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May 23, 2006 (9:05a) - New Jersey Status
The situation in New Jersey has become even more
precarious for the companies, as three state politicians have publicly announce
their opposition to the merger. Assemblymen Joseph Cryan, Joseph R. Malone, and
Kevin J. O'Toole have directly petitioned the PSC to slow down its review
process, citing statewide job losses as their primary concern.
The fact that the opposition is bipartisan in nature is
particularly problematic for the deal, as further political momentum could very
easily motivate the Governor into action. The companies have not yet publicly
responded to this development, but it can be assumed that they are scrambling
to develop some sort of plan to turn public/political opinion in New Jersey.
Combined with the growing shareholder concern on EXC's side,
there it is clearly now appropriate to speculate that this deal may not succeed
without some sort of major changes to the deal.
May 15, 2006 (8:55a) - EXC Shareholder Concern
Reported
Duquesne Capital Management has publicly stated
that EXC should at this point reconsider the merger transaction with PEG,
citing the potential for additional divestitures in order to obtain DOJ and NJ
BPU approval.
In response, EXC has disclosed that it will convene it Board
of Directors to review the transaction after further discussions with both
regulators. No date for a Board meeting has been set as of yet.
As it is abundantly clear that additional concessions will
be required in at least the NJBPU review process, the chances for this deal
failing continue to be perceived as relatively high.
May 8, 2006 (11:00a) - New Jersey Status
A coalition of groups opposed to the merger has
formally requested the intervention of Governor Corzine to block the
transaction. At this time, the Governor has not indicated a willingness to
participate in the merger review process, but claims to be "following the
situation closely."
Although it is unlikely the Governor will directly intervene
in the case at this point, it is not entirely out of the question if the
companies are unable to reach settlement agreements with the various opponents
and if there is an indication from the NJ BPU that the merger should be blocked
under the current terms. In other words, the potential for Gubernatorial
involvement should provide some additional motivation for the companies to
accelerate the negotiation process, as direct intervention would essentially
signal an imminent failure for the merger.
May 2, 2006 (9:30a) - NJ BPU Status
EXC has claimed, via earnings call, that it will
consider terminating this transaction if the companies are forced to divest
additional nuclear operations as part of the
NJ BPU
and/or DOJ reviews. The companies have also openly expressed frustration with
the review processes, claiming they did not expect the level of scrutiny
received to this point.
The
NJ BPU
has been expected by this publication to be an extremely difficult obstacle
from the outset, so there is no sympathy for the companies on this point. Any
major utility deal involving the BPU will be very difficult and the companies
should have been fully aware of this before entering the merger agreement. That
being said, EXC's comments can not be taken literally at this time. This is
more likely posturing as part of the intense negotiations process which can
understandably become arduous. Despite recommendations to reject the merger
from consumer/public advocate groups, there has been no indication that a
middle ground is unattainable at this point. And in a situation such as this,
the imminent failure of negotiations would surely have been leaked in some form
or another.
The companies have indicated that they expect some type of
clarity from the BPU by the end of this month. Since, the ALJ recommendation
continues to be delayed, this may be overly optimistic, if not naive. More
likely the companies will be forced to wait until June for an ALJ
recommendation and move forward from the point based on the recommendation
itself.
Obviously, the BPU and DOJ reviews will continue into the
third quarter of this year, and the companies will simply have to adjust to
this time frame accordingly -- even if it slips deeper into Q3 or even
Q4.
April 27, 2006 (11:00a) - NJ BPU Status
The New Jersey Division of Rate Counsel has
filed a formal petition with the
NJ BPU
ALJ to reject or significantly modify the current proposals offered by the
companies. The BPU is expected to issue a press release in response to the
petition, but has not yet posted the release.
The ALJ recommendation has already been delayed
approximately one month and additional delays are likely with the continued
opposition of the Rate Payer Advocate (see
this report released yesterday) and the
NJPIRG. The ALJ
recommendation is currently expected in late-June, but this could easily be
pushed into July or August given the lack of progress in the settlement
process.
As of this entry, the BPU still has not adopted a revised
procedural schedule to reflect the ALJ recommendation delay. It is anticipated
that the final decision date will be pushed into August 2006, barring major
concessions from the companies in an attempt to reach a settlement agreement.
This would have to occur within the next month in order for the BPU to approve
the deal before the end of July.
March 28, 2006 (9:30a) - NJ BPU Status
The
NJ BPU
continues to include this transaction on its
Board
meeting agenda, updated through tomorrow, March 29. The BPU is obviously
continuing to hear testimony in the case and will apparently keep the hearing
process open until all intervenors have been heard. Since a revised procedural
schedule has not been released as of yet, it is assumed that the hearings are
now essentially open-ended, and that a new procedural schedule will be released
at some point in April.
As noted previously, the BPU review is fully expected to be
delayed significantly given the extended hearings and forthcoming negotiations
process. The negotiations with BPU staff and third parties will be one of the
most complicated and very likely most lengthy in recent memory for this
regulator, suggesting even further delays are possible, if not probable.
March 24, 2006 (11:10a) - NJ BPU Status
According to the
Newark Star-Ledger,
experts testimony in front of the
NJ BPU
are claiming that additional divestitures will be necessary in order for this
merger to have net benefit for New Jersey residents. It is generally expected
that the companies will in fact be forced to divest more operations than
originally offered, which will naturally result in a longer post-hearing
negotiation process. In response to this development, a PSEG official stated
the following:
"Paul Rosengren, a PSEG spokesman, said if
the companies are required to sell nuclear units, they would 'have to take a
large step backward and assess the impact on the transaction.'"
It therefore appears that the extended hearings are not
going as well as the companies would like -- although it comes as no surprise
to this publication given the very tough NJ BPU review process and immense
impact of the proposed transaction.
The hearings are currently scheduled to end on March 27, but
this could easily be delayed given the nature of the proceedings. Obviously,
the ALJ recommendation will not be issued on March 30 as originally scheduled.
A new ALJ deadline has not yet been obtained, but is expected in roughly May
2006. The final decision date will naturally be pushed back according --
probably into July 2006 at the very earliest.
March 15, 2006 (9:50a) - NJ BPU Status
The
NJ BPU
has added this case (EM05020106) to tomorrow's
Board
meeting agenda. The agenda states the following:
"In the Matter of the Joint Petition of
Public Service Electric and Gas Company and Exelon Corporation for Approval of
a Change in Control of Public Service Electric and Gas Company, and Related
Authorizations; and In the Matter of Exelon Corporation Public Service
Enterprise Group - FERC Docket No. EC05-043-000."
The exact nature of the matters to be considered tomorrow
are unclear, but details are expected from the BPU shortly. It is presumed that
the BPU will either confirm or extend the ALJ recommendation date which is
currently set at March 30, 2006. It is also possible that the tentative
decision date of May 15 will be confirmed or extended as well.
February 22, 2006 (12:20p) - Connecticut DEP
Information
The
Connecticut DEP process is
defined as a "permit transfer" involving two PGE properties:
Bridgeport and New Haven power plants. The review generally has a length of 30
to 45 days and will focus almost entirely on EXC's track record as a power
plant manager. The standards of suitability are defined by Connecticut statutes
and therefore the review process is very straightforward. EXC will simply need
to provide an information packet for each operation and disclose its
environmental compliance record for previous years.
The DEP has not received the packets as of yet and expects
the information to be withheld until the New Jersey BPU process nears a
conclusion. The DEP typically times its decision issuance with the approximate
closing date of the transaction.
In short, the DEP review is essentially a non-problematic
"final process" that the companies will initiate roughly four to six
weeks before the expected completion date.
February 9, 2006 (8:55a) - New Jersey BPU
Status
Not surprisingly, the
New Jersey
BPU has extended its hearings for this transaction another month, to
March 27, 2006.
This action will effectively push back the ALJ
recommendation into April or May, and the BPU decision into June or July of
this year. Naturally, further delays are very possible in this case and, as
mentioned previously, the BPU review must be considered as a possible
deal-threatening matter.
At this stage, the chances of the BPU blocking the deal or
imposing unacceptable (to the companies) conditions are considered rather low.
But again, it can not be ruled out given the current public concerns over
energy costs and the BPU's well-known tendency to incorporated public input
into its rulings.
February 6, 2006 (8:15a) - New Jersey BPU
Status
PJM Market Monitoring issued
this report on February 2, which recommends additional
divestitures in order to obtain NJ BPU approval. The report, which was
commissioned by the companies, will more than likely be used by the BPU
staff (and opponents) as leverage in the negotiation process and may result in
additional delays for the BPU final decision. Some reports are now suggesting
that the projected second quarter close is in jeopardy as a result of the PJM
report.
This possibility has been discussed throughout the
transaction and thus it comes as no surprise that problems with the NJBPU
remain a significant factor for the deal. At this point, it is far too early to
speculate as to the potential of the deal falling through due to the NJBPU
review, but it must be considered possible at this point.
January 30, 2006 (8:05a) - Pennsylvania PUC
Approval
The
Pennsylvania PUC formally
approved this merger on Friday, January 27. The official PUC press release is
available by following
this link.
The
New Jersey
BPU review is expected to continue wello into the second qauarter of this
year and continues to be considered a potentially deal-threatening process.
Additional analysis of the BPU review will be posted shortly.
January 6, 2006 (9:35a) - New Jersey BPU
Status
The
New Jersey
BPU hearings have begun for the review of this transaction, and are
scheduled to continue through January 20, 2006. Not surprisingly, this
particular deal is expected to draw an extremely high volume of testimony from
consumer groups, including the
New Jersey Ratepayer
Advocate, which has already re-affirmed its opposition to the transaction
at the hearings.
The current procedural schedule calls for an ALJ
recommendation by March 30, 2005. However, the amount of testimony expected
during the hearings could very easily push the ALJ recommendation and final
decision deadline (May 15) into the summer of this year.
November 30, 2005 (12:25p) - Pennsylvania PUC
Status (ALJ Recommendation)
The ALJ assigned to this case in the
Pennsylvania PUC has issued
a recommendation for approval of the merger. The full text of the ALJ
recommendation is available by following
this
link.
Formal PUC approval is now expected in early-January
2006.
November 15, 2005 (11:30a) - New Jersey BPU
Status
Philadelphia Gas Works, along with several other
third-parties, yesterday filed written testimony in opposition to the merger
with the New
Jersey. The groups in opposition are essentially the same as those
identified on October 12 by the NJPIRG, as well
as the American Antitrust Institute and several state (NJ) consumer/union
groups.
At this point in the New Jersey review, the momentum is
clearly with the opposition. The companies will therefore be required to focus
a majority of its energy and resources into negotiating settlements with NJBPU
staff and third parties. As seen in previous deals involving the NJBPU, this
process can be extremely long and arduous, more so in circumstances similar to
the this one.
The concessions required to turn the opponents around will
be significant. It is far too early to predict if the companies will succeed in
appeasing the NJBPU and opposition, but it is clear that the task will be
extremely difficult. It would therefore not be at all surprising if the review
process encounters additional delays and the current May 15 decision date is
pushed back well into the second or even third quarter of next year.
October 12, 2005 (11:40a) - New Jersey
Opposition Coalition Announcement
The New Jersey Public Interest Research Group (NJPIRG) has issued
a press release announcing the formal opposition to this transaction by a
coalition of third parties.
Excerpts from the NJPIRG press release include the
following:
"An incredibly broad and diverse set of
organizations stood together today to announce the expansion of the coalition
challenging Exelon Corporation’s proposed acquisition of PSEG (Public
Service Enterprise Group).
"Exelon’s proposal is currently before the New
Jersey BPU, an agency that has invested time and resources into examining the
facts. BPU President Jeanne Fox recently announced that the buy-out must
provide positive benefits in the areas of rates, competition, jobs and
reliability in order to be considered in the public interest and so
approved.
"'Our group is particularly concerned that the BPU, as
the regulatory agency with decades of expertise in these matters, continue to
have the freedom to review this matter in the manner that best serves the
public interest. Our state is in an election year, and it would be naïve
to ignore the temptation to play politics with this merger. We have already
seen such political interference in at least one other state, and we strongly
urge New Jersey lawmakers to avoid similar circumstances here. Utility
customers, lawmakers and, most importantly, the public interest, will benefit
if the agency with expertise that is delegated the responsibility to review the
proposed merger is left alone to do its job,' concluded (Steve Goldenberg, the
attorney for the New Jersey Large Energy Users Coalition).
Again, this is considered a major development in the NJBPU
review and the transaction as a whole. The companies will need to be extremely
careful in their response to this type of opposition and begin considering
major concessions within New Jersey in order to obtain NJBPU approval. The
rationale for the transaction could conceivably be destroyed if the New Jersey
opponents and BPU insist on the level of concessions currently
anticipated.
October 12, 2005 (9:40a) - New Jersey BPU
Status
According to published reports, a larger
coalition of opponents to this merger will announce a formal challenge in the
New Jersey
BPU at some point today. The coalition includes the New Jersey Large Energy
Users, a group of big industrial manufacturers, the New Jersey Public Interest
Research Group, Utility Workers Union Local 601, New Jersey Citizen Action, the
Chemistry Council of New Jersey, the NAACP Voter Fund and the Service Employees
Union, among others.
As noted from the outset of the deal, the NJBPU review
process will be extraordinarily complex and lengthy for this case, and a
development such as this presents a very real possibility of rejection from the
regulator. Perhaps more than any other regulator, the NJBPU allows full
participation of third parties, and especially consumer groups which often have
a significant role in utility reviews. The CIV-POM is a
good example of the BPU's inclusion and influence in deals such as this -- the
review in that transaction took 13 months and forced major concessions from the
companies.
At this time it is too early to determine the precise impact
a solid opposition coalition will have in the NJPBU's final decision. However,
it must now be acknowledged that this particular regulatory process poses a
threat to the deal's completion.
September 29, 2005 (8:55a) - Amended
Application/Declaration Filed (PUHCA)
EXC has filed an
amended U-1
with the SEC. Key excerpts regarding PUHCA procerdure and regulatory matters
are included below:
Applicants are asking the Commission to issue an
order granting the requested authority on or before December 15, 2005.
Applicants remain hopeful that they will be able reach settlements in their
various regulatory proceedings so as to permit a closing by year-end and enable
investors and consumers to realize the benefits associated with the proposed
transaction.
NJBPU
On February 4, 2005, Exelon and PSE&G made the initial filing of their
joint application with the NJBPU for approval of the indirect transfer of the
capital stock of PSE&G resulting from the Merger. While New Jersey law does
not specify a timetable for completion of the NJBPU’s review, Exelon and
PSE&G have asked that the NJBPU handle the matter on an expedited
basis.
New Jersey Department of Environmental Protection
Subsidiaries of PSEG own facilities in New Jersey that are industrial
establishments as defined in ISRA. The parties have already filed their
application with NJDEP and have received letter of non-applicability under ISRA
with respect to the Merger, the Generation Restructuring and Merger related
corporate restructurings during the first quarter of 2005.
New York Public Service Commission
As an owner of generation facilities in the State of New York, a subsidiary of
PSEG Power is subject to the jurisdiction of the New York Public Service
Commission (“NYPSC”). Under Section 70 of the New York Public Service
Law, the NYPSC’s written consent is required in connection with the
indirect transfer of ownership interests in such subsidiary of PSEG Power in
connection with the Merger. Under Section 70 of the New York Public Service
Law, the NYPSC must determine whether the Merger is in the public interest. The
parties have already filed their application and have received approval with
the NYPSC
Pennsylvania Public Utility Commission
On September 13, 2005, PECO announced that it had filed with the PAPUC a
settlement of most issues raised in Pennsylvania’s review of the Merger.
If the settlement is approved, PECO would provide $120 million over four years
in rate discounts for customers and cap its rates through the end of 2010. The
settlement also provides substantial funding for alternative energy and
environmental projects, economic development, expanded outreach and assistance
for low-income customers, and various corporate safeguards. Later in September,
a PAPUC administrative law judge will review testimony about the settlement, as
well as other issues not resolved in the case. The judge subsequently will make
a recommendation to the PAPUC, which will vote on the case possibly before the
end of 2005.
Connecticut
As the owner of generation stations in the State of Connecticut, PSEG Power
Connecticut LLC, an indirect subsidiary of PSEG Power, is subject to the
jurisdiction of the Connecticut Siting Council (“CSC”) under
Connecticut public utility laws and the Connecticut Department of Environmental
Protection (“CDEP”) under Connecticut environmental law. The indirect
transfer of the ownership interests in these entities may require the approval
of the CDEP and will require the approval of the CSC. The parties filed their
application with the CSC on March 3, 2005 and received their approval. The
parties intend to file their application for approval with the CDEP during the
first quarter of 2006.
Nuclear Regulatory Commission (“NRC”)
The parties have filed applications with the NRC.
HSR
The parties received a second request for information from the Antitrust
Division and have certified substantial compliance with such request. The
waiting period mandated by the H-S-R Act expired September 1, 2005. The
Antitrust Division review continues notwithstanding such expiration but the
parties do not expect a delay in closing will result.
Federal Communications Commission
The Federal Communications Commission (“FCC”) must approve the
transfer of control of telecommunications permits or licenses. The
Communications Act of 1934 prohibits the transfer, assignment or disposal in
any manner of any license, or any rights thereunder, to any person without
authorization from the FCC. PSEG’s subsidiaries hold telecommunications
licenses and, together with the appropriate subsidiaries of Exelon, will seek
the necessary approvals from the FCC for the assignment of or transfer of
control over such licenses in connection with the Merger. Under the
Communications Act, the FCC will approve a transfer of control if it serves the
public interest, convenience, and necessity.
Private Letter Ruling of the Internal Revenue Service
Exelon will request that the IRS issue a private letter ruling confirming
section 1081 tax treatment in respect of the Generation Transactions as and to
the extent that Exelon will seek to utilize such tax treatment in respect of
the divestiture of a particular generating unit. It is possible that the IRS
may require Exelon to modify aspects of the structure of the Generation
Transactions to obtain the private letter ruling. The Generation Transactions
are deemed to include any such modifications to the extent such modifications
allow Exelon to comply with the order of the Commission on the Applications and
is otherwise acceptable to Exelon.
Procedure
The Commission is respectfully requested to publish the requisite notice under
Rule 23 with respect to this Application as soon as possible, such notice to
specify a date by which comments must be entered and such date being the date
when an order of the Commission granting and permitting this Application to
become effective may be entered by the Commission. The Applicants request that
the Commission’s order be issued as soon as the rules allow, and that
there should not be a 30-day waiting period between issuance of the
Commission’s order and the date on which the order is to become effective.
The Applicants hereby waive a recommended decision by a hearing officer or any
other responsible officer of the Commission and consent that the Division of
Investment Management may assist in the preparation of the Commission’s
decision and/or order, unless the Division opposes the matters proposed herein.
September 13, 2005 (10:10a) - Pennsylvania
Status
The Governer of Pennsylvania has announced (in
an obvious PR attempt) that a settlement agreement has been reached with the
companies and various third-party intervenors. The settlement agreement is in
conjuncton with the pending PAPUC review, which remains expected to conclude in
January 2006.
August 16, 2005 (8:20p) - PA PUC / NJBPU
Status
The ALJ assigned at the PAPUC has revised the
procedural schedule in this case. The initial ALJ recommendation is now due in
mid-December (rather than November 7). The PAPUC decision order is now expected
in January, 2005.
Additionally, the ALJ at the NJBPU has pushed the review
back as well. The initial ALJ decision is currently expected on or before
March 30, 2006, and the final order date is now May 15,
2006.
These delays have been fully expected from the outset of the
transaction, especially with the NJBPU. It will not be at surprising if the
state reviews are delayed even further, as opposition
to this transaction among consumer groups is expected to continue well into
next year. The NJBPU will continue to be considered the key timing factor in
the deal and could conceivably push the deal beyond the second quarter of next
year.
July 22, 2005 (11:30a) - EXC Shareholder
Approval
EXC shareholders have approved the merger
transaction.
An EXC
press release states the following:
"The merger now requires the approval of
the New Jersey Board of Public Utilities and Pennsylvania Public Utility
Commission, as well as reviews by U.S. Department of Justice, Nuclear
Regulatory Commission, and Securities and Exchange Commission, among
others."
July 22, 2005 (8:10a) - EXC Q2 Earnings
Statement
EXC included the following update of the merger
in its Q2 earnings release:
"Exelon and PSEG believe that the closing
of the merger transaction in the first quarter of 2006 is achievable, assuming
they are able to reach settlements with interested parties that are approved by
the PAPUC and NJBPU. If settlements are not reached, the companies expect that,
assuming all other conditions to completion of the merger are satisfied, the
closing of the merger should occur early in the second quarter of
2006."
The key work above being "assuming," referring
primarily to the NJBPU consumer advocacy groups which have shown virtually no
flexibility in drawing major concessions in similar transaction. The companies
enthusiasm that agreements will be reached in New Jersey is perceived as overly
optimistic and unrealistic, given recent history with NJBPU merger reviews.
In other words, it would be a small miracle if the companies
were able to obtain the required approvals before the end of the first quarter
of next year.
July 20, 2005 (7:45a) - PEG Shareholder
Approval
PEG shareholders approved the merger yesterday
afternoon.
A PEG press
release states the following:
"In addition to the PSEG shareholder action
received today, the merger has been approved by the Federal Energy Regulatory
Commission (FERC) and is currently being reviewed by various other regulatory
agencies including the New Jersey Board of Public Utilities. 'Based on the
current regulatory schedule, we hope to complete the merger in the first or
second quarter of 2006. There is also the possibility that these proceedings
could be settled earlier, allowing for an earlier close. While it is impossible
to predict exactly how long it will take, we are confident of a positive
outcome.'"
EXC shareholders are expected to approved the merger this
Friday, June 22.
June 30, 2005 (12:35p) - FERC Approval
The FERC has
approved this merger without requiring public hearings.
June 29, 2005 (8:45a) - Additional Opposition
Details
Additional opposition to this transaction has
surfaced in the Pennsylvania PUC review, where labor unions from Pennsylvania,
Illinois, and New Jersey have formally asked the PAPUC to reject the companies
merger application. This is a potentially serious factor in the PAPUC review,
as the Commonwealth is fiercely pro-union and the regulator is thus more likely
to take this opposition into serious consideration. The PAPUC hearing remains
scheduled for tomorrow (6/30).
Also, Philadelphia Gas Works has petitioned the PAPUC to
force the companies to divest additional assets in both Pennsylvania and New
Jersey.
June 24, 2005 (12:25p) - FERC Status
The FERC has added this case to its
June 30 open meeting agenda.
At the meeting, the FERC will consider petitions for a
formal public hearing, which the FERC is expected to grant based on the volume
of opposition and magnitude of the transaction. If the FERC does agree to hold
a public hearing, it is expected to be scheduled during the fall of this
year.
June 24, 2005 (9:35a) - New Jersey BPU
Status
The
New Jersey
BPU yesterday determined, via unanimous Board member vote, that the
companies must establish "positive benefits" of the merger before the
BPU can issue an approval. This decision, which requires a much higher effort
on the companies, is most likely a direct result of the powerful New Jersey
public interest groups: NJPIRG and
NJCA. Both
groups have already established their involvement in the review and will, as
mentioned on March 28, create significant delays in
the BPU review through the negotiation process.
The BPU hearings will be held on October 11, 12, 13, 14, 17,
18, 19, 20 and 21, 2005, and it is very possible that additional dates will be
added in the future. The current ALJ recommendation date is February 26, 2006
-- but this date is tenuous and could easily be delayed as the review proceeds
into next year.
June 17, 2005 (9:30a) - Additional Third-Party
Details
Fight the Power Grab, a consumer/labor group coalition, has
been formed for the following three stated purposes:
* Open and accountable public hearings by FERC,
NJBPU, and PAPUC
* Guarantees that the merger will benefit consumers
* Reliable and affordable energy for homes and businesses
It is just this type of organized response to the merger
that will ultimately force the FERC, and other regulators, to hold full public
hearings in their respective reviews. The FERC is expected to announce public
hearings in this case within the next several weeks.
June 16, 2005 (10:25a) - PA PUC Public Hearing
Scheduled
The
Pennsylvania PUC has
scheduled a single public hearing on June 30, 2005 in its review of this
transaction (A-110550F0160).
The ALJ recommendation in this case is currently expected on
November 7, 2005, although this date may be altered in the course of the
pending review. A final PAPUC decision is expected at the very end of this
year, or very early in 2006.
June 10, 2005 (8:55a) - FERC Status
EXC executives have publicly stated that the
merger transaction will proceed regardless of the FERC's decision on a public
hearing. This sounds like the companies are now resigned to the probability
that the FERC will indeed hold public hearings in response to the high volume
of third-party opposition already voiced in the review.
This publication continues to anticipate FERC public
hearings, and a review process that carries the transaction well into next
year.
June 6, 2005 (10:50a) - Definitive Proxy
Statement Filed
The companies have filed the
defintivie proxy
statement with the SEC on June 3. The proxies will be mailed to
shareholders beginning on June 10, 2005.
May 31, 2005 (8:55a) - Preliminary Proxy
Statement Filed
The companies have filed the
third amended
proxy statement with the SEC on May 27. The PEG shareholder meeting has
been scheduled for July 19, 2005 (record date May 27, 2005). The
EXC shareholder meeting has been scheduled for July 22, 2005 (record
date May 2, 2005).
Regarding the pending FERC review, the proxy states the
following:
On May 9, 2005, Exelon and PSEG filed a
supplement to their February 4 filing with FERC, responding to objections and
concerns raised by the intervenors. In the supplementary filing on May 9,
Exelon and PSEG proposed that if FERC approved the merger without an
evidentiary hearing, Exelon and PSEG would divest at least 1,100 MW of
additional fossil fuel generation capacity. Exelon and PSEG also proposed to
invest approximately $25 million in new transmission projects over five years
if the merger is approved by FERC without a hearing.
Exelon and PSEG currently expect that the FERC schedule
relating to approval under Section 203 will not impact the anticipated timing
of closing of the merger. However, as indicated above, several intervenors in
the FERC proceeding, including the NJBPU, have requested that FERC hold
hearings on the application relating to the merger. If FERC were to hold
hearings with respect to the merger the approval process would extend the
anticipated closing into mid-2006 or perhaps later.
May 27, 2005 (12:20p) - FERC Status
Today is the deadline for replies to the
companies' response to opposition and intervention submissions. The May 9
company response is available by following
this FERC document link, or by going to this
FERC search engine and entering the docket number (EC 05-43)
in the appropriate location.
Obviously, third-party opposition to this deal is
significant and has continued to increase as the FERC review has proceeded.
Requests for hearings have been submitted by several entities and it expected
that additional requests will be submitted, within the coming months. The
assertion by the companies that a public hearing is not necessary and can be
avoided continues to be overly-optimistic and assumes that the FERC, in the
context of a volatile energy environment, will simply ignore public demands.
The companies attempts to appease opponents via divestitures
will most likely not avert a public hearing process with the FERC, and a FERC
decision remains expected much later than the companies anticipate.
May 26, 2005 (8:50a) - Senate PUHCA Repeal Bill
Reported
According to published reports, the Senate
Energy and Natural Resources Committee is today expected to announce the
drafting of a bill that would repeal PUHCA.
If this does in fact occur, and if the bill is signed into
law -- a virtual certainty given the current administration -- both the
CIN-DUK and PEG-EXC deals will
clearly benefit from a timing perspective. While the PEG-EXC deal still has
significant state regulators and public opposition issues, the PUHCA repeal
would have a direct, positive impact on the CIN-DUK deal which would very
likely encounter serious delays under PUHCA.
Additional details of this development will be posted when
made publicly available.
May 19, 2005 (10:00a) - New Jersey BPU
Status
The New Jersey BPU procedural schedule is
available by following
this link. Public hearings will be held on October 11, 12,
13, 14, 17, 18, 19, 20 and 21, 2005.
May 16, 2005 (8:45a) - Preliminary Proxy
Statement Filed
The companies have filed the second
amended
preliminary proxy statement with the SEC. Shareholder meeting dates and
record dates are not included in this proxy.
The regulatory matters section of the proxy states the
following:
On February 4, 2005, Exelon and PSE&G made
the initial filing of their joint application with the NJBPU for approval of the indirect transfer of the
capital stock of PSE&G resulting from the merger. On April 5, 2005, the
administrative law judge in the proceeding before the NJBPU issued a prehearing
order establishing a timetable for the regulatory approval process in New
Jersey. The order provides for the administrative law judge to issue an initial
decision by February 26, 2006. Thereafter, pursuant to the provision of the New
Jersey Administrative Procedure Act, a decision of the full NJBPU can be
expected by approximately March 23, 2006. The procedural schedule
resulted from an agreement among Exelon, PSEG, the NJBPU staff, and the New
Jersey Ratepayer Advocate pertaining to the procedural schedule to be followed
during the course of the administrative process before the NJBPU.
Subsidiaries of PSEG own properties in New Jersey that may
be subject to the New Jersey Industrial Site Recovery Act. The indirect
transfer of those properties in connection with the merger may require approval
by the NJDEP under ISRA. It is a condition to the completion of the merger that
it be determined ISRA does not apply to the transfers or that the parties
otherwise comply with the requirements of ISRA. The parties filed their
application for a letter of non-applicability on March 31, 2005.
The parties filed their application for approval with the
NYPSC on March 16, 2005.
On February 4, 2005, PECO and PSE&G made the initial
filing of their joint application for approval by the PPUC under the Public
Utility Code of Pennsylvania or a determination that Chapters 11, 22 and 28 are
not applicable to the merger. On March 30, 2005, the administrative law judge
in the proceeding before the PPUC issued a prehearing order establishing a
timetable for the regulatory approval process in Pennsylvania, which provides
for the administrative law judge to issue an initial decision on November 7,
2005. Thereafter, a decision of the full PPUC can be expected in
December 2005 or January 2006. The procedural schedule resulted from an
agreement among Exelon, PSEG, and numerous parties in the case, including the
PPUC Office of Trial Staff and the Pennsylvania Office of Consumer
Advocate.
As the owner of generation stations in the State of
Connecticut, PSEG Power Connecticut LLC, an indirect subsidiary of PSEG Power,
is subject to the jurisdiction of the Connecticut Siting Council under
Connecticut public utility laws and the Connecticut Department of Environmental
Protection under Connecticut environmental law. The indirect transfer of the
ownership interests in these entities may require the approval of the
Connecticut Department of Environmental Protection under Connecticut
environmental law and will require the approval of the Connecticut Siting
Council under Connecticut public utility laws. The parties received approval on
March 16, 2005 from the CSC.
The parties filed their application with the NRC on March 8,
2005.
On May 9, 2005, Exelon and PSEG filed a supplement to their
February 4 filing with FERC, responding to objections and concerns raised by
the intervenors. In the supplementary filing on May 9, Exelon and PSEG proposed
that if FERC approved the merger without an evidentiary hearing, Exelon and
PSEG would divest at least 1,100 MW of additional fossil fuel generation
capacity. Exelon and PSEG also proposed to invest approximately $25 million in
new transmission projects over five years if the merger is approved by FERC
without a hearing.
May 10, 2005 (11:45a) - FERC Status
The companies have announced a supplemental
filing with the FERC in an attempt to eliminate the need for a formal public
hearing, and thereby expedite the review process.
An EXC press release states the following:
"Provided that FERC approves the merger
without a hearing, the companies will divest additional capacity to address
some of the concerns raised."
While this is a savvy move by the companies, it remains
extremely likely that the considerable and coordinated opposition to the merger
will compel the FERC to allow for a public forum in its review. And once again,
even if a FERC hearing can be avoided, the New Jersey BPU presents an equal
obstacle in terms of timing for the transaction.
It continues to be expected that the deal will continue well
into next year, despite the companies' current efforts.
May 9, 2005 (10:55a) - Status Report
(Opposition)
As noted in the initial analysis of today's
CIN-DUK deal, this transaction is encountering
significant from a variety of third parties. More often than not, opposition to
mergers of this magnitude eventually fade out as the companies offer
concessions and/or assurances to address the most vocal opponents. However,
this does not seem to be occurring for this deal and in fact the opposition
continues to mount against the companies' plans to merger.
A Newark Star Ledger article published yesterday states the
following regarding this issue:
"A remarkably broad spectrum of interests
are lining up in hopes of scaling back or scuttling the agreement of energy
company Exelon to purchase Newark-based Public Service Enterprise Group.
"These filings come from an array of competitors,
representatives of large industrial customers, consumer advocates and state
agencies.
"In this case, opponents of the deal are massing their
efforts at the gates of the Federal Energy Regulatory Commission in Washington,
D.C. The commission, which oversees the energy industry, can call extensive
hearings and can force the companies to sell off assets or even cancel the
whole deal.
"The ratepayer advocate's office has been joined by the
Illinois Attorney General's office, the New Jersey Board of Utilities, and
others in either opposing the proposed merger or asking the federal agency to
hold extensive hearings on the deal. If the federal agency does hold hearings,
a step the two companies oppose, it would delay the closing of the deal until
the second half of 2006 or later.
With momentum at this point working decidedly against the
merger, the companies clearly need to launch a major public relations campaign,
as well as work incredibly hard behind the scenes, in order to begin shifting
opinion to at least a neutral point. This does not look like the type of deal
where time will gradually erode opposition. Regulators such as the FERC and
NJBPU are at this time hyper-sensitive to public opinion, especially where
energy interests are concerned. If the companies do not quickly act to address
the multitude of third-party opponents, the regulators will very likely side
with the opposition over the coming months.
April 27, 2005 (9:35a) - Additional
Divestitures Proposed
EXC stated yesterday that it would consider
additional power divestitures in order to appease the high volume of opposition
to this transaction. The statements were directed to the FERC, which the
companies are now hoping will approve the deal in June, which at this point
seems incredibly over-optimistic. As noted previously,
the FERC is likely to extend its review well into the third quarter of this
year, and perhaps beyond if public hearings are necessary. In a case of this
magnitude, hearings are very probable and would add further delays to the FERC
process.
April 19, 2005 (9:25a) - FERC Status
Philadelphia Gas Works and the City of
Philadelphia have announced their joint filing of a "Petition to
Intervene" in the FERC review of this merger. A press release states
the following:
"PGW is concerned about potential impact on
electric and natural gas prices. Gas and electric prices that rise above
already high rates would have a major impact on the City budget, on low-income
customers, on PGW and on economic development within the City.
"PGW has not yet reached a final conclusion with regard
to the proposed merger or the imposition of conditions that would make the
merger acceptable by protecting customers, except that it is critical that the
FERC and PUC proceed carefully and scrutinize the potential impact of the
merger."
the FERC has assigned docket number EC 05-43 for this
transaction. As noted on April 8, the New Jersey
BPU has also intervened in the case, and requested the FERC hold formal
hearings, which would substantially delay the FERC review if granted.
Regardless, the FERC review is currently expected to exceed the standard
four-month review period, as the volume of petitioners is extremely high for
this deal. The best-case scenario, which would include the denial of public
hearings, would be for a FERC decision in the third quarter of this year.
All current document and filings in the case may be accessed
by going to
this FERC search engine and entering the docket number and
date range in the appropriate fields.
April 15, 2005 (9:15a) - Preliminary Proxy
Statement Filed
The companies have filed an
amended
preliminary proxy statement with the SEC. Shareholder meeting dates and
record dates are not included in this proxy.
April 8, 2005 (2:30p) - Regulatory
Status
On April 5, the companies
issued an
update on the regulatory processes, which disclosed an HSR second request,
and projected timing for the NJBPU and PAPUC reviews. The relevant dates have
been posted above.
Not surprisingly, the companies are now indicating the deal
closing may be delayed due to the regulatory processes, which has been the
prediction of this publication since the merger announcement. As noted in the
following excerpts of the recent announcement, the FERC, NJBPU and PAPUC
reviews will be the key timing factors in the transaction:
"When Exelon and PSEG announced the merger
agreement on December 20, 2004, they indicated that they expected to close the
transaction in 12-15 months. The companies believe that this objective is
reasonably achievable assuming Exelon and PSEG are able to reach settlements
with interested parties that are approved by the PAPUC and NJBPU. If
settlements are not reached, the companies expect that, assuming all other
conditions to completion of the Merger are satisfied, the closing of the Merger
will occur early in the second quarter of 2006.
"The filings with the NRC, NJDEP and SEC under PUHCA
remain pending and currently are not expected to impact the anticipated closing
date of the Merger. In addition, Exelon and PSEG currently expect that the FERC
schedule will not impact the anticipated timing of closing of the Merger.
However, the NJBPU has intervened and requested that FERC hold a hearing on the
application relating to the Merger. If FERC were to hold hearings with respect
to the Merger the approval process would extend the anticipated closing into
mid-2006 or perhaps later."
March 28, 2005 (9:00a) - NJBPU Status
As expected, the two major public interest
groups in New Jersey (New Jersey Public Interest Research Group and New Jersey
Citizen Action and Public Citizen) have announced that they will formally
oppose the merger with the NJBPU this week.
This is standard procedure for these groups in New Jersey,
and represents the very beginning stages of what is sure to be an extremely
long negotiating process with both the public groups and the NJBPU.
March 24, 2005 (10:30a) - Initial
Application/Declaration Filed (PUHCA)
Procedure
Applicants request that the Commission issue a final order
granting the requested authority without an evidentiary hearing, as
expeditiously as feasible, but no later than December 15, 2005.
The Commission is respectfully requested to publish the
requisite notice under Rule 23 with respect to this Application as soon as
possible, such notice to specify a date by which comments must be entered and
such date being the date when an order of the Commission granting and
permitting this Application to become effective may be entered by the
Commission. The Applicants request that the Commission’s order be issued
as soon as the rules allow, and that there should not be a 30-day waiting
period between issuance of the Commission’s order and the date on which
the order is to become effective. The Applicants hereby waive a recommended
decision by a hearing officer or any other responsible officer of the
Commission and consent that the Division of Investment Management may assist in
the preparation of the Commission’s decision and/or order, unless the
Division opposes the matters proposed herein.
Generation Divestiture
The proposed Merger will increase the total capacity of
generation resources owned or controlled by Exelon. To ensure that the combined
company does not have market power in any relevant market, Exelon and PSEG have
proposed a comprehensive market power mitigation plan designed to address in
full FERC’s requirements for competitive markets. As part of the plan, the
companies have proposed the Generation Divestiture — to divest a number of
coal, mid-merit, and peaking generating plants and transfer control of the
output of a portion of their baseload nuclear generating capacity.
The Applicants propose to divest 1,000 MW of peaking
capacity and 1,900 MW of mid-merit capacity, including at least 550 MW of coal
capacity which (when combined with the proposed nuclear baseload mitigation
discussed below) should fully mitigate the market concentration in all
geographic markets. 14 The divestiture will occur either through a swap of
assets with owners of generation located outside of PJM or through an outright
sale of generating facilities or units within facilities. No more than half of
this capacity, i.e. 1,450 MW, will be sold to a single purchaser. In addition,
no capacity will be sold to a market participant with a greater than 5% share
of installed capacity in either PJM East or Expanded PJM. 15 Furthermore, no
more than 25% of this amount of capacity, i.e., 725 MW, will be sold in the
aggregate to market participants with 3% — 5% of the total installed
capacity in either the PJM East or the Expanded PJM markets.
Rather than divest their nuclear baseload units, the
Applicants have proposed to FERC to implement a “virtual divestiture”
whereby they will divest themselves, through sales of long-term firm energy
rights, of 2,600 MW of nuclear generating capacity in PJM East. Such
“virtual divestiture” will take the form of FERC jurisdictional
wholesale power transactions and will not constitute the disposition of
“utility assets” within the meaning of the Act, therefore, no
approval by the Commission is required for the virtual divestiture.
The Applicants have not yet identified the specific assets
that they intend to divest. However, they recognize that the FERC needs to be
assured that the divested generation will be located in PJM East to ensure that
FERC market concentration criteria will be met. Applicants also understand that
the Commission will need to approve any dispositions of “utility
assets” associated with the Generation Divestiture.
Regulatory Matters
New Jersey BPU
On February 4, 2005, Exelon and PSE&G made the initial filing of their
joint application with the NJBPU for approval of the indirect transfer of the
capital stock of PSE&G resulting from the Merger. While New Jersey law does
not specify a timetable for completion of the NJBPU’s review, Exelon and
PSE&G have asked that the NJBPU handle the matter on an expedited
basis.
New Jersey Department of Environmental Protection
Subsidiaries of PSEG own facilities in New Jersey that are industrial
establishments as defined in ISRA. The parties intend to file their application
with NJDEP for a letter of non-applicability under ISRA with respect to the
Merger, the Generation Restructuring and Merger related corporate
restructurings during the first quarter of 2005.
New York PSC
As an owner of generation facilities in the State of New York, a subsidiary of
PSEG Power is subject to the jurisdiction of the New York Public Service
Commission (“NYPSC”). Under Section 70 of the New York Public Service
Law, the NYPSC’s written consent is required in connection with the
indirect transfer of ownership interests in such subsidiary of PSEG Power in
connection with the Merger. Under Section 70 of the New York Public Service
Law, the NYPSC must determine whether the Merger is in the public interest. The
parties intend to file their application for approval with the NYPSC during the
first quarter of 2005.
Pennsylvania PUC
On February 4, 2005, PECO and PSE&G made the initial filing of their joint
application for approval by the PAPUC under the Public Utility Code of
Pennsylvania or a determination that Chapters 11, 22 and 28 are not applicable
to the Merger. 76 While the Public Utility Code of Pennsylvania does not
specify a timetable for completion of the PAPUC’s review, PECO and
PSE&G have asked that the PAPUC handle the matter on an expedited
basis.
Connecticut
As the owner of generation stations in the State of Connecticut, PSEG Power
Connecticut LLC, an indirect subsidiary of PSEG Power, is subject to the
jurisdiction of the Connecticut Siting Council (“CSC”) under
Connecticut public utility laws and the Connecticut Department of Environmental
Protection (“CDEP”) under Connecticut environmental law. The indirect
transfer of the ownership interests in these entities may require the approval
of the CDEP and will require the approval of the CSC. The parties filed their
application with the CSC on March 3, 2005 and intend to file their application
for approval with the CDEP during the first quarter of 2005
NRC
PSEG Power holds a NRC operating license for its Salem and Hope Creek nuclear
generating facilities. This license authorizes PSEG Power to own and/or operate
its nuclear generating facilities. The Atomic Energy Act provides that a
license may not be transferred or, in any manner disposed of, directly or
indirectly, through transfer of control of any license unless the NRC finds
that the transfer complies with the Atomic Energy Act and consents to the
transfer. Therefore, the consent of the NRC is required for the transfer of
control pursuant to the Merger of the license held by PSEG Power. The parties
have filed applications with the NRC.
FERC
On February 4, 2005 Exelon and PSEG made the initial filing of their
application for approval with FERC. Included in the filing was the
parties’ market concentration mitigation plan.80 The market concentration
mitigation plan contemplates (1) the divestiture of fossil fuel generating
facilities with 2,900 MW of generating capacity and (2) the transfer of control
of 2,600 MW of baseload nuclear capacity through either long-term firm baseload
energy sales contracts or an annual auction. Exelon and PSEG have not offered
to divest any nuclear generating facilities and do not anticipate doing
so.
HSR
Under the provisions of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, the Merger cannot be completed until both Exelon and PSEG
file a notification of the proposed transaction with the Antitrust Division of
the United States Department of Justice and the Federal Trade Commission
(“FTC”) and the specified waiting periods have expired or been
terminated. The parties have been informed that the Antitrust Division will
review the case and the FTC will not.
FCC
The Federal Communications Commission (“FCC”) must approve the
transfer of control of telecommunications permits or licenses. The
Communications Act of 1934 prohibits the transfer, assignment or disposal in
any manner of any license, or any rights thereunder, to any person without
authorization from the FCC. PSEG’s subsidiaries hold telecommunications
licenses and, together with the appropriate subsidiaries of Exelon, will seek
the necessary approvals from the FCC for the assignment of or transfer of
control over such licenses in connection with the Merger. Under the
Communications Act, the FCC will approve a transfer of control if it serves the
public interest, convenience, and necessity.
IRS
United States Treasury Regulations generally provide for the nonrecognition of
gain or loss for United States federal income tax purposes with respect to the
transfer of certain decommissioning trust funds maintained by nuclear power
plant owners in connection with the transfer of an interest in a nuclear power
plant. The precise application of these Treasury Regulations in the context of
the Merger, however, is not free from doubt. Therefore, Exelon and PSEG have
agreed to seek a ruling from the Internal Revenue Service confirming that no
gain or loss will be recognized for United States federal income tax purposes
with respect to the transfer of PSEG’s decommissioning trust funds as a
result of the Merger.
February 11, 2005 (9:00a) - Preliminary Proxy
Statement Filed
Shareholder Meeting Details
| |
PEG |
EXC |
| SH Date |
|
|
| Record Date |
|
|
| Proxy Mailing |
|
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Termination Date
June 20, 2006
Regulatory Matters
States
New Jersey
On February 4, 2005, Exelon and PSE&G made the initial filing of their
joint application with the NJBPU for approval of the indirect transfer of the
capital stock of PSE&G resulting from the merger. While New Jersey law does
not specify a timetable for completion of the NJBPU's review, Exelon and
PSE&G have asked that the NJBPU handle the matter on an expedited
basis.
Subsidiaries of PSEG own properties in New Jersey that may
be subject to the New Jersey Industrial Site Recovery Act. The indirect
transfer of those properties in connection with the merger may require approval
by the NJDEP under ISRA. It is a condition to the completion of the merger that
it be determined ISRA does not apply to the transfers or that the parties
otherwise comply with the requirements of ISRA. The parties intend to file
their application for a letter of non-applicability during the first quarter of
2005.
New York
As an owner of generation facilities in the State of New York, a subsidiary of
PSEG Power is subject to the jurisdiction of the New York Public Service
Commission. Under Section 70 of the New York Public Service Law, the NYPSC's
written consent is required in connection with the indirect transfer of
ownership interests in such subsidiary of PSEG Power in connection with the
merger. Under Section 70 of the New York Public Service Law, the NYPSC must
determine whether the merger is in the public interest. The parties intend to
file their application for approval with the NYPSC during the first quarter of
2005.
Pennsylvania
On February 4, 2005, PECO and PSE&G made the initial filing of their joint
application for approval by the PPUC under the Public Utility Code of
Pennsylvania or a determination that Chapters 11, 22 and 28 are not applicable
to the merger. While the Public Utility Code of Pennsylvania does not specify a
timetable for completion of the PPUC's review, PECO and PSE&G have asked
that the PPUC handle the matter on an expedited basis.
Connecticut
As the owner of generation stations in the State of Connecticut, PSEG Power
Connecticut LLC, an indirect subsidiary of PSEG Power, is subject to the
jurisdiction of the Connecticut Siting Council under Connecticut public utility
laws and the Connecticut Department of Environmental Protection under
Connecticut environmental law. The indirect transfer of the ownership interests
in these entities may require the approval of the Connecticut Department of
Environmental Protection under Connecticut environmental law and will require
the approval of the Connecticut Siting Council under Connecticut public utility
laws. The parties intend to file their application for approval with the CSC
during the first quarter of 2005.
SEC PUHCA
Exelon is a registered holding company under PUHCA subject to the jurisdiction
of the SEC thereunder. Exelon's acquisition of 100% of the common stock of PSEG
will require approval by the SEC under Sections 9 and 10 of PUHCA.
NRC
The parties intend to file their application with the NRC during the first
quarter of 2005.
FERC
On February 4, 2005 Exelon and PSEG made the initial filing of their
application for approval with FERC. Included in the filing was the parties'
market concentration mitigation plan. The market concentration mitigation plan
contemplates (1) the divestiture of fossil fuel generating facilities with
2,900 MW of generating capacity and (2) the transfer of control of 2,600 MW of
baseload nuclear capacity through either long-term firm baseload energy sales
contracts or an annual auction. Exelon and PSEG have not offered to divest any
nuclear generating facilities and do not anticipate doing so.
HSR
Under the provisions of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, the merger cannot be completed until both Exelon and PSEG
file a notification of the proposed transaction with the Antitrust Division of
the United States Department of Justice and the Federal Trade Commission and
the specified waiting periods have expired or been terminated. The parties have
been informed that the Antitrust Division will review the case and FTC will
not.
IRS
United States Treasury regulations generally provide for the nonrecognition of
gain or loss for United States federal income tax purposes with respect to the
transfer of certain decommissioning trust funds maintained by nuclear power
plant owners in connection with the transfer of an interest in a nuclear power
plant. The precise application of these Treasury Regulations in the context of
the merger, however, is not free from doubt. Therefore, Exelon and PSEG have
agreed to seek a ruling from the IRS confirming that no gain or loss will be
recognized for United States federal income tax purposes with respect to the
transfer of PSEG's decommissioning trust funds as a result of the
merger.
February 7, 2005 (9:45a) - Regulatory
Information
From an
EXC press release:
"Exelon Corporation (NYSE: EXC) and Public
Service Enterprise Group Incorporated (NYSE: PEG) announced today that they
have made four major regulatory filings relating to their planned merger. The
filings include applications to the Federal Energy Regulatory Commission
(FERC), the New Jersey Board of Public Utilities (NJBPU), and the Pennsylvania
Public Utility Commission (PAPUC). Exelon also filed a notice detailing the
companies’ plans with the Illinois Commerce Commission (ICC).
"In addition to the above filings, the following
agencies will also have a role in reviewing aspects of the transaction: U.S.
Department of Justice, Nuclear Regulatory Commission, Internal Revenue Service,
Federal Communications Commission, Securities and Exchange Commission; New
Jersey Department of Environmental Protection; New York Public Service
Commission; Connecticut Siting Council; and the Connecticut Department of
Environmental Protection. The scope of the required reviews varies widely, but
the reviews are expected to be completed in a timely manner."
February 2, 2005 (8:45a) - Regulatory
Information
From a
Form 425 filed
with the SEC
Q. What are the key milestones for next steps
for the merger? When will the transition team be named?
A. The next steps in this merger include regulatory filings
with the BPU and the FERC. PSEG hopes to have completed both sets of filings
within the next several weeks. More information will be made available as
filings are completed. Another milestone will be the naming of the rest of the
transition team. It is expected that the team members will be announced within
the next several weeks, as well.
Q. Do you really expect that this transaction will take 12
months? How long did it take from the time they acquired PECO before employees
were impacted?
A. It was initially announced that the transaction would
take 12-15 months to complete. While the regulatory process is somewhat
unpredictable, both companies are working together to set up timelines and
processes to ensure that we can meet this target. If past history serves as a
guide, in September 1999, Commonwealth Edison's parent company, Unicom,
announced its intent to merge with PECO to form Exelon Corp. This merger was
completed in October 2000 - 13 months later.
Q. For FERC approval, is it true that the company will have
to sell off thousands of megawatts of fossil assets? If so, are all of the gen
stations in both companies up for potential sale or just those in the
northeast? PJM only? Illinois? Any of the above? When will the proposal to FERC
be made public? In the event that the need arises to sell off any of the
company's fossil units due to regulatory compliance issues, what is the
protocol for the employees of those locations? Do the employees accompany the
asset with the sale or are they retained by the company for reassignment? Is
there is a planned sale date?
A. Exelon Chairman and CEO John Rowe indicated - both when
the merger was announced and in subsequent comments - that there may be a need
to respond to market power concerns by selling some fossil assets and/or
auctioning a certain amount of output from nuclear assets (nuclear output, not
the plants themselves). It is our understanding that the merger approval filing
with the FERC, which should occur around the end of January, will contain a
market power mitigation plan.
January 27, 2005 (9:15a) - "Exelon seeks
fast approval of merger"
Abstracted from a
Star-Ledger
(NJ) article:
"Exelon, the Chicago energy giant that is
acquiring Newark- based Public Service Enterprise Group, said yesterday it is
willing to share merger-related savings with New Jersey ratepayers if the sale
wins expedited approval from state regulators.
"Exelon, which agreed last month to buy the state's
largest electric and gas utility in a $12 billion deal, hopes to win approval
from state and federal regulators within 12 to 15 months. However, the head of
the state Board of Public Utilities, Jeanne Fox, has said the process could
take up to two years.
"In a conference call with analysts yesterday, Exelon
Chief Executive John Rowe, who has met with Fox twice since the deal was
announced, conceded the burden was on the two companies to demonstrate the
merger was in the best interests of the state. PSEG's utility unit, Public
Service Electric & Gas, has 2 million customers.
"To further expedite regulatory approval, Exelon has
retained former New Jersey Gov. Jim Florio as an adviser. Rowe did not specify
exactly what role Florio will play or how much he will be paid.
"To win approval, Exelon and PSEG would likely agree to
freeze or even lower rates for electric and gas customers in New Jersey for
several years. The extent of a rate roll-back or the length of a freeze would
depend on how much savings the companies realize from the merger.
"In addition to the state BPU, the two companies must
win approval from the Federal Energy Regulatory Commission, the Securities and
Exchange Commission and Pennsylvania utility officials. Rowe said the company
expects to begin making the required regulatory filings early next
month."
January 18, 2005 (10:30a) - "Halt nuclear
merger, whistleblower asserts"
Abstracted from a
Gloucester County
Times (NJ) article:
"A whistleblower at the Salem nuclear power
complex made a last-ditch call Monday for federal officials to delay the
planned sale of the facility.
"The plea came Monday as owner PSEG Nuclear entered a
management contract with Exelon Energy of Illinois, giving Exelon daily
oversight of the three reactors at the Artificial Island complex in Lower
Alloways Creek. A planned merger of the two companies is pending before state
regulators.
"Environmentalists oppose the two companies' intent to
operate the Hope Creek reactor for 18 months without fixing a damaged pump.
Critics say the pump poses a danger.
"Also on Monday, activists called for Acting Gov.
Richard Codey to direct the state Board of Public Utilities to halt the merger
-- at least until the corporations fix the pump.
"Members of the New Jersey Public Interest Research
Group said that both companies have checkered pasts when it comes to nuclear
safety. Although the state has no regulatory power over the nuclear operation,
officials with the group suggested that economic concerns should halt the
merger."
January 13, 2005 (8:20a) - FERC Status /
Comment
According to published reports, the companies
will meet with the FERC beginning today, for preliminary discussions involving
the review process for this transaction. FERC Chairman Patrick Wood as been
quoted as saying the divestitures are very likely and that the current goal is
to complete the merger review in 60 days.
Given that the FERC rarely, if ever, completes merger
reviews in less than three months (let alone two), Wood's prediction seems
unusually optimistic. This deal is certain to draw a high volume of third-party
interest, and therefore a formal public hearing (perhaps multiple hearings) are
virtually certain to be required. If this is the case, the FERC review can be
expected to last its standard four months, give or take a few weeks.
The very fact that the companies are holding preliminary
discussions with regulators indicates the overall complexity of this
combination, and would seem to foreshadow some extremely long review processes
from the lead regulators such as the FERC and the
New Jersey
BPU.
This publication continues to see the projected time frame
for the deal as too enthusiastic by the companies. Completion within 12 months
is not expected to occur, and the transaction could very easily go beyond the
15 months the companies have suggested as the 'worst-case
scenario."
December 27, 2004 (9:40a) - "Merged
utility would be less accountable to state"
Abstracted from an
Asbury Park Press
article:
"There are no assurances that a massive,
consolidated utility will be of any benefit to the public. The New Jersey
Public Interest Research Group opposes the merger, as a utility of this size
will be far less accountable to the state of New Jersey to provide the
cleanest, safest, most affordable electricity to residents.
"There is no evidence that the merger will benefit
ratepayers. In the short term, there will be costs associated with the merger,
and it is possible that the companies will pass them along to
ratepayers.
"However, NJPIRG is even more concerned with the
merger's long-term effects. Deregulation was sold on the merits of electric
competition, and that competition continues to decrease as energy consolidation
continues to occur around the country. Currently, New Jersey runs an auction
where utilities buy power from the lowest priced power generation. This leaves
consumers vulnerable to the prices of the biggest power companies down the
road.
"The merger also threatens to stall New Jersey's
progress in promoting the development of clean, renewable energy such as wind
and solar power. Exelon and PSEG have a history of generating power from dirty
and dangerous sources. If the two companies merged, their total energy
generation would be 45 percent nuclear, 50.5 percent fossil fuel and 3.5
percent hydroelectric.
"PSEG and Exelon are also co-owners of the Salem 1 and
2 nuclear reactors in South Jersey. The plant has been cited numerous times by
the Nuclear Regulatory Commission for poor management and lax maintenance.
Making matters worse, Exelon talks openly about building new nuclear plants,
even though there are no safe storage options for nuclear waste.
"We need energy companies that are accountable to New
Jersey to provide clean, safe and affordable electricity. The merger between
Exelon and PSEG will leave consumers vulnerable to an energy future that is
more costly to our health and safety, the environment and our
wallets."
December 20, 2004 (1:05p) - Initial
Analysis
The timing red flag for this deal is the
New Jersey
BPU and its extremely active and influential consumer group, the
NJ Rate Payer Advocate.
In a deal of this magnitude, the RPA is certain to play a major role in the
settlement agreement with the BPU, and will very likely cause delays in the
process. Although the recent NUI-AGL deal sailed through
the NJBPU review, most major utility transactions encounter lengthy review with
this regulator, as seen below:
PEG's operation in New Jersey are quite substantial, as
noted in the company's annual report:
PSE&G provides electric and gas service in
areas of New Jersey in which approximately 5.5 million people, about 70% of
the State’s population, reside. PSE&G’s electric and gas
service area is a corridor of approximately 2,600 square miles running
diagonally across New Jersey from Bergen County in the northeast to an area
below the city of Camden in the southwest. The greater portion of this area is
served with both electricity and gas, but some parts are served with
electricity only and other parts with gas only. This heavily populated,
commercialized and industrialized territory encompasses most of New
Jersey’s largest municipalities, including its six largest
cities—Newark, Jersey City, Paterson, Elizabeth, Trenton and
Camden—in addition to approximately 300 suburban and rural
communities. This service territory contains a diversified mix of commerce and
industry, including major facilities of many nationally prominent corporations.
PSE&G’s load requirements are almost evenly split among residential,
commercial and industrial customers. PSE&G believes that it has all the
franchises (including consents) necessary for its electric and gas distribution
operations in the territory it serves. Such franchise rights are not exclusive.
These operations virtually guarantee a protracted BPU
review, which will very likely result in quite a few concessions from the
companies before obtaining final consent. Thus, it seems overly-optimistic at
this point to expect BPU approval, followed by PUHCA consent, within a 12-month
time frame. The 16-month time frame noted by the companies seems much more
likely and could very easily exceed that length, as did the CIV-POM deal in
2002.
In short, the current projection is for a close at the
earliest in the latter part of the first quarter of 2006, with slippage
very likely into the second quarter.
December 20, 2004 (12:15p) - Conf Call
Details
Exelon and PSEG will hold a teleconference and
webcast for the investment community and the media today at 1:00 PM EST. The
dial in numbers for the call will be (800) 289-0572 (domestic) or
(913)-981-5543 (international). It can also be accessed through both
companies’ websites at: www.exeloncorp.com and www.pseg.com.
A telephonic replay of the call will be available until
December 28, 2004. The replay numbers are (888) 203-1112 and (719)
457-0820. The access code is 840128.
Exelon and PSEG will also host a press conference today,
December 20, 2004 at 2:30 PM EST at PSEG’s headquarters, located at 80
Park Plaza, Rooms 206-207, Newark, NJ. The press conference will also be
available by teleconference and webcast. The dial in numbers for the press call
will be (800) 406-5356 (domestic) or (913) 981-5572
(international). A replay of this call will be available by dialing (888)
203-1112 (domestic) or (719) 457-0820 (international) access code:
175664.
Webcast
Link
December 20, 2004 (12:15p) - Timelines - Recent
Utility Transactions
| Transaction |
Length
(Days) |
$ |
HSR |
SEC |
SEC
(PUHCA) |
FERC |
Misc |
| NUI Corp (NUI) - AGL Resources
(ATG) |
139 |
691m |
30 |
28 |
94 |
n/a |
NJ
103
VA
81
MD
69
|
| Amer Water Works (AWK) - RWE AG
(DAX: RWE) |
481 |
4.6b |
30 |
27 |
n/a |
n/a |
States (12)
See File
|
| Seabrook Consortium - FPL
Group, Inc. (FPL) |
201 |
837m |
> 30 |
n/a |
n/a |
n/a |
NRC
165
IRS
150
States
NJ, DC, MD, DE, VA, PA
(See File)
|
| Lattice Group PLC - National
Grid Group PLC (NGG) |
183 |
21.7b |
n/a |
n/a |
131 |
n/a |
|
| Conectiv (CIV) - Potomac Electric
Power (POM) |
536 |
2.2b |
30 |
34 |
370 |
136 |
States
NJ, DC, MD, DE, VA, PA
(See File)
FCC
155
|
| PowerGen PLC (PWG) - E.ON AG
(EON) |
449 |
7.4b |
30 |
n/a |
282 |
122 |
Exon-Florio
34
EU / OFGEM
39
|
| RGS Energy Group (RGS) - Energy
East (EAS) |
484 |
1.4b |
30 |
40 |
374 |
133 |
|
| NRG Energy (NRG) - Xcel Energy
(XEL) |
80 |
|
|
24 |
77 |
|
|
| Orion Power (ORN) - Reliant
Resources (RRI) |
146 |
2.9b |
62
(Re-filed) |
31 |
|
115 |
NY PSC
56
|
| Niagara Mohawk (NMK) - National
Grid (NGG) |
514 |
3b |
>30 |
|
344 |
122 |
NY PSC
316
VT PSC
41
Exon-Florio
30
UK OFT
30
Virginia
131
Kentucky
33
|
| Aquila, Inc. (ILA) - UtiliCorp
United Inc. (UCU)$ |
62 |
|
n/a |
|
n/a |
36
(shares only) |
SEC
24
|
| GPU, Inc. (GPU) - FirstEnergy
Corp. (FE) |
455 |
11.9b |
30 |
|
373 |
126 |
NJ
NY
PA
NRC
160+/-
FCC
90+/-
|
| IPALCO Enterprises (IPL) - AES
(AES) |
254 |
2.15b |
10 |
|
148 |
115 |
IN
|
| Columbia Energy (CG) - NiSource
(NI) |
248 |
8.5b |
30 |
|
200 |
106 |
PA
VA
KY
ME
|
| Unicom Corp (UCM) - PECO Energy Co
(PE) |
394 |
31.8b |
|
|
217 |
153 |
NRC
295
|
| New Century Energies (NCE) -
Northern States (NSP) |
513 |
4.8b |
30 |
|
198 |
140 |
TX
NM
WY
CO
ND
MN
AZ
KS
|
|