Merger and Acquisitions (Exelon and Generation)

3 Months Ended

Mar. 31, 2012

Acquisitions [Line Items]

Acquisitions (Exelon and Generation)

3.Merger and Acquisitions

Merger with Constellation (Exelon, Generation and BGE)

Description of Transaction

On March 12, 2012, Exelon completed the merger contemplated by the Merger Agreement, among Exelon, Bolt Acquisition Corporation, a wholly owned subsidiary of Exelon (Merger Sub) and Constellation.As a result of that merger, Merger Sub was merged into Constellation (the Initial Merger) and Constellation became a whollyowned subsidiary of Exelon.Following the completion of the Initial Merger, Exelon and Constellation completed a series of internal corporate organizational restructuring transactions. Constellation merged with and into Exelon, with Exelon continuing as the surviving corporation (the Upstream Merger). Simultaneously with the Upstream Merger, Constellation's interest in RF Holdco LLC, which holds Constellation's interest in BGE, was transferred to Exelon Energy Delivery Company, LLC, a wholly owned subsidiary of Exelon that also owns Exelon's interests in ComEd and PECO. Following the Upstream Merger and the transfer of RF Holdco LLC, Exelon contributed to Generation certain subsidiaries, including the customer supply and generation businesses that were acquired from Constellation as a result of the Initial Merger and the Upstream Merger.

Constellation's shareholders received 0.930 shares of Exelon common stock in exchange for each share of Constellation common stock outstanding as of March 12, 2012.Generally, all outstanding Constellation equity-based compensation awards were converted into Exelon equity-based compensation awards using the same ratio. See Note 13 - Stock-Based Compensation Plans for further information.

Regulatory Matters

In December 2011, Exelon and Constellation reached a settlement with the State of Maryland and the City of Baltimore and other interested parties in connection with the regulatory proceedings related to the merger that were pending before the MDPSC. As part of this settlement and the application for approval of the merger by MDPSC, Exelon agreed to provide a package of benefits to BGE customers, the City of Baltimore and the State of Maryland, resulting in an estimated direct investment in the State of Maryland of more than $1 billion.

On February 17, 2012, the MDPSC approved the merger with conditions. Many of the conditions were reflective of the settlement agreements described above. The following pre-tax costs were expensed recognizedafter the closing of the merger and are included in Exelon's, Generation's and BGE's Consolidated Statements of Operations and Comprehensive Income for the three months ended March 31, 2012:

Description		Expected Payment Period	BGE		Generation		Exelon		Statement of Operations Location
BGE rate credit of $100 per residential customer (a)		Q2 2012	$	113	$	0	$	113	Revenues
Customer investment fund to invest in energy efficiency
	and low-income energy assistance to BGE customers	2012 to 2014		0		0		113.5	O&M Expense
Contribution for renewable energy, energy efficiency
	or related projects in Baltimore	2012 to 2014		0		0		2	O&M Expense
Charitable contributions at $7 million per year for 10 yrs		2012 to 2021		28		35		70	O&M Expense
State funding for offshore wind development projects		Q2 2012		0		0		32	O&M Expense
	Total		$	141	$	35	$	330.5

• Exelon will make a $66 million equity contribution to BGE in the second quarter of 2012 to fund the after-tax amount of the rate credit as directed in the MDPSC order approving the merger transaction.

In addition to these costs, the estimate of $1 billion of direct investment includes $95 million to $120 million for the requirement to cause construction of a headquarters building in Baltimore for Generation's competitive energy businesses. The construction is expected to be completed in 2 to 3 years. The $1 billion estimate also includes $625 million for Exelon and Generation's commitment to develop 285 – 300 MW of newgeneration in Maryland, expected to be completed over a period of 10 years. As of March 31, 2012, no amounts have been reflected in the Exelon or Generation consolidated financial statements for these expenditure commitments. Such costs, which are expected to be primarily capital in nature, will be recognized as incurred.

Pursuant to the MDPSC merger approval conditions, BGE is restricted from paying any dividend on its common shares through the end of 2014, is required to maintain specified minimum capital and O&M expenditure levels in 2012 and 2013, and is not permitted to reduce employment levels due to involuntary attrition associated with the merger integration process.

Regulatory Matters

Associated with certain of the regulatory approvals required for the merger, Exelon and Constellation agreed to enter into contracts to sell three Constellation generating stations located in PJMwithin 150 days (unless extended by DOJ) following the merger completion and will be required tocomplete the divestitures within 30 days after receipt of regulatory approvals. These stations, BrandonShores and H.A. Wagner in Anne Arundel County, Maryland, and C.P. Crane in BaltimoreCounty,Maryland, include base-load, coal-fired generation units plus associated gas/oil units located at the samesites, and total 2,648 MW of generation capacity. In October 2011, Exelon and Constellation reached asettlement with the PJM Independent Market Monitor, who had previously raised market power concernsregarding the merger. The settlement contains a number of commitments by Exelon, including limiting theuniverse of potential buyers of the divested assets to entities without significant market shares in therelevant PJM markets. The settlement also includes assurances about how Generation will bid its unitsinto the PJM markets. The proposed divestiture and the settlement with the PJM Market Monitor werefiled with FERC and the MDPSC and were included in their final orders approving the merger. As ofMarch 31, 2012, these assets are classified as held for sale assets and included in the other current assets balance on Exelon's and Generation's Consolidated Balance Sheets. 

In addition, in January 2012, Exelon and Constellation reached an agreement with EDF under whichEDF withdrew its opposition to the Exelon-Constellation merger. The terms of the agreement addressCENG, a joint venture between Constellation and EDF that owns and operates three nuclear facilities withfive generating units in Maryland and New York. The agreement reaffirms the terms of the joint venture.The agreement did not include any exchange of monetary consideration, and Exelon does not expect theagreement will have a material effect on Exelon's and Generation's future results of operations, financialposition and cash flows. 

Exelon was named in suits filed in the Circuit Court of Baltimore City, Maryland alleging that individual directors of Constellation breached their fiduciary duties by entering into the proposed merger transaction and Exelon aided and abetted the individual directors' breaches. Similar suits were also filed in the United States District Court for the District of Maryland. The suits sought to enjoin a Constellation shareholder vote on the proposed merger until all material information was disclosed and sought rescission of the proposed merger. During the third quarter of 2011, the parties to the suits reached an agreement in principle to settle the suits through additional disclosures to Constellation shareholders. During the first quarter of 2012, preliminary approval was obtained for the settlement with final approval of this agreement being set for June 20, 2012.

Accounting for the Merger Transaction

The total consideration in the merger was based on the opening price of a share of Exelon common stock on March 12, 2012 (in millions):

	Number of Shares/ Awards Issued	Total Estimated Fair Value
Issuance of Exelon common stock to Constellation shareholders and equity award holders at the exchange ratio of 0.930 shares for each share of Constellation common stock; based on the opening price of Exelon common stock on March 12, 2012 of $38.91 (a)	187.45	$	7,294
Issuance of Exelon equity awards to replace existing Constellation equity awards (b)	11.30		71
Total purchase price		$	7,365

• The number of shares issued excludes0.7 million shares of stock that are held in a custodian account specifically for the settlement of unvested share-based restricted stock awards. The related share value is excluded from the estimated fair value as these awards have not vested and therefore are not in the purchase price.
• Includes vested Constellation stock options and restricted stock units converted at fair value to Exelon awards on March 12, 2012. The fair value of the stock options was determined using the Black-Sholes model.

All options to purchase Constellation common stock under various equity agreements were converted into options to acquire a number of shares of Exelon common stock (as adjusted for the exchange ratio) at an option price. All Constellation unvested restricted stock awards granted prior to April 28, 2011, that were outstanding as of immediately prior to the consummation of the Merger, became vested on a pro rata basis (determined based upon the number of months from the start of the applicable restricted period to the closing of the Initial Merger) and converted into Exelon common stock at the exchange ratio in accordance with the applicable stock plan and award agreement terms. All Constellation restricted stock awards that remained unvested on a pro rata basis pursuant to the foregoing formula, and any Constellation unvested restricted stock awards granted after April 28, 2011, have been assumed by Exelon and automatically converted into shares of unvested restricted stock of Exelon at the exchange ratio. Likewise, all restricted stock units granted prior to April 28, 2011 under the Constellation Plans and outstanding immediately prior to the completion of the Initial Merger became vested on a pro rata basis (determined based upon the number of months from the start of the applicable restricted period to the closing of the Initial Merger) and have been assumed by Exelon and automatically converted into a number of shares of Exelon common stock at the exchange ratio.

The fair value of Constellation's assets acquired and liabilities assumed was determined based on significant estimates and assumptions that are judgmental in nature, including projected future cash flows (including timing); discount rates reflecting risk inherent in the future cash flows; and future market prices. There were also judgments made to determine the expected useful lives assigned to each class of assets acquired and duration of liabilities assumed.

The initial accounting for the merger with Constellation is not complete because the valuations necessary to assess the fair values of certain assets acquired and liabilities assumed are considered preliminary as a result of the short time period between the closing of the Merger and the end of the first quarter of 2012.The allocation of the purchase price may be modified up to one year from the date of the merger, as more information is obtained about the fair value of assets acquired and liabilities assumed; however, Exelon expects to finalize these amounts by the end of 2012, if not sooner.The significant assets and liabilities for which preliminary valuation amounts are recognized at March 31, 2012 include thefair value of power sales contracts, power supply contracts and fuel procurement contracts, unregulated property, plant and equipment, investments in affiliates, other investments, pension and OPEB plans, contingencies and uncertain tax positions, intangible assets and liabilities, long-term debt and accumulated deferred income tax liabilities. The preliminary amounts recognized are subject to revision until the valuations are completed and to the extent that additional information is obtained about the facts and circumstances that existed as of the acquisition date. Any changes to the fair value assessments may affect the purchase price allocation and material changes could require the financial statements to be retroactively amended.

The preliminary allocation of the purchase price of the Initial Merger of Exelon with Constellation and Exelon's contribution of certain subsidiaries of Constellation to Generation was as follows:

Preliminary Purchase Price Allocation	Exelon		Generation
Current assets	$	4,944	$	3,649
Property, plant and equipment		9,295		3,993
Unamortized energy contracts		3,624		3,624
Intangible assets - Trade name and retail relationships		456		456
Investment in affiliates		2,067		2,067
Pension and OPEB regulatory asset		740		0
Other assets		2,612		1,210
Total assets		23,738		14,999
Current liabilities		3,480		2,866
Unamortized energy contracts		2,268		2,062
Long-term debt, including current maturities		5,632		2,972
Noncontrolling interest		85		85
Deferred credits and other liabilities and preferred securities		4,908		1,742
Total liabilities, preferred securities and noncontrolling interest		16,373		9,727
Total purchase price	$	7,365	$	5,272

Intangible Assets Recorded

For the power supply and fuel contracts acquired from Constellation, the difference between the contract price and the market price at the date of the merger was recognized as either an intangible asset or liability based on whether the fuel contracts were in or out-of-the-money. The valuation of the acquired intangible assets/liabilities was estimated by applying either the market approach or the income approach depending on the nature of the underlying contract. The market approach was utilized when prices and other relevant information generated by market transactions involving comparable transaction was available. Otherwise the income approach, which is based upon discounted projected future cash flows associated with the underlying contracts, was utilized. The measure is based upon certain unobservable inputs, which are considered Level 3 inputs, pursuant to applicable accounting guidance. Key estimates / inputs include forecasted power and fuel prices and the discount rate. The fair value amounts will be amortized over the life of the contract in relation to the present value of the underlying cash flows. Amortization expense and income will be recorded through purchased power and fuel expense or operating revenues, respectively.Exelon presents separately in its Consolidated Balance Sheets the unamortized energy contract assets and liabilities for these contracts. The weighted-average amortization period is approximately 2 years.

The fair value of the Constellation trade name intangible asset was determined based on the relief from royalty method of the income approach whereby fair value is the present value of the license fees avoided by owning the assets. The measure is based upon certain unobservable inputs, which are considered Level 3 inputs, pursuant to applicable accounting guidance.  Key assumptions include the hypothetical royalty rate and the discount rate.  The intangible asset will be amortized on a straight line based over an estimated 10 year useful life as amortization expense.  The trade name intangible asset is included in deferred debits and other assets within Exelon's Consolidated Balance Sheets.

The fair value of the retail relationships was determined based on a“multi-period excess method” of the income approach.  Under this method, the intangible asset's fair value is equal to the estimated future cash flows that will be earned on the current customer base, taking into account expected contract renewals based on customer attrition rates and costs to retain those customers.  The measure is based upon certain unobservable inputs, which are considered Level 3 inputs, pursuant to applicable accounting guidance.  Key assumptions include the customer attrition rate and the discount rate.  The intangible assets will be amortized on a straight line based over the useful life of the underlying assets averaging approximately 12 years. The retail relationships intangible assets are included in deferred debits and other assets within Exelon's Consolidated Balance Sheets.

Exelon's intangible assets and liabilities acquired through the merger with Constellation included in its Consolidated Balance Sheets, along with the future estimated amortization, were as follows as of March 31, 2012:

								Estimated amortization expense
Description	Weighted Average Amortization	Gross		Accumulated Amortization		Net		Remainder of 2012		2013		2014		2015		2016
Unamortized energy contracts, net (a)	1.5	$	1,356	$	(122)	$	1,234	$	804	$	340	$	52	$	18	$	(25)
Trade name	10.0		243		(2)		241		22		24		24		24		24
Retail relationships	11.8		213		(1)		212		19		21		20		19		19
Total, net		$	1,812	$	(125)	$	1,687	$	845	$	385	$	96	$	61	$	18

(a) Includes the fair value of BGE's power and gas supply contracts for which an offsetting regulatory asset was also recorded.

Current Quarter Impact of Merger

It is impracticable to determine the current quarter impact for the Constellation subsidiaries contributed down to Generation following the Upstream Merger.  Upon closing of the merger, the operations of these Constellation subsidiaries were integrated into Generation's operations and are therefore not distinguishable after the merger. 

The current quarter impact of BGE on Exelon's Statement of Operations includes operating revenues of $52 million and net loss of $65 million during three months ended March 31, 2012.

During the three months ended March 31, 2012, Exelon, Generation, ComEd, PECO and BGE incurred merger and integration-related costs of $484 million, $110 million, $2 million, $7 million and $152 million, respectively. These costs are primarily classified within Operating and Maintenance Expense in their respective Consolidated Statements of Operations, with the exception of the $113 million BGE customer rate credit, which is included as a reduction to operating revenues.

Severance Costs

The Registrants have an ongoing severance plan under which, in general, the longer a terminated employee worked prior to termination the greater the amount of severance benefits. The Registrants record a liability and expense or regulatory asset for severance once terminations are probable of occurrence and the related severance benefits can be reasonably estimated. For severance benefits that are incremental to its ongoing severance plan (“one-time termination benefits”), the Registrants measure the obligation and record the expense at its fair value at the communication date if there are no future service requirements, or, if future service is required to receive the termination benefit, ratably over the required service period.

Upon closing the merger with Constellation, Exelon recorded a severance accrual for the anticipated employee position reductions as a result of the post-merger integration. The majority of these positions are anticipated to be corporate and Generation support positions. The estimated amount of severance payments associated with this plan are expected to be approximately $91 million, $51 million, $12 million, $6 million and $16 million for Exelon, Generation, ComEd, PECO and BGE, respectively.The number of employee position reductions at each Registrant and in total at Exelon will be finalized through completion of the post-merger integration process. As of March 31, 2012, management recorded its best estimate of severance benefits, which could be adjusted through completion of the post-merger integration process when specific employee position reductions are identified. Adjustments to obligations associated with the severance plan could be material to the Registrants' results of operations. During the merger restructuring process, employees are being given the opportunity to nominate themselves for voluntary termination. At the discretion of management, these employees will receive benefits in accordance with the severance plan. Any BGE employee position reductions as a result of the post-merger integration will be voluntary under this self-identification process. For the three months ended March 31, 2012, the Registrantsrecorded the following charges associated with the anticipated employee reductionswithin operating and maintenance expense in their Consolidated Statements of Operations, except for ComEd and BGE:

Severance benefits (a)		Exelon		Generation		ComEd (b)		PECO		BGE (c)
Severance charges (d)	$	67	$	35	$	9	$	3	$	14
Stock compensation		8		5		1		1		1
Other charges (e)		8		5		1		1		1
Total severance benefits	$	83	$	45	$	11	$	5	$	16

• For Generation, ComEd, PECO and BGE, amounts include charges billed through intercompany allocations.
• Pursuant to EIMA, ComEd established a regulatory asset of $11 million for severance benefits costs, which are expected to be recovered over a five-year period.
• Consistent with prior MDPSC precedent, BGE established a regulatory asset of $16 million for severance benefits costs, and these costs are expected to be recovered over a five-year period.
• Includes salary continuance and health and welfare severance benefits. For the three months ended March 31, 2012, amounts represent ongoing severance plan benefits. One-time termination benefits are expected to beginto be recognized in the second quarter of 2012.
• Primarily includes life insurance, employer payroll taxes, educational assistance and outplacement services.

Cash payments under the severance plan will begin in the second quarter of 2012 and will continue through 2014. Substantially all cash payments under the plan are expected to be made by the end 2014 resulting in the completion of the merger restructuring plan. As of March 31, 2012, the obligations associated with the severance benefits costs are $83 million, $45 million, $11 million, $5 million and $16 million for Exelon, Generation, ComEd, PECO and BGE, respectively.

Pro-forma Impact of the Merger

The following unaudited pro forma financial information reflects the consolidated results of operations of Exelon and Generation as if the merger with Constellation had taken place on January 1, 2011. The unaudited pro forma information was calculated after applying Exelon's and Generation's accounting policies and adjusting Constellation's results to reflect purchase accounting adjustments.

The unaudited pro forma financial information has been presented for illustrative purposes only and is not necessarily indicative of results of operations that would have been achieved had the merger events taken place on the dates indicated, or the future consolidated results of operations of the combined company.

	Generation				Exelon
		Three Months Ended March 31,				Three Months Ended March 31,
		2012		2011		2012		2011
Total Revenues	$	3,997	$	4,873	$	6,864	$	8,002
Net income attributable to Exelon		67		343		112		593
Basic Earnings Per Share		n.a.		n.a.	$	0.13	$	0.70
Diluted Earnings Per Share		n.a.		n.a.		0.13		0.70

Exelon and Constellation both incurred non-recurring costs directly related to the merger that have been included in the pro forma earnings presented above. During the three months ended March 31, 2012, Exelon and Generation incurred $144 million and $75 million, respectively, of merger and integration costs, excluding the impact of Maryland commitments. In addition, during the three months ended March 31, 2012, Exelon and Generation incurred $328 million and $35 million, respectively, related to costs incurred as part of the Maryland order approving the merger transaction as discussed above.

Exelon Generation Co L L C [Member]

Acquisitions [Line Items]

Acquisitions (Exelon and Generation)

Other Acquisitions (Exelon and Generation)

AntelopeValley Solar Ranch One. On September 30, 2011, Generation acquired all of the interests in Antelope Valley Solar Ranch One (Antelope Valley), a 230-MW solar PV project under development in northern Los Angeles County, California, from First Solar, Inc., which developed and will build, operate and maintain the project. On April 5, 2012, AntelopeValley received the firstDOE-guaranteedloan advance of $69 million and terminated the put option that Generation had on the AntelopeValley project.  See Note 8 - Debt and Credit Agreements for additional information.

Wind Development.As part of its plan to construct multiple wind facilities in 2012, Generation has acquired several project entities.  The acquisitions are not considered material individually or in the aggregate for disclosure.