will may have one question, but it is in 27 parts. When we look at the capacity markets pricing, that we are seeing, I am presuming that it is in fact higher than what you envisioned when you laid out your short and long-term forecast in your December analyst meeting. If in fact that's true, how do we think about that in terms of increasing the dollar amount of the shareholder value return estimate? And how you think about managing your balance sheet. There’s obviously been a heated debate amongst the investment community over why you carry such a lean balance sheet? And with capacity values rising, you should be able to have a larger shareholder value return potential and should be that much more comfortable in how you gear the balance sheet? Could you comment on that please?

Hey Greg, obviously the RPM auction that just occurred in the time period that it sets prices, has some impact to our near-term earnings, not a tremendous amount because of the lack of open capacity positions that we have because of our obligations that we've already entered into with various PPA's in forward sales. PECO, ComEd and others. But on a longer term basis and I think there is two more auctions this year to get the second or third year of that out. And we will revisit as we do every year. The entire view for a five year period, all of that will be taken into account. That’s one of the reasons why we will be announcing in the third quarter, what the near-term result of our value return policy is and then we’ll kind of give you a better idea as to where that may take us in that five-year period. Similar to what we did for you in the last year.

But assuming there is not a steep backwardation in the results from the next two tranches of auctions. These numbers are in fact, higher than what was envisioned than the initial December forecast, correct?

Yes.

Thank you.

Thank you. Your next question is coming from John Kiani with Deutsche Bank.

Good morning

Good morning, John.

What are you all seeing, kind of a little bit longer-term and perhaps what's your view as well on off-peak power pricing in the Midwest and in PJM, especially giving consideration to the growing Contango in the eastern PRB coal markets, and some heat rate increase expectations as well?

Ian, do you want to address that?

Yeah. The off-peak prices, you picked an interesting topic. They have been moving higher recently. I think it's a combination of the coal prices and the risks associated, and then also the gas is coming on the margin more often. So, we have seen a nice move up within those prices in the past couple of months. And you don't see the corresponding price rise in the other [areas], so they kind of move in with more velocity than the rest of the price curve.

So then it is safe to assume, as that trend continues, that once your existing hedges roll-off, there will be a better realized 7/24 price because the off-peak pricing is better and that differential of that spread is narrower?

Yeah. I would say that's absolutely correct.

Okay. And then one more quick question if I may. John, from a leverage perspective kind of touching on the subject that Greg brought up. What do you think is the optimal debt-to-EBITDA or returns on leverage we should think about, and thinking about the optimal capital structure for your company? I mean, obviously there are different drivers that are going to move your cash flows in different directions. But generally speaking, when you look to eventually monetize a lot of the excess balance sheet capacity for shareholders, how should we think about the more optimal capital structure and based on the current gas price environment as well?

Since that was your third question, we are not going answer that. But, obviously we gave an indication of that in December. We'll give another indication of that when we revise our plan going forward. The balance sheets of the two distribution companies, we have a target there that we are headed towards. We have an FFO in that kind of range that we are trying to get solidly in the BBB plus area for the corporation. And those are the metrics I would use right now. That's the ones we have, that's the one we've announced. We are not changing those on this call. And if we revise any of that on a forward looking basis that would be later in the third quarter, when we talk about that.

Got it. Thank you very much.

Thank you. Your next question is coming from you Hugh Wynne with Sanford Bernstein.

Good morning. I had a question regarding your nuclear fuel expense. You amortize approximately $380 million of nuclear fuel annually, and my question is, given the run-up in the uranium price, and given the fact that your existing nuclear fuel will deplete, I assume over the next four or five years. What is the level of fuel cost or amortization of nuclear fuel that we should be anticipating as current stocks of fuel are replaced at the prices prevailing today in the market?

Okay Hugh. We did actually provide a slide that I am looking at, one of our prior 8-Ks and tell apart from it. I think you've seen it, but I've got some additional information for you. First of all, our physical position is that we are effectively hedged through 2010 and significantly hedged in 2011 as well. So, both from a physical and financial perspective, we have pretty good price certainty through that timeframe. The sensitivities in 2011, and this is just trying to give you an idea, a $50 increase in what our average costs would be, with the replacement in 2011 that we don't have hedged, would decrease earnings by about a $10 million amount. Okay. Now that's five years from now. We're not that sensitive to movement in the uranium prices at that point. The same kind of thing, we have about half of that impact for $10 of the enrichment price, if it goes up to $10 [per SLU], that's about a $5 million impact. We depreciate our nuclear fuel, I believe over a six-year period. So the cost impacts of any price spike in a five or six year period. Because both of the depreciation schedule and because of the amount we're already physically hedged against, doesn’t impact us tremendously. So prices would have to stay up for a significant time period from that to have a big cost increase for us.

Thank you very much. But I guess what I was trying to get at was beyond the maturity of those hedges in the environment that we see in the market today. Should we be anticipating that this amortization expense doubles or goes up by 50% or whatever. When is it rolled off and the need to stock at market prices assuming today's prices?

The assumption of the base prices is something that I couldn’t assume for 2014, 2015. So, I haven’t done that math. It's pretty far in the future and we are doing a lot of work underway to try to restore ourselves against that kind of price spike in the general uranium enrichment markets. So I couldn’t answer to that.

Okay. Thank you very much.

Thank you. Your next question is coming from Vic Khaitan with Deutsche Asset Management.

Good morning Vic.

Good morning. Thank you everybody. John you've mentioned there is significant value still at the company and I agree with that. But the bigger overhang remains this issue about settling this Illinois issue. So could you elaborate or Frank Clark could say something about where the possibilities are and whether there is a movement from the other side, from the politician side towards settlement?

Let me kick it off Vic and then I’ll ask Frank to kick it up. At the present time, that [Senate] has taken the position that rate-freeze legislation is just a bad idea. The Senate Minority Leader and some of the people who supported the rate freeze bill in the Senate. They have said they really don't think rate-freeze is a very good idea. They would like to initiate some compromise discussions. There are few people in the House who said that too. To-date the only person who is in some ways in a position to bring that in the House, is the Speaker of the House, has not indicated an interest in a serious settlement negotiation. Vic, you know me well enough to know that I hate things that are binary. Having all or nothing issues is the most unattractive thing. So, we are holding the ground that they deregulated our generation. But you all paid for it and it's yours. And I believe if we have to vindicate that is the course, I believe we will succeed. It's a funny loop-the-loop in Springfield, because some people vote for freeze legislation, knowing that it's likely to be invalidated and thinking that gives them a free vote. So it's very hard to know where anyone wants to come out. As long as we are sacrificing the principal that's frankly what's yours is yours. We have dozens of ideas on what we think would be good settlement drafts. We will continue to think like that. But at the moment, anything we put on the table would be just leaving against ourselves. And probably during the works with (inaudible), worked for most of the past year and a half, on settlement idea. That's my picture of this situation; the speaker had said on several occasions that he regrets that he deregulated the generation. I think if he has more information on the real economics of the business he would see that his consumers still went by what he did. Now, it's obviously that our investors went too and that creates the NV factor. Frank, would you like to add to that.

I would only say about this that all of the closed bills, that would include Presidents, that would include speaker and (inaudible) as well as the posture of the bill that is currently kind of (inaudible), has in one way or another all indicative that this issue needs to be resolved. And most recently, if you heard the speaker, it was quoted saying that he was actually seeing that (inaudible) state resolution. But in turn of it as we see, and its my judgment that there is a desire to the vision of AS. But on the other hand, none has come to us with any type of a project that relate to our settlement to-date. So, they will be continuing to wait, as John said, continuing to come forward, they are almost over as you said, (inaudible) themselves, and that's not a truly [Bad Audio]. And that creates a desire, under which ultimately I would hope that sometimes as a settlement because they would come about in the interim, we are out very aggressively talking about the ComEd plan also a series of assistance of targeted groups totaling over three years in $4 million. And we expect that to continue to provide for an environment, that's a hopeless [new office].

Okay. Thank you.

Thank you. Ladies and gentlemen, we ask that you please limit your question to one question per person in order to allow equal time for all participants to post questions. Thank you. Your next question is coming from Jonathan Arnold with Merrill Lynch.

Good morning.

Hi, Jonathan.

Question for John. John could you talk a little about your sense of the consolidation environment and the company's prospective on M&A potentially involving the Generation business at some point?

Sure. We continue to believe that consolidation must occur. And as long as you do it out of dollars and cents and not out of ego, they are real business opportunities in consolidation. We've also tried twice and -- to achieve which proves to us that we didn't know it anyway that the environment isn't as easy for a consolidation as it was five or six years ago. I think the best opportunities are now in the Generation sector. The trick is finding something you don't have to over pay for and finding something in an environment where it's politically acceptable to do so. I mean personally I believe the whole industry has something positively at stake in the [THQ] matter. I think it will be beneficial if that goes on to conclusion. But the reason I think the consolidation is ultimately so important is the scale of the investments that are required. I mean if you were back five years ago or so, a polarized coal plant could still be built because carbon wasn't such a big issue. The investments on what it costs were probably somewhere between $1,600 to $1,700 per kilowatt. Today those costs would be somewhere between $2,000 and $2,500 per kilowatt. I have seen estimates for a nuclear plant all over the place but most of them would be between $2,500 and $4,000 per kilowatt. It takes big companies to make substantial improvements in capacity in that kind of a market. It takes big companies to do it especially if you are in a competitive market place. But frankly it takes a lot of balance sheet to do it in a rate based environment too. This nation needs new nuclear plants badly. In need if it's going to deal effectively with the carbon challenge to have the coal with carbon capture and the gasification cycle work. Personally, I think that will be even more expensive than a nuclear fuel plant. There will continue to be more money spent on renewable. So far it's not been my experience to achieve except for landfill methane. So, we need to have a Generation sector that can make the kind of businesses a low-carbon, more energy, independent economy required. And that requires folks at least as big as we are and I think you will see more consolidations brought about to do it. But we all remember Ed Tirello famous forecast. We all know it didn't quite work that way. And I think they will continue to happen supported by systems start. There will be opportunity, but only for the patient, so be careful.

Thank you.

Thank you. Your next question is coming from Paul Ridzon from KeyBanc Capital Markets.

Please give some flavor as to what the major stumbling block was in getting a settlement ahead of last Friday's legislation. We're all kind of I guess cautiously optimistic of the talks that are progressing and was really just a question of dollars. If you could describe what broke down and what that means about the eventual possibilities of achieving something?

This is Frank Clark. I don't know all the reasons that it did not occur only. When we went a couple of weeks ago, it's the patient that we would had announced, some of those, we don't are utilities, whether it would be ComEd and the Illinois companies. That announcement never came forward. I do not think it was certainly a case of dollars. I think it was typically a case of the faster of the bill, ultimately losing that and expect for the merger. And the rate freeze flow that was starting (inaudible) that probably absolutely provided, so greater and immediate relief soon. I hope I have got a notice that are familiar with that view (inaudible) in the house, we will look onto provide a real and immediate relief as opposed to the clinical upside of that in [April].

Thank you.

Thank you. Your next question is coming from Paul Patterson with Glenrock Associates.

Hi Paul.

Hi, how are you? I was wondering you mentioned that two binary outcomes, you mentioning a large amount of CapEx and EPS growth coming out of ComEd. On the other hand, you guys are mentioning potential for bankruptcy. And I was wondering if you could may be potentially shift more of the CapEx or if you're thinking about shifting more of the CapEx out of ComEd into some other Exelon venture. When you have these kind of binary outcomes, I'm saying as opposed to the outlook that you guys currently have for having ComEd driving, so much of the CapEx and EPS growth going forward in next few years?

We think about it all the time. Bear in mind the worst day of my life was at Exelon Company, which was the Friday in 1999 when near Chicago, ate my liver out on television to a fair response in the city. ComEd needs this capital. It is a fact that if the state will not treat it fairly overtime as a regulated wire company, there will come a time when it can't continue to reverse that the rate it currently is. But in my philosophy is don't play chicken with the capital program and to some extent the more ComEd is forced to be separate, it's really Frank and the ComEd Board that will make that decision, not me. So, I think your variety in leading TV is that if other people want to play chicken with ComEd at some point its board won't have a lot of choice. But, we are not going to play with it at Exelon, simply as the matter of discretionary capital. We've taken the position that ComEd meets its obligation and close from that. Frank, would you like to add to that?

All right, sir. We reiterate what John just said. When we looked at our capital budget and its expenditures so those are necessary program, our reliability as first and foremost and as long as to have the financial goals to meet our obligations and we expect comparing to the regulatory process [to state] of '09 and we cover our totally incurred cost. For whatever the reason, possibly does not allow us to do that in obligations or where they are, whether at least it probably over some period of time or a reduction in our ability to meet our service obligations, but I don't. And it's not just a statement, I want to see that occur and I expect to receive a profitable regulatory treatment over period of time.

Let me just add to that ComEd thoughts, Exelon thoughts, it is the initial order of the commission. And ComEd’s last delivery case was quite unfair. But ComEd required a request for consideration and while it didn't get everything it thinks that I too have got. The commission showed more than a little courage in its reconsideration decision. The Illinois commission had shown great courage and integrity in its dealing with ComEd's power procurement obligations. We don't advise backing down on our public service obligations when you've got a commission that is trying very hard to meet its obligation.

Thank you.

Sir, your next question is coming from Michael Lapides with Goldman Sachs.

Hi, I really have a question that's probably directed best towards Ian. Ian, when looking at the PJM capacity market auction pricing, for Rest-of-Pool, so kind of that $1.20 per kW a month pricing level. When do you think the long-term meaning next five to ten years, directionally and kind of when do you expect that difference between East and West to begin converging more? Is that a five or seven year process? Is that a ten to twenty year process? Just trying to get your view point on when that major difference between close to $6 a kW month and above $20 a kW month really tightens?

If you look at the forward market, you see that narrowing already, to more like 50 bucks a couple of years out, although that assumes the MAAC prices will be a lot lower when they cleared and see either market showing that. But, when we look at the fundamentals in the Midwest, and the fundamentals in the East, there is going to be a big premium in the East for a long time until somebody builds a lot more generation in the East, then, there is plenty of metal in the ground in the Midwest, a lot of it's nuclear, a lot of it's coal. So, it's relatively cheaper than the gas in the East. So, we expect that it won't will be there for the foreseeable future.

And is it safe to assume that in the Midwest that every year demand grows how much new coal plants being built? Gas will become more and more on the margin overtime, so the impact on power prices will obviously be a bit steeper as gas becomes more on the margin?

Yes, that’s what our modeling shows that gas comes on the margin, relatively slowly though, but it does become on the margin more and more as a function of time.

Right.

Great, thank you Ian.

Thank you. I'm sorry we do not have time for any further questions. I’d like to turn the floor back over to management for closing remarks.

I think we've done our best to wrap it up. We believe we had a very good quarter, particularly some of the things done in nuclear and power teams. We loved to be able to say we have the Illinois situation behind us but we don’t. As I've said before, the real source of the Illinois issue is the very success that we had. We'll keep working on it. We will keep our eyes open for practical settlement. We won't forget who the generation belongs to. Thank you.

Thank you. And this does conclude today's Exelon Corporations first quarter 2007 earnings release conference call. You may now disconnect your lines and have a pleasant day.