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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
November 3, 2003
(Date of earliest
event reported)
Exhibit 99.1
[EXELON LOGO]
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News Release
From: Exelon Corporation For Immediate Release
Corporate Communications November 3, 2003
P.O. Box 805379 Chicago, IL 60680-5379
Contact: Don Kirchoffner, 312.394.3001
Tabrina Davis, 312.394.7919
Linda Marsicano, 312.394.3099
Exelon Corporation Announces Acquisition of Illinois Power's
Assets from Dynegy Inc.
CHICAGO (November 3, 2003) - Exelon Corporation, the parent company of Illinois
utility ComEd, today announced that it has entered into an agreement with Dynegy
Inc., to acquire substantially all of the operating assets of Illinois utility
Illinois Power. The purchase price of $2.225 billion includes the assumption of
approximately $1.8 billion of Illinois Power's debt at closing, a $150 million
promissory note from Exelon and approximately $275 million of cash, subject to
adjustment for working capital. The acquisition is expected to help protect
jobs, guarantee long-term, stable electric rates for millions of customers and
ensure reliable service for ComEd and Illinois Power customers. Exelon officials
said the acquisition is consistent with the company's strategy to provide
sustainable and predictable earnings and cash flow growth.
Each company's board of directors approved the acquisition. It also requires the
approval of the Illinois Commerce Commission (ICC), the Federal Energy
Regulatory Commission, the Securities and Exchange Commission, and other federal
agencies. Depending on the timing of these regulatory approvals the transaction
is expected to close in the fourth quarter of 2004.
"We believe that this transaction will be good for Exelon's customers, employees
and investors and Illinois Power's customers and employees," said Exelon
Chairman and CEO John W. Rowe. "This agreement has the potential to establish
long-term, stable and reasonable rates for millions of ComEd and Illinois Power
customers, and provide stability for the working men and women of Illinois
Power. However, to make this work, we will need additional clarity and certainty
after the state-mandated transition period ends on December 31, 2006."
Rowe said that the passage of legislation that will be introduced in the
Illinois General Assembly during its November session is necessary to facilitate
the acquisition. Exelon, ComEd, Dynegy and Illinois Power, as well as a broad
and diverse base of labor, business and community groups, are supporting the
legislation, which would authorize the ICC to complete a review of the
transaction within nine months.
The legislation would give the ICC the authority to set rates for four years
after the transition period ends in 2006, which would pave the way for stable
rates for smaller ComEd and Illinois Power customers through the end of 2010.
Even with a modest increase in rates in 2007, ComEd and Illinois Power's smaller
customers would still be paying rates well below those of the early 1990s.
(more)
In addition, with set rates customers will be protected against volatile
electric bills. If there are spikes in gas and wholesale electric prices, Exelon
bears the risk since customers will have the benefit of a stable rate. If gas
and wholesale electric prices go down, customers have the option to switch to
another electric company and take advantage of lower prices that competitors
offer.
"We believe this transaction will help the Illinois Power business regain
financial strength and stability, but we need to move forward sooner rather than
later," Rowe said. "Exelon, ComEd and Illinois Power want to provide electricity
to smaller customers at prices that do not vary with gas prices and nuclear
performance, but to do that, ComEd and Illinois Power must have a better idea of
what the future holds. In the utility world, 2007 is right around the corner. We
need to start planning now."
"Competition is working for large consumers, for utilities and for our electric
supply competitors," Rowe said. "This acquisition will help support the
competitive marketplace. By bringing pro-competitive rules to more of the
state's electric market, it will be easier for competitors to navigate across a
larger area and customer base."
Exelon has demonstrated that it is willing to make the investments necessary to
maintain and improve electric reliability, including investing more than $2
billion over the past five years to improve and maintain ComEd's electric
system. Through any transaction, Exelon's commitment to reliable electric
service would be reflected in investments in Illinois Power's infrastructure.
Following the approvals required for Exelon's acquisition, the Illinois Power
business will retain its name and will be operated as a separate unit under
Exelon's energy delivery business. In addition, Illinois Power's 1,800 employees
will become part of Exelon. Illinois Power will also join the PJM
Interconnection as a part of the acquisition. ComEd expects to join PJM next
spring. ComEd will continue to serve Northern Illinois, and Illinois Power will
continue to serve Central and Southern Illinois.
Conference call information: Exelon has scheduled a conference call for 11 AM ET
(10 AM CT) on November 3. The call-in number in the US is 877-715-5317 and the
international call-in number is 973-582-2720. No password is required. Media
representatives are invited to participate on a listen-only basis.
###
Except for the historical information contained herein, certain of the
matters discussed in this news release are forward-looking statements, within
the meaning of the Private Securities Litigation Reform Act
of 1995 that are subject to risks and uncertainties. The factors that could
cause actual results to differ materially from the forward-looking statements
made by a registrant include those factors discussed
herein, as well as the items discussed in (a) the Registrants' 2002 Annual
Report on Form 10-K - ITEM 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations-Business Outlook and
the Challenges in Managing Our Business for each of Exelon, ComEd, PECO and
Generation, (b) the Registrants' 2002 Annual Report on Form 10-K - ITEM 8.
Financial Statements and Supplementary Data: Exelon - Note 19, ComEd -
Note 16, PECO - Note 18 and Generation - Note 13 and (c)
other factors discussed in filings with the United States Securities and
Exchange Commission (SEC) by the Registrants. Readers are
cautioned not to place undue reliance on these forward-looking
statements, which apply only as of the date of this release. None of the
Registrants undertakes any obligation to publicly release any revision to
its forward-looking statements to reflect events or circumstances after
the date of this release.
###
Exelon Corporation is one of the nation's largest electric utilities with
approximately 5 million customers and more than $15 billion in annual
revenues. The company has one of the industry's largest
portfolios of electricity generation capacity, with a nationwide reach and
strong positions in the Midwest and Mid-Atlantic. Exelon distributes
electricity to approximately 5 million customers in Illinois and
Pennsylvania and gas to more than 440,000 customers in the
Philadelphia area. Exelon is headquartered in
Chicago and trades on the NYSE under the ticker EXC.
Exhibit 99.2
[EXELON LOGO]
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Exelon Corporation www.exeloncorp.com
P.O. Box 805379
Chicago, IL 60680-5379
November 3, 2003
Exelon has scheduled a conference call for 11 AM ET (10 AM CT) on November 3.
The call-in number in the US is 877-715-5317 and the international call-in
number is 973-582-2720. No password is required. A conference call re-play will
be available. The numbers to dial for the re-play are: 877-519-4471 for US
callers and 973-341-3080 for international callers. The conference number is
4288403.
Note to Exelon's Financial Community:
Exelon Corporation Announces Acquisition of
Illinois Power's Assets from Dynegy Inc.
CHICAGO (November 3, 2003) - Exelon Corporation, the parent of Illinois utility
ComEd, announced today that it has entered into an agreement to acquire
substantially all of the operating assets of Dynegy Inc.'s Illinois Power (IP)
business unit. The purchase price of $2.225 billion includes the assumption of
approximately $1.8 billion of Illinois Power's debt, a $150 million promissory
note from Exelon and approximately $275 million in cash subject to a working
capital adjustment.
The transaction is contingent upon the receipt of all regulatory approvals as
specified in the purchase agreement, including approval by the Illinois Commerce
Commission (ICC) of the asset purchase, the purchase power agreements (PPAs) and
bundled rates for residential and small commercial customers through 2010 for
both ComEd and Illinois Power. The transaction is also contingent upon Federal
Energy Regulatory Commission (FERC) approval of the transaction and the related
PPAs between Exelon Generation and its affiliates ComEd and the new Illinois
Power business unit. Other required regulatory approvals include the SEC, the
FCC, and a Hart Scott Rodino review. Depending on the timing of the various
regulatory approvals, the transaction could close in twelve to eighteen months.
Exelon's purchase of the assets of Illinois Power is consistent with the
company's strategy to reduce risk and provide predictable earnings and cash flow
growth. The assets to be purchased include IP's electric and gas transmission
and distribution assets, which serve approximately 590,000 electric customers
and 415,000 gas customers in central and southern Illinois. The acquisition
provides incremental predictable earnings from IP's transmission and delivery
business. The proposed rate increases for both ComEd and IP will be based upon
their purchase power and other operating costs and investments in their systems'
reliability, subject to ICC approval. The IP transaction is expected to be
accretive on a stand-alone basis. Further, the addition of IP's load and the
related PPAs add stability to Exelon Generation's supply portfolio.
Structure of the Transaction
The transaction is an asset purchase by Exelon Energy Delivery Company, LLC.
Exelon Energy Delivery (EED) is the regulated energy transmission and
distribution subsidiary of Exelon and is the parent company of ComEd and PECO
Energy. The IP assets will be held by a new subsidiary under EED. The sellers
are Dynegy Inc. and its subsidiary Illinois Power Company and its subsidiary IP
Gas Supply Company. The Illinois Power assets being purchased exclude the $2.3
billion Intercompany Note Receivable from Dynegy.
Dynegy will receive total consideration of $2.225 billion including $275 million
of cash and a $150 million promissory note from Exelon Corporation. The
promissory note bears interest at a rate of 5%, payable quarterly, and has a
stated maturity at December 31, 2010, subject to prepayment or extension
depending on the resolution of environmental matters relating to electric
generation facilities formerly owned by Illinois Power or upon the occurrence of
specified credit rating upgrades for Dynegy. EED's new IP subsidiary will assume
approximately $1.8 billion of outstanding debt. The new IP subsidiary will also
assume the liabilities of IP other than excluded liabilities related to
generation assets once owned and operated by Illinois Power but now owned and
operated by another Dynegy subsidiary.
In order to provide for an appropriately capitalized and financially stable
utility, Exelon will commit to the ICC to pay down certain outstanding
indebtedness of IP using equity contributions. Approximately $260 million of IP
debt will be defeased or called at closing of the transaction. An additional
$360 million of IP notes will be called at year-end 2006, leaving the new IP
business unit with a capital structure of no more than 55% debt and no less than
45% equity at 12/31/06.
Purchase Power Agreements
As part of the transaction, Exelon Generation (ExGen) will enter into a new PPA
with Dynegy Power Marketing, Inc. (DYPM). Under the new six-year PPA beginning
1/1/05, DYPM will sell ExGen energy, ancillary services and capacity of
approximately 2,400 MWs from peaking facilities and about 500 MWs from the
Kendall facility. DYPM will also provide to ExGen approximately 3,100 MWs of
regulatory capacity from coal-fired generating units. Dynegy will dispatch and
sell the energy from these coal assets into the Illinois wholesale marketplace.
ExGen will also enter into a new full requirements PPA with Illinois Power.
The PPAs included in the structure of the transaction help balance Exelon's
supply-demand portfolio in the Midwest, thereby reducing risk and increasing
revenue stability and predictability. ExGen's purchase of capacity from Dynegy
provides ExGen with needed mid-range and peaking generating capability to serve
retail load in Illinois. The full requirements PPA between ExGen and Illinois
Power provides load that can be met with ExGen's existing base load capacity in
Illinois. The PPA would allow ExGen to commit approximately 40% of its
uncontracted energy in Illinois to IP's customers.
Transaction Time Line
Legislation will be introduced in Illinois during the November veto session that
would authorize the ICC to consider the acquisition and rate plan for ComEd and
IP in a single proceeding and render a decision on both issues in a nine-month
review process. The veto session ends on November 20. If legislation is passed
during the veto session, a petition would be filed with the ICC in early
December, which would start the nine-month review with a decision expected by
early September 2004.
The filings with FERC and the SEC are expected to be made at around the same
time as the application is filed with the ICC. Approvals by these federal
agencies would ordinarily be expected within a few months following approval by
the ICC.
Financial Impact
The closing of the transaction would require an estimated $275 million cash
payment to Dynegy and approximately $260 million of cash to pay down IP debt. In
addition, approximately $360 million of cash is needed to pay down debt in late
2006. The $150 million promissory note will also be funded with cash when
conditions are satisfied relating to Dynegy's credit rating or IP's potential
exposure for environmental matters relating to its former generation facilities.
Exelon's $1 billion of cash to fund the transaction would be funded with equity.
No operating synergy savings are assumed in Exelon's transaction analysis.
Further, while it is possible that the equity funding could take place in two or
more steps - closing and debt refinancing in late 2006, the transaction analysis
is based on the assumption of approximately $1 billion of new equity at closing.
Finally, it assumes approval of the PPAs. Based on these assumptions, the
acquisition is expected to be approximately $0.05 per share accretive to
Exelon's earnings in 2005 and 2006. The earnings impact starting in 2007 would
be a function of the rates set by the ICC for the years 2007 through 2010.
Exelon expects EBITDA for Illinois Power to be approximately $300 million in
2005, for the first year after close. The PPA from ExGen to IP is expected to
improve ExGen's EBITDA as compared with selling that excess energy into the spot
market. This combined EBITDA justifies the acquisition price of $2.225 billion
and produces the aforementioned accretion.
The proposed bundled tariff increases for ComEd and IP are based on ComEd's and
IP's stand-alone costs for transmission and distribution and relevant market
prices for the commodity component of the bundled tariff. The acquisition of IP
is dependent upon the proposed rate increases solely because of the need for
regulatory certainty in Illinois.
For additional information please contact me at (312) 394-7696 or Marybeth
Flater at (312) 394-8354.
Sincerely,
Linda C. Byus, CFA
Vice President Investor Relations
================================================================================
Except for the historical information contained herein, certain of the matters
discussed in this note are forward-looking statements, within the meaning of the
Private Securities Litigation Reform Act of 1995, that are subject to risks and
uncertainties. The factors that could cause actual results to differ materially
from the forward-looking statements made by a registrant include those discussed
herein as well as those discussed in Exelon Corporation's 2002 Annual Report on
Form10-K in (a) ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations--Business Outlook and the Challenges in
Managing Our Business for Exelon, ComEd, PECO and Generation and (b) ITEM 8.
Financial Statements and Supplementary Data: Exelon--Note 19, ComEd--Note 16,
PECO--Note 18 and Generation--Note 13, and (c) other factors discussed in
filings with the Securities and Exchange Commission (SEC) by Exelon Corporation,
Commonwealth Edison Company, PECO Energy Company and Exelon Generation Company,
LLC (Registrants). Readers are cautioned not to place undue reliance on these
forward-looking statements, which apply only as of the date of this note. None
of the Registrants undertakes any obligation to publicly release any revision to
its forward-looking statements to reflect events or circumstances after the date
of this note.
###
Exelon Corporation is one of the nation's largest electric utilities with
approximately 5 million customers and more than $15 billion in annual
revenues. The company has one of the industry's largest
portfolios of electricity generation capacity, with a nationwide reach and
strong positions in the Midwest and Mid-Atlantic. Exelon distributes electricity
to approximately 5 million customers in Illinois and Pennsylvania and gas to
approximately 450,000 customers in the Philadelphia area. Exelon is
headquartered in Chicago and trades on the NYSE under
the ticker EXC.