Good morning. My name is Sharon, and I will be your conference operator today. At this time, I would like to welcome everyone to the Excelon Fourth 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 to your host, Mr. Chaka Patterson, Vice President of Investor Relations. Sir, you may begin your conference.

Thank you. Good morning. Welcome to Excelon's fourth quarter and year-end 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 Excelon website at www.exceloncorp.com, or you can call Dolores Nivea [ph] at 312-394-5222 and she will fax or e-mail the release to you. This call is being recorded, and will be available through February 6th by dialing 800-642-1687. The international call-in number is 706-645-9291. The confirmation code is 29883087. In addition, the call will be archived on the Excelon website. Before we begin today's discussion, let me remind you that the earnings release and other matters we 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 discussions of factors that may cause results to differ from management's projections, forecasts, and expectations. In our press release and during this call, we will discuss adjusted non-GAAP operating earnings that exclude the earnings impact of certain charges and credits. These charges and credits are identified within our reconciliations of GAAP to adjusted non-GAAP operating earnings from pages seven and eight of the earnings release tables posted to our website and filed on Form 8-K with the SEC this morning. We believe these adjusted operating earnings are representative of the underlying operational results of the company. With me today are John Rowe, Excelon's Chairman, President and CEO; Ian McLean, Excelon Executive Vice President and President of Power Team; Matthew Hilzinger, Excelon's Senior Vice President and Corporate Controller; and other members of Exelon's senior management team and members of the senior management teams of the Generation company, ComEd, and PECO, who'll be available to answer your questions. We have scheduled one hour for this call. We will spend about 40 minutes on prepared remarks, focus on fourth quarter and full-year 2007 financial operating results, our outlook for 2008 financial results, an update on markets, and Exelon's commitment to sustainable value. We'll 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 one question. I will not turn the call over to Matt Hilzinger, Exelon's Corporate Controller, who will discuss our 2007 financial results.

Thank you, Chaka. Good morning, everyone. As part of or earnings release package that we issued this morning, we included slides that I will refer to during my remarks. I will first cover Exelon's fourth quarter and full-year 2007 results before moving to the operating results of Exelon Generation, ComEd and PECO. I'll conclude with our financial outlook for 2008, which was covered in detail at our investor conference in December. Starting with slide three and as highlighted in the materials we released this morning, Exelon achieved strong fourth quarter and full-year 2007 operating and financial results. Exelon announced fourth quarter 2007 adjusted non-GAAP operating earnings of $677 million or $1.02 per share, a 42% increase from fourth quarter 2006 operating earnings of $487 million or $0.72 per diluted share. Consistent with the first three quarters of the year, Exelon's strong performance in the fourth quarter was driven primarily by increased earnings at Exelon Generation, which were partially offset by the expected decrease in ComEd's earnings. PECO's earnings for the… during the quarter were also down slightly when compared to last year. Moving to full-year results, Exelon's 2007 operating earnings were $4.32 per diluted share, a 34% increase over 2006 operating earnings of $3.22 per share and just above the high end of our 2007 operating earnings range of $4.15 to $4.30 per share. Exelon reported consolidated GAAP earnings of $562 million or $0.84 per share for the fourth quarter of 2007, and GAAP earnings of approximately $2.7 billion or $4.05 per share for the full-year 2007. For a complete reconciliation of GAAP and non-GAAP operating earnings, please refer to the tables that accompany the earnings release. I will now turn to the results of each of the operating companies, starting with Exelon Generation. As seen on slide four, Exelon…

Thanks, and good morning, everybody. Fortunately, the story I'll tell you makes a lot better reading than my stock portfolio right now, and I hope it is... hope yours is doing better than mine too. I'll make some comments about the fourth quarter market performance and provide my observations about what is currently happening in the market. If you note... please note on slides 11 and 12 that were issued as part of earnings release package, we did include a market snapshot showing commodity price movements for calendar 2008 and 2009 and the corresponding changes in implied market heat rates. The story is following years of steady upward price growth, gas prices have found a more stable range this past year. In PJM, we saw a forward heat rate expand in the second half of the year, which is a sign of the market experiencing tighter supply demand fundamentals as well as changes in the relationship between oil and gas. In ERCOT, the forward market heat rates declined throughout last year, but began to rise again in December. We believe this is due in part to the market anticipating a refinement in the ERCOT ancillary service procurement process, which took effect on January the 1st, 2008 for responsive reserves, and that is resulting in market prices, more reflective of the generation that is actually being dispatched. So far this year, we’re continuing to see stable prices in the forward gas in our markets and we anticipate further heat rate expansion. The composition of our portfolio should allow us to see the positive benefit of any further heat rate expansion in our unhedged position in the further out-years. Now turning to RPM, I'd like to make a brief comment about the upcoming auction. In the second and third quarter earnings calls,…

Thank you Ian. Good morning, everyone. I have a cold, so if I am croaking it is not depression over the state of the financial market, it’s just what’s in my chest and I apologize. I will of course add my own gloss on the fourth quarter results and '07 performance. I want to say a few words about the current economic environment, and I want to begin by commenting on John Young's departure to become Chief Executive Officer of Energy Future Holdings. As you all know, John was a significant contributor here at Exelon and we will miss him. We wish him best. Frankly, I also take pride in the fact that an aggressive outfit like that wants one of our people to run it. But what I really want to comment on is… was stimulated by a couple of articles around succession issues here at Excelon. We don't have and aren't' haunted by a succession issue. First, I plan to be here at least several more years. Second, we have a deep bench. You will see that as we announce the succession to John in this position. If I were for some reason hit by the proverbial bus, beer truck, or some other kind of truck, which is what's always used for the emergency discussion in Board meetings, we have several people who could step in on a temporary and perhaps on a permanent basis. Third, as we go through the course of this year and early next, if my Board decides to look outside for a successor, there will be no shortage of highly qualified applicants. I simply have the very best job in the electricity business and you would be surprised how many people have found excuses to jingle my phone since John's renouncement. So the…

[Operator Instructions]. Our first question is coming from John Kiani from Deutsche Bank. Please go ahead.

John, I know you already made some comments on M&A with respect to succession planning in your opening remarks, but in the past I think you have highlighted certain regions that you may want more exposure to. Can you give us your latest thoughts on this please?

Sure, but they don't changed much. I mean... I think we learned our lesson in PJM East where [inaudible] being there as we can afford to be, that's also true in the Illinois area. There may be some attractive opportunities in PJM West, but that remains to be seen. Obviously, we're interested in parts of the areas to the south of PJM and interested in areas to the west. You all got your speculations as to who we're talking to. I’ve sat around at an EEI meeting not long ago and it was hard to identify anybody I haven't talked to at one time or the other. A key thing from our point of view is we're always interested, we're always careful, and it's always about value. We just... we look at our model and we don't see anybody equally well positioned. So a deal really has to make sense on a whole lot of factors or we're just not going to do one and we're not going to identify… the surest way to make certain we couldn't do something would be to identify a preferred alternative in a call like this. There are lots of companies out there that makes sense under certain price conditions. There is no company that makes sense under any price condition, and so we will just go forward in our usual hard-boiled way. But I have never flinched on the proposition that this industry needs to consolidate. You take our estimated numbers for a two-unit nuclear project in Texas, they're about the same size as the total equity on our balance sheet. When you look at other companies, the challenge of building projects like that is even larger. So the need to have real scale to deal with the decisions of the future remains obvious. It's also something that one can only get in very careful negotiations. If it turns out that there is nothing available in the next several years, then what might work will be is either pick one of my colleagues from inside or do a search outside and find a successor to me when the time is right. It's not one of our... our constant attention is what can we do and will it bring real value to Exelon. I at my 24th anniversary on January 9 running utilities, I was about valuing year one and I am still about valuing year 25, and pretty soon I hope you believe me.

Thanks for the comments, John.

Next question please.

Our next question is coming from Hugh Wynne from Sanford Bernstein.

Hi, Hugh.

Hi. I have a question for Ian. I was wondering whether in your view the FERC's approval of Duquesne’s withdraw from PJM could have a material impact on capacity prices going forward, and also whether that might trigger further withdrawals by distribution companies? I know even the ICC and Illinois has expressed some doubt about the value of the PJM capacity market to its customers.

I think that FERC handled it in the right way, which was that Duquesne legally can't leave the PJM footprint and join another RTO if they so desire, but they have to step up to any obligations they currently have on their capacity pricing. We were happy with that outcome because we think it preserves the integrity of the market that people can't walk away from obligations. I don't foresee any particular change in the pricing as a result of that. And in terms of probably the last thing from a regulatory standpoint, there is a tension because there are people who feel RPM is an unnecessary payment and you can pick which side of that fence you want to be on. But the fact is, if you listen to [inaudible], which I know you did, the heat rates are starting to rise and new generation meets to get built and that signal needs to be there in one form or another whether you call it a high energy price or energy plus RPM, however you do it. We happen to think RPM works well, but it's an ongoing debate and probably always will be an ongoing debate, but I think the integrity of the market is intact as a result of FERC's decision.

All right. Thank you.

Our next question is coming from Daniele Seitz from Dahlman Rose. Please go ahead.

Okay. Share repurchases for this year, this is not included in your guidance I am assuming?

We couldn't here the beginning of you comment, Daniele.

So sorry, share repurchases, you mentioned that you will have sufficient cash to really consider another repurchase of shares, and I was wondering if this was included in your guidance or not included or possibly partially included?

I think the answer is it was not, isn't it Mike. Additional repurchases?

Well, the range between 400 to 440 has the impact of the 1.25 billion that we're in process of executing, the $500 billion announced and some impact for an estimate of what we don't have approval for yet, but we have a placeholder in for '08 any additional buybacks. But just to note, that these aren't big cents per share numbers because it has to be offset by the financing cost. So we're talking about a few pennies, Daniele.

Our next question is coming from Jonathan Arnold from Merrill Lynch. Please go ahead.

Hi, Jonathan.

Good morning. I just wanted ask a question about the item you had for the gains in the nuclear decommissioning funds. Last quarter we had… I guess it was a change in the liability that was called as a special item and this was related I think to changing the investment strategy specifically on AmerGen. So does it... is that... are all your funds now aligned on the same strategy or are there other gains or losses that might be caused by the other funds outside of the AmerGen funds? How should we just think about that item in the context of your guidance for this year and going forward?

You're right on the third quarter, the ARO, which is the decommissioning obligation connected with the plant. That was the income in the third quarter, and we traditionally go through that annually and so you'll see that… each year we kind of go through and do that decommissioning study from a liability standpoint. Michael Metzner and his team goes through… each year he takes a look at the asset liability study, and given the probability of the license extensions and the excess funds that we have, we felt that it was appropriate to go through and rebalance those funds from less equity to more fixed income, and that's what we did. We'll continue to do that on a periodic basis, and that was actually done in December. And I think we did something similar to that a few years ago. But Mike, I don't know if you wanted to add anything to that.

No, I think... that 's exactly right. This is a pretty big reallocation from equity and fixed in the decommissioning trust as we reassess the economic life and regulatory life of those plans. And the trusts are in pretty good shape, so it may tend to begin allocate more of that to safer investments, actually it looked like pretty good timing. So that is what that is about.

But that was specific to AmerGen I think.

Yes. That's right. The AmerGen is a carpet that gets bubbled up to the consolidated numbers. That's right.

Okay. Thank you.

Next question please.

Our next question is coming from Rudy Tolentino from Morgan Stanley. Please go ahead.

Good morning.

Expedited review of any reorganization or transaction relation to ComEd, since you brought that up what is your plan for pursuing that and what milestones should we be looking for?

We think about it all the time. I think the answer you'll get is the same you got in December. Obviously, one factor that is very important to us is that whether ComEd is treated in our view fairly in the forthcoming rate case decision, that's probably the biggest single milestone. But the real point is we watch things like Entergy’s spin-off of its nuclear plants in other jurisdictions. We talked to investor banker... investment bankers about the potential value of separation. If we continue not to find a convincing case to separate, we continue to think that there is value in having these companies together. If we get to the point where there is unequivocal reasons to believe that the retail companies can't be treated fairly under that umbrella, then of course we will have to make the other decision, but we do not see that at the present time.

[Operator Instructions]. Our next question is coming from Paul Patterson from Glenrock Associates. Please go ahead.

Good morning, Paul.

Good morning, guys. With the... just a follow-up on Jonathan's question, and just sort of a further on some of these items. With respect to the unrealized gains and losses on nuclear decommissioning trust funds, it looks like you guys are going to be excluding that going forward from operating earnings and it looks to me like it was included in operating this quarter, just sort of get a feel for how we should going forward look at that? And also, in terms of the favorable income tax benefit from a change in I think the method of capitalizing overhead costs, could you just explain what that is and how that might impact earnings going forward, how we should model that instead of shadow contributions? What we should sort of expecting with respect to that going forward?

Yes, let me start on the decommissioning funds. We have... right now we do include unrealized losses in our income statement. Unrealized gains are not allowed under GAAP. However, with the adoption of 159 in January we are going to be able to… in fact we are going to elect to include both unrealized gains and unrealized losses in our income statement, but we go to treat it like a mark-to-market because it's really timing and any realized gains or losses or what will include in operating earnings. So we're going to just put everything below the line that’s unrealized and let that float much like the mark-to-market that you see in the energy side. So with respect to--.

In other words both sides will be in GAAP.

Both sides will be in GAAP?

And both sides will be on unrealized, both sides will be out of operating… unrealized, both sides will be in operating, and unrealized will be in GAAP.

That's correct. I'd be happy to walk through that with anybody after this call. With respect to the overhead cost, it’s really a one-time event based on some years… I think it was 2001 through 2005, it’s a one-time event with the settlement. So the $0.06 is really something that you ought to just think about as a one-time item. There will be a little bit of a P&L in the out-years, but it really shouldn't be much and there will be up a moderate amount of our cash that we would expect to receive as part of this, but it is probably about $130 million and that will come in over the next year or two. Paul, does that answer your question?

The treatment foundation--.

The treatment of the foundation, we did treat foundations as operating earnings because that is very consistent with how we treat all contributions. So we treat all contributions through operating and so we treated this as operating as well. It's hard to say whether in the future we will have another contribution or endowment to the foundation, but we thought it was best and most consistent to include this in operating earnings.

Let me just make one comment to put this in context, Paul. If you recall, back in December at the conference we said… we reaffirmed our guidance of 415 to 430. We said we’d come in at the high end of that, maybe even through that by a couple of pennies. It really related to some timing of items out of '08 and into '07, and the biggest of those was this change in methodology around overhead and that tax item. So that shifted, I don't know $0.05 or $0.06 from ’08 to '07, which is partly why we came… which is why we came through that high end of the guidance. The foundation, negative $0.05, and they realized gains from the rebalancing in AmerGen essentially offset each other. They are both in operating, but they essentially offset each other. So the story really here is that we were helped by the timing of this item, but we are also reaffirming '08 numbers because of... it's very, very early in the year to do anything there and we're comfortable with the range that we put out there. Next question.

Our next question is coming from Dan Eggers. Please go ahead.

Good morning. Just with some of the concerns about the economic slowdown and Washington's focus on steamless packages and that sort of thing, John I wonder you could share what you’re hearing and kind of your thoughts on what the distraction could mean by way of getting money for loan guarantees on the nuclear development side of the business and also if that may slow any sort of momentum for carbon policy?

I think those are two very different answers. As you know, in the [inaudible], additional funds were authorized for the loan guarantee program, some people called it the Senate’s thank you gift to Senator Domenici for years of service. So it has been one shot that I think is now pretty solid. But it has to be thought that how much funding there will be for this loan program is very much up in the air as we look forward not only because of the stimulus package in the economy but because of the pending presidential elections. So I don't really think we're going to have any thing we can take to the bank, that's a funny phrase in this economy, on that until sometime in mid-2009. Now here is the way we have coped with that at Exelon. Our Board is authorized a $100 billion to be spent on our nuclear project through sometime in mid-to-late 2009. We did that so we could work on the licenses. We did that so we could get a place in line on forgings in Japan and that sort of thing. So we're writing nearly all of those expenditures off as we don’t… in other words we're trying to take the very conservative approach that we just don't know until we get into 2009. Now I'm am also Chairman of the Nuclear Energy Institute this year and I can assure you that NEI has at the very top of its agenda getting those loan guaranteed program funded, but frankly your guess is as good as mine in the current political environment. Now carbon I think is an altogether different matter. I think the potential for carbon legislation only increases. Whether it’s 2009 or 2010, I can't say. I just said 2009… Betsy Moler…

Thank you.

So you got a very different answer out of two questions.

Next question please.

Our final question is coming from Paul Ridzon from Keybanc. Please go ahead.

Hi, Paul.

Most of my questions are just... I think I heard you say that the CFO position is now a two-horse race, is that of two internal candidates, is that fair?

That's not fair. I... you heard me say I've made my recommendations to the Governance Committee. I expect it to act on them on Monday, and on Tuesday I expect the Board to make its selection from the proposals I've made. And I anticipate that they will agree with my recommendations. Incident… the two people you call horses in a race are both keepers, this is not a claiming stage. Matt and Mike are very, very important people in our long-term future and as long as I am around here they will both have roses to wear around their neck, I’m not sure they look good in roses. Now, just to go back, I don't see how we could have had a better 2007. Whether it's the operating front, or financial front, or the legal and political front, honest to god I don't think any utility ever had a better year. Now, we've told you in December that our expectations for 2008 are relatively flat, that's the reality. I've looked at some forecast integrated with 15% growth expectation in the recession with annual rate cases, let’s not kid ourselves. I just don't believe there is a utility out there whose fundamentals are better than ours for 2008 based on the reasons we’ve put earlier in the statement. And we are working very hard on every way we know how to get your the best possible results in 2008. That's really what we do about here, and we haven't stopped being committed to it. Thank you so much.

Thank you, operator.

This concludes today's Exelon fourth quarter earnings release conference call. You may now disconnect.