[cdn-nucl-l] Exelon Acquiring PSEG in $12B Stock Deal

["Adam Mclean" <adam.mclean@utoronto.ca>]

Posted on Yahoo News on December 20, 2004 and at:
http://story.news.yahoo.com/news?tmpl=story&u=/ap/20041220/ap_on_bi_ge/exelo
n_pseg&e=1
"The new company would have $79 billion in assets, with $27 billion in
annual revenues and $3.2 billion in annual profit"
Golly!

Note: PSEG operates the Salem and Hope Creek NGS, and has part ownership of
the Peach Bottom NGS.  Exelon already operates the largest nuclear fleet in
the US: 17 units at 11 sites.

Adam

--------------------


Exelon Acquiring PSEG in $12B Stock Deal 
By JEFFREY GOLD, AP Business Writer 

NEWARK, N.J. - Exelon Corp. is acquiring Public Service Enterprise Group
Inc. in a $12 billion stock deal that would create the nation's largest
power generation company with customers in Illinois, New Jersey and
Pennsylvania. 
  
"We will be the company that keeps over 18 million people warm in the
winter, and cool in the summer," John W. Rowe, chairman, president and CEO
of Exelon, said Monday in announcing the deal that will create Exelon
Electric & Gas. 

Roughly 1,400 jobs are expected to be cut over the next two years, part of
the effort to achieve an estimated half-billion dollars in savings, said
Thomas M. O'Flynn, PSEG chief financial officer. The two companies currently
employ 28,500 people. 

The new company would have $79 billion in assets, with $27 billion in annual
revenues and $3.2 billion in annual profit, the companies said. 

Shares of both companies finished the day higher, despite some concerns that
regulatory approval might be an issue for the deal, which is expected to
close in 12 to 15 months. 

PSEG shares surged $3.29, or 7 percent, to finish at $50.56 on the New York
Stock Exchange (news - web sites) - a new 52-week high for the stock. 

Exelon shares rose $1.19, or 2.8 percent, to close at $43.05 on the NYSE -
also within striking distance of their 52-week high of $43.58. 

Under the agreement, each Public Service share will be converted into 1.225
shares of Exelon. The offer values Public Service at $51.28 a share, an 8.5
percent premium to its closing price of $47.27 Friday. Following the deal,
PSEG stockholders will own approximately 32 percent, or 306 million of
Exelon Electric & Gas' pro-forma shares outstanding, and Exelon shareholders
will own approximately 68 percent, or 650 million shares. 

Chicago-based Exelon and Newark-based PSEG said both of their boards had
unanimously approved the move. 

David M. Schanzer, a utility analyst at Janney Montgomery Scott, foresaw no
problem with regulators in Illinois and Pennsylvania, where Exelon has
customers, but said New Jersey typically was skeptical of out-of-state
companies controlling a utility that serves its residents. 

"The question is whether the feds and state of New Jersey will put up with
it," Schanzer said. "If they were caught by surprise, this could be a little
bit more of a difficult process." 

Federal regulators would be concerned about the market power of the combined
company, Schanzer said. "This is going to be the 800-pound gorilla," he
said. 

The deal, if approved, also might encourage other utilities to consider
merging to compete, he said. 

Jeanne Fox, president of the New Jersey Board of Public Utilities, said it
was too early to predict what would happen to gas and electric rates if the
merger is approved, but predicted the deal might result in some savings. 

Fox said the merger petition will probably be filed in a month or two, and
that public hearings would be held. Among the issues she wants to evaluate
are reliability and customer service. 

The companies said the transaction also would require approval of the
Federal Energy Regulatory Commission (news - web sites), the Nuclear
Regulatory Commission, the Securities and Exchange Commission (news - web
sites), and either the Department of Justice (news - web sites) or the
Federal Trade Commission. 

Exelon operates the largest group of nuclear power plants in the country,
including four in joint ventures with a PSEG subsidiary. The new company
will oversee daily operations at the troubled Hope Creek-Salem nuclear plant
complex along the Delaware River in southern New Jersey, parts of which are
among those jointly owned. 

Analyst Hugh Wynne at Bernstein & Co. said he saw the deal as a good fit
commercially, and a sound transaction financially. Exelon has sustained its
growth by making operational improvements, cutting costs and selling noncore
businesses, he said. 

"Now that they've pretty much squeezed that orange dry, they have to find
another company where they can repeat that process of cost improvement,"
Wynne said. 

PSEG, although it has a "fairly bloated" cost structure, brings several
years of experience in buying energy at auctions, which Exelon may soon be
allowed to do in Illinois, he said. 

Also Monday, Fitch Ratings upgraded its rating on PSEG to positive from
stable, and affirmed its stable rating on Exelon Corp. 

Exelon and PSEG said they expected the deal to create immediate cost
savings, and provide improved service because of efficiencies with
generation, transmission, distribution and power marketing. They also
claimed there will be greater earnings predictability. 

The combined company is to be based in Chicago and would serve some 7
million electric users and 2 million natural gas customers. 

The new company will be led by Rowe, Exelon's current top executive. Its
board will be comprised of 12 members nominated by Exelon and six members
nominated by PSEG. 

The new company would be the nation's largest power generator, with
approximately 52,000 megawatts of domestic capacity, including long-term
contracts, the companies said. 

PSEG's main subsidiaries are Public Service Electric and Gas Co. (PSE&G),
New Jersey's largest utility with 2 million electricity and 1.6 million gas
customers, and PSEG Energy Holdings. 

The new company's energy trading operations and nuclear headquarters will be
located in Pennsylvania. The headquarters of the combined generation company
will be located in Newark, as will the PSE&G headquarters. 

Exelon distributes electricity to 5.1 million customers in Illinois and
Pennsylvania, and gas to 460,000 customers in the Philadelphia suburbs. 

___ 

On the Net: 

Exelon: http://www.exeloncorp.com 

PSEG: http://www.pseg.com