Public Service Enterprise Group Incorporated · NYSE:PEG
Public Service Enterprise — Merger or Acquisition (December 2004)
40 slides from Public Service Enterprise's merger presentation, Dec 20, 2004
Slide 1: Creating the Utility Company of Tomorrow
Exelon. €>) PSEG Creating the Utility Company of Tomorrow
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
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 CNO, Exel
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 scope
Slide 7: Key Transaction Terms
Key Transaction Terms Offer Price: Ownership: Governance: Timing: Nuclear Agreement: Approvals: 1.225 shares of Exelon per PSEG share 68% Exelon shareholders 32% PSEG shareholders John W. Rowe to be CEO E. James Ferland to be non-executive Chairman 18 Board members — 12 nominated by Exelon — 6 nomin
Slide 8: Closing Achievable in 12-15 months
Closing Achievable in 12-15 months Announce Transaction Exelon & PSEG Shareholder Meetings Make Regulatory Filings File Joint Proxy Statement Work to Secure Regulatory Approvals (FERC, SEC, NRC, DOJ or FTC, NJBPU, NJDEP*, PAPUC, ICC*, NYPSC) Develop Transition Implementation Plans Receive Regulatory
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 starting i
Slide 10: E. James Ferland
E. James Ferland Chairman, President & CEO PSEG
Slide 11: The Nation's Premier Utility Company
The Nation’s Premier Utility Company 2003A 2003A Rank Elec. Customers 5,100,000 2,000,000 7,100,000 Gas Customers 460,000 1,600,000 2,060,000 U.S. Generation Assets (MW) (1) 34,467 17,117 51,584 Nuclear Generation(MW) 16,943 3,510 20,453 $’s in Billions Total As sets $41.9 $28.1 $70.0 Market Cap (12
Slide 12: Creating A Larger Growth Platform
Creating A Larger Growth Platform EAST Generation Nuclear 9,400 MW Non-nuclear 15,700 MW WEST Generation Nuclear 11,100 MW Non-nuclear 5,850 MW A combination of three urban utilities, with a low-cost generation portfolio, in an integrated Regional Transmission Organization
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 Excellence in transmission and distribution operations Expertis
Slide 14: Opportunity For Improved T&D Reliability
Opportunity For Improved T&D Reliability $191 2.88 0.63 Performance PSE&G $235 2.40 1.09 Performance Exelon Quartile Quartile 2nd 2nd Safety (OSHA Recordables Rate) 1st 3rd Total T&D $/Customer 2nd 4th Customer Satisfaction (ACSI) 1st 2nd Reliability – Outage Frequency (SAIFI) 2003 Key Performance I
Slide 15: John F. Young
John F. Young EVP Exelon Corporation & President Exelon Generation
Slide 16: Strong Generation Platform
Strong Generation Platform Complementary Generation Portfolio Positions New Company for Success Premier nuclear operator, based on consistent top quartile performance Balanced and diverse generation portfolio Reliable and commercially responsive fossil operations Experienced leader in wholesale powe
Slide 17: Balanced Generation Portfolio
Balanced Generation Portfolio Projected 2004 year-end Domestic Generation Capacity (includes long-term contracts) Exelon PSEG Exelon/PSEG 34,467 MWs 17,117 MWs 51,584 MWs Balanced fuel, geography and dispatch with improved load serving capabilities Bulk of generation assets are within PJM, the natio
Slide 18: Improved Dispatch Diversity in Mid-Atlantic
Improved Dispatch Diversity in Mid-Atlantic Source: Platt’s PowerDat for 2006 data (Excluding AEP and Northern Illinois) $0 $25 $50 $75 $100 $125 $150 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 PJM Exelon PSEG Cumulative PJM Capacity (MW)
Slide 19: Track Record of Operational and Commercial Excellence
Track Record of Operational and Commercial Excellence Increased Scale Will Strengthen Operating Position 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 fl
Slide 20: Power Marketing and Trading Skills and Experience
Power Marketing and Trading Skills and Experience to Realize Benefits of Assets and Markets 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 margin
Slide 21: Christopher M. Crane
Christopher M. Crane President & CNO Exelon Nuclear
Slide 22: Opportunity For Improved Nuclear Performance
Opportunity For Improved Nuclear Performance Exelon has proven track record of improving and sustaining safety, operating and cost performance Significant opportunity to improve PSEG fleet performance under Nuclear Operating Services Contract, starting January 2005 Every 1% increase in capacity fact
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 technical team Exelon’
Slide 24: Thomas M. O'Flynn and Robert S. Shapard
Thomas M. O’Flynn Chief Financial Officer, PSEG Robert S. Shapard Chief Financial Officer, Exelon
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: $470m (year
Slide 26: $500 Million of Synergies in Year 2
$500 Million of Synergies in Year 2 7% 9% 34% 39% 11% Trading Genco Corp/ Fossil T&D Corporate, Business Services Nuclear (1) 15% 16% 43% 9% Corporate Programs Info Technology Staffing Supply By Business By Category Nuclear Production Improvements 14% 3% Nuclear Outage Costs (1) Includes cost and pr
Slide 27: Balanced Financial Profile
Balanced Financial Profile (1) Net of inter-company transactions, synergies and merger adjustments (2) Adjusted for securitization impact 2006E EBITDA = $7.0 billion Pro Forma EBITDA (1)(2) (2006 E) 2006E Assets = $79 billion Pro Forma Assets (2006 E) Energy Holdings 9% ComEd 22% Genco 36% PECO 12%
Slide 28: Value Capture to PSEG Shareholders
Value Capture to PSEG Shareholders (1) $1.8 - 2.0 B $2.0 - $3.0 B Premium To PSEG NPV Synergies (2) > $4.0 B Value To PSEG Shareholders Premium P/E (1) Assumes 32% PSEG ownership of pro-forma combined company (2) NPV based on after-tax synergies assuming reasonable sharing Due to Stronger Growth Pla
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 goodwill Asset an
Slide 30: Solid Balance Sheet
Solid Balance Sheet Exelon and PSEG believe they will retain solid investment- grade ratings on a combined basis 7.1x 7.0x EBITDA Interest Coverage 41% 41% Debt / Capital 6.2x 5.8x Funds from Operations Interest Coverage 31% 28% Funds from Operations / Average Total Debt Year 2 Year 1 Pro Forma Key
Slide 31: Proven Record of Delivering Value
Proven Record of Delivering Value 8% 10% 28% 107% -9% 18% 65% 196% -10% 40% 90% 140% 190% 240% S&P 500 S&P Electrics PSEG Exelon 3 -Year 5 -Year
Slide 32: PSEG Recent Stock Price Performance
PSEG Recent Stock Price Performance Combination provides opportunity for long-term improvement in valuation 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 $35.00 $40.00 $45.00 $50.00 $55.00 PSEG S&P Electric Utilities Index Nuclear issues surface
Slide 33: Value Capture to Exelon Shareholders
($1.8 – 2.0B) Value Capture to Exelon Shareholders (1) (1) Assumes 68% Exelon ownership of pro-forma combined company (2) NPV based on after-tax synergies assuming reasonable sharing (3) 2005 P/E discount to Exelon on 12/15/04 $450 - $500 M $5.5-$6.5 B Premium To PSEG PSEG P/E Discount (3) NPV Syner
Slide 34: Growing Dividend
Growing Dividend (1) (1) Dividends are payable at the discretion of the board of directors (2) Given 1.225 exchange ratio 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
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 energy prices
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 balance sheet
Slide 37: John W. Rowe
John W. Rowe Chairman, President & CEO Exelon Corporation
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
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
Public Service Enterprise Group — Merger or Acquisition (December 2004) on 6ix