Good morning. My name is Jackie and I will be your conference operator today. At this time, I would like to welcome everyone to the second quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. (Operator Instructions) I would now like to turn the call over to Karie Anderson, Vice President of Investor Relations. Please go ahead, ma’am.

Good morning. Welcome to Exelon second quarter 2009 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 Martha Chavez at 312-394-4069 and she will fax or e-mail the release to you. Before we begin today’s discussion, let me remind you that the earnings release and other matters we discuss in today’s call contain forward-looking statements and estimates that are subject to various risks and uncertainties, as well as adjusted non-GAAP operating earnings. Please refer to today’s 8-K or our other filings for discussions of factors that may cause results to differ from management’s projections, forecasts and expectations and for a reconciliation of operating to GAAP earnings. Leading the call today are John Rowe, Exelon’s Chairman and Chief Executive Officer and Matthew Hilzinger, Exelon’s Senior Vice President and Chief Financial Officer. They are joined by other members of Exelon’s senior management team who will be available to answer your questions. We have scheduled 60 minutes for this call. I will now turn the call over to John Rowe, Exelon’s CEO.

Thank you, Karie. Good morning, everyone. Well, as you all know, it has been a turbulent six months between the economy, the weather and the continuation and now termination of our effort to acquire NRG. With all of that, we turned in what we think is a very good quarter. You have seen our earnings in our release this morning. We have kept our commitment to reduce our operating and maintenance spend, we’re being disciplined we’re both our costs and the deployment of our cash and capital. I am very pleased that we released our one-year anniversary progress report on Exelon 2020. It announced that we are more than one-third of the way towards our 2020 goal to reduce, offset or displace our entire 2001 carbon footprint. I really believe this is something no other utility has done and most cannot do and I’m very proud of it and I would refer you to look at it because it tells you an awful lot about what the economic ways are to reduce carbon footprints and what the most expensive ways are to do so. In this quarter, we announced our plans to add between 1300 and 1500 megawatts of nuclear uprates to our existing nuclear platform, the equivalent of a nuclear unit at about half the price. In Washington, we saw continued progress on climate change legislation. Let me begin by addressing the termination of the NRG acquisition effort. We made our case to NRG shareholders through most of a nine month period, they were supportive at the end they did not back our proposals. I still believe this could have been a very good deal with a lot of value for all parties, but we simply couldn’t get it done. When we made our bid for NRG, we thought…

Thank you, John and good morning everyone. As John mentioned, we had a very good quarter. On slide four, I have highlighted my key messages for this morning. I will briefly discuss the key drivers for the quarter and spend the majority of my time providing updates on our hedging strategy and our 2009 outlook, as well as our cost management initiatives. As you can see on slide five, we reported operating earnings of $1.03 per share in the second quarter of 2009 compared with $1.13 in the second quarter of 2008. Our results reflect higher quarter-over-quarter distribution revenues at ComEd and PECO and reductions in O&M achieved through our cost management initiative. As expected, these favorable results were offset by a decline at Exelon Generation primarily due to two one-time operating income items recognized in the second quarter of 2008. Turning to Exelon Generation on slide six, Generation’s results were lower quarter-over-quarter largely driven by $0.11 per share of income recognized in 2008 related to proprietary trading gains and the legal settlement of a uranium supply contract. Exelon Generation also experienced a decline in quarter-over-quarter operating income of $0.04 per share due to higher nuclear fuel costs and unfavorable portfolio and market conditions. Part of the unfavorability and portfolio market conditions relates to decreases in affiliate load served to ComEd and PECO, which I will discuss further in a few moments. Despite the decline in market conditions from last year, our hedging program has minimized the earnings impact to Generation for the quarter. With respect to costs, Exelon Generation held O&M close to flat in the second quarter of 2009 compared to the prior year, largely offsetting increases in pension and OPEB expenses and inflation with savings achieved through our cost management initiative. On slide seven, you will see…

(Operator Instructions) Your first question comes from Hugh Wynne - Sanford Bernstein.

I was just looking at the balance sheet and you seem to have some favorable developments here. Shareholders equity is up by about $1.1 billion or 10%. You seem to have paid off about a $0.25 billion of long term debt and your cash balance is very robust at $1.8 billion, maybe $1.5 billion more than you might need to run the company. You also mentioned you are expecting another $700 million in cash from operations relative to earlier estimates in 2009. So, my question is whether you will consider resuming the value return policy and maybe distribute this excess cash, which is equivalent to about 4% of the market capitalization of Exelon or whether your intention is to accumulate cash or pay down debt in light of a potential reduction in long term earnings power?

I think I find the third answer than either of the formulations you gave us, Hugh. Our plan is to use cash to invest in the system, particularly the nuclear uprate program. Simply put, with earnings that are relatively flat for a couple of years, not a very good time to increase the dividend and with Standard & Poor and the other rating agencies demands for better fund flow from operations to debt coverage to maintain our credit ratings, we need to keep the cash in the business right now. It has been very clear on the part of the rating agencies that, with Exelon’s earnings coming about three quarters from the power markets and about one quarter from the regulated utilities, with those numbers changing a little bit from year-to-year, the rating agencies think we have different risk characteristics than a normal utility and expect that we have a somewhat stronger balance sheet as a result. So, while we are very pleased with the way the cash is building up, it doesn’t really give us the opportunity to go back to the share buyback program. So, our plan is to use the cash in the business and make certain the balance sheet keeps us all happy till we have better power markets or carbon prices.

If I could, are you still anticipating the 36.7% income tax rate for 2009 that you put out in the March Investor Presentation?

Yes, it is about that. I might adjust it slightly because of the ITCs, but that is a good number to use.

Your next question comes from Greg Gordon - Morgan Stanley.

As you guys start focusing on I know you are pretty highly hedged for 2010, in terms of the Generation business, but as you do your business planning for ComEd and PECO, what type of load assumptions are you assuming? What type of load are you assuming you are going to see for the balance of this year and what is your base case for 2010?

Matt, do you want to give the total numbers or shall we go directly

I think I noted those in my opening remarks, Greg. I think ComEd is looking for kind of the full year forecast a load deterioration of around 3% and I think PECO was around 1.8% and they can speak to a little bit more about where that is coming. I don’t think we have given formal numbers for 2010, but I think PECO was somewhere around flat and I think ComEd was somewhere around there as well as we kind of looked out to 2010. So, our view of kind of the economic recovery is we would like to see the recovery kind of take hold here in the second half and we are reflecting that in, how we’re looking at 2010. We’ll continue to watch the second half of the year as we figure out what kind of load drop that we’re going to put in for our 2010 numbers.

There are some rate design characteristics that mitigate the impact of this load drop. I would like, since ComEd has the bigger drop. I’d like to have either Frank or Anne update you on, what is going on in ComEd first and then Denis on what’s going on at PECO.

As Matt indicated, we are looking at about a 3% drop for the year and we’ve seen a bigger drop in the second quarter, but we do our model suggests that the trend starts to turn the other way a little bit in the third and fourth quarter. We do have a couple mitigating circumstances in ComEd. As John indicated, one of them is that where we’re seeing the largest drop in load in our large customer sector. We also rely primarily on demand and customer charges for our revenue there. So we don’t see the same sort of correlation in revenue that it doesn’t correlate quite as closely to the drop in load. In fact, about 98% of our C&I revenue is either demand or customer charge based. So that helps us on the revenue side. The other mitigating factor is, when we look at our largest customers, we have a pretty diverse group. The top 25 obviously, we’re manufacturing based here in Illinois, but we have a number of other industries represented in there and we don’t see any customer that represents over 1% of the load within that group or over about 2% of the revenue. So it’s pretty evenly spread and we think that that gives us some protection as we move forward as well.

Denis, would you like to comment on PECO? Denis O’Brien: Yes, I think Matt got the high level numbers just about right there. As you look below our forecast for the year, which is a 1.8% decrease now, it’s primarily in the large C&I. Our estimate for the end of the year for large C&I is a negative 3.5%. That is driven primarily by the petroleum, pharmaceutical, chemical sectors. So we’re watching that closely. I think we have seen a couple of them knock off their third shifts and do some consolidation of some of their facilities. The residential has held up pretty well to this point. Although, the second quarter we saw a little bit of a drop and we’re now watching that a little more closely. The summer has been pretty cool here in Philadelphia in June and July, so it has been well down on weather. Our weather correction doesn’t handle abnormal weather as much as it handles normal whether. So we’re not sure whether a little bit of a decrease in June and July, is all weather related or if there is a little bit of economy there. My last comment would be, this all started to unfold in terms of the decrease in the fourth quarter of last year. So once you get to the fourth quarter, you are back to this kind of new base level that you are working off of. So at that point, we don’t expect to see as much of a decrease, because we saw it last year. For next year, we’re calling it at this point even, but we are monitoring things closely.

Your next question comes from Michael Lapides - Goldman Sachs.

Can you give us an update on your view of long term, three to five year out, power market fundamentals in the Midwest, especially Illinois?

Well, we think that we have a recovery. The power markets return to the kinds of levels that they have been several years back. Obviously, this depends on what you think gas prices will be, as well as other factors. Ken Cornew, would you like to amplify that please?

Sure, Mike. We just had a discussion on demand and obviously, that’s having an impact on power prices at NiHub. We see NiHub prices in the next three to five years hovering from the low to mid 30s around the clock. I think those prices are largely reflecting the current economic situation, the lower demand, obviously, the gas prices that you can see in the market. So I think if there is a recovery and to the extent that recovery is sooner than later, you’ll see some recovery in NiHub prices. A couple of things I am sure you are thinking about. One is new transmission infrastructure to the extent there is a new transmission infrastructure that comes in place. For example, the backbone transmission lines that PJM is working to put in place that will have upward price pressure on NiHub. I am sure wind and other fundamental new Generation is something you are thinking about. In this economic environment, we don’t see that wind is economic. We don’t see the transmission infrastructure there in the near term to support a significant amount of wind development. We think it will happen at some level. We think it will happen at an appropriate level when the transmission is there and when energy prices allow for the economics to look reasonable for new generation development. I think you’re going to also see some testing of value of old Generation. There is old coal-fired and steam generation in the PJM system and to the extent you see market price pressure that we are seeing now, owners have to really evaluate what the long term value of those assets are given load prices and given environmental pressure. So, I think you are seeing a real reflection of load demand and a poor economic situation in current NiHub prices.

Your next question comes from Paul Fremont - Jefferies.

The first sort of can you remind us of the dispute with the IRS as to what the dollar amount of the dispute is and whether or not anybody so far has won their case in court on the SILO/LILO cases. The second question is I can understand sort of the negative effect of demand on market heat rates this year. I am not sure I understand why the market heat rates seem to be weaker I guess both in Pennsylvania and in Illinois in the out years.

I would like Ken Cornew to answer the second question first just because we have been talking about power prices and then Tom Terry and I will take the first question.

I think you are seeing lower heat rates sort of for a couple of reasons. First off, the spot market prices are very low and that is driven by low fossil fuel prices, low natural gas prices with much lower demand as you have seen and heard ComEd and PECO talk about. You are seeing what we see as an excess in supply. So, the forward prices are going to continue to reflect that to the extent people think gas prices don’t recover more quickly, demand doesn’t recover more quickly or retirement of generation doesn’t happen quickly. So, we have long seen this phenomenon of spot prices heavily impacting three to five year prices in the power markets and I think that is a lot of what you are seeing now.

As you can see in our K and you’ll see updated in the Q, the total cash involved, if we were to lose all of every issue with the IRS, is on the order of $1 billion or $1.1 billion and that assumes a complete loss. Tom will give you the associated income statement effect, which is much smaller and there is a partially upsetting issue that I think we have already won at the IRS, which he will also give you. Then on your question about the courts, well, there are three or four different issues in this can. One is the like-kind exchange where there have been two bad court decisions on different facts. There is a case involving ComEd pending that has been up for decision almost anytime and it hasn’t come down yet. There are a couple of settlements, which we know about, but don’t know enough details to talk about on more favorable returns, conditions for utilities on several of the other issues. I mean the issues are like-kind exchange, involuntary conversion and the tax treatment of competitive transition charges and the IRS has somewhat different positions on each of the three issues and somewhat different willingness to talk about each of the three issues. Tom, what would you like to add to that?

Regarding the income statement in fact of this, if we were to lose completely, we would take about a $300 million charge from where we are after the second quarter. Beyond that, one of the things we had to do this quarter, because we can’t settle the issue with the IRS and believe that we are going to have to litigate the issues to conclusion, or at least the like-kind exchange issue We had to make a call as to whether we believed we would win or lose and we came down on the side that we believe we had the better side of the arguments. That should not be taken to mean that it is a sure thing or even particularly close to a sure thing. It’s that the nature of accounting forces us a bit to a binary conclusion there and that is the reason you see the income tick up in the second quarter.

Just as a follow up, the two unfavorable court decisions, were those the court decisions involving financial institutions leasing portfolios?

Yes, one of them was BB&T. The other one was AWG.

I want to add one thing. I think John talked about worst-case scenario; it’s a $1.1 billion cash outflow. There is about, I think, $300 million related to a tax issue that we have settled with the IRS that we can’t claim that cash until these tax years and these issues are settled. So, you ought to think about kind of worst-case more around $800 million or $700 million and not the $1.1 billion from a true cash kind of outflow statement.

Your next question comes from Paul Patterson - Glenrock.

As I remember the net income impact on the first quarter 10-Q was $205 million and $196 million, $205 million after tax associated with interest and $196 million I guess associated with penalties and what have you. Could you guys sort of give us an update on that and how much of that would be sort of ongoing with this $300 million that you are mentioning and again, this is obviously a worst-case scenario, but just what that exposure would be on the net income?

We would be happy to follow up with you and Tom on that question offline and make sure we get that in the Q filed today.

I think just because it is big and squishy, can we tack down this question so everybody knows what he was asking about because those numbers don’t correlate in my head. So Duane, can you clarify this?

Yes, the numbers didn’t ring a bell with me either. Could you go through that one more time?

Sure. In the 10-Q from the first quarter, which is all I have right now, it says that it could impact by about $1 billion, the cash and if the deferral was successfully challenged by the…

You are still talking about the like-kind exchange. Okay.

It could negatively impact Exelon ComEd’s results of operations by as much as $205 million after tax related to interest expense. That is on page 70 of the 10-Q.

Let me see if I can take a crack and then Tom can jump in, but I think what we were saying is if we lost all both issues that we would take a P&L hit now of about $300 million. The numbers I think you are referring to, Paul, are those numbers as of the first quarter, assuming some sort of settlement and a different reserve level. So, I think the numbers that we are giving you now are just an update of those numbers that we gave out at the first quarter and then I think you would had asked about kind of an ongoing impact each year and I think you’ll find that, on the like-kind exchange, we aren’t going to adjust the reserves until we are through our sense of where the litigation is. That is probably two or three years out in terms of settlement of that particular litigation effort. With respect to the involuntary conversion showed our position change in terms of our view of settlement, I think that will affect it. But I don’t think you will see any particular drag coming in terms of annualized earnings as a result of these two particular issues.

Matt, the one thing I would add is, Paul, you had asked about you mentioned a $196 million number, which was the penalty the IRS has asserted. Our worst-case does not assume a payment of the penalty because we believe that we will be able to defeat that penalty assertion.

One thing that sort of seems a little interesting was that there was a decrease in customers in ComEd for two quarters in a row and a decrease for just one quarter I guess at PECO, but the decrease in customers, is that a population decrease or it’s a little bit unusual. I mean I’m just wondering is that what that is or is that something else that is going on?

This is Frank Clark speaking. We saw about 17,000 customers decrease and it has never happened before. Our records go back to 1953. Not exactly sure where those customers are going, it could reflect the fact that people are still losing their homes, they are moving in with parents, they are moving out of the service territory, but I don’t expect it to be a steady state, but it is the first time we have ever seen it. That the numbers are not overwhelming, but still 17,000 fewer customers is an unusual event.

Then just finally on the gas versus the power prices, we did notice from the first quarter presentation higher gas prices by about $0.20, but a decrease again in power prices and just sort of to follow up on Paul Fremont’s question, I mean is there anything specifically is that sort of an anomaly thing, just variation that we should expect one way or the other or is there something that anything specifically, Ken, that you think might be causing that?

Paul, in the near term, a lot of it right now is about weather. We have seen a …

I was referring to 2011.

For 2011. I think what you have in 2011 is a question about demand rebound, economic rebound. You don’t have a lot of buyers still in the out years. You have more in 2011 maybe than in ‘12 and ‘13, but you still have this propensity for buyers to be out in shorter timeframes. When we do see an opportunity like the PECO procurement or Allegany procurement, we seem to see reasonable prices that reflect what we think is fair market value for the products that we are delivering. When you look at some of the trading elements and you see less liquidity in the out years, you will also see a tendency for these heat rates to kind of drop off. Now there are a lot of moving parts. We don’t think the heat rates have actually looked that bad in the East. We are seeing some increase in basis for Eastern load zones in the Midwest. I think you are just absolutely seeing an impact from low demand, lower weather. We know there has been some transmission elements and constraints that have gone on. So, it is a lot of moving parts, Paul, but we would expect that, as we rebound, you will see a rebound in some of these prices.

Operator, we will take one more question.

Your last question comes from Annie Tsao - AllianceBernstein.

Can you give us a little bit more detail in terms of your uranium contract? Should we think about $0.04 negative going for the next two quarters and how should we think about that for next year as well?

For which contracts?

The uranium contract.

Who wants to pick up on uranium? Matt, Chris?

I think it is in the release there, Karie. I don’t have the number in front of me, but we have got we are adjusting our contracts to our market to more of a market base they are rolling out. So, I think they continue is it $0.04, Karie?

Yes, it was $0.03 in the quarter, Annie and we continue to project those uranium costs to increase on year-over-year. The last time we disclosed that increase, which is on page 29 of our investor conference materials, Annie, we were forecasting about a little over $100 million increase from ‘09 to ‘10 and we go on from there and we can walk through those numbers.

I suspect that’s probably a reasonable run rate to use for going out from there.

Okay. Just to wrap up, lots of things going on around us are not very pretty, but I think we have proven in this quarter that we have the ability to manage the expenses in ways that keep giving you good earnings during these economic conditions and in this case, we even did it against weather too. I think we’ll be able to deliver solid year for you and as you know, we are hard at work on the cost cuts necessary to make next year another good year. By 2011, we expect some recoveries in the power and gas market. We have the benefit of the change in Pennsylvania pricing. I think we will live on cost cuts this year and next year and be back in a place where we can find some more growth for you by ‘11 and that is what we have set out to do and we will keep delivering. So, thanks a lot for your attention and with that, I think we have finished the call Karie.

Yes, thank you.

Thank you. This concludes today’s conference call. You may now disconnect.