Filing highlights merger-driven reliability
commitments and expected economic benefits of $542 million to $623
million and about 6,300 to 7,000 new jobs in Maryland
Exelon Corporation (NYSE:EXC) and Pepco Holdings Inc. (NYSE:POM)
today filed an application seeking approval of their proposed
merger (click here for filing) with the Maryland Public Service
Commission. The companies announced their proposed merger on April
30.
The combination of the companies will bring together Exelon’s
three electric and gas utilities – BGE, ComEd and PECO – and Pepco
Holdings’ (PHI’s) three electric and gas utilities – Atlantic City
Electric, Delmarva Power and Pepco – to create the leading
mid-Atlantic electric and gas utility.
The Maryland filing describes Exelon’s commitment to
significantly improve reliability, maintain charitable
contributions at higher than 2013 levels for at least 10 years
following closing of the merger and provide immediate economic
benefits to Pepco and Delmarva Power customers in Maryland. Pepco
serves approximately 537,000 customers in Montgomery and Prince
George’s counties; and Delmarva Power serves approximately 231,000
customers on Maryland’s Eastern Shore. Submission of the filings
initiates the regulatory approval process in Maryland.
“The filing we are making today describes in detail how our
proposed merger will benefit Maryland’s economy and the customers
served by Pepco and Delmarva Power,” said Chris Crane, Exelon
president and CEO. “The commitments we are making will deliver
immediate economic benefits to customers and Maryland, and will
ensure that Pepco and Delmarva Power continue their long history of
investing in their communities.”
Joseph M. Rigby, PHI chairman, president and CEO, said the two
companies share a culture of customer service and will benefit from
sharing best practices across all utilities.
“The combination of our companies will provide us an opportunity
to take the customer service and reliability improvements we’ve
already made in Maryland to an even greater level," said Rigby.
“I’m very pleased that Exelon is committed to maintaining and
enhancing service, meeting customers’ needs reliably and
efficiently, and actively engaging in civic and charitable life in
the Maryland communities we serve.”
Benefits to PHI utility customers and service territories
described in the regulatory filings and testimony include:
- Customer Investment Fund
Commitment. Upon closing of the merger, Exelon will provide an
aggregate $100 million, of which $40 million will go to benefit
Pepco and Delmarva Power customers in Maryland. The funds can be
used as the PSC deems appropriate for customer benefits, such as
bill credits, assistance for low-income customers and
energy-efficiency measures.
- Charitable Contributions
Commitment. Exelon has committed to provide $50 million over 10
years to charitable organizations and programs in the communities
the PHI utilities serve —exceeding PHI’s 2013 funding levels.
Exelon will exceed PHI’s 2013 charitable giving of $623,000 in
Maryland.
- Local Jobs, Local Presence and Local
Leadership. Exelon has committed to no net involuntary
merger-related job losses of Pepco and Delmarva Power utility
employees for at least two years after the merger, and to honor all
collective bargaining agreements. Exelon and PHI have announced
that upon the retirement of Joe Rigby at the close of the merger,
Dave Velazquez, currently executive vice president, PHI
Power Delivery, will become president and chief executive officer
of the PHI utilities. Donna Cooper (Pepco) and Gary
Stockbridge (Delmarva Power) will also remain with the company
in their roles as regional presidents.
- Enhanced Customer Service and
Reliability Commitment. Exelon has committed to build on the
significant improvements to service reliability that Pepco and
Delmarva Power have already achieved for customers in recent years
by setting new, more stringent reliability targets. By 2020, Exelon
commits to reducing the frequency of power outages for Pepco by 38
percent and average outage duration by nearly 43 percent compared
with the 2011-2013 period. In the Delmarva Power service area,
Exelon has committed to reducing the frequency of outages by nearly
40 percent and average outage duration by 53 percent compared with
the 2011-2013 period. Exelon has offered to be subject to financial
penalties if Delmarva Power or Pepco do not meet their targets. The
combined companies also will benefit from sharing best practices
and storm restoration resources.
These proposed merger commitments are anticipated to result in
substantial economic benefits for Maryland customers and
communities, as detailed in an economic modeling analysis included
in the merger approval filings.
Combined with reliability improvement projects already announced
by PHI and underway, the merger commitments are expected to produce
about 6,300 to 7,000 jobs and result in $542 million to $623
million in economic benefits to the Maryland economy. These results
are anticipated to be achieved within six years after the merger
closes.
Exelon also proposes measures to effectively insulate the PHI
utilities from potential financial risks of other Exelon
businesses; these measures are described in detail in the
filing.
The companies have already made transaction-related filings with
the Federal Energy Regulatory Commission, the Virginia State
Corporation Commission, the Delaware Public Service Commission, the
Public Service Commission of the District of Columbia and the New
Jersey Board of Public Utilities. The transaction is also subject
to the notification and reporting requirements under the
Hart-Scott-Rodino Act and other customary closing conditions.
The transaction requires the approval of the stockholders of
PHI, which is scheduled to take place on Sept. 23, 2014. The
companies anticipate completing the merger in the second or third
quarter of 2015.
About Exelon Corporation
Exelon Corporation (NYSE: EXC) is the nation’s leading
competitive energy provider, with 2013 revenues of approximately
$24.9 billion. Headquartered in Chicago, Exelon does business in 48
states, the District of Columbia and Canada. Exelon is one of the
largest competitive U.S. power generators, with more than 35,000
megawatts of owned capacity comprising one of the nation’s cleanest
and lowest-cost power generation fleets. The company’s
Constellation business unit provides energy products and services
to approximately 100,000 business and public sector customers and
more than 1 million residential customers. Exelon’s utilities
deliver electricity and natural gas to more than 7.8 million
customers in central Maryland (BGE), northern Illinois (ComEd) and
southeastern Pennsylvania (PECO). Follow Exelon on Twitter
@Exelon.
About Pepco Holdings Inc.
Pepco Holdings Inc. is one of the largest energy delivery
companies in the Mid-Atlantic region, serving about 2 million
customers in Delaware, the District of Columbia, Maryland and New
Jersey. PHI subsidiaries Pepco, Delmarva Power and Atlantic City
Electric provide regulated electricity service; Delmarva Power also
provides natural gas service. PHI also provides energy efficiency
and renewable energy services through Pepco Energy Services. For
more information, visit online: www.pepcoholdings.com.
Cautionary Statements Regarding Forward-Looking
Information
Except for the historical information contained herein, certain
of the matters discussed in this communication constitute
“forward-looking statements” within the meaning of the Securities
Act of 1933 and the Securities Exchange Act of 1934, both as
amended by the Private Securities Litigation Reform Act of 1995.
Words such as “may,” “might,” “will,” “should,” “could,”
“anticipate,” “estimate,” “expect,” “predict,” “project,” “future”,
“potential,” “intend,” “seek to,” “plan,” “assume,” “believe,”
“target,” “forecast,” “goal,” “objective,” “continue” or the
negative of such terms or other variations thereof and words and
terms of similar substance used in connection with any discussion
of future plans, actions, or events identify forward-looking
statements. These forward-looking statements include, but are not
limited to, statements regarding benefits of the proposed merger,
integration plans and expected synergies, the expected timing of
completion of the transaction, anticipated future financial and
operating performance and results, including estimates for growth.
These statements are based on the current expectations of
management of Exelon Corporation (Exelon) and Pepco Holdings, Inc.
(PHI), as applicable. There are a number of risks and uncertainties
that could cause actual results to differ materially from the
forward-looking statements included in this communication. For
example, (1) PHI may be unable to obtain shareholder approval
required for the merger; (2) the companies may be unable to
obtain regulatory approvals required for the merger, or required
regulatory approvals may delay the merger or cause the companies to
abandon the merger; (3) conditions to the closing of the
merger may not be satisfied; (4) an unsolicited offer of
another company to acquire assets or capital stock of Exelon or PHI
could interfere with the merger; (5) problems may arise in
successfully integrating the businesses of the companies, which may
result in the combined company not operating as effectively and
efficiently as expected; (6) the combined company may be
unable to achieve cost-cutting synergies or it may take longer than
expected to achieve those synergies; (7) the merger may
involve unexpected costs, unexpected liabilities or unexpected
delays, or the effects of purchase accounting may be different from
the companies’ expectations; (8) the credit ratings of the
combined company or its subsidiaries may be different from what the
companies expect; (9) the businesses of the companies may
suffer as a result of uncertainty surrounding the merger;
(10) the companies may not realize the values expected to be
obtained for properties expected or required to be sold;
(11) the industry may be subject to future regulatory or
legislative actions that could adversely affect the companies; and
(12) the companies may be adversely affected by other
economic, business, and/or competitive factors. Other unknown or
unpredictable factors could also have material adverse effects on
future results, performance or achievements of the combined
company. Therefore, forward-looking statements are not guarantees
or assurances of future performance, and actual results could
differ materially from those indicated by the forward-looking
statements. Discussions of some of these other important factors
and assumptions are contained in Exelon’s and PHI’s respective
filings with the Securities and Exchange Commission (SEC), and
available at the SEC’s website at www.sec.gov, including: (1)
Exelon’s 2013 Annual Report on Form 10-K in (a) ITEM 1A.
Risk Factors, (b) ITEM 7. Management’s Discussion and
Analysis of Financial Condition and Results of Operations and
(c) ITEM 8. Financial Statements and Supplementary Data:
Note 22; (2) Exelon’s Second Quarter 2014 Quarterly Report on Form
10-Q in (a) Part II, Other Information, ITEM 1A. Risk Factors; (b)
Part 1, Financial Information, ITEM 2. Management’s Discussion and
Analysis of Financial Condition and Results of Operations and (c)
Part I, Financial Information, ITEM 1. Financial Statements: Note
15; (3) the definitive proxy statement that PHI filed with the SEC
on August 12, 2014 and mailed to its stockholders in connection
with the proposed merger; (4) PHI’s 2013 Annual Report on Form
10-K in (a) ITEM 1A. Risk Factors, (b) ITEM 7. Management’s
Discussion and Analysis of Financial Condition and Results of
Operations and (c) ITEM 8. Financial Statements and Supplementary
Data: Note 15; and (5) PHI’s Second Quarter 2014 Quarterly Report
on Form 10-Q in (a) PART I, ITEM 1. Financial Statements, (b) PART
I, ITEM 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations and (c) PART II, ITEM 1A. Risk
Factors. In light of these risks, uncertainties, assumptions and
factors, the forward-looking events discussed in this communication
may not occur. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date
of this communication. Neither Exelon nor PHI undertakes any
obligation to publicly release any revision to its forward-looking
statements to reflect events or circumstances after the date of
this communication. New factors emerge from time to time, and it is
not possible for Exelon or PHI to predict all such factors.
Furthermore, it may not be possible to assess the impact of any
such factor on Exelon’s or PHI’s respective businesses or the
extent to which any factor, or combination of factors, may cause
results to differ materially from those contained in any
forward-looking statement. Any specific factors that may be
provided should not be construed as exhaustive.
ExelonPaul Elsberg, 312-394-7417orPepco HoldingsCourtney Nogas,
202-872-2680
Exelon (NYSE:EXC)
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