Exelon seeing power demand picking up

Exelon Q1 2010 earnings reflect utilities trends as EPS beats views but revenue misses; rising electricity demand at PECO and ComEd, nuclear refueling outages, hedging gains, and updated guidance signal an improving economic backdrop.

Power provider Exelon Corp. said that its firstquarter earnings rose 5 percent and that electricity demand and residential customer growth is starting to pick up as the economy improves.

The nations utilities are a proxy for how the economy is doing. Signs of improved demand would support other indicators that the economy is getting better.

Exelon, based in Chicago, where ComEd's future is being weighed, said it earned $749 million, or $1.13 per share, for the quarter ended March 31, up from $712 million, or $1.08 per share, in the yearago quarter.

Discounting the onetime gains and charges, Exelon profit would have been $662 million, or $1 per share, down from $797 million, or $1.20 per share, in the year ago quarter.

Analysts surveyed by Thomson Reuters expected a lower adjusted profit of 89 cents a share.

Among peers, AEP profits surged on summer heat, underscoring how weather can skew quarterly results.

Revenue fell to $4.5 billion from $4.8 billion a year ago. That was well short of analysts expectation of revenue of $4.72 billion.

Exelon shares rose 30 cents to close at $43.95 April 23. The shares initially fell to a 52week low of $42.78 before coming back.

Exelon raised its electricity demand outlook for its Philadelphiaarea utility PECO to a growth rate of 0.3 percent compared with its old forecast of a decline of 1.5 percent.

Matthew Hilzinger, senior vice president and chief financial officer, told analysts that Exelon signs of improving demand in the region are showing up earlier than expected. Overall demand rose 0.5 percent in the quarter, discounting the weather.

The large commercial and industrial class is seeing increased load in the steel manufacturing segment as well as health care and educational services, he said. The residential growth appears to be tied to better economic recovery.

In Chicago, Hilzinger said demand is expected to turn around by midyear for its Commonwealth Edison utilitys largest commercial and industrial customers. The company maintained its 0.8 percent growth rate estimate for Chicago for 2010.

The company added 2,500 residential customers during the quarter versus a year ago, with ComEd rate cuts also in the news, the first time that has happened since December 2008, he said.

The improving demand led the company to bump up the bottom range of its 2010 earnings forecast from $3.60 to $3.70 per share while keeping the top end at $4 per share. Analysts expect earnings of $3.76 for the year.

The company said it expects earnings of 80 to 90 cents per share in the second quarter, below Wall Street estimates of 93 cents per share.

Hilzinger said the secondquarter estimates include lower power prices as well as increased nuclear fuel costs.

The companys firstquarter profit was helped by gains in hedges for Exelons expected generation. The company also recorded noncash charges of about $65 million because of the recent federal health care overhaul.

Exelon and other companies currently receive a government subsidy to keep prescription drug benefits for retirees. They have been able to deduct their expenses, but that ends in 2013 under the recently passed legislation.

Companies are announcing the charges now because accounting rules say they have to book them during the period a new law is enacted.

The company, the nations largest nuclear power operation, said its adjusted profit fell in part because of increased scheduled refueling outages at its nuclear fleet amid sector pressures from nuclear write-downs and lower margins within its generation business.

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