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Pepco to Merge with BGE and Other Utilities

This morning Pepco Holdings Inc. has announced that PHI stockholders at a special meeting today voted to approve the merger agreement with Exelon Corporation announced April 30.

Completion of the transaction is subject to customary closing conditions, as well as approval by the Federal Energy Regulatory Commission, the public service commissions in Delaware, Maryland, New Jersey, Virginia and the District of Columbia, and the notification and reporting requirements under the Hart-Scott-Rodino Act.

The merger, which is anticipated to close in the second or third quarter of 2015, will bring together Exelon’s three top-performing electric and gas utilities — BGE, ComEd and PECO — and Pepco Holdings’ electric and gas utilities — Atlantic City Electric, Delmarva Power and Pepco — to create the leading Mid-Atlantic electric and gas utility, serving approximately 10 million customers.

Pepco is saying PHI customers will benefit from a $100 million customer benefit fund that Exelon is establishing that public service commissions in PHI service territories could use for customer benefits such as rate credits, assistance programs or energy efficiency. Exelon also has committed $50 million over the next 10 years to maintain charitable contributions in the areas served by the PHI utilities. 

Exelon also has committed to build on reliability improvements that are already underway at the PHI utilities with new, more stringent targets in each jurisdiction. Exelon has agreed to financial penalties if the targets are not met by 2020. Exelon also will honor Pepco Holdings’ bargaining unit agreements. PHI this summer successfully negotiated contract extensions with all four of the unions representing its utility employees.

Pepco claims these proposed merger commitments are anticipated to result in substantial economic benefits for customers and communities served by the PHI utilities, as detailed in an economic modeling analysis. Combined with reliability improvement projects already announced by PHI and underway, the merger commitments are expected to produce approximately 11,000 to 14,000 new jobs and between $1.0 billion to $1.3 billion in benefits to the economies of Delaware, Maryland, New Jersey and Washington, D.C., within six years after the merger closes.

The all-cash transaction consideration of $27.25 per share represents a 24.7 percent premium to Pepco Holdings’ closing price of $21.85 on April 25, 2014, and a 29.5 percent premium to the volume-weighted average share price over the 20 trading days ending April 25, 2014.  Following the merger, Pepco Holdings utilities will retain their regional headquarters in May’s Landing, N.J. (Atlantic City Electric), Newark, Del. (Delmarva Power), and Washington, D.C. (Pepco).

[Source: Pepco press release, Sept 23, 2014]

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