Exelon Corporation · NASDAQ:EXC
Exelon — Merger or Acquisition (December 2004)
40 slides from Exelon's merger presentation, December 2004
Slide 1: Draft 12/17 PM – Brunswick will have new slide master and fix fonts,graphs and
Draft 12/17 PM – Brunswick will have new slide master and fix fonts,graphs and PSEG and GIN names in 12/18 version 1
Slide 2: Safe Harbor Language
Safe Harbor Language This presentation includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, for example, statements regarding benefits of the proposed merger, integration plans, and expected synerg
Slide 3: Additional Information
Additional Information This communication is not a solicitation of a proxy from any security holder of Exelon or PSEG. Exelon intends to file with the Securities and Exchange Commission a registration statement that will include a joint proxy statement/prospectus and other relevant documents to be m
Slide 4: John W. Rowe
John W. Rowe Chairman, President & CEO Exelon Corporation 4
Slide 5: Agenda
Agenda • Overview: John W. Rowe, Chairman, President and CEO, Exelon • Combined Profile: E. James Ferland, Chairman, President and CEO, PSEG • Power Generation Platform: John F. Young, EVP, Exelon, and President, Exelon Generation • Nuclear Profile: Christopher M. Crane, SVP, Exelon, President and C
Slide 6: A Compelling Combination
A Compelling Combination • Large, balanced energy portfolio across PJM • Enhanced service to the largest customer base in the industry • Improved nuclear performance • Common business and regulatory framework • Strengthened financial performance driven by significant synergies and enhanced base and
Slide 7: Key Transaction Terms
Key Transaction Terms Offer Price: 1.225 shares of Exelon per PSEG share Ownership: 68% Exelon shareholders 32% PSEG shareholders Governance: John W. Rowe to be CEO E. James Ferland to be non-executive Chairman 18 Board members — 12 nominated by Exelon — 6 nominated by PSEG Timing: Expected to close
Slide 8: Closing Achievable in 12-15 months
Closing Achievable in 12-15 months Dec Dec 2004 2004 Q1 Q1 2005 2005 Q2 Q2 2005 2005 Q3 Q3 2005 2005 Q4 Q4 2005 2005 Q1 Q1 2006 2006 Announce Announce Transaction Transaction Make Make Regulatory Regulatory Filings Filings File FileJoint JointProxy Proxy Statement Statement Implement ImplementNuclea
Slide 9: Financial Benefits
Financial Benefits • Stronger platform to achieve consistent earnings growth • Annual synergies of approximately $400 million in year 1 growing to $500 million by year 2 • Earnings accretion for both companies’ shareholders in year 1 • Nuclear contract provides earnings benefit for both companies st
Slide 10: E. James Ferland
E. James Ferland Chairman, President & CEO PSEG 10
Slide 11: The Nation's Premier Utility Company
The Nation’s Premier Utility Company Combined 2003A 2003A 2003 Rank Elec. Customers 5,100,000 2,000,000 7,100,000 1 Gas Customers 460,000 1,600,000 2,060,000 7 U.S. Generation Assets 34,467 17,117 51,584 1 (MW) (1) Nuclear Generation(MW) 16,943 3,510 20,453 1 $’s in Billions Total Assets $41.9 $28.1
Slide 12: Creating A Larger Growth Platform
Creating A Larger Growth Platform A combination of three urban utilities, with a low-cost generation portfolio, in an integrated Regional Transmission Organization WEST Generation EAST Generation Nuclear 11,100 MW Nuclear 9,400 MW Non-nuclear 5,850 MW Non-nuclear 15,700 MW 12
Slide 13: A "Win-Win" Combination
A “Win-Win”Combination Combined Company • Enhanced earnings • Regulatory and market diversity • Increased operating flexibility • Strong, stable cash flow with commitment to solid investment grade ratings • Experienced management team PSEG Brings Exelon Brings • Excellence in transmission and • Prem
Slide 14: Opportunity For Improved T&D Reliability
Opportunity For Improved T&D Reliability 2003 Key Performance Indicators Exelon PSE&G Performance Quartile Performance Quartile Reliability – Outage Frequency (SAIFI) 1.09 2nd 0.63 1st Customer Satisfaction (ACSI) 70 4th 76 2nd Safety (OSHA Recordables Rate) 2.40 2nd 2.88 2nd Total T&D $/Customer $2
Slide 15: John F. Young
John F. Young EVP Exelon Corporation & President Exelon Generation 15
Slide 16: Strong Generation Platform
Strong Generation Platform • Premier nuclear operator, based on consistent top quartile performance • Balanced and diverse generation portfolio • Reliable and commercially responsive fossil operations • Experienced leader in wholesale power marketing and risk management Complementary Complementary G
Slide 17: Balanced Generation Portfolio
Balanced Generation Portfolio Exelon PSEG Exelon/PSEG 5% 1% 4% 21% 37% 49% 63% 46% 40% 15% 11% 9% 34,467 MWs 17,117 MWs 51,584 MWs Nuclear Coal Gas/Oil Hydro/Other • Balanced fuel, geography and dispatch with improved load serving capabilities • Bulk of generation assets are within PJM, the nation's
Slide 18: Improved Dispatch Diversity in Mid-Atlantic
2006E PJM Dispatch Cost ($/MWh) 18 $25 $50 $75 $100 $125 $150 $0 PJM Muddy Run Conowingo Peach Bottom Salem Limerick Source: Platt’s PowerDat for 2006 data Hope Creek Three Mile Island Oyster Creek Exelon Conemaugh Keystone (RELIANT) Cromby Eddystone Hudson Mercer Mercer Linden Bergen PSEG Burlingto
Slide 19: Track Record of Operational and Commercial Excellence
Track Record of Operational and Commercial Excellence • Proven model of operations in fossil • Significant improvement in reducing fossil forced outage rate at Exelon • Experience in integrating plants on a national operating platform • Exelon generating fleet reliably responds to market opportuniti
Slide 20: Power Marketing and Trading
Power Marketing and Trading • Both companies have well-grounded philosophy of hedging and risk management • Enhanced geographic and customer diversity • Improved asset optimization • Improving market fundamentals (i.e. tightening reserve margins/higher capacity prices) in all regions Skills Skills a
Slide 21: Christopher M. Crane
Christopher M. Crane President & CNO Exelon Nuclear 21
Slide 22: Opportunity For Improved Nuclear Performance
Opportunity For Improved Nuclear Performance 100.0% $14.00 $12.00 90.0% $10.00 $8.00 80.0% $6.00 $4.00 70.0% $2.00 60.0% $0.00 1999 2000 2001 2002 2003 2004 1999 2000 2001 2002 2003 Exelon-operated PSEG-operated Exelon Non-Fuel PSEG Non-Fuel Capacity Factor Capacity Factor Production Cost Production
Slide 23: Exelon's Nuclear Track Record
Exelon’s Nuclear Track Record • Exelon’s performance record is grounded in its Nuclear Management Model • Performance tools include: – Material condition improvement process – Refueling outage execution – Cost management strategies – Operating fundamentals focus – Experienced management and technica
Slide 24: Thomas M. O'Flynn, Robert S. Shapard
Thomas M. O’Flynn Chief Financial Officer, PSEG Robert S. Shapard Chief Financial Officer, Exelon 24
Slide 25: Synergies Across All Business Segments
Synergies Across All Business Segments • Delivering approximately $400 million (year 1) growing to $500 million (year 2) in annual pre-tax synergies, excluding costs to achieve – 85% cost synergies, 15% nuclear production improvement – 70% unregulated, 30% regulated synergies – Cost to achieve: $470
Slide 26: $500 Million of Synergies in Year 2
$500 Million of Synergies in Year 2 By Business By Category Corporate, Supply Nuclear (1) Business Services Staffing 16% Corporate 34% 39% Programs 43% 15% 9% 9% Info 11% 3% 14% 7% Technology Trading Nuclear Genco Corp/ T&D Outage Costs Nuclear Fossil Production Improvements (1) Includes cost and pr
Slide 27: Balanced Financial Profile
Balanced Financial Profile Pro Forma Assets (2006 E) Pro Forma EBITDA(1)(2) (2006 E) Energy PECO Energy PECO Holdings Holdings 7% 11% 9% 12% Genco ComEd ComEd 24% 22% 36% 42% 16% 21% Genco PSE&G PSE&G 2006E Assets = $79 billion 2006E EBITDA = $7.0 billion (1) Net of inter-company transactions, syner
Slide 28: Value Capture to PSEG Shareholders
Value Capture to PSEG Shareholders (1) Value To PSEG Premium P/E Shareholders NPV Synergies (2) Due to Stronger Growth Platform and Lower Risk Premium $2.0 - $3.0 B Profile To PSEG > $4.0 B $1.8 - 2.0 B (1) Assumes 32% PSEG ownership of pro-forma combined company (2) NPV based on after-tax synergies
Slide 29: Pro Forma Accretion Assumptions
Pro Forma Accretion Assumptions • Gross synergies of $400m (year 1) and $500m (year 2) – 70% unregulated, 30% regulated • Financial impact of any regulatory mitigation assumed to be neutral • Purchase accounting adjustments expected to be income neutral – $7.0 billion of estimated additional goodwil
Slide 30: Solid Balance Sheet
Solid Balance Sheet Exelon and PSEG believe they will retain solid investment- grade ratings on a combined basis Pro Forma Key Ratios (1) Year 1 Year 2 Funds from Operations / 28% 31% Average Total Debt Funds from Operations 5.8x 6.2x Interest Coverage EBITDA 7.0x 7.1x Interest Coverage Debt / Capit
Slide 31: Proven Record of Delivering Value
Proven Record of Delivering Value 240% 196% 190% Total Return 140% 107% 90% 65% 40% 28% 8% 18% 10% -10% 3 -Year -9% 5 -Year S&P 500 S&P Electrics PSEG Exelon 31
Slide 32: PSEG Recent Stock Price Performance
PSEG Recent Stock Price Performance Combination provides opportunity for long-term improvement in valuation $55.00 $50.00 Indexed Price $45.00 Nuclear $40.00 issues surface $35.00 12/15/03 1/23/04 3/5/04 4/15/04 5/26/04 7/5/04 8/13/04 9/24/04 11/5/04 12/15/04 PSEG S&P Electric Utilities Index 32
Slide 33: Value Capture to Exelon Shareholders
Value Capture to Exelon Shareholders (1) Value To Exelon Premium P/E Shareholders PSEG P/E Discount (3) NPV Synergies (2) $450 - $500 M Due to Stronger Growth Platform and Lower Risk Profile > $4.0 B Premium $5.5-$6.5 B To PSEG ($1.8 – 2.0B) (1) Assumes 68% Exelon ownership of pro-forma combined com
Slide 34: Growing Dividend
(1) Growing Dividend PSEG current dividend $2.20 PSEG expected 2005 increase .04 PSEG pro forma $2.24 Exelon dividend required to keep PSEG shareholders whole (2) $1.83 Current Exelon dividend $1.60 Expected Exelon increase $0.23 or 14% (1) Dividends are payable at the discretion of the board of dir
Slide 35: Earnings Upside from Improving Wholesale Market Fundamentals
Earnings Upside from Improving Wholesale Market Fundamentals • Large, low-cost, low-emissions generation fleet • Built and sited to serve native utility load • Illinois transition to market prices • Improving capacity values in all regions served, led by eastern PJM • Will also benefit from high ene
Slide 36: Significant Financial Outcome
Significant Financial Outcome • $8-9 billion present value of synergies (1) • PSEG valuation discount mitigates merger premium • 14% higher dividend for Exelon shareholders, PSEG shareholders kept whole (2) • 11-13% accretion in 2006/2007 for PSEG • 3-4% accretion in 2006/2007 for Exelon • Strong ba
Slide 37: John W. Rowe
John W. Rowe Chairman, President & CEO Exelon Corporation 37
Slide 38: A Compelling New Company
A Compelling New Company • Combination of two strong industry leaders • Increased scale and scope • Complementary operations/business models • Low-cost supply portfolio • Disciplined financial policy • Highly experienced management team 38
Slide 39: Safe Harbor Language
Safe Harbor Language This presentation includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, for example, statements regarding benefits of the proposed merger, integration plans, and expected synerg
Slide 40: Exelon: Creating the Utility Company of Tomorrow
Exelon Electric & Gas Creating the Utility Company of Tomorrow