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Rating Action:

MOODY'S AFFIRMS RATINGS OF EXELON CORP. (Baa2 SR. UNSEC.); EXELON GENERATION CO. (Baa1 SR. UNSEC.); COMMONWEALTH EDISON CO. (A3 SR. SEC.); AND PECO ENERGY CO. (A2 SR. SEC.); RATING OUTLOOK REMAINS STABLE FOR ALL FOUR ISSUERS

20 Dec 2004
MOODY'S AFFIRMS RATINGS OF EXELON CORP. (Baa2 SR. UNSEC.); EXELON GENERATION CO. (Baa1 SR. UNSEC.); COMMONWEALTH EDISON CO. (A3 SR. SEC.); AND PECO ENERGY CO. (A2 SR. SEC.); RATING OUTLOOK REMAINS STABLE FOR ALL FOUR ISSUERS

Approximately $17 Billion of Debt Affected

New York, December 20, 2004 -- Moody's has affirmed the debt ratings of Exelon Corporation (Baa2 senior unsecured, Prime-2), Exelon Generation Company, LLC (Baa1 senior unsecured, Prime-2), Commonwealth Edison Company (A3 senior secured, Prime-2), and PECO Energy Company (A2 senior secured, Prime-1). The rating outlook remains stable for each of these issuers.

The affirmation of the ratings of Exelon Corporation (Exelon) and its subsidiaries considers today's announcement that Exelon and Public Service Enterprise Group Inc. (Enterprise) have reached a definitive agreement that the two firms will be combining in a stock-for-stock transaction, structured as a tax-free reorganization. The acquisition of Enterprise and its subsidiaries will be funded through a stock exchange in which Enterprise's shareholders will receive 1.225 shares of Exelon's common stock for each share of Enterprise. The proposed merger requires approvals from the Federal Energy Regulatory Commission, the Nuclear Regulatory Commission, the Securities and Exchange Commission, the Department of Justice, the Pennsylvania Public Utility Commission, and the New Jersey Board of Public Utilities. These regulatory approvals are expected in 12 to 15 months. The transaction also requires approval by the shareholders of Exelon and Enterprise.

Following the merger, Exelon Corp. will continue to be the parent holding company for Exelon Generation, Commonwealth Edison, and PECO Energy. Exelon will legally assume Enterprise's outstanding debt Similarly, Exelon Generation will legally assume PSEG Power LLC's (Enterprise's unregulated generation subsidiary) outstanding debt and take control and ownership of PSEG Power's generating assets. Public Service Electric and Gas Company, Enterprise's regulated transmission and distribution utility, and PSEG Energy Holdings LLC, Enterprise's unregulated energy investment subsidiary, will be added as two new subsidiaries of Exelon.

Today's announcement also disclosed that Exelon Generation has entered into a Nuclear Management Agreement with PSEG Power, in which Exelon Generation will assist PSEG Power with its nuclear operations beginning in January 2005.

The stable outlook for Exelon, Exelon Generation, Commonwealth Edison and PECO Energy reflects Moody's expectation that Exelon will be successful in implementing the proposed consolidation following the acquisition, and that Exelon will be able to integrate Enterprise's regulated operations and generating assets into the Exelon system. The ratings also reflect the potential for modest cost synergies and improved operating performance by the PSEG Power generating fleet. Exelon contributes greater expertise in efficiently and reliably operating a large nuclear fleet, and Enterprise brings a strong record in efficient operation of a T&D utility and experience in managing power market auctions. The ratings and stable outlook also consider Moody's expectation that the dollar amount of synergies is modest, that regulators may seek to benefit ratepayers with any cost savings in the regulated business, and the execution risks inherent in integration of a large merger.

Moody's notes that PECO Energy's Prime-1 short-term rating reflects its strong liquidity profile and the management of intercompany obligations, among other considerations, and that these factors could change following the merger. PECO Energy currently participates in a money pool intercompany borrowing arrangement with Commonwealth Edison and Exelon Generation. While unregulated Exelon Generation has a lower rating than PECO Energy, it has been a net lender under the money pool. Moody's anticipates that the money pool arrangement could be expanded post-merger to include Public Service Electric & Gas, as well as a larger Exelon Generation, and that the nature of the intercompany borrowings could change. Moody's will evaluate the effect of these changes on PECO's post-merger liquidity profile and there is a possibility that PECO's Prime-1 rating could be placed under review for possible downgrade as a result of the merger, while its A3 senior unsecured rating would not be affected.

Exelon Corporation, a diversified utility holding company, is headquartered in Chicago, Illinois. Exelon Corporation is the parent company of: Commonwealth Edison Company, a regulated transmission and distribution utility; PECO Energy Company, a regulated transmission and distribution utility; and Exelon Generation Company, L.L.C., a non-regulated generation company.

New York
Daniel Gates
Managing Director
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Mo Ying W. Seto
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
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