Michael J. Egan
Senior Vice President
Finance and CFO
There are things the world sees that impact our stock value and things the world does not see that affect our financial strength. The most important thing for our financial strength has been leadership and courage to embark on a contrarian strategy.
Our nuclear approach was a contrarian strategy. From the market`s perspective, we were able to articulate a clear strategy when others have not. Then we executed on the strategy. We delivered. The combination of those two elements has been very powerful.
… On getting things done
Execution of the strategy is critical. We just announced a merger with Unicom. For most utilities, it would have been their key accomplishment at a given time. But during the same period of time when we were doing that merger, we reached an agreement to purchase Conectiv`s share of Peach Bottom, we reached agreement to buy Oyster Creek from GPU, we reached agreement to buy Vermont Yankee, we reached agreement to buy six platform companies for EIS [Exelon Infrastructure Services] with revenue of over $400 million, we went through Hurricane Floyd, the second-worst storm in this company`s history, and we planned and executed the Peach Bottom outage.
This company`s capacity to execute is orders of magnitude beyond where it might have been not that long ago. We get things done. The market sees that, and the people in the company see that and get excited about it.
… On long-term investments
In the short term, we haven`t been able to fully articulate the value proposition for some of our aggressive push, for example in the telcom area. We have some very exciting investments in telcom. Those businesses have enormous value and the potential for value going forward. Right now they`re dilutive.
This is an industry where the analyst and investing community tend to be earnings-per-share focused. Having the courage to make investments that will be dilutive, like telcom, is something that in the short term may be penalizing our stock-although more analysts are starting to recognize the value inherent in that strategy. But for a while they weren`t. In the long term that`s a strategy that will pay off extremely well for us.
… On being flexible
[PECO`s $4 billion] securitization enabled us in one fell swoop to restructure our balance sheet and provide a greater degree of flexibility as we move to a more competitive environment.
We talk about competition and their impacts for utilities. But one thing people overlook is that you compete for capital too. That`s part of what happened through securitization. Our securitized debt gets a triple-A rating, so clearly we`ve got a cost advantage associated with it and our cost of capital goes down. At the same time, we were able to buy back a significant amount of stock, and, with all that done, still improve the credit quality.
We look at our balance sheet and our asset base as a portfolio. We`re trying to optimize the value of that portfolio, whether it`s the right side or the left side. The way we structured our long-term debt and equity position was designed to mitigate any potential regulatory risk we might face, and at the same time provide the optimal amount of flexibility.
We need to be opportunistic and flexible to take advantage of things as they come along.