Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Hugh Wynne - Sanford Bernstein.
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?
John Rowe
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.
Hugh Wynne - Sanford Bernstein
If I could, are you still anticipating the 36.7% income tax rate for 2009 that you put out in the March Investor Presentation?
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