EFTA01378311

INTERNAL USE ONLY DO NOT DISTRIBUTE IN PART OR IN WHOLE Corporate Credit > U.S. Investment Grade Exelon Corp Updated: November 2, 2015 Trade Idea: Buy Exelon Generation Co LLC 10-year bonds Investment Rationale: EXC reached a settlement agreement with the DC Mayor, with support from the DC Attomey General, the Office of the People's Counsel and various other local groups, on some enhanced conditions to the merger. With the new terms, plus the support of the Mayor and various other groups, we think it will be difficult for the DC commission to reject the deal, although nothing is certain. In order to allow sufficient time for the commission to approve the merger, EXC and POM agreed to extend the merger agreement 150 days from the settlement, which would extend the deadline to early-March 2016. This is conditioned on the commission not denying the settlement agreement or not setting a procedural schedule to approve the deal within the 150 day extension. Nonetheless, we think the probability of the deal going through has increased and we continue to view the impact as positive for EXC and POM bonds. We are maintaining our outperform recommendation on EXC at this time based more on the expectation of fundamental improvement in the PJM. We think there is still some additional performance potential given the expectation that there may be some fundamental improvement in the wholesale power markets in 2016 when coal-fired generation plant retirements remove some of the low-cost base load supply from the markets. We also believe the recent results of the PJM auction indicate improving market conditions in the area where some of the Exelon Generation capacity is located. Within the complex, we think the EXC Generation bonds offer the best value on a risk/reward basis compared to the PECO and ComEd FMBs given the fact that they are currently quoted well behind the secured bonds on a G-Spread basis. Recommendation(s): Trade Ratings Issue Spread Cash View Horizon Ticker CPN Maturity CCY Size Yield Price ISIN S&P Nbxly's Entry Target Loss Outpedorm 12 mos. EXC 4 25 6/15/2022 BBB Baal USD 523M 394 213 183 243 101.70 US30161 MAL72 Deutsche Asset & Wes3hManagerner4 11 CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) CONFIDENTIAL DB-SDNY-0075480 SDNY_GM_00221664 EFTA01378311