Constellation Energy Corporation · NASDAQ:CEG
Constellation Energy — Merger or Acquisition (December 2005)
48 slides from Constellation Energy's merger presentation, Dec 19, 2005
Slide 1: Creating the Premier Competitive Energy Company
Creating the Premier Competitive Energy Company Investor Presentation December 19, 2005 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, the likelihood and timing of closing o
Slide 3: Use Of Non-GAAP Financial Measures
Use Of Non-GAAP Financial Measures It is important to recognize that in certain instances in this presentation we have adjusted actual financial results, prepared in accordance with generally accepted accounting principles (GAAP), for certain items, including special items (which are defined as item
Slide 4: Non-Solicitation
Non-Solicitation This communication is not a solicitation of a proxy from any security holder of FPL Group or Constellation Energy. Constellation Energy intends to file with the Securities and Exchange Commission a registration statement that will include a joint proxy statement/prospectus of Conste
Slide 5: Agenda
Agenda Topic Presenter Introduction and Overview Lew Hay A Unique Growth Platform Mayo Shattuck Financials Follin Smith Conclusion Lew Hay Q&A All 5
Slide 6: Introduction and Overview
Introduction and Overview — | Constellation 6 Energy
Slide 7: Today We Are Announcing Our Agreement To Merge Our Two Companies
Today We Are Announcing Our Agreement To Merge Our Two Companies Regulated Electric Customers (millions) (1) 4.3 5.5 1.2 Generation – Owned Capacity (MWs) (2) 33,333 45,194 11,861 Nuclear (MWs) (2) 4,434 8,228 3,794 Fossil (MWs) 25,112 32,722 7,610 Wind (MWs) 3,211 3,211 - Wholesale Competitive Supp
Slide 8: Key Transaction Terms
Key Transaction Terms Structure: Modified merger of equals ― 1 share of FPL Group converted to 1 share of Constellation Energy after the merger ― 1 share of Constellation Energy converted to 1.444 shares of Constellation Energy after the merger Consideration: 100% stock Premium: Approximately
Slide 9: Organizational Structure
Organizational Structure Board of Directors Mayo Shattuck – Chairman Lew Hay – Director Non-executive (13) – Directors Chief Executive Officer Lew Hay Competitive Energy Chief Financial Regulated Utilities Transition & (Market-Facing Officer& Chief & Generation Integration Retail & Wholesale) Admin.
Slide 10: The New Entity: A Unique And Compelling Combination
The New Entity: A Unique And Compelling Combination Wholesale Retail The premier competitive energy provider offering attractive growth and a balanced, moderate risk Generation posture… + + Florida Baltimore …a solid base of stable, growing Power & Light + Gas & earnings and cash flow… Electric + +
Slide 11: Building The Leading Platform In The Competitive Energy Sector
Building The Leading Platform In The Competitive Energy Sector Diverse Customer Mix Customer Customer Contract Size Geography Length Pre-eminent hedging, portfolio optimization and risk management platform Dispatch Purchased Fuel Mix Renewables Point Power Owned Generation Diverse Supply Base 11
Slide 12: Building A Bigger, Stronger, And More Diversified Regulated Utility Business
Building A Bigger, Stronger, And More Diversified Regulated Utility Business FPL’s Florida Service Territory BGE’s Maryland Service Territory 4.3 Electric customers (millions) 1.2 - Gas customers (millions) 0.6 $11.2 Rate base (billions) (1) $3.0 $788 Net income (millions) (2) $168 Long-term volume
Slide 13: Benefits To Regulated Utility Customers
Benefits To Regulated Utility Customers Balance sheet strength Maryland - Benefits to Customers Modest direct cost savings through leveraging utility Florida - Benefits to Customers expertise across a larger platform Opportunities to improve reliability through best practices sharing Mutual
Slide 14: Growth Will Be Further Enhanced By Meaningful Synergies
Growth Will Be Further Enhanced By Meaningful Synergies Increased Revenue/Gross Margin Balanced footprint and portfolio scale Jointly managed competitive supply Competitive Supply Operations organization Jointly managed fleet operation Generation Purchasing leverage Best practice sharing U
Slide 15: We Will Have The Financial Strength And Flexibility To Support Our Business
We Will Have The Financial Strength And Flexibility To Support Our Business Financial Strength Balanced Business Mix ― Regulated / Deregulated ― Generation technologies and fuel ― Geography $57 billion of total assets (1) $4.5 billion to $5.0 billion of cash flow from operations (2) Combined
Slide 16: Creating A New FORTUNE 100 Company And An Industry Leader
Creating A New FORTUNE 100 Company And An Industry Leader #1 U.S. Generation (45,194 MWs) #1 Wind Generation (3,211 MWs) #1 Wholesale Competitive Supplier (22,040 MWs) #1 Retail Competitive Supplier (16,550 MWs) #2 Regulated Electric Customers (5.5 million) #3 Nuclear Generation (8,228 MWs) (1) (1)
Slide 17: A Unique Growth Platform
A Unique Growth Platform — | Constellation 17 Energy
Slide 18: Diverse Channels Of Growth Create Value For All New Constellation Energy Shareholders
Diverse Channels Of Growth Create Value For All New Constellation Energy Shareholders The building blocks of growth Shareholder value-focused management team New Capital Deployment Invest in strategically-relevant opportunities that match the generation asset and skill base + Market share gain
Slide 19: Combination Of Top-Performing Utilities
Combination Of Top-Performing Utilities Florida Power Baltimore Gas & Light and Electric Healthy long-term volume 3.0% 1.0% - 1.5% growth (customer & usage) Focus on customer satisfaction 102 103 (2005 J.D. Powers Residential Survey) Top quartile Top quartile Low-cost operations $176 $249 (Electric
Slide 20: Growth In Florida
Growth In Florida 900 110 3.4% 100 e d Sa les CAGR er 800 FPL Deliv 90 Delivered Sales (Billions kwhs) 80 700 5.3% Net Income ($ millions) R 70 come C AG Net In 60 600 50 40 500 30 400 20 10 300 0 93 94 95 96 97 98 99 00 01 02 03 04 Earnings Sales 20
Slide 21: Generation Margin Expansion Before Synergies
Generation Margin Expansion Before Synergies Constellation Energy – FPL Energy – Mid-Atlantic Fleet Merchant Generation 1.1 1.3 1.2 Gross Margin ($ billions) Gross Margin ($ billions) 1.0 1.0 1.0 0.9 1.0 0.9 0.8 0.8 0.8 0.8 0.7 0.7 0.7 0.5 0.6 2005 2006 2007 2008 2005 2006 2007 2008 Other gross ma
Slide 22: FPL Group Wind Growth
FPL Group Wind Growth Historical Projected 5,000 4,460 - 4,710 3,835 - 3,960 4,000 3,211 3,000 2,720 2,758 MW 2,000 1,745 1,421 1,000 578 460 0 99 00 01 02 03 04 05E 06E 07E 22
Slide 23: Wholesale Competitive Supply Growth
Wholesale Competitive Supply Growth (Constellation Energy Only) 700 650 Gross Margin ($ millions) 600 550 500 450 387 400 350 300 271 250 197 200 150 2002 2003 2004 2005 2006 Historical Projected Attractive growth track record with modest capital requirements See appendix 23
Slide 24: Retail Competitive Supply Growth
Retail Competitive Supply Growth (Constellation Energy Only) 500 30% 24% Gross Margin ($ millions) 25% 400 21% Market Share (%) 20% 16% 300 15% 269 10% 200 5% 178 100 0% 2003 2004 2005 2006 Gross Margin (Historical) Market Share (Historical) Gross Margin (Projected) Market Share (Projected) Relative
Slide 25: Complementary Merchant Business Strengths
Complementary Merchant Business Strengths Highest load serving Generation assets in market share NEPOOL / ERCOT Constellation Leading risk Energy management Strong wind FPL Group expertise position Both Strong nuclear capability Focus on cost and operational efficiency 25
Slide 26: A Unique Blending Of Related And Complementary Assets And Skills
A Unique Blending Of Related And Complementary Assets And Skills FPL Constellation Group Energy Retail Competitive Supply Operations (peak MWs) Wholesale Competitive Supply Operations (gross margin) Generation Operations (MWs) - Total - Nuclear - Renewables Regulated Utility Operations (customers) C
Slide 27: Complementary Generation and Customer Businesses
Complementary Generation and Customer Businesses FPL Group Constellation Energy Combined Peak Peak Peak Load Load Load Served (1) Generation (2) Served (1) Generation (2) Served (1) Generation (2) (MW) (MW) (MW) (MW) (MW) (MW) NEPOOL 900 2,793 9,800 - 10,700 2,793 PJM 600 1,159 13,200 6,413 13,800 7
Slide 28: Value Of Constellation Energy's Competitive Supply Portfolio Scale
Value Of Constellation Energy’s Competitive Supply Portfolio Scale 800 200 703 700 621 175 ($ gross margin in millions) 600 150 Portfolio Size - Backlog 508 165 PM&T Gross Margin 476 500 125 ($ millions) 400 122 100 300 93 75 200 50 100 48 25 - 0 2003A 2004A 2005E 2006E Portfolio Scale PM&T Gross Ma
Slide 29: Other Complementary Competitive Skills
Other Complementary Competitive Skills Pairing FPL Group’s leading wind business with Constellation Energy’s retail business ― Ability to market “green” products Applying FPL Group’s Qualifying Facility restructuring expertise to Constellation Energy’s Qualifying Facilities Marrying Constellat
Slide 30: Financials
Financials — | Constellation CcROUP 30 - Energy’
Slide 31: 2007 Baseline: 16% Annual Growth Over 2005
2007 Baseline: 16% Annual Growth Over 2005 Retail Constellation Comp. Energy CTC / 2,300 Wholesale Supply Other Comp. Supply 60 (40) 2,200 2,150 Fleet 100 Repricing 2,100 Combined Adjusted Net 220 Income ($ millions) 2,000 New 1,900 Wind 110 1,800 Utility 100 1,700 1,600 1,600 16% annual growth 1,50
Slide 32: Balanced Earnings Profile
Balanced Earnings Profile 2007 Combined Estimated EBIAT (1) Contribution BGE 8% Deregulated operations 54% FPL 38% Deregulated operations Plants with PPAs (including wind) 17% Baseload plants 21% Wholesale competitive supply 12% Note: Note: Combined amounts exclude the effects of synergies, as Retai
Slide 33: Synergies
Synergies Balanced footprint and portfolio scale drive revenue opportunities Systems and process alignment and purchasing leverage drive cost opportunities Competitive Supply Utility Operations ― Increased scale to mid- and back- ― Enhanced purchasing leverage offices ― Systems commonality ― Sys
Slide 34: Growing Dividends
Growing Dividends Current FPL Group 2005 dividend $1.42 Current Constellation Energy 2005 dividend $1.34 Exchange ratio 1.444 Effective Constellation Energy dividend increase (post-closing) (1) 53% Significant value to Constellation Energy shareholders through 53% dividend increase (1) Dividends are
Slide 35: Value Capture To Shareholders
Value Capture To Shareholders Constellation Energy FPLFPL Group Shareholders Shareholders Constellation Energy Shareholders Premium paid $1.5 billion Premium received $1.5 billion Value of synergies $1.5 - $2.1 Value of synergies $1.0 - $1.4 billion billion Immediately accretive to Enhan
Slide 36: Commitment To Credit Quality
Commitment To Credit Quality FPL Group and Constellation Energy believe they will retain solid investment-grade ratings on a combined basis Combined Estimated Key Ratios (1) 2007 Funds from Operations / Total Debt 31% - 33% Funds from Operations / Interest Coverage 6.0x - 6.5x Debt / Total Capital
Slide 37: Conclusions
Conclusions — | Constellation CcROUP 37 - Energy’
Slide 38: Summary
Summary Compelling opportunity to create U.S. market leading competitive energy provider Well-matched, complementary contributions from two strong companies Multiple channels of growth, balanced by strong base of moderate risk cash flow and earnings Multiple sources of synergy Combined ent
Slide 39: Transaction Timeline
Transaction Timeline Q4 2005 Q1 2006 Q2 2006 Q3 2006 Q4 2006 Announce Transaction Make Regulatory Filings File Joint Proxy Statement Develop Transition Implementation Plans FPL Group & Receive Regulatory Approvals Constellation Energy Shareholder Meetings Close Transaction Major regulatory filings
Slide 40: Shareholder Value Focus (Stock Price Appreciation)
Shareholder Value Focus (Stock Price Appreciation) 150% 125% CEG +112% 100% 75% 50% FPL +52% S&P Elec +36% 25% S&P 500 +10% 0% (25%) (50%) 2/28/02 4/30/02 6/30/02 8/30/02 10/30/02 12/30/02 3/1/03 5/1/03 7/1/03 8/31/03 10/31/03 12/31/03 3/1/04 5/1/04 7/1/04 8/31/04 10/31/04 12/31/04 3/2/05 5/2/05 7/2
Slide 41: Appendix
Appendix — | Constellation CROP 41 ; Energy
Slide 42: Strong Combined Presence In Key Regions
Strong Combined Presence In Key Regions South Dakota North Dakota Minnesota Wisconsin West Virginia West Virginia New York New York New Hampshire Maine 41 MW 62 MW 117 MW 30 MW 300 MW 66 MW 2,045 MW 110 MW 1,076 MW 1,017 MW • Renew (41) • Renew (62) • Renew (117) • Renew (30) • Gas (300) • Renew • N
Slide 43: Synergies
Synergies Retained revenue and cost synergies of at least $200 - $250 million by year three ― Excludes costs to achieve ― Approximately one-third in year one and second third achieved in year two Accretive to both former Constellation Energy and FPL Group shareholders in first full year of combi
Slide 44: More-Balanced Generation Mix
More-Balanced Generation Mix Capacity FPL Group (1) Constellation Energy (2) Combined 33,333 MWs 11,861 MWs 45,194 MWs Other 1% Other 2% Other 4% Wind Wind Nuclear Coal 3% 10% 13% Nuclear Coal 7% Nuclear Coal 18% 8% 23% 32% 73% 41% 65% Oil / Gas Oil / Gas Oil / Gas Balanced fuel, geography and dispa
Slide 45: Non-GAAP Financial Measures
Non-GAAP Financial Measures 45
Slide 46: Summary of Non-GAAP Measures
Summary of Non-GAAP Measures Slide(s) Where Used in Slide Containing Non-GAAP Measure Presentation Most Comparable GAAP Measure Reconciliation Adjusted Net Income Reported GAAP Net Income FPL Group (12 months ended 9/30/05) 7 47 Constellation Energy (12 months ended 9/30/05) 7 47 Combined (12 months
Slide 47: Adjusted Net Income
Adjusted Net Income RECONCILIATION: ($s in Millions) Twelve Months Ended 9/30/05 Constellation Energy Notes FPL Group Notes Combined Reported GAAP net income $ 563 $ 851 $ 1,414 Adjustments Income from discontinued operations (16) a (16) Non-qualified hedges 29 b 141 d 170 Workforce reduction costs
Slide 48: Adjusted & Projected Gross Margin
Adjusted & Projected Gross Margin (Constellation Energy Only) RECONCILIATION ($s in Millions) Year Ended December 31, 2004 GAAP Adjustments in GAAP Fuel & Purchased Arriving at Gross Margin Revenue & Expense Categories Revenues Energy Expenses Difference Gross Margin Notes (Non-GAAP) Wholesale Compe
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