Exelon Corporation · NASDAQ:EXC
Exelon — Merger or Acquisition (December 2004)
39 slides from Exelon's merger presentation, Dec 20, 2004
Slide 1: Draft cover slide
Draft 12/17 PM - Brunswick will have new slide master and fix fonts,graphs and PSEG and GIN names in 12/18 version
Slide 2: 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 synergies, anticipated futu
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: 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 5: 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 6: 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 7: Path to closing timeline
Dec 2004 Q1 2005 Q2 2005 Q3 2005 Q4 2005 Q1 2006 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 T
Slide 8: 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 9: E. James Ferland, Chairman, President & CEO PSEG
E. James Ferland Chairman, President & CEO PSEG
Slide 10: The Nation's Premier Utility Company
Projected 2004 year-end. Generation numbers include long-term contracts. (2) Income from Continuing Operations Combined The Nation's Premier Utility Company
Slide 11: 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 Creating A Larger Growth Platform A combination of three urban utilities, with a low-cost generation portfolio, in an integrated Regional Transmission Organization
Slide 12: 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 13: Opportunity For Improved T&D Reliability
Opportunity For Improved T&D Reliability 2003 Key Performance Indicators Exelon Exelon PSE&G 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
Slide 14: John F. Young, EVP Exelon & President Exelon Generation
John F. Young EVP Exelon Corporation & President Exelon Generation
Slide 15: 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 Generation Portfolio Po
Slide 16: 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 17: Improved Dispatch Diversity in Mid-Atlantic
Improved Dispatch Diversity in Mid-Atlantic Source: Platt's PowerDat for 2006 data (Excluding AEP and Northern Illinois) Cumulative PJM Capacity (MW) PJM Exelon PSEG Asbury Park 352.8 0 Bear Creek 372.8 0 Five Fathom Bank 2 1058.8 0 Five Fathom Bank 3 2023.6 0 Forward Wind Farm 2053.6 0 Great Egg 24
Slide 18: 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 opportunities Incre
Slide 19: 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 and Experience t
Slide 20: Christopher M. Crane, President & CNO Exelon Nuclear
Christopher M. Crane President & CNO Exelon Nuclear
Slide 21: 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 factor for PSEG's nuclear fleet generates pre-tax
Slide 22: 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 23: Thomas M. O'Flynn and Robert S. Shapard, CFOs
Thomas M. O'Flynn Chief Financial Officer, PSEG Robert S. Shapard Chief Financial Officer, Exelon
Slide 24: 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 25: $500 Million of Synergies in Year 2
$500 Million of Synergies in Year 2 Corporate/BSC 0.39 T&D 0.11 GENCO Corp 0.07 Trading 0.09 Nuclear 0.34 7% 9% 34% 39% 11% Trading Genco Corp/ Fossil T&D Corporate, Business Services Nuclear (1) Staffing 0.43 Nuclear Production Improvements 0.14 Nuclear Outages 0.03 IT 0.09 Corp Programs 0.15 Suppl
Slide 26: Balanced Financial Profile
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) Balanced Financial Profile 2006E Assets = $79 billion Pro Forma Assets (2006 E) Assets PECO 9482 ComEd 17152 PSE&G 16696 Genco 28644
Slide 27: Value Capture to PSEG Shareholders
$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 Assumes 32% PSEG ownership of pro-forma combined company NPV based on after-tax synergies assuming reasonable sharing Value Capture to PSEG Shareholders (1) Due to Stronger Growth Platform an
Slide 28: 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 29: 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 / Average Total Debt 28% 31% Funds from Operations Interest Coverage 5.8x 6.2x EBITDA Interest Coverage 7.0x 7.1x Debt / Capit
Slide 30: Proven Record of Delivering Value
S&P 500 S&P Electrics PSEG Exelon 3-Year 0.08 0.1 0.28 1.07 5-Year -0.09 0.18 0.65 1.96 10-Year 1.14 2.07 4.28 Proven Record of Delivering Value 3 -Year 5 -Year
Slide 31: 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 Indexed Price PSEG S&P Electric Utilities Index Nuclear issues surface
Slide 32: Value Capture to Exelon Shareholders
Assumes 68% Exelon ownership of pro-forma combined company NPV based on after-tax synergies assuming reasonable sharing 2005 P/E discount to Exelon on 12/15/04 ($1.8 - 2.0B) $450 - $500 M $5.5-$6.5 B Premium To PSEG PSEG P/E Discount (3) NPV Synergies (2) > $4.0 B Value To Exelon Shareholders Premiu
Slide 33: 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% Growing Dividend (1) (1) Dividends are payable at the discretion of the board of dir
Slide 34: 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 35: 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 36: John W. Rowe, Chairman, President & CEO Exelon
John W. Rowe Chairman, President & CEO Exelon Corporation
Slide 37: 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 38: 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 39: Exelon: Creating the Utility Company of Tomorrow
Exelon Electric & Gas Creating the Utility Company of Tomorrow