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As Filed with the Securities and
Exchange Commission on ______, 1997 File No. 70-_____
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM U-1
APPLICATION-DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
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CONECTIV, INC. ATLANTIC CITY ELECTRIC COMPANY
DELMARVA POWER & LIGHT COMPANY ATLANTIC ENERGY ENTERPRISES, INC.
SUPPORT CONECTIV, INC. and SUBSIDIARIES
800 King Street 6801 Black Horse Pike
Wilmington, DE 19899-0231 Egg Harbor Township, NJ 08234
DELMARVA CAPITAL INVESTMENTS, INC.
and SUBSIDIARIES
CONECTIV SERVICES, INC.
CONECTIV COMMUNICATIONS, INC.
Christiana Building
University Plaza
P.O. Box 6066
Newark, DE 19714-6066
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(Names of companies filing this statement and addresses of principal
executive offices)
CONECTIV, INC.
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(Name of top registered holding company parent)
Barbara S. Graham Michael J. Barron
President and Secretary Vice President and Treasurer
Conectiv, Inc. Conectiv, Inc.
800 King Street 6801 Black Horse Pike
Wilmington, Delaware 19899 Egg Harbor Township, NJ 08234
(Names and addresses of agents for service)
The Commission is requested to send copies of all notices, orders and
communications in connection with this Application-Declaration to:
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Dale G. Stoodley, Esq. James E. Franklin II, Esq. Joyce Koria Hayes,
Delmarva Power & Light Company Atlantic Energy, Inc. Esq.
800 King Street 6801 Black Horse Pike 7 Graham Court
Wilmington, DE 19899 Egg Harbor Township, NJ 08234 Newark, DE 19711
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ITEM 1. DESCRIPTION OF PROPOSED TRANSACTION
(a) Furnish a reasonably detailed and precise description of the proposed
transaction, including a statement of the reasons why it is desired to
consummate the transaction and the anticipated effect thereof. If the
transaction is part of a general program, describe the program and its relation
to the proposed transaction.
A. General
Conectiv, Inc. ("Conectiv")1, a Delaware corporation, has previously
filed an Application-Declaration on Form U-1 with the U. S. Securities and
Exchange Commission (the "Commission") under Section 9(a)(2) of the Public
Utility Holding Company Act of 1935, as amended (the "Act"), seeking approvals
relating to the proposed acquisition by Conectiv of securities of Delmarva Power
& Light Company ("Delmarva"), a Delaware and Virginia utility corporation, and
merger into Conectiv of Atlantic Energy, Inc.("Atlantic"), a New Jersey
corporation and parent of Atlantic City Electric Company ("Atlantic Electric"),
a New Jersey utility corporation (collectively, these transactions are referred
to as the "Merger"), and for other related transactions including the formation
of Support Conectiv as a subsidiary service company in accordance with the
provisions of Rule 88 under the Act (File No. 70-9069) (the "Merger U-1")2.
Conectiv will register as a holding company under the Act upon consummation of
the
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1 To be renamed Conectiv subsequent to merger.
2 No authority to issue debt or equity securities is sought in the
Merger U-1 except for the authority for Conectiv to issue one share of Conectiv
common stock for each share of Delmarva common stock outstanding on the
effective date and .75 of a share of common stock and .125 of a share of Class A
common stock for each share of Atlantic common stock outstanding on the
effective date of the Merger and for Support Conectiv to issue up to 3,000
shares of its common stock to Conectiv.
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transactions contemplated in the Merger U-1. Each of the entities that will
be directly and indirectly owned subsidiaries of Conectiv upon consummation of
the transactions described in the Merger U-1 is referred to herein individually
as a "Subsidiary" and collectively as "Subsidiaries". The terms "Subsidiary" and
"Subsidiaries" shall also include other direct or indirect subsidiaries that
Conectiv may form after the Merger with either the approval of the Commission,
pursuant to the Rule 58 exemption or pursuant to Section 34 of the Act. Thus,
future Rule 58 and exempt telecommunication companies ("ETCs") are included in
the term "Subsidiaries", but exempt wholesale generators ("EWGs") and foreign
utility companies ("FUCOs") are not. Conectiv and the Subsidiaries are sometimes
hereinafter collectively referred to as the "Conectiv System" or as the
"Applicants".
In order to ensure that the Conectiv System is able to meet its capital
requirements immediately following registration and plan its future financing,
the Applicants hereby request authorization for financing transactions for the
period beginning with the effective date of an order issued pursuant to this
filing through December 31, 2000 (the "Authorization Period").
B. Description of the Parties to the Transaction
Following the consummation of the Merger, Conectiv will have two
operating utility subsidiaries (the "Utility Subsidiaries"): Delmarva, an
electric and gas utility company providing gas and electric service in Delaware,
and electric service in ten primarily Eastern Shore counties in Maryland and the
Eastern Shore area of Virginia; and Atlantic Electric, an electric utility
company providing service in the southern part of New Jersey. A description of
Conectiv's other
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Subsidiaries is set forth in the Merger U-1 and the exhibits thereto. All of
Conectiv's direct and indirect Subsidiaries, other than the Utility
Subsidiaries, are herein called the "Non-Utility Subsidiaries".
C. Overview of Financing Request
The Applicants hereby request authorization to engage in the financing
transactions set forth herein during the Authorization Period. The approval by
the Commission of this Application-Declaration (the "Application") will give the
Applicants flexibility that will allow them to respond quickly and efficiently
to their financing needs and to changes in market conditions, which, in turn,
should make them more competitive with other energy companies, including those
not subject to the jurisdiction of the Act. At the same time, the Commission
will continue to have oversight over financings by the Applicants through the
regular disclosures under the Securities Act of 1933, as amended (the "1933
Act"), and the Securities Exchange Act of 1934, as amended (the "1934 Act"), and
through the notification process established pursuant to this Application. This
request for authority to issue a variety of securities over a period of time is
consistent with existing Commission precedent. See, e.g., The Columbia Gas
System, Inc., et al., HCAR No. 26634 (December 23, 1996); Consolidated Natural
Gas Company, HCAR No. 26500, File 70-8667 (March 28, 1996); Gulf States
Utilities Company, HCAR No. 26451 (January 16, 1996). The request for Conectiv
to issue long-term debt is consistent with precedent noted in Regulation of
Public Utility Holding Companies, the report of The Division of Investment
Management dated
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June 1995 at page 44 and with the Commission order dated August 23, 1996 in
General Public Utilities Corporation, HCAR No. 26559.
The Applicants also hereby request authorization to deviate from the
Commission's statements of policy with respect to first mortgage bonds and
preferred stock in connection with the securities proposed to be issued and sold
pursuant to this Application or pursuant to applicable exemption under the Act.
The authorizations requested herein relate to (i)(a) external issuances
by Conectiv of common stock, long-term debt, short-term debt, and other
securities for cash and the issuance of common stock by Conectiv in
consideration for the acquisition by Conectiv or a Non-Utility Subsidiary of
securities acquired pursuant to an order issued in connection with the Merger
U-1 or pursuant to Rule 58 or Section 34 and (b) the entering into by Conectiv
of transactions to manage interest rate risk ("hedging transactions"); (ii)
issuances of debt securities (including commercial paper) and the entering into
of hedging transactions by the Utility Subsidiaries to the extent not exempt
pursuant to Rule 52; (iii) issuances by Non-Utility Subsidiaries of debt
securities which are not exempt pursuant to Rule 52; (iv) the establishment of a
money pool (the "Money Pool") and the issuance of intrasystem guarantees by
Conectiv and the Non-Utility Subsidiaries on behalf of Subsidiaries; and (v)(a)
the ability of wholly-owned Subsidiaries to alter their capital stock to engage
in financing with their parent company and to engage in a reverse stock split to
reduce franchise taxes, subject in the case of Utility Subsidiaries to the
approval of a state utility commission in a state where the utility is
incorporated and doing business and (b) the
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ability of Non-Utility Subsidiaries to pay dividends out of capital or unearned
surplus; (vi) the formation of financing entities and the issuance by such
entities of securities otherwise authorized to be issued and sold pursuant to
this Application or pursuant to applicable exemptions under the Act, including
intrasystem guarantees of such securities and the retention of existing
financing entities; and (vii) the establishment of intermediary subsidiaries
which will invest in EWGs and FUCOs and the use of proceeds of the financings
listed above for such investments.
D. Parameters for Financing Authorization
Authorization is requested herein to engage in certain financing
transactions during the Authorization Period for which the specific terms and
conditions are not at this time known, and which may not be covered by Rule 52,
without further prior approval by the Commission. The following general terms
will be applicable where appropriate to the financing transactions requested to
be authorized hereby:
1. Effective Cost of Money on Borrowings
The effective cost of money on long-term debt borrowings occurring
pursuant to the authorizations granted under the Application will not exceed at
issuance 300 basis points over comparable term U.S. Treasury securities and the
effective cost of money on short-term borrowings pursuant to authorizations
granted under the Application will not exceed at issuance 300 basis points over
the comparable term London Interbank Offered Rate ("LIBOR").
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2. Maturity of Debt
The maturity of indebtedness will not exceed 50 years.
3. Issuance Expenses
The underwriting fees, commissions, or other similar remuneration paid
in connection with the non-competitive issue, sale or distribution of a security
pursuant to the Application will not exceed 5% of the principal or total amount
of the financing.
4. Use of Proceeds
The proceeds from the sale of securities in external financing
transactions will be used for general and corporate purposes including (i) the
financing, in part, of capital expenditures of the Conectiv System, (ii) the
financing of working capital requirements of the Conectiv System, (iii) the
acquisition, retirement, or redemption pursuant to Rule 42 of securities
previously issued by Conectiv or the Subsidiaries without the need for prior
Commission approval, and (iv) other lawful purposes including direct or indirect
investment in companies authorized under the Merger U-1 and in Rule 58
companies, ETCs, EWGs and FUCOs.
The authorization requested herein to engage in external or intrasystem
financing without additional Commission approval does not apply in the case of
any financing, the proceeds of which will be used to invest in an EWG or a FUCO,
unless such financing is in compliance with Rules 53 and 54 (as described below)
at the time of the financing. The Applicants represent that no such financing
proceeds will be used to acquire a new subsidiary unless such financing is
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consummated in accordance with an order of the Commission or an available
exemption under the Act.
Conectiv represents that, at all times during the Authorization Period,
its common equity (as reflected in its most recent Form 10-K or Form 10-Q filed
with the Commission pursuant to the 1934 Act) will be at least 30% of its
consolidated capitalization as adjusted to reflect subsequent events that affect
capitalization.
E. Description of Specific Types of Financing
1. Conectiv External Financing
Conectiv requests authorization to obtain funds externally through sales
of common stock and long-term and short-term debt securities. With respect to
common stock, Conectiv also requests authority to issue common stock to third
parties in consideration for the acquisition by Conectiv or a Non-Utility
Subsidiary of equity or debt securities of a company being acquired pursuant to
Rule 58, Section 34 of the Act or pursuant to order issued in connection with
the Merger U-1. In addition, Conectiv seeks the flexibility to enter into
certain hedging transactions to manage interest rate risk.
a. Common Stock.
The aggregate amount of financing obtained by Conectiv during the
Authorization Period from the issuance and sale of common stock, $0.01 par value
per share, as described in this section, shall not exceed, when combined with
issuances of long-term debt pursuant to this
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Application, $500 million for the uses set forth above. In addition,
authorization is requested to issue up to 10 million shares of Conectiv common
stock (or options to purchase such shares) pursuant to benefit plans and the
dividend reinvestment plan described below during the ten year period from the
date of the order of the Commission under this Application. The number of shares
to be issued pursuant to the benefit plans will not exceed 5 million. The shares
of common stock to be issued in connection with acquisitions will not exceed an
aggregate market value of $100 million.
i. General
Subject to the foregoing, Conectiv may issue and sell common stock or,
if pursuant to employee benefit plans, issue options exercisable for common
stock and common stock upon the exercise of options. Conectiv may also buy back
shares of such stock or such options during the Authorization Period in
accordance with Rule 42.
Common stock financings may be issued and sold pursuant to underwriting
agreements of a type generally standard in the industry. Public distributions
may be pursuant to private negotiation with underwriters, dealers or agents as
discussed below or effected through competitive bidding among underwriters. In
addition, sales may be made through private placements or other non-public
offerings to one or more persons. All such common stock sales will be at rates
or prices and under conditions negotiated or based upon, or otherwise determined
by, competitive capital markets.
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Conectiv may sell common stock covered by this Application in any of the
following ways: (i) through underwriters or dealers; (ii) through agents; (iii)
directly to a limited number of purchasers or a single purchaser; or (iv)
directly to employees (or to trusts established for their benefit) and other
shareholders through its employee benefit plans or its dividend reinvestment
plan. If underwriters are used in the sale of the securities, such securities
will be acquired by the underwriters for their own account and may be resold
from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale. The securities may be offered to the public either through
underwriting syndicates (which may be represented by a managing underwriter or
underwriters designated by Conectiv) or directly by one or more underwriters
acting alone. The securities may be sold directly by Conectiv or through agents
designated by Conectiv from time to time. If dealers are utilized in the sale of
any of the securities, Conectiv will sell such securities to the dealers as
principals. Any dealer may then resell such securities to the public at varying
prices to be determined by such dealer at the time of resale. If common stock is
being sold in an underwritten offering, Conectiv may grant the underwriters
thereof a "green shoe" option permitting the purchase from Conectiv at the same
price additional shares then being offered solely for the purpose of covering
over-allotments.
ii. Benefit Plans
The number of shares of Conectiv common stock to be issued and sold
under benefit plans pursuant to the authority requested herein shall be subject
to the limitation set forth in Item
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1.E.1.a. above, relating to benefit plans and the dividend reinvestment plan. As
described in the Merger U-1, it is intended that the Conectiv Incentive
Compensation Plan will replace long-term incentive plans currently in place at
Delmarva and Atlantic. Conectiv may adopt one or more other plans which will
provide for the issuance and/or sale of Conectiv common stock, stock options and
stock awards to a group which has not yet been determined but may include
directors, officers and employees. Conectiv may issue shares of its common stock
under the authorization, and within the limitations, set forth herein in order
to satisfy its obligations under such plans. To the extent that, following
consummation of the Merger, Conectiv modifies an existing Delmarva or Atlantic
plan or adopts its own employee benefit plans that provide for the issuance of
Conectiv common stock or options or awards for Conectiv common stock, Conectiv
may issue shares of its common stock or options or awards for such shares under
the authorization and within the limitations set forth herein, provided that
Conectiv will provide the Commission with a summary of the terms of any such
Conectiv employee benefit plan prior to issuing any shares or options or awards
pursuant to any authorization provided in this proceeding. Shares of common
stock for use under any employee benefit plan may either be newly issued shares,
treasury shares, or shares purchased in the open market.
iii. Dividend Reinvestment Plan
The number of shares of Conectiv common stock to be issued and sold
under the dividend reinvestment plan pursuant to the authority requested herein
shall be subject to the limitation set forth in Item 1.E.1.a. above, relating to
benefit plans and the dividend reinvestment plan.
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Concurrent with the Merger, a Conectiv Dividend Reinvestment Plan substantially
in the form attached hereto as Exhibit B-5 will become operational. Under the
Conectiv Dividend Reinvestment Plan, shares of common stock may be issued to
stockholders reinvesting in the plan or to any individual making optional cash
investments. Conectiv may issue and/or sell shares of its common stock under the
authorization, and within the limitations set forth herein, in connection with
the operation of the Conectiv Dividend Reinvestment Plan. Shares of common stock
for use under the plan may either be newly issued shares, treasury shares or
shares purchased in the open market. Conectiv hereby seeks authority for the
issuance and sale of its shares in accordance with the Conectiv Dividend
Reinvestment Plan.
iv. Acquisitions
Under the terms of the Merger U-1, Rule 58 and Section 34 of the Act,
Conectiv is authorized to acquire securities of companies engaged in
energy-related consumer services, "energy related businesses" as described in
Rule 58 and ETCs. Historically, similar acquisitions have occasionally involved
the exchange of parent company stock for securities of the company being
acquired in order to provide the seller with certain tax advantages. These
transactions are individually negotiated. The Conectiv common stock to be
exchanged may be purchased on the open market pursuant to Rule 42, treasury
shares or may be original issue. Original issue stock may be registered under
the 1933 Act, but at present it is expected that the common stock would not be
registered and the common stock acquired by the third parties would be subject
to resale
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restrictions pursuant to Rule 144 under the 1933 Act. Such transactions would
not occur while a public offering is being made.
The ability to offer stock as consideration makes a transaction more
economical for Conectiv as well as the seller of the business. Therefore,
Conectiv requests authorization to issue common stock with an aggregate market
value of up to $100 million in consideration for the acquisition by Conectiv or
a Non-Utility Subsidiary of securities of a business, the acquisition of which
is exempt under Rule 58 or Section 34 of the Act, or which has been authorized
in the Merger U-1. The Conectiv common stock would be valued at market value
based upon the closing price on the day before closing of the sale or based upon
average high and low prices for a period prior to the closing of the sale as
negotiated by the parties. From the perspective of the Commission, the use of
stock as consideration valued at market value is no different than a sale of
common stock on the open market and use of the proceeds to acquire securities,
the acquisition of which is otherwise authorized.
b. Long-Term Debt
Conectiv requests Commission authorization during the Authorization
Period to issue long-term debt securities in an amount, when combined with
issuances of common stock (other than for benefit plans or the Conectiv Dividend
Reinvestment Plan) under this Application, not to exceed $500 million. Such
long-term debt securities would include notes, debentures and medium-term notes
issued under an indenture (the "Conectiv Indenture") and/or borrowings from
banks and other financial institutions under terms described below. Any
long-term debt security
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would have such designation, aggregate principal amount, maturity, interest
rate(s) or methods of determining the same, terms of payment of interest,
redemption provisions, non-refunding provisions, sinking fund terms and other
terms and conditions as Conectiv may determine at the time of issuance.
i. Terms of Indenture
The Conectiv Indenture will permit the issuance of a wide variety of
unsecured debt securities in one or more series. Securities issuable can include
notes, debentures, medium-term notes, securities having a low or zero coupon
(which may be issued with original issue discount), securities as to which
payments of interest or principal are based on a formula or index, and
securities on which payment of interest or principal are denominated in a
foreign currency or currencies. The terms of a specific issue of securities,
including any applicable negative covenants, will be set under the Conectiv
Indenture by a supplemental indenture.
The Conectiv Indenture contains numerous variable terms, such as the
principal amount, interest rate, redemption terms, denominations, events of
default, etc., which may be included as part of the terms of a new issue, and
permits other terms to be included or excluded in the supplemental indenture
authorizing a particular series of securities. In theory, any combination of the
variable terms could be included in a single series of securities which, under
current practice, would be called "notes", "debentures" or "medium-term notes".
The Conectiv Indenture also permits any series of securities to be issued either
in certificated form or in "global" form (i.e.,
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transferable only by book-entry on the records of a securities depository such
as The Depository Trust Company).
The Conectiv Indenture contains no negative covenants or restrictions.
Any covenants or restrictions negotiated at the time of issuance will be
included in a supplemental indenture establishing a particular security. The
Conectiv Indenture contains the following event of default provisions: (i)
defaults in payment of the Conectiv Indenture securities; (ii) failures to
comply with covenants; and (iii) certain events of insolvency with respect to
Conectiv, subject, as applicable, to customary grace periods.
Conectiv may, at any time, terminate (i) all its obligations under the
Conectiv Indenture securities and the Conectiv Indenture ("Legal Defeasance
Option") or (ii) its obligations to comply with certain restrictive covenants,
provided that Conectiv irrevocably deposits in trust money or U.S. Government
obligations for the payment of principal of and interest on the Conectiv
Indenture securities to maturity or redemption, as the case may be. Conditions
to defeasance shall be that (i) no default exists or occurs and (ii) Conectiv
obtains a certificate from a firm of nationally recognized independent
accountants that the deposited U.S. Government obligations will be sufficient to
pay principal when due and interest on the Conectiv Indenture securities to be
defeased.
An application on Form T-3 for qualification of the Conectiv Indenture
under the Trust Indenture Act of 1939, as amended, will be filed and become
effective prior to the issuance of any
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securities under the Conectiv Indenture. A form of the Conectiv Indenture will
be filed by amendment herein as Exhibit A-2.
ii. Terms of Borrowings from Banks and Other Financial Institutions.
Borrowings from banks and other financial institutions will be unsecured
debt and will rank pari passu with debt securities issued under the Conectiv
Indenture and the short-term Credit Facility (as described below). Specific
terms of any borrowings will be determined by Conectiv at the time of issuance
and will comply in all regards to the parameters on financing authorization set
forth above. A copy of any note or agreement executed pursuant to this
authorization will be filed under cover of the next quarterly report under Rule
24.
iii. Benefit of Structure
Conectiv has chosen this financing structure (i.e., the issuance of
long-term debt at both the holding company and subsidiary levels) because it
provides more flexibility with a reduced administrative burden than the
alternative of having the smaller and mostly startup (and likely less
creditworthy) Non-Utility Subsidiaries issue long-term debt supported by a
Conectiv guarantee. At the same time the proposed financial structure produces
the same result in that the ultimate obligor is Conectiv. For example, the
establishment of individual medium-term note programs for multiple Non-Utility
Subsidiaries would be impractical from both cost and administrative
perspectives. The establishment of a single, medium-term note program at the
Conectiv level to primarily fund the capital requirements of the Non-Utility
Subsidiaries provides administrative
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efficiencies without duplicative expenses for document preparation, printing,
legal review, etc. Further, the funding of the capital requirements of the
Non-Utility Subsidiaries, a substantial portion of which is anticipated to
involve projects which are long-term by nature, with long-term debt is
appropriate. To fund such requirements with short-term debt may increase
Conectiv's exposure to short-term interest rate swings and to rollover risk.
c. Short-Term Debt
To provide financing for general corporate purposes, working capital
requirements and Subsidiary capital expenditures until long-term financing can
be obtained, Conectiv requests authorization to have outstanding at any one time
during the Authorization Period, up to $500 million of short-term debt
consisting of bank borrowings, commercial paper or bid notes (all as described
below).
As noted on Exhibit I-2, Atlantic entered into a Revolving Credit
Agreement dated September 28, 1995 with the Bank of New York, as Agent under
which approximately $63 million was owed and outstanding as of June 30, 1997. It
is anticipated that, upon merger of Atlantic into Conectiv, this Revolving
Credit Agreement will be terminated and another agreement entered into. Conectiv
anticipates entering into a revolving credit facility (the "Credit Facility")
with a group of banks on or before the effective date of the Merger. A portion
of the Credit Facility may be used to support letters of credit issued by
Conectiv or the Subsidiaries in the ordinary course of business. Also, as
discussed below, if a Utility Subsidiary issues
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commercial paper, the Utility Subsidiary may be made a party to the Credit
Facility as backup for the commercial paper.
The interest rates on the Credit Facility are expected to be based on a
triple option pricing formula as follows:
Option 1: Prime Rate
Option 2: LIBOR + Margin
Option 3: CD + Margin
Maturities on loans issued under the LIBOR rate option are expected to
be for 1, 2, 3 or 6 months. Maturities on loans issued under the CD rate option
are expected to be for 30, 60, 90 or 180 days. All such loans will be evidenced
by promissory notes. It is expected that the Credit Facility will contain
negative covenants consistent with those covenants required by bank lenders for
comparable bank facilities. The Credit Facility will be unsecured debt of
Conectiv and will rank pari passu with debt issued under the Conectiv Indenture
and any long-term debt securities issued directly to banks or other financial
institutions.
A copy of the Credit Facility will be filed under cover of the next
quarterly report under Rule 24 after execution.
Conectiv may sell commercial paper, from time to time, in established
domestic or European commercial paper markets. Such commercial paper would be
sold to dealers at the discount rate or coupon rate per annum prevailing at the
date of issuance for commercial paper of comparable quality and maturities sold
to commercial paper dealers generally. It is expected that
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the dealers acquiring commercial paper from Conectiv will reoffer such paper at
a discount to corporate, institutional and, with respect to European commercial
paper, individual investors. Institutional investors are expected to include
commercial banks, insurance companies, pension funds, investment trusts,
foundations, colleges and universities and finance companies.
Backup bank lines of credit for 100% of the outstanding amount of
commercial paper are generally required by credit rating agencies. The Credit
Facility will serve as backup for Conectiv's commercial paper program, thus
negating the need for additional lines of credit.
Conectiv requests approval to enter into individual agreements ("Bid
Note Agreements") with one or more commercial banks which may or may not be
lenders under the Credit Facility. The Bid Note Agreements would permit Conectiv
to negotiate with one or more banks ("Bid Note Lender[s]") on any given day for
such Bid Note Lender, or any affiliate or subsidiary of such lender, to purchase
promissory notes ("Bid Notes") directly from Conectiv. Such notes would bear
interest rates comparable to, or lower than, those available through other forms
of short-term borrowing with similar terms requested in this Application. The
maturity of any Bid Note would not exceed 270 days, and the total amount of Bid
Notes outstanding at any time, when added to the aggregate amounts of short-term
borrowing outstanding under other forms of short-term borrowing contemplated in
this Application, would not exceed the total amount of short-term debt for which
authorization is requested. A form of the proposed Bid Note Agreement will be
filed by amendment as Exhibit A-5 to this Application; however, the exact form
of the Bid Note Agreement will be negotiated separately with each of the Bid
Note Lenders.
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d. Other Securities
In addition to the specific securities for which authorization is sought
herein, Conectiv may also find it necessary or desirable to minimize financing
costs or to obtain new capital under then existing market conditions to issue
and sell other types of securities from time to time during the Authorization
Period. The issuance of any such securities would be subject to the aggregate
$500 million limit on long-term debt or $500 million limit on short-term debt
and to the parameters on financing authorization set forth above. Conectiv
requests that the Commission reserve jurisdiction over the issuance of
additional types of securities. Conectiv also undertakes to file a
post-effective amendment in this proceeding which will describe the general
terms of each such security and the amount to be issued and to request a
supplemental order of the Commission authorizing the issuance thereof by
Conectiv.
e. Interest Rate Risk Management Devices
Conectiv requests authority to enter into, perform, purchase and sell
financial instruments intended to manage the volatility of interest rates,
including but not limited to interest rate swaps, caps, floors, collars and
forward agreements or any other similar agreements. Conectiv would employ
interest rate swaps as a means of prudently managing the risk associated with
any of its outstanding debt issued pursuant to this authorization or an
applicable exemption by, in effect, synthetically (i) converting variable rate
debt to fixed rate debt, (ii) converting fixed rate debt to variable rate debt,
(iii) limiting the impact of changes in interest rates resulting from variable
rate debt and (iv) providing an option to enter into interest rate swap
transactions in future periods for
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planned issuances of debt securities. In no case will the notional principal
amount of any interest rate swap exceed that of the underlying debt instrument
and related interest rate exposure, i.e., Conectiv will not engage in
"leveraged" or "speculative" transactions. The underlying interest rate indices
of such interest rate swaps will closely correspond to the underlying interest
rate indices of Conectiv's debt to which such interest rate swap relates.
Conectiv will only enter into interest rate swap agreements with counterparties
whose senior debt ratings, as published by Standard & Poor's Corporation, are
greater than or equal to "BBB+", or an equivalent rating from Moody's Investor
Service, Inc., Fitch Investor Service or Duff & Phelps.
2. Utility Subsidiary Financing
As shown on Exhibit I-1, Delmarva has previously issued, and there are
currently outstanding, preferred stock, commercial paper notes, first mortgage
bonds issued under a Mortgage and Deed of Trust dated October 1, 1943, medium
term notes issued under an Indenture dated as of November 1, 1988, unsecured
subordinated debt securities issued in connection with certain securities issued
by a subsidiary trust and various exempt revenue bonds and pollution control
notes. Any future issue of such securities would qualify for issuance without
prior approval by this Commission pursuant to Rule 52, except short-term debt
securities which will have been approved by the Virginia State Corporation
Commission ("VSCC") but not
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the Delaware Public Service Commission ("DPSC"),3 and except for unsecured
subordinated debt securities issued in connection with securities issued by a
subsidiary trust which involve affiliate guarantees.
Commission authorization is sought for the issuance by Delmarva of up to
$275 million of short-term debt securities consisting of commercial paper,
unsecured bank loans and borrowings from the System Money Pool (as described
below). A copy of the order issued by the VSCC will be filed by amendment as
Exhibit D-1. Such issuances of securities will comply in all instances with the
parameters for financing described above. Any short-term borrowings by Delmarva,
when combined with short-term borrowings by Conectiv for which authority is
sought herein, will not exceed $500 million at any time during the Authorization
Period.
As shown on Exhibit I-2, Atlantic also has previously issued and there
are currently outstanding preferred stock, first mortgage bonds and secured
medium term notes issued under a Mortgage and Deed of Trust dated January 15,
1937, unsecured medium term notes issued under an Indenture dated March 1, 1997,
junior funded debt issued under an Indenture dated February 1, 1986, pollution
control notes, and notes under bank credit lines and unsecured subordinated debt
securities issued in connection with certain securities issued by a subsidiary
trust. Any future issue of similar securities would be issued with the approval
of the New Jersey Board of Public Utilities ("NJBPU") and thus, such issue would
be exempt under the terms of Rule 52, except that
- ----------
3 Since Delmarva is incorporated both in Delaware and Virginia, it is
unclear whether Rule 52 requires approval of a proposed security issue by both
States. Therefore, Delmarva will assume that Rule 52 does not apply and requests
authority from this Commission.
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unsecured subordinated debt securities issued by a subsidiary trust involve
affiliate guarantees and do not qualify under Rule 52.
In Item I.E.6 below, authorization is requested for both Utility
Subsidiaries to retain certain existing financing entities, to establish and
acquire new financing entities and for the financing entities to issue
securities to third parties to be guaranteed by the applicable Utility
Subsidiary.
In addition, the Utility Subsidiaries may find it necessary or desirable
to issue other types of securities during the Authorization Period that are not
exempt from prior Commission approval. The Utility Subsidiaries request that the
Commission reserve jurisdiction over the issuance of such additional types of
securities and the amount thereof except to the extent the same are exempt
pursuant to Rule 52. Each Utility Subsidiary also undertakes to have a
post-effective amendment filed in this proceeding that will describe the general
terms of each such security and the amount thereof of such Utility Subsidiary
and request a supplemental order of the Commission authorizing the issuance
thereof. To the extent that a Utility Subsidiary elects to issue commercial
paper, either pursuant to Rule 52 or pursuant to an order in this file, the
Utility may be made party to the Conectiv Credit Facility discussed above as
back-up to the commercial paper.
To the extent not exempt under Rule 52, the Utility Subsidiaries also
request authority to enter into interest rate risk management transactions of
the same type and under the same conditions as requested above by Conectiv.
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3. Non-Utility Subsidiary Financing
As noted on Exhibits I-1 and I-2, certain Non-Utility Subsidiaries have
debt, construction loans, letters of credit and support arrangements in place.
Certain guarantees in favor of a direct or indirect Subsidiary issued by another
Subsidiary may be replaced by a Conectiv guarantee as described below. It is
expected that future financing by the Non-Utility Subsidiaries will be made
pursuant to the terms of Rule 52.
The Non-Utility Subsidiaries are engaged in and expect to continue to be
active in the development and expansion of their existing energy-related or
otherwise functionally-related, non-utility businesses. They will be competing
with large, well-capitalized companies in different sectors of the energy and
other industries. In order to quickly and effectively invest in such competitive
arenas, it will be necessary for the Non-Utility Subsidiaries to have the
ability to engage in financing transactions which are commonly accepted for such
types of investments. The majority of such financings will be exempt from prior
Commission authorization pursuant to Rule 52(b). The Non-Utility Subsidiaries
may, however, engage in types of security financing with non-affiliates that are
not exempt from prior Commission approval. The Non-Utility Subsidiaries
therefore request that the Commission reserve jurisdiction over the issuance of
such additional types of securities and the amounts thereof and undertake to
cause a post-effective amendment to be filed in this proceeding which will
describe the general terms of each such security and the amounts thereof and
request a supplemental order of the Commission authorizing the issuance thereof
by the subject Non-Utility Subsidiary.
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4. Guarantees and Intrasystem Money Pool
a. Guarantees
Conectiv requests authorization to enter into guarantees, obtain letters
of credit, enter into expense agreements or otherwise provide credit support
with respect to the obligations of Subsidiaries as may be appropriate to enable
such Subsidiaries to carry on in the ordinary course of their respective
businesses, in an aggregate principal amount not to exceed $350 million
outstanding at any one time, except to the extent the same are exempt pursuant
to Rule 45. Included in this amount are guarantees and other credit support
mechanisms of Atlantic previously issued in favor of its subsidiaries which will
be assumed by Conectiv upon consummation of the Merger.
In addition, authority is requested for Non-Utility Subsidiaries to
enter into arrangements with each other similar to those described with respect
to Conectiv above in an aggregate principal amount not to exceed $100 million
outstanding at any one time, except to the extent the same are exempt pursuant
to Rule 45. The limits on guarantees and other credit support obligations
described above are not to be included in the aggregate respective limits
applicable to external financings requested elsewhere herein. Any guarantee of
an existing Subsidiary which is an energy-related company as defined in Rule 58
or of a new subsidiary whose securities are acquired pursuant to Rule 58 will be
included in the computation of aggregate investments in energy-related companies
for purposes of Rule 58.
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Conectiv requests that this guarantee authority include the ability to
guarantee debt. With respect to domestic Subsidiaries, the debt guaranteed will
comply with the parameters for financing set forth above. Any promissory note or
other similar evidence of indebtedness issued by a special purpose direct or
indirect Subsidiary (hereinafter "Project Parent") formed in a foreign country
for purposes of investment in an EWG or FUCO (EWGs and FUCOs are sometimes
collectively referred to herein as "Exempt Projects") to a person other than
Conectiv or an intermediary parent company with respect to which Conectiv or an
intermediary parent may issue a guarantee would mature not later than 30 years
after the date of issuance. It would bear interest at a rate that would not
exceed (a) the greater of 250 basis points above the lending bank's or other
recognized prime rate and 50 basis points above the federal funds rate; (b) 400
basis points above the specified LIBOR rate plus any applicable reserve
requirement; or (c) a negotiated fixed rate 500 basis points above the 30 year
"current coupon" U.S. treasury bond rate if such note or other indebtedness is
U.S. dollar denominated. If such note or other indebtedness is denominated in
the currency of a foreign nation, the interest rate will not exceed a fixed or
floating rate on a U.S. dollar denominated borrowing of identical average life
that does not exceed 10% over the highest rate set forth above.
Conectiv may enter into reimbursement agreements with banks to support
letters of credit delivered as security for Conectiv's direct or indirect equity
contribution obligation to a Project Parent or otherwise in connection with
project development activities. Any reimbursement agreement supporting a letter
of credit would have a term not in excess of 30 years. Drawings
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under any such letter of credit would bear interest at not more than 5% above
the prime rate of the letter of credit bank as in effect from time to time and
letter of credit fees would not exceed 1% annually of the face amount of the
letter of credit. (See New England Electric System, HCAR No. 26729, dated June
10, 1997)
b. Authorization and Operation of System Money Pool
Since all lending and borrowing transactions conducted through the
proposed System Money Pool involve the issuance of a note, Rule 52 applies so
long as the participation by any utility subsidiary has been approved by the
state commission in the state where the utility is incorporated and doing
business and the formulation of applicable interest rates comply with Rule 52.
Participation in the System Money Pool by Delmarva will have been approved by
the VSCC but not the DPSC. In addition, there is a question as to whether
participation in the System Money Pool by an ETC is an affiliate transaction
which is not exempt under Section 34 of the Act. Conectiv and the Subsidiaries
hereby request authorization to establish the System Money Pool.
The Applicants believe that the all-in cost of the proposed borrowings
through the System Money Pool will generally be more favorable to the borrowing
participants than the comparable all-in cost of external short-term borrowings,
and the yield to the participants contributing available funds to the System
Money Pool will generally be higher than the typical yield on short-term
investments.
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Under the proposed terms of the System Money Pool, short-term funds
would be available from surplus funds in the treasuries of Conectiv and the
Subsidiaries for short-term loans to the Subsidiaries from time to time. The
determination of whether a System Money Pool participant at any time has surplus
funds to lend to the System Money Pool or shall lend funds to the System Money
Pool would be made by such participant's chief financial officer or treasurer,
or by a designee thereof, on the basis of current cash position, cash flow
projections and other relevant factors.
System Money Pool participants that borrow would borrow pro rata from
each company that lends, in the proportion that the total amount loaned by each
such lending company bears to the total amount then loaned through the System
Money Pool. On any day when more than one fund source (e.g., surplus treasury
funds of Conectiv and other System Money Pool participants ("Internal Funds")
and funds from external borrowings by Conectiv ("External Funds")), with
different rates of interest, is used to fund loans through the System Money
Pool, each borrower would borrow pro rata from each such funding source in the
System Money Pool in the same proportion that the amount of funds provided by
that funding source bears to the total amount of short-term funds available to
the System Money Pool.
Interest expense (income) will be charged (credited) monthly to all
participants in the System Money Pool based on each participant's daily average
cash position. The cost of money for all advances from the System Money Pool and
the investment rate for moneys invested in the System Money Pool will be the
same. To derive this rate, Support Conectiv will use the System
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Money Pool's net monthly interest expense (expense less any income) generated by
external borrowings incurred on behalf of the System Money Pool. This net amount
will then be divided by Support Conectiv's average net daily
investment/borrowing position to derive an interest rate for the month. In the
unlikely event that, on a consolidated basis, investments in the System Money
Pool are exactly offset by borrowings from the System Money Pool such that there
are no external borrowings or investments, the cost of money and the investment
rate will be the prior month's average Federal Funds Rate as published in the
Federal Reserve Statistical Release, Publication H.15 (519).
The cost of compensating balances, if any, and fees paid to banks to
maintain credit lines and accounts by Conectiv in lending External Funds to the
System Money Pool would initially be paid by Conectiv. A portion of such costs
- -- or all of such costs in the event Conectiv establishes a line of credit
solely for purposes of lending any External Funds obtained thereby into the
System Money Pool -- would be allocated to the System Money Pool participants
borrowing such External Funds through the System Money Pool in proportion to
their respective daily outstanding borrowings of such External Funds.
Borrowings from the System Money Pool would require authorization by the
borrower's chief financial officer or treasurer, or by a designee thereof. No
loans through the System Money Pool would be made to Conectiv.
Conectiv and investing Subsidiaries would be investors ("Investors")
pursuant to a System Money Pool evidence of deposit (see Exhibit A-7). Loans to
Subsidiaries through the System
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Money Pool will be made pursuant to a short-term grid note (see Exhibit A-8)
Such short-term grid note will be due upon demand by the Investor(s), but in any
case will be repaid prior to May 1 of the calendar year after borrowing. A
default rate equal to 2% per annum above the pre-default rate on unpaid
principal or interest amounts will be assessed if any interest or principal
payment becomes past due.
Funds not required by the System Money Pool to make loans (with the
exception of funds required to satisfy the Money Pool's liquidity requirements)
would ordinarily be invested in one or more short-term investments, including:
(i) interest-bearing accounts with banks; (ii) obligations issued or guaranteed
by the U.S. government and/or its agencies and instrumentalities, including
obligations under repurchase agreements; (iii) obligations issued or guaranteed
by any state or political subdivision thereof, provided that such obligations
are rated not less than "A" by a nationally recognized rating agency; (iv)
commercial paper rated not less than "A-1" or "P-1" or their equivalent by a
nationally recognized rating agency; (v) money market funds; (vi) bank
certificates of deposit, (vii) Eurodollar funds; and (viii) such other
investments as are permitted by Section 9(c) of the Act and Rule 40 thereunder.
A draft copy of the Conectiv System Money Pool Investment Guidelines is included
as Exhibit A-9. The interest income and investment income earned on loans and
investments of surplus funds would be allocated among the participants in the
System Money Pool in accordance with the proportion each participant's
contribution of funds bears to the total amount of funds in the System Money
Pool and the cost of funds provided to the System Money Pool by such
participant.
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Operation of the System Money Pool, including record keeping and
coordination of loans, will be handled by Support Conectiv under the authority
of the appropriate officers of the participating companies. Support Conectiv
will administer the System Money Pool on an "at cost" basis. Support Conectiv
will act strictly in an agency capacity, and not as principal, with regard to
funds deposited in the System Money Pool by other participants.
The maximum amount of System Money Pool borrowings outstanding for each
Subsidiary will be determined by Conectiv and the Subsidiaries in accordance
with business needs. Actual short-term financing would be issued based on
working capital requirements and any interim financing needed to bridge between
issuances of long-term capital.
Proceeds of any short-term borrowings from the System Money Pool by the
Applicants may be used by each such Applicant (i) for the interim financing of
its construction and capital expenditure programs; (ii) for its working capital
needs; (iii) for the repayment, redemption or refinancing of its debt and
preferred stock; (iv) to meet unexpected contingencies, payment and timing
differences, and cash requirements; and (v) to otherwise finance its own
business and (vi) for other lawful general purposes.
5. Changes in Capital Stock of Wholly-Owned Subsidiaries and
Dividends Out of Capital or Unearned Surplus by Non-Utility
Subsidiaries
The portion of an individual Subsidiary's aggregate financing to be
effected through the sale of stock to Conectiv or other intermediate parent
company during the Authorization Period pursuant to Rule 52 and/or pursuant to
an order issued pursuant to this file cannot be ascertained
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at this time. It may happen that the proposed sale of capital stock may in some
cases exceed the then authorized capital stock of such Subsidiary. In addition,
the Subsidiary may choose to use capital stock with no par value or a different
par value. Also, a wholly-owned Subsidiary may wish to engage in a reverse stock
split to reduce franchise or other taxes. As needed to accommodate such proposed
transactions and to provide for future issues, request is made for authority to
change the terms of any such wholly-owned Subsidiary's authorized capital stock
capitalization by an amount deemed appropriate by Conectiv or other immediate
parent company in the instant case. A Subsidiary would be able to change the par
value, or change between par and no-par stock, without additional Commission
approval. Any such action by a Utility Subsidiary would be subject to and would
only be taken upon the receipt of any necessary approvals by the state
commission in the state or states where the Utility Subsidiary is incorporated
and doing business. (See New Century Energies, Inc. No. 35-26750, dated August
1, 1997).
In addition, Conectiv requests the flexibility to withdraw capital from
a Non-Utility Subsidiary with excess funds through a dividend out of capital
surplus to the full extent permitted by the law of the state where the
Non-Utility Subsidiary is incorporated. Said capital would then be used for the
authorized business of the Conectiv System.
Applicants expect that situations will arise where a direct or indirect
Non-Utility Subsidiary will have unrestricted cash available for distribution in
excess of current and retained earnings. Consequently, in these situations the
declaration and payment of a dividend would have to be charged, in whole or in
part, to capital or unearned surplus.
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One situation could result if Conectiv were to acquire all of the
capital stock of an Exempt Project indirectly through an Project Parent and,
following the acquisition, the Exempt Project incurred borrowings, some or all
of the proceeds of which were distributed to the Project Parent, as a reduction
in the amount invested in such Exempt Project (i.e., return of capital).
Assuming it had no earnings, the Project Parent could not, without prior
Commission approval, distribute such cash to its parent.
In that same example, if the Project Parent were to sell a portion of
its equity in the Exempt Project to a third party for cash, the Project Parent
would again have substantial unrestricted cash available for upstream
distribution, but (assuming no profit on the stock sale) would not have
available current earnings and therefore could not, without prior Commission
approval, declare and pay a dividend out of such cash proceeds.
Any dividend actually declared and paid out of capital or unearned
surplus pursuant to the authority requested herein will conform to applicable
law of the respective company's jurisdiction or organization and applicable
covenant restrictions in loan or other financing agreements.
The ability of the Non-Utilities Subsidiaries to use distributable cash
to pay dividends ultimately to Conectiv will benefit the Conectiv System by
enabling Conectiv to apply such amounts to the reduction or refinancing of
outstanding bank borrowings and to fund operations of other Subsidiaries. In
addition, since the Non-Utility
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Subsidiaries are or will be engaged in activities exclusively dedicated to
owning or operating non-utility facilities as permitted under existing
Commission orders or regulations, the payment of dividends by the Non-Utility
Subsidiaries out of capital or unearned surplus will not adversely affect the
financial integrity of the Conectiv System or jeopardize the working capital of
Utility Subsidiaries within the contemplation of Section 12(c) of the Act.
The Commission has recently issued orders authorizing the payment of
dividends out of capital or unearned surplus under circumstances substantially
similar to those proposed herein. See The Columbia Gas System, Inc. Release No.
35-26209, December 29, 1994; GPU International, Inc., et al., Release No.
35-26678, February 28, 1997; The Southern Company, et al., Release No. 35-26543,
July 17, 1996; Cinergy Corp., et al., Release No. 35-26719, May 22, 1997.
6. Financing Entities
Authority is sought for the Subsidiaries to organize new corporations,
trusts, partnerships or other entities created for the purpose of facilitating
financings through their issuance to third parties of income preferred
securities or other securities authorized hereby or issued pursuant to an
applicable exemption. Request is also made for these financing entities to issue
such securities to third parties in the event such issuances are not exempt
pursuant to Rule 52. Additionally, request is made for authorization with
respect to (i) the issuance of debentures or other evidences of indebtedness by
any of the Subsidiaries to a financing entity in return for the proceeds of the
financing, (ii) the acquisition by any of the Subsidiaries of voting interests
or equity securities issued by the financing entity to establish any such
Subsidiary's ownership of the financing entity (the equity portion of the entity
generally being created through a capital contribution or the
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purchase of equity securities, ranging from 1 to 3 percent of the capitalization
of the financing entity) and (iii) the guarantee by the Applicants of such
financing entity's obligations in connection therewith. Each of the Subsidiaries
also request authorization to enter into expense agreements with its respective
financing entity, pursuant to which it would agree to pay all expenses of such
entity. Any amounts issued by such financing entities to third parties pursuant
to this authorization will be included in the overall external financing
limitation authorized herein for the immediate parent of such financing entity.
Applicants also request that Delmarva be authorized to retain Delmarva Power
Financing I, a wholly-owned trust, that issued trust preferred securities and
loaned the proceeds to Delmarva and that Atlantic Electric be authorized to
retain Atlantic Capital I, a wholly-owned trust, that issued trust preferred
securities and loaned the proceeds to Atlantic Electric. The authorization
sought herein with respect to financing entities is substantially the same as
that given to New Century Energies, Inc. in Release No. 35-26750 dated August 1,
1997.
F. Financing of EWGs and FUCOs
Sections 32 and 33 of the Act permit a registered holding company to
acquire and maintain interests in one or more EWGs and FUCOs without the need to
apply for or receive approval from the Commission. To the extent that funds for
one or more projects are required in excess of internally generated funds,
Conectiv hereby requests Commission authorization to form one or more
intermediary companies and to fund those companies with some of the proceeds
from the financings authorized hereby for the purpose of investing in EWGs and
FUCOs in
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compliance with Rule 53(a)(1) such that Conectiv's aggregate investment at any
one time during the period covered by this Application will not exceed 50% of
its "consolidated retained earnings", as defined in Rule 53(a)(1)(ii). Conectiv
undertakes to maintain, or cause to be maintained to the extent reasonable under
the circumstances, the books and records of any EWG, foreign EWG or FUCO in
which it holds an interest in accordance with the requirements of Rule 53(a)(2).
It is also anticipated that a minimal number of employees of the Utility
Subsidiaries may render services, directly or indirectly, to EWGs and FUCOs in
the Conectiv System, provided that the number of such employees shall not in any
event exceed two percent (2%) of the total number of employees of such public
utility companies. Conectiv may seek additional Commission authorization if one
or more prospective transactions warrant additional financing. At the time of
issuance of any securities authorized in connection with this Application, the
proceeds of which will be used to invest in any EWG or FUCO, Conectiv will be in
compliance with Rule 53.
G. Summary of Authorizations Sought
Conectiv requests Commission authorization with this Application for the
following financing transactions without any additional Commission approvals
required except as indicated. Unless otherwise specifically indicated, all
requested authorizations pertain to transactions initiated prior to December 31,
2000.
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1. Conectiv External Financing
a. Authorization to issue common stock and long-term debt in an
aggregate amount not to exceed $500 million, including $100
million of common stock to be issued for acquisitions
b. Authorization to issue up to 10 million shares of Conectiv
common stock (in addition to the authorization sought in Item
1.G.1.a above) pursuant to dividend reinvestment plans and
Conectiv benefit plans and, in connection with benefit plans, to
issue options to acquire Conectiv common stock for a period
extending ten years from the date of the Commission Order under
this Application
c. Authorization to issue common stock aggregating no more than
$100 million (included in the authorization sought in Item
1.G.1.a above) in market value at the time of issue in
consideration for securities being acquired by Conectiv or a
Non-Utility Subsidiary pursuant to the order issued in
connection with the Merger U-1 or pursuant to Rule 58 or Section
34
d. Authorization to have outstanding at any one time, up to $500
million of short-term debt consisting of borrowings under the
Credit Facility, the issuance of commercial paper and the sale
of bid notes
e. Authorization to issue other types of securities that Conectiv
deems appropriate, for which the Commission would reserve
jurisdiction over such issuance subject to the parameters for
financing authorization described herein
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f. Authorization for Conectiv to enter into certain hedging
transactions to convert all or a portion of its variable rate
debt existing or to be issued pursuant to this Application to
fixed rate debt or to convert all or a portion of its fixed rate
debt existing or to be issued pursuant to this Application to
variable rate debt or to limit the impact of changes in interest
rates on variable rate debt or planned issuances of debt
2. Utility Subsidiary Financing
a. Authorization for Delmarva to have outstanding at any one time
up to $275 million of short-term debt consisting of commercial
paper, unsecured bank loans and borrowings under the System
Money Pool
b. To the extent not exempt under Rule 52, authorization to enter
into hedging transactions similar to those identified above for
Conectiv
c. To the extent not exempt under Rule 52, authorization to issue
other types of securities that the Utility Companies deem
appropriate, for which the Commission would reserve jurisdiction
over issuance
3. Non-Utility Subsidiary Financing
a. To the extent not exempt, authorization to issue other types of
securities that the Non-Utility Companies deem appropriate, for
which the Commission would reserve jurisdiction over issuance
thereof
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4. Intrasystem Financing
a. To the extent not exempt under Rule 45, authorization for
Conectiv to enter into guarantees (of debt and otherwise),
letters of credit or otherwise provide credit support with
respect to the obligations of Conectiv System companies in an
aggregate amount not to exceed $350 million
b. To the extent not exempt under Rule 45, authorization for the
Non-Utility Subsidiaries to enter into guarantees, letters of
credit or otherwise provide credit support with respect to the
debt and obligations of other Subsidiaries in an aggregate
amount not to exceed $100 million
c. To the extent not exempt under Rule 52, authorization to
establish and operate the System Money Pool
5. Financing Entities
a. Authorization for the Subsidiaries to organize new corporations,
trusts, partnerships or other entities created for the purpose
of facilitating financings through their issue to third parties
of income preferred securities or other securities. Request is
also made for these financing entities to issue such securities
to third parties in the event such transactions may not be
covered by Rule 52. Additionally, request is made for
authorization with respect to (i) the issuance of debentures or
other evidences of indebtedness by any of the Subsidiaries to a
financing entity in return for the proceeds of the financing,
(ii) the acquisition by any of the Subsidiaries of voting
interests or
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equity securities issued by the financing entity to establish
any such Subsidiary's ownership of the financing entity and
(iii) the guarantee by the Applicants of such financing entity's
obligations.
b. Authorization for certain Subsidiaries to retain financing
entities in existence prior to the Merger
6. Financing of EWGs and FUCOs
a. Authorization for the formation of one or more intermediary
companies for the purpose of investing the proceeds of
borrowings by Conectiv in EWGs and FUCOs in compliance with the
standards set forth in Rule 53.
H. Filing of Certificates of Notification
It is proposed that, with respect to Conectiv, the reporting systems of
the 1933 Act and the 1934 Act be integrated with the reporting system under the
Act. This would eliminate duplication of filings with the Commission that cover
essentially the same subject matters, resulting in a reduction of expense for
both the Commission and Conectiv. To effect such integration, the portion of the
1933 Act and 1934 Act reports containing or reflecting disclosures of
transactions occurring pursuant to the authorization granted in this proceeding
would be incorporated by reference into this proceeding through Rule 24
certificates of notification. The certificates would also contain all other
information required by Rule 24, including the certification that each
transaction being reported on had been carried out in accordance with the
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terms and conditions of and for the purposes represented in this Application.
Such certificates of notification would be filed within 60 days after the end of
each of the first three calendar quarters, and 90 days after the end of the last
calendar quarter, in which transactions occur.
The Rule 24 certificates will contain the following information:
a. If sales of common stock or debt by Conectiv are reported, the
purchase price per share and the market price per share at the
date of the agreement of sale;
b. The total number of shares of Conectiv common stock issued or
issuable pursuant to options granted during the quarter under
Conectiv's dividend reinvestment plan and employee benefit plans
including any employee benefit plans hereinafter adopted as
discussed in Item 1.E.1.a.ii;
c. If Conectiv common stock has been transferred to a seller of
securities of a company being acquired, the number of shares so
issued, the value per share and whether the shares are
restricted in the hands of the acquiror;
d. If a guarantee is issued during the quarter, the name of the
guarantor, the name of the beneficiary of the guarantee and the
amount, terms and purpose of the guarantee;
e. The amount and terms of any short-term debt issued by Conectiv
and Delmarva during the quarter;
f. The amount and terms of any financings consummated by any
Utility Subsidiary that are not exempt under Rule 52;
<PAGE> 42
PAGE 41
g. The amount and terms of any financings consummated by any
Non-Utility Subsidiary during the quarter that are not exempt
under Rule 52;
h. A list of U-6B-2 forms filed with the Commission during the
quarter, including the name of the filing entity and the date of
filing;
i. Consolidated balance sheets as of the end of the quarter and
separate balance sheets as of the end of the quarter for each
company, including Conectiv, that has engaged in jurisdictional
financing transactions during the quarter; and
j. Future registration statements filed under the 1933 Act with
respect to securities that are subject of the Application will
be filed or incorporated by reference as exhibits to the next
certificate filed pursuant to Rule 24
I. Statement Pursuant to Rule 54
Rule 54 promulgated under the Act states that in determining whether to
approve the issue or sale of a security by a registered holding company for
purposes other than the acquisition of an EWG or a FUCO, or other transactions
by such registered holding company or its subsidiaries other than with respect
to EWGs or FUCOs, the Commission shall not consider the effect of the
capitalization or earnings of any subsidiary which is an EWG or a FUCO upon the
registered holding company system if Rules 53(a), (b) or (c) are satisfied. As
demonstrated below, such rules are satisfied.
<PAGE> 43
PAGE 42
Rule 53 requires that the aggregate investment in EWGs and FUCOs not
exceed 50% of a system's consolidated retained earnings. Conectiv and the
Subsidiaries will not make any investments in EWGs and FUCOs that cause it to
exceed that limitation, unless the Commission otherwise authorizes.
Conectiv and the Subsidiaries will maintain books and records to
identify the investments in and earnings from EWGs and FUCOs in which they
directly or indirectly hold an interest, thereby satisfying Rule 53(a)(2). In
addition, the books and records of each such entity will be kept in conformity
with United States generally accepted accounting principles ("GAAP"), the
financial statements will be prepared according to GAAP, and Conectiv undertakes
to provide the Commission access to such books and records and financial
statements as it may request.
Employees of Conectiv's domestic public-utility companies will not
render services, directly or indirectly, to any EWGs or FUCOs in the Conectiv
System, thereby satisfying Rule 53(a)(3).
Conectiv will submit copies of this Form U-1 and every certificate filed
pursuant to Rule 24 with every federal, state or local regulator having
jurisdiction over the retail rates of the public utility companies in the
Conectiv System. Rule 53(a)(4) will be correspondingly satisfied.
None of the conditions described in Rule 53(b) exists with respect to
Conectiv, thereby satisfying Rule 53(b) and making Rule 53(c) inapplicable.
<PAGE> 44
PAGE 43
ITEM 2. FEES, COMMISSIONS AND EXPENSES
(a) State (1) the fees, commissions and expenses paid or incurred, or to be paid
or incurred, directly or indirectly, in connection with the proposed transaction
by the applicant or declarant or any associate company thereof, and (2) if the
proposed transaction involves the sale of securities at competitive bidding, the
fees and expenses to be paid to counsel selected by applicant or declarant to
act for the successful bidder.
Estimated Legal Fees and Expenses
Estimated Miscellaneous Expenses
TOTAL *(TO BE PROVIDED BY AMENDMENT)
* The above fees do not include the expenses for the public issuance of
long-term debt and equity securities. As noted previously, Conectiv proposes
that such fees be capped at 5% of the issuance amount.
(b) If any person to whom fees or commissions have been or are to be paid in
connection with the proposed transaction is an associate company or an affiliate
of the applicant or declarant, or is an affiliate of an associate company, set
forth the facts with respect thereto.
Not applicable.
ITEM 3. APPLICABLE STATUTORY PROVISIONS
(a) State the section of the Act and the rules thereunder believed to be
applicable to the proposed transaction. If any section or rule would be
applicable in the absence of a specific exemption, state the basis of exemption.
Conectiv External Financing:
The issuance of common stock, long-term debt, short-term debt and other
securities by Conectiv is subject to Sections 6 and 7 of the Act. Rule 54 is
also applicable to the issuance of securities by Conectiv. Compliance with Rule
54 is discussed above.
Section 6(a) provides in relevant part that it is unlawful for a
registered holding company or subsidiary of a registered holding company to
issue a security except in accordance with a
<PAGE> 45
PAGE 44
declaration under Section 7 and with the order under such section permitting
such declaration to become effective or except pursuant to applicable exemption
or exception.
Subparagraph (b) of Section 6 provides an exemption from the approval
requirement for short-term (maturing in less than nine months) debt issued in a
private offering aggregating no more than 5 per cent of the principal amount and
par value of the other securities of the company outstanding or such greater
amount as the Commission authorizes. The authorized level of short-term debt
sought herein for Conectiv would be approximately 10% of consolidated
capitalization and is well within the parameters established by Commission
precedent.
Section 7 sets forth the requirements for the declaration and the
standards that must be met before an order may be issued permitting the
declaration to become effective. Section 7(c) requires that the security to be
issued be one of those set forth or be "for necessary and urgent corporate
purposes of the declarant where the requirements of the provisions of paragraph
(1) would impose an unreasonable financial burden upon the declarant and are not
necessary or appropriate in the public interest of for the protection of
investors or consumers." The debentures, and medium term notes meet the
standards of Section 7(c)(1) except for certain criteria set forth in the
Statements of Policy governing First Mortgage Bonds and Preferred Stock.
However, the Commission has stated, " . . .[T]he SEC has found that the
Statements of Policy have become anachronistic and hinder the ability of
registered companies to raise capital. As a result, the SEC has permitted more
and more deviations on a case-by-case basis from the requirements of the
Statements of Policy." Conectiv hereby requests authority to deviate from
<PAGE> 46
PAGE 45
the Statements of Policy to the extent that any preferred stock which may be
issued by the Utility Subsidiaries pursuant to Rule 52 and the long-term debt to
be issued by Conectiv pursuant to authority sought herein and the Utility
Subsidiaries pursuant to Rule 52 do not comply with such statements. As
discussed in Item 1 above, the issuance of long-term notes by Conectiv is "for
necessary and urgent corporate purposes where the requirements of the provisions
of paragraph (1) would impose an unreasonable financial burden upon the
declarant and are not necessary or appropriate in the public interest or for the
protection of investors or consumers."
Section 7(d) sets forth specific findings that, if made, preclude the
SEC from permitting the application to go effective:
1. the security is not reasonably adapted to the security structure of the
declarant and other companies in the same holding company system;
As shown on the pro-forma financial statements, Conectiv's consolidated
debt-equity ratio will be consistent with that of an investment grade
utility system.
2. the security is not reasonably adapted to the earning power of the
declarant;
The ability of Conectiv to meet its interest obligations hinges on the
earnings of its subsidiaries. Conectiv will have the financial capacity
to discharge all of its payment obligations without adversely affecting
the operating companies.
<PAGE> 47
PAGE 46
3. financing by the issue and sale of the particular security is not
necessary or appropriate to the economical and efficient operation of a
business in which the applicant is engaged or has an interest;
As discussed above, financing with long-term debt offers advantages over
alternative means of obtaining funding.
4. the fees, commission, or other remuneration, to whomsoever paid,
directly or indirectly, in connection with the issue, sale or
distribution of the security are not reasonable;
The fees, commissions, expenses and margins referenced in Item 2 are
reasonable.
5. in the case of a . . .guaranty of . . a security of another company, the
circumstances are such as to constitute the making of such guaranty . ..
an improper risk . . ; or
The guarantees to be issued by Conectiv in favor of the Subsidiaries are
discussed below.
6. the terms and conditions of the issue or sale of the security are
detrimental to the public interest or the interest of investors or
consumers.
The investor and public interest issues are discussed above.
The acquisition by Conectiv and the Utility Subsidiaries of hedging
instruments that represent interests in securities is subject to Sections 9 and
10 of the Act.
Subsidiary Financing:
Except as exempt pursuant to Rule 52 discussed below, the issuance of
common stock or debt securities by a Subsidiary is subject to Sections 6, 7 and
12 and Rule 43 and the acquisition by an affiliate is subject to Sections 9, 10
and 12 of the Act and Rule 45.
<PAGE> 48
PAGE 47
Applicability of Rule 52:
The issuance of common or preferred stock and long-term debt by Delmarva
will have been approved by the VSCC and will qualify for exemption from the
approval requirements of Sections 6 and 7 of the Act pursuant to the terms of
Rule 52. The issuance of such securities and short-term debt by Atlantic
Electric will have been approved by the NJBPU and will qualify for exemption
from the approval requirements of Sections 6 and 7 of the Act pursuant to the
terms of Rule 52.
The issuance by Delmarva of commercial paper and short-term notes,
including the issuance of short-term notes in connection with money-pool
borrowing will have been approved by the VSCC but not by the DPSC. Since
Delmarva is incorporated in both Delaware and Virginia, a question exists as to
whether Rule 52 would apply in the absence of orders from both states. If Rule
52 does not apply, Sections 6 and 7 apply to require Commission approval prior
to the issuance of such notes and, to the extent that short-term notes are
acquired by Conectiv or an affiliate, Sections 9 and 10 apply.
Guarantees:
The issuance by Conectiv and/or Non-Utility Subsidiaries of guarantees
on behalf of their subsidiaries or other Non-Utility Subsidiaries is subject to
Section 12(b) and Rule 45 thereunder.
<PAGE> 49
PAGE 48
Subsidiary Changes in Par Value and Non-Utility Subsidiary Dividends out of
Capital or Unearned Surplus:
To the extent that a change in par value may result in the effective
exchange of one security for another, Sections 6, 7, 9, and 10 and Rule 52 may
be deemed applicable. Section 12(c) and Rule 46 are applicable to the proposed
issuance by a Non-Utility Subsidiary of dividends out of capital or unearned
surplus including surplus created by a change in par value. Upon the issuance of
an order permitting this application to become effective, the terms of Rule 46
will have been complied with.
General:
To the extent that the transactions which are the subject matter of this
Application are considered by the Commission to require authorization, approval
or exemption under any section of the Act or provision of the rules and
regulations other than those specifically referred to herein, request for such
authorization, approval or exemption is hereby made.
ITEM 4. REGULATORY APPROVAL
(a) State the nature and extent of the jurisdiction of any State commission or
any Federal commission (other than the U. S. Securities and Exchange Commission)
over the proposed transaction.
The DPSC and VSCC exercise jurisdiction over the issuance of common
stock, preferred stock, and long-term debt securities by Delmarva. The VSCC also
approves Delmarva's issuance of short-term debt. In addition, the VSCC has
jurisdiction over Delmarva's sale of common stock, preferred stock, and both
long- and short-term debt
<PAGE> 50
PAGE 49
securities to Conectiv. The DPSC has no similar authority. The NJBPU will also
have approved the issuance by Atlantic Electric of preferred stock and
short-term and long-term debt securities.
(b) Describe the action taken or proposed to be taken before any commission
named in answer to paragraph (1) of this item in connection with the proposed
transaction.
An application will be made by the aforementioned subsidiary companies
to their respective state regulatory commissions as set forth in answer to Item
3(a) above.
ITEM 5. PROCEDURE
(a) State the date when Commission action is requested. If the date is less than
40 days from the date of the original filing, set forth the reasons for
acceleration.
The Applicants hereby request that there be no hearing on this
Application and that the Commission issue its order as soon as practicable after
the filing hereof. The Commission is respectfully requested to issue and publish
the requisite notice under Rule 23 with respect to the filing of this
Application not later than September 9, 1997, such notice to specify a date not
later than October 3, 1997, by which comments may be entered and a date not
later than the date of the Commission's order for the Merger U-1, as the date
which an order of the Commission granting and permitting the Application to
become effective may be entered by the Commission.
(b) State (i) whether there should be a recommended decision by a hearing
officer, (ii) whether there should be a recommended decision by any other
responsible officer of the Commission, (iii) whether the Division of Investment
Management may assist in the preparation of the Commission's decision, and (iv)
whether there should be a 30-day waiting period between the issuance of the
Commission's order and the date on which it is to become effective.
<PAGE> 51
PAGE 50
Applicants hereby (i) waive a recommended decision by a hearing officer,
(ii) waive a recommended decision by any other responsible officer or the
Commission, (iii) consent that the Division of Investment Management may assist
in the preparation of the Commission's decision, and (iv) waive a 30-day waiting
period between the issuance of the Commission's order and the date on which it
is to become effective.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS
(a) Exhibits
A-1 Restated Certificate of Incorporation of Conectiv (filed as Annex IV to
the Registration Statement on Form S-4 on December 26, 1996
(Registration No. 333-18843), and incorporated herein by reference)
A-2 Form of Conectiv Indenture including Form of Debenture (to be filed by
amendment)
A-3 Form of Conectiv Common Stock Certificate (to be filed by amendment)
A-4 Form of Conectiv Commercial Paper Note
A-5 Form of Bid Note (to be filed by amendment)
A-6 Form of System Money Pool Evidence of Deposit
A-7 Form of System Money Pool Short-Term Grid Note
A-8 Draft Investment Guidelines
B-1 Form of Standard Conectiv Underwriting Agreement (Common Stock) (to be
filed by amendment)
B-2 Form of Standard Conectiv Underwriting Agreement (Debt) (to be filed by
amendment)
<PAGE> 52
PAGE 51
B-3 Form of Standard Conectiv Master Distribution Agreement (Medium-Term
Notes) (to be filed by amendment)
B-4 Summary of Terms of Conectiv Benefit Plans (to be filed by amendment)
B-5 Form of Conectiv Dividend Reinvestment Plan (to be filed by amendment)
C-1 Registration Statement (to be filed by amendment via incorporation by
reference)
D-1 Order of the Virginia State Corporation Commission related to nonexempt
financing (to be filed by amendment).
F-1 Opinion of Counsel (to be filed by amendment)
H-1 Proposed Notice
H-2 Financial Data Schedules
I-1 Summary of existing financing arrangements for Delmarva and
subsidiaries.
I-2 Summary of existing financing arrangements for Atlantic and
subsidiaries.
(b) Financial Statements
A. Balance Sheets as of June 30, 1997
1. Delmarva Power & Light Company and Subsidiaries
2. Atlantic Energy, Inc. and Subsidiaries
3. Conectiv, Inc. and Subsidiaries
4. Conectiv, Inc. and Subsidiaries (pro forma for financing
authorization requested in this Application)
5. Conectiv, Inc.
<PAGE> 53
PAGE 52
6. Conectiv Inc. (pro forma for financing authorization requested
in this Application)
B. Income Statements for the Twelve Months Ended
1. Delmarva Power & Light Company and Subsidiaries
2. Atlantic Energy, Inc. and Subsidiaries
3. Conectiv, Inc. and Subsidiaries
4. ProForma Conectiv, Inc. and Subsidiaries (pro forma for
financing authorization requested in this Application)
5. Conectiv, Inc.
6. Conectiv Inc. (pro forma for financing authorization requested
in this Application)
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS
(a) Describe briefly the environmental effects of the proposed transaction in
terms of the standards set forth in Section 102(2) (C) of the National
Environmental Policy Act [42 U.S.C. 4232(2)(C)]. If the response to this term is
a negative statement as to the applicability of Section 102(2)(C) in connection
with the proposed transaction, also briefly state the reasons for that response.
As more fully described in Item 1, the proposed transactions subject to
the jurisdiction of this Commission relate only to the means of financing
activities. The proposed transactions subject to the jurisdiction of this
Commission have no environmental impact in and of themselves.
<PAGE> 54
PAGE 53
(b) State whether any other federal agency has prepared or is preparing an
environmental impact statement ("EIS") with respect to the proposed transaction.
If any other federal agency has prepared or is preparing an EIS, state which
agency or agencies and indicate the status of that EIS preparation.
No federal agency has prepared or, to Conectiv's knowledge, is preparing
an EIS with respect to the proposed transaction.
<PAGE> 55
PAGE 54
SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, the undersigned companies have duly caused this filing on Form U-1 to
be signed on their behalf by the undersigned thereunto duly authorized.
DATE: CONECTIV, INC.
August 27, 1997 /s/ Barbara S. Graham
- ----------------------------- ---------------------------------------
Barbara S. Graham
President & Secretary
<PAGE> 56
CONSOLIDATED CONECTIV, INC.
PRO FORMA COMBINED BALANCE SHEETS
JUNE 30, 1997
(DOLLARS IN THOUSANDS)
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
CONSOLIDATED CONSOLIDATED MERGER
DELMARVA ATLANTIC PRO FORMA
AS ADJUSTED AS ADJUSTED ADJUSTMENTS
------------ ------------ ------------
<S> <C> <C> <C>
Utility Plant, At Cost
Electric 2,960,183 2,546,102 --
Gas 233,414 -- --
Common 148,143 -- --
------------ ------------ ------------
3,341,740 2,546,102 --
Less: Accumulated depreciation 1,314,643 894,176 --
------------ ------------ ------------
Net utility plant in service 2,027,097 1,651,926 --
Construction work-in-progress 118,622 102,360 --
Leased property, net 31,159 36,795 --
Cost in excess of net assets acquired, net 74,870 -- 229,166(f)
------------ ------------ ------------
2,251,748 1,791,081 229,166
------------ ------------ ------------
Investments and Nonutility Property
Nonutility property, net 88,757 73,252 --
Investment in leveraged leases 46,281 80,080 --
Funds held by trustee 36,954 89,304 --
Other investments 5,461 40,500 --
------------ ------------ ------------
177,453 283,136 --
------------ ------------ ------------
Current Assets
Cash and cash equivalents 36,882 17,994 --
Accounts receivable 162,811 139,294 --
Deferred energy costs 17,351 35,512 --
Inventories, at average cost:
Fuel (coal, oil, and gas) 34,040 27,887 --
Materials and supplies 43,164 38,120 --
Prepayments 5,835 54,221 --
Other -- 5,961 --
------------ ------------ ------------
300,083 318,989 --
------------ ------------ ------------
Deferred Charges and Other Assets
Unrecovered purchased power costs -- 74,837 --
Deferred recoverable income taxes 130,716 85,858 --
Unrecovered state excise taxes -- 49,703 --
Deferred debt refinancing costs 20,063 28,946 --
Other regulatory assets 31,002 55,019 --
Prepaid employee benefit costs 38,898 6,934 21,726(g)
Unamortized debt expense 13,664 14,536 --
Other 28,179 47,592 (11,272)(i)
------------ ------------ ------------
262,522 363,425 10,454
------------ ------------ ------------
Total Assets 2,991,806 2,756,631 239,620
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
MERGED FINANCING PRO FORMA
CONSOLIDATED PRO FORMA CONSOLIDATED
CONECTIV, INC. ADJUSTMENTS CONECTIV, INC.
-------------- ------------ --------------
<S> <C> <C> <C>
Utility Plant, At Cost
Electric 5,506,285 -- 5,506,285
Gas 233,414 -- 233,414
Common 148,143 -- 148,143
-------------- ------------ --------------
5,887,842 -- 5,887,842
Less: Accumulated depreciation 2,208,819 -- 2,208,819
-------------- ------------ --------------
Net utility plant in service 3,679,023 -- 3,679,023
Construction work-in-progress 220,982 -- 220,982
Leased property, net 67,954 -- 67,954
Cost in excess of net assets acquired, net 304,036 -- 304,036
-------------- ------------ --------------
4,271,995 -- 4,271,995
-------------- ------------ --------------
Investments and Nonutility Property
Nonutility property, net 162,009 -- 162,009
Investment in leveraged leases 126,361 -- 126,361
Funds held by trustee 126,258 -- 126,258
Other investments 45,961 -- 45,961
-------------- ------------ --------------
460,589 -- 460,589
-------------- ------------ --------------
Current Assets
Cash and cash equivalents 54,876 849,567 (q)(r)(s) 904,443
Accounts receivable 302,105 -- 302,105
Deferred energy costs 52,863 -- 52,863
Inventories, at average cost:
Fuel (coal, oil, and gas) 61,927 -- 61,927
Materials and supplies 81,284 -- 81,284
Prepayments 60,056 -- 60,056
Other 5,961 -- 5,961
-------------- ------------ --------------
619,072 849,567 1,468,639
-------------- ------------ --------------
Deferred Charges and Other Assets
Unrecovered purchased power costs 74,837 -- 74,837
Deferred recoverable income taxes 216,574 -- 216,574
Unrecovered state excise taxes 49,703 -- 49,703
Deferred debt refinancing costs 49,009 -- 49,009
Other regulatory assets 86,021 -- 86,021
Prepaid employee benefit costs 67,558 -- 67,558
Unamortized debt expense 28,200 -- 28,200
Other 64,499 -- 64,499
-------------- ------------ --------------
636,401 -- 636,401
-------------- ------------ --------------
Total Assets 5,988,057 849,567 6,837,624
============== ============ ==============
</TABLE>
The accompanying notes to the unaudited pro forma combined balance sheet and
statements of income are an integral part of this statement.
<PAGE> 57
CONSOLIDATED CONECTIV, INC.
PRO FORMA COMBINED BALANCE SHEETS
JUNE 30, 1997
(DOLLARS IN THOUSANDS)
(UNAUDITED)
CAPITALIZATION AND LIABILITIES
<TABLE>
<CAPTION>
CONSOLIDATED CONSOLIDATED MERGER
DELMARVA ATLANTIC PRO FORMA
AS ADJUSTED AS ADJUSTED ADJUSTMENTS
------------ ------------ -----------
<S> <C> <C> <C>
Capitalization
Common stock 138,399 562,686 (700,078)(a)
Class A common stock - - 66 (a)
Additional paid-in capital - common stock 520,572 - 940,142 (b)(k)
Additional paid-in capital - Class A common stock - - 136,774 (b)
Retained earnings 288,125 222,678 (244,173)(d)
------------ ------------ -----------
947,096 785,364 132,731
Treasury shares, at cost (4,434) - 4,434 (e)
Unearned compensation (340) (2,676) 3,016 (k)
------------ ------------ -----------
Total common stockholders' equity 942,322 782,688 140,181
Preferred stock not subject to mandatory redemption 89,703 - (89,703)(p)
Preferred stock of subsidiaries:
Not subject to mandatory redemption - 30,000 89,703 (p)
Subject to mandatory redemption 70,000 113,950 -
Long-term debt 923,710 786,187 -
------------ ------------ -----------
2,025,735 1,712,825 140,181
------------ ------------ -----------
Current Liabilities
Short-term debt 49,533 100,900 -
Preferred stock redemption requirement - 10,000 -
Long-term debt due within one year 52,792 197,675 -
Variable rate demand bonds 84,300 - -
Accounts payable 75,186 51,354 -
Taxes accrued 1,798 30,593 (1,361)(k)
Interest accrued 20,249 21,133 -
Dividends declared 24,475 21,624 -
Current capital lease obligation 12,708 729 -
Deferred income taxes, net 2,305 3,013 -
Other 32,057 29,141 87,643 (h)(i)
------------ ------------ -----------
355,403 466,162 86,282
------------ ------------ -----------
Deferred Credits and Other Liabilities
Deferred income taxes, net 518,989 433,494 (40,339)(l)
Deferred investment tax credits 41,221 45,310 -
Long-term capital lease obligations 18,819 36,066 -
Postretirement obligations - 35,609 53,496 (g)
Other 31,639 27,165 -
------------ ------------ -----------
610,668 577,644 13,157
------------ ------------ -----------
Total Capitalization and Liabilities 2,991,806 2,756,631 239,620
============ ============ ===========
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
MERGED FINANCING PRO FORMA
CONSOLIDATED PRO FORMA CONSOLIDATED
CONECTIV, INC. ADJUSTMENTS CONECTIV, INC.
-------------- ----------- --------------
<S> <C> <C> <C>
Capitalization
Common stock 1,007 139 (q) 1,146
Class A common stock 66 - 66
Additional paid-in capital - common stock 1,460,714 249,861 (q) 1,710,575
Additional paid-in capital - Class A common stock 136,774 - 136,774
Retained earnings 266,630 - 266,630
-------------- ----------- --------------
1,865,191 250,000 2,115,191
Treasury shares, at cost - - -
Unearned compensation - - -
-------------- ----------- --------------
Total common stockholders' equity 1,865,191 250,000 2,115,191
Preferred stock not subject to mandatory redemption - - -
Preferred stock of subsidiaries:
Not subject to mandatory redemption 119,703 - 119,703
Subject to mandatory redemption 183,950 - 183,950
Long-term debt 1,709,897 250,000 (r) 1,959,897
-------------- ----------- --------------
3,878,741 500,000 4,378,741
-------------- ----------- --------------
Current Liabilities
Short-term debt 150,433 349,567 (s) 500,000
Preferred stock redemption requirement 10,000 - 10,000
Long-term debt due within one year 250,467 - 250,467
Variable rate demand bonds 84,300 - 84,300
Accounts payable 126,540 - 126,540
Taxes accrued 31,030 - 31,030
Interest accrued 41,382 - 41,382
Dividends declared 46,099 - 46,099
Current capital lease obligation 13,437 - 13,437
Deferred income taxes, net 5,318 - 5,318
Other 148,841 - 148,841
-------------- ----------- --------------
907,847 349,567 1,257,414
-------------- ----------- --------------
Deferred Credits and Other Liabilities
Deferred income taxes, net 912,144 - 912,144
Deferred investment tax credits 86,531 - 86,531
Long-term capital lease obligations 54,885 - 54,885
Postretirement obligations 89,105 - 89,105
Other 58,804 - 58,804
-------------- ----------- --------------
1,201,469 - 1,201,469
-------------- ----------- --------------
Total Capitalization and Liabilities 5,988,057 849,567 6,837,624
============== =========== ==============
</TABLE>
The accompanying notes to the unaudited pro forma combined
balance sheet and statements of income are an integral part of this statement.
<PAGE> 58
CONSOLIDATED CONECTIV INC.
PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED JUNE 30, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
CONSOLIDATED CONSOLIDATED MERGER
DELMARVA ATLANTIC PRO FORMA
AS ADJUSTED AS ADJUSTED ADJUSTMENTS
------------ ------------ -----------
<S> <C> <C> <C>
Operating Revenues
Electric $1,018,358 $970,220 -
Gas 134,388 - -
Other services 103,474 16,325 -
------------ ------------ -----------
1,256,220 986,545 -
------------ ------------ -----------
Operating Expenses
Electric fuel and purchased energy 362,579 220,309 -
Gas purchased 82,828 - -
Purchased electric capacity 29,129 195,787 -
Operation and maintenance 368,507 195,503 -
Depreciation and amortization 132,779 82,640 5,767 (j)
State excise taxes - 102,842 -
Other taxes 36,508 9,744 -
------------ ------------ -----------
1,012,330 806,825 5,767
------------ ------------ -----------
Operating Income 243,890 179,720 (5,767)
------------ ------------ -----------
Other Income
Allowance for equity funds used
during construction 857 931 -
Other income 7,630 4,616 -
------------ ------------ -----------
8,487 5,547 -
------------ ------------ -----------
Interest Expense
Interest charges 78,980 69,668 -
Allowance for borrowed funds used
during construction and capitalized interest (4,713) (897) -
------------ ------------ -----------
74,267 68,771 -
------------ ------------ -----------
Preferred Stock Dividend
Requirements of Subsidiaries 4,234 11,021 6,372 (p)
------------ ------------ -----------
Income Before Income Taxes 173,876 105,475 (12,139)
Income Taxes 71,367 37,017 -
------------ ------------ -----------
Net Income 102,509 68,458 (12,139)
Dividends on Preferred Stock 6,372 - (6,372)(p)
------------ ------------ -----------
Earnings Applicable to Common Stock:
Common stock 96,137 68,458 (16,368)
Class A common stock - - 10,601 (m)
------------ ------------ -----------
$96,137 $68,458 ($5,767)
============ ============ ===========
Average common shares outstanding (000):
Common stock 60,841 52,603 (13,225)(n)
Class A common stock - - 6,563 (n)
Earnings per average share outstanding of:
Common stock $1.58 $1.30 -
Class A common stock - - -
Dividends declared per share of:
Common stock $1.54 $1.54 -
Class A common stock - - -
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
MERGED FINANCING PRO FORMA
CONSOLIDATED PRO FORMA CONSOLIDATED
CONECTIV INC. ADJUSTMENTS CONECTIV INC.
------------- ----------- -------------
<S> <C> <C> <C>
Operating Revenues
Electric $1,988,578 - $1,988,578
Gas 134,388 - 134,388
Other services 119,799 - 119,799
------------- ----------- -------------
2,242,765 - 2,242,765
------------- ----------- -------------
Operating Expenses
Electric fuel and purchased energy 582,888 - 582,888
Gas purchased 82,828 - 82,828
Purchased electric capacity 224,916 - 224,916
Operation and maintenance 564,010 - 564,010
Depreciation and amortization 221,186 - 221,186
State excise taxes 102,842 - 102,842
Other taxes 46,252 - 46,252
------------- ----------- -------------
1,824,922 - 1,824,922
------------- ----------- -------------
Operating Income 417,843 - 417,843
------------- ----------- -------------
Other Income
Allowance for equity funds used
during construction 1,788 - 1,788
Other income 12,246 - 12,246
------------- ----------- -------------
14,034 - 14,034
------------- ----------- -------------
Interest Expense
Interest charges 148,648 37,600 (r)(s) 186,248
Allowance for borrowed funds used
during construction and capitalized interest (5,610) - (5,610)
------------- ----------- -------------
143,038 37,600 180,638
------------- ----------- -------------
Preferred Stock Dividend
Requirements of Subsidiaries 21,627 - 21,627
------------- ----------- -------------
Income Before Income Taxes 267,212 (37,600) 229,612
Income Taxes 108,384 (13,160)(r)(s) 95,224
------------- ----------- -------------
Net Income 158,828 (24,440) 134,388
Dividends on Preferred Stock - - -
------------- ----------- -------------
Earnings Applicable to Common Stock:
Common stock 148,227 (24,440) 123,787
Class A common stock 10,601 - 10,601
------------- ----------- -------------
$158,828 ($24,440) $134,388
============= =========== =============
Average common shares outstanding (000):
Common stock 100,219 13,889 (q) 114,108
Class A common stock 6,563 - 6,563
Earnings per average share outstanding of:
Common stock $1.48 $1.08
Class A common stock $1.62 $1.62
Dividends declared per share of:
Common stock $1.54 $1.54
Class A common stock $3.20 $3.20
</TABLE>
The accompanying notes to the unaudited pro forma combined balance sheet and
statements of income are an integral part of this statement.
<PAGE> 59
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(a) Adjustments to record the estimated par value at $0.01 per share of
Conectiv Common Stock and Conectiv Class A Common Stock to be issued and
outstanding. The number of shares of Conectiv stock was estimated using
the number of Delmarva and Atlantic Common Stock shares outstanding as
of June 30, 1997. Each outstanding share of Delmarva Common Stock was
converted into one share of Conectiv Common Stock and each outstanding
share of Atlantic Common Stock was converted into 0.75 of one share of
Conectiv Common Stock plus 0.125 of one share of Conectiv Class A Common
Stock. The adjustments are summarized below.
<TABLE>
<CAPTION>
As of June 30, 1997
-------------------
<S> <C>
Common Stock:
Number of Atlantic Common Stock shares outstanding 52,504,479
Conversion Ratio 0.75
-------------
Number of Common Stock shares to be issued to
Atlantic Common Stockholders 39,378,359
Number of Common Stock shares to be issued to
Delmarva Common Stockholders (Equal to the
number of Delmarva Common Stock shares outstanding) 61,296,320
-------------
Total number of Common Stock shares to be issued 100,674,679
Par value per share $ 0.01
-------------
(In Thousands of Dollars)
Adjusted par value of total number of Common Stock shares
to be issued $ 1,007
Delmarva's Common Stock, as previously reported (138,399)
Atlantic's Common Stock, as previously reported (562,686)
-------------
Adjustment to Common Stock $ (700,078)
=============
Class A Common Stock:
Number of Atlantic Common Stock shares outstanding 52,504,479
Conversion Ratio 0.125
-------------
Number of Class A Common Stock shares to be issued to
Atlantic Common Stockholders 6,563,060
Par value per share $ 0.01
-------------
Par value (In Thousands of Dollars) $ 66
=============
</TABLE>
<PAGE> 60
(b) Adjustments to record additional paid-in-capital to reflect the
following:
<TABLE>
<CAPTION>
As of June 30, 1997
----------------------
(Dollars in Thousands)
<S> <C>
Additional Paid-In-Capital--Common Stock:
Cancellation of the Delmarva Treasury Stock cost in excess
of par value $ (3,952)
Adjustment to par value of Delmarva Common Stock outstanding 137,304
Consideration to be paid to Atlantic's Common Stockholders in the
form of the Company Common Stock in excess of par value 807,847
Estimated registration and issuance costs (1,750)
---------
$ 939,449
=========
Additional Paid-In-Capital--Class A Common Stock:
Consideration to be paid to Atlantic's Common Stockholders in the
form of the Company Class A Common Stock in excess of par value $ 136,774
=========
</TABLE>
(c) The total consideration to be paid to the Atlantic Common Stockholders
was measured by the average daily closing market price of Atlantic's
Common Stock for the ten trading days following the public announcement
of the Merger Agreement on August 12, 1996.
Delmarva's Common Stockholders will receive one share of Conectiv Common
Stock for each share of Delmarva Common Stock. Therefore, the average
daily market price of Delmarva's Common Stock for the same ten day
period following the public announcement of the Merger Agreement was
used to measure the market value of Conectiv Common Stock to be paid to
Atlantic's Common Stockholders. Delmarva's average market price per
share was multiplied by the Atlantic conversion ratio for Conectiv
Common Stock to determine the estimated market value per share of
Atlantic Common Stock attributed to Conectiv Common Stock. This market
value per share was multiplied by the number of Atlantic Common Stock
shares outstanding at June 30, 1997 to estimate the consideration to be
paid to Atlantic Common Stockholders in the form of Conectiv Common
Stock.
The difference between the total compensation to be paid to Atlantic's
Common Stockholders and the portion attributed to Conectiv Common Stock
was attributed to Conectiv Class A Common Stock.
The schedules below show the calculation of the total consideration to
be paid to Atlantic's Common Stockholders and the allocation of the
total consideration to be paid between Conectiv Common Stock and
Conectiv Class A Common Stock:
<TABLE>
<CAPTION>
Amounts
-------
<S> <C>
Average market price per share of Atlantic Common Stock used
to determine consideration to be paid $18.00
Number of Atlantic Common Stock shares outstanding as of
June 30, 1997 52,504,479
----------
Total consideration to be paid to Atlantic Common Stockholders
(In Thousands of Dollars) $945,081
==========
</TABLE>
<PAGE> 61
<TABLE>
<CAPTION>
Amounts
-------
<S> <C>
Average market price per share of Delmarva Common Stock for the ten trading
days following the public announcement of
the Merger Agreement $20.525
Conversion ratio of Conectiv Common Stock for each share of
Atlantic Common Stock 0.75
----------
Estimated market value per share of Atlantic Common Stock
attributed to Conectiv Common Stock $15.39375
Number of Atlantic Common Stock shares outstanding as of
June 30, 1997 52,504,479
----------
Consideration to be paid to Atlantic's Common Stockholders in
the form of Conectiv Common Stock (In Thousands of Dollars) $808,241
==========
(In Thousands of Dollars)
Total consideration to be paid to Atlantic Common Stockholders $945,081
Portion of total consideration attributed to Conectiv Common Stock 808,241
----------
Portion of total consideration attributed to Conectiv Class A
Common Stock $136,840
==========
</TABLE>
(d) Adjustments to retained earnings as follows:
<TABLE>
<CAPTION>
Amounts
----------------------
(Dollars in Thousands)
<S> <C>
Eliminate retained earnings of Atlantic $(220,939)
Charges to expense of $35.4 million ($20.9 million after tax) for
nonrecurring employee separation costs related to Delmarva
employees and employee retraining costs [see note (h)] (20,886)
Charge to expense to eliminate unearned income [see Note (k)] (2,348)
----------
Total adjustment $(244,173)
==========
</TABLE>
Prior to elimination, the retained earnings of Atlantic, as reported in
its Form 10-Q for the quarter ended June 30, 1997, of $222,678,000 was
reduced by $1,739,000, which is Atlantic's after tax portion of the
expense recognized that was related to employee incentive plans [see
Note (k)].
<PAGE> 62
(e) Adjustment to reflect the cancellation of the Delmarva treasury stock as
a condition of the Mergers.
(f) The schedule below shows the calculation of the cost of acquiring
Atlantic and the allocation of the total acquisition cost to
identifiable tangible and intangible assets and liabilities.
<TABLE>
<CAPTION>
Cost of Acquiring Atlantic Amounts
-------------------------- ----------------------
(Dollars in Thousands)
<S> <C>
Consideration to be paid to Atlantic's Common Stockholders
[see Note (c)] $945,081
Add: Estimated direct costs of acquisition to be incurred by Delmarva 25,015
Less: Registration and issuance costs (1,750)
----------
Total acquisition cost $968,346
==========
Less assets acquired:
Electric utility plant - net $1,791,081
Investments and nonutility property 283,136
Current assets 318,989
Deferred debits 363,425
----------
Total assets acquired $2,756,631
==========
Add liabilities acquired:
Preferred stock of subsidiaries $143,950
Long-term debt 786,187
Current liabilities 465,225
Deferred credits and other liabilities 577,644
----------
Total liabilities acquired $1,973,006
----------
Costs incurred and liabilities assumed in connection with the Mergers $ 44,445
Cost in excess of net assets acquired $229,166
==========
</TABLE>
The current liabilities of Atlantic as of June 30, 1997 included in net
assets acquired was adjusted to reflect transactions to be recorded by
Atlantic prior to the Mergers as shown below:
<TABLE>
<CAPTION>
As of June 30, 1997
----------------------
(Dollars in Thousands)
<S> <C>
Current liabilities of Atlantic as adjusted [see Note (p)] $466,162
Accrued tax benefit [see Note (k)] (937)
---------
Current liabilities acquired $465,225
=========
</TABLE>
The fair value of the utility assets of Atlantic is their book value due
to the ratemaking process. Utility assets are recognized for ratemaking
purposes at their book values in determining utility revenue
requirements. Accordingly, the economic substance is that fair value of
the utility assets is their book value.
(g) Adjustments to record additional pension prepayment ($21.7 million) and
postretirement benefit liabilities ($53.5 million), assumed in the
acquisition of Atlantic in accordance with Statements of Financial
Accounting Standards (SFAS) Nos. 87 and 106.
<PAGE> 63
(h) Adjustment to record an estimated liability of $38.5 million, which is
included in the acquisition cost, for employee separation and relocation
costs, and facilities integration costs related to Atlantic's employees
and facilities. The adjustment also includes a liability of $35.4
million, which will be expensed, for employee separation costs related
to Delmarva's employees and employee retraining costs. The Unaudited Pro
Forma Combined Statement of Income for the twelve months ended June 30,
1997 does not reflect the nonrecurring estimated expenses of $35.4
million before taxes ($20.9 million after taxes) for employee separation
costs related to Delmarva's employees and employee retraining costs.
(i) Adjustment to record the estimated direct costs of the Mergers of $25.0
million. These costs are included in the cost to acquire Atlantic.
<TABLE>
<CAPTION>
As of June 30, 1997
----------------------
(Dollars in Thousands)
<S> <C>
Other current liabilities $13,743
--------
Deferred debits ($11,272)
--------
</TABLE>
(j) Adjustment to reflect the amortization of goodwill acquired over forty
(40) years.
(k) Adjustment to recognize a pretax expense of $4.0 million to satisfy
unearned and deferred compensation costs payable under employee
incentive plans at the time of the Mergers. The adjustment is summarized
below:
<TABLE>
<CAPTION>
As of June 30, 1997
----------------------
(Dollars in Thousands)
<S> <C>
Decrease in retained earnings:
Atlantic $(1,739)
Delmarva (609)
--------------------
Total decrease in retained earnings
$(2,348)
====================
Accrued tax benefit:
Atlantic $(937)
Delmarva (424)
--------------------
Total decrease in accrued taxes $(1,361)
====================
Eliminate unearned and deferred compensation $3,016
--------------------
Additional paid-in capital - common stock $693
====================
</TABLE>
The Unaudited Pro Forma Combined Statement of Income for the twelve
months ended June 30, 1997 does not reflect the nonrecurring estimated
expense of $3.7 million before taxes ($2.3 million after taxes).
<PAGE> 64
(l) Adjustment to record additional deferred income taxes for the following
temporary differences:
<TABLE>
<CAPTION>
(Dollars in Thousands)
Temporary Deferred
Differences Income Taxes
----------- ------------
<S> <C> <C>
Additional pension prepayment [see Note (g)] $ 21,726 ($ 7,604)
Additional postretirement benefit liabilities
[see Note (g)] 53,496 18,724
Liabilities for employee separation, relocation, and
retraining costs and facilities integration costs
[see Note (h)] 73,900 27,989
Liability for a portion of DP&L direct acquisition costs
that are deemed to be tax deductible [see Note (i)] 3,000 1,230
--------
Total deferred income taxes $ 40,339
========
</TABLE>
In accordance with SFAS No. 109, deferred income taxes were not recorded
on goodwill and the amortization is not deductible for tax purposes.
(m) Adjustment to present earnings applicable to the Class A Common Stock.
The Class A Common Stock is intended to reflect the growth prospects and
regulatory environment of Atlantic's regulated electric utility
business. When the Mergers are consummated, the shares of Class A Common
Stock received by holders of Atlantic Common Stockholders will
represent, in aggregate, a 30% interest in any earnings of Atlantic's
regulated electric utility business in excess of $40 million per year.
The calculation of the pro forma earnings applicable to the Class A
Common Stock for the twelve months ended June 30, 1997 is shown below
(in thousands):
<TABLE>
<S> <C>
Atlantic City Electric Company (ACE) and
Subsidiary Income Available for Common
Stockholders $ 74,578
Add: Net Losses of Nonutility Activities
Specifically Excluded 760
Less: Fixed Amount of $40 million per year (40,000)
--------
Subtotal 35,338
Percentage Applicable to Class A Common Stock 30%
--------
Earnings Applicable to Class A Common Stock $ 10,601
========
</TABLE>
<PAGE> 65
(n) Adjustments to decrease the weighted average number of Common Stock
shares outstanding based on the conversion ratio of 0.75 to 1 of
Conectiv Common Stock to be issued to holders of Atlantic Common Stock
and reflect the issuance of Class A Common Stock shares to holders of
Atlantic Common Stock. The number of shares of Conectiv Common Stock and
Class A Common Stock estimated to be issued to holders of Atlantic
Common Stock for the acquisition were deemed to be issued and
outstanding for the entire period.
(o) The Merger Agreement provides, subject to certain conditions, that the
dividends declared and paid on the Class A Common Stock will be
maintained at a level of $3.20 per share per annum from the Effective
Date until the earlier of July 1, 2001 or the end of the twelfth
calendar quarter following the calendar quarter in which the Effective
Date occurs. Thereafter, it is the intention of Conectiv, subject to
certain conditions, to pay annual dividends on the Class A Common Stock
in an aggregate amount (including the amount credited to the Intergroup
Interest as provided in the Conectiv Charter) equal to 90% of Conectiv
Net Income Attributable to the Atlantic Utility Group. The Merger
Agreement further provides that if and to the extent that the annual
dividends paid on the Class A Common Stock during the Initial Period
(including the aforesaid amount) shall have exceeded 100% of Conectiv
Net Income Attributable to the Atlantic Utility Group during such
period, the Conectiv Board may consider such fact in determining the
appropriate annual dividend rate on the Class A Common Stock following
the Initial Period.
The pro forma Class A Common Stock dividends per share exceed the pro
forma Class A Common Stock earnings per share for the twelve months
ended June 30, 1997.
(p) Adjustment to reflect Delmarva's preferred stock as preferred stock of a
subsidiary.
(q) Adjustment to record the issuance of 13,888,889 shares of common stock,
par value $0.01, at $18 a share (for pro forma purposes it is assumed
that 50% of the $500 million of long-term financing requested is in the
form of common stock equity)
(r) Adjustment to record the issuance of $250 million of long-term debt at
7% (for pro forma purposes it is assumed that 50% of the $500 million of
long-term financing requested is in the form of long-term debt)
(s) Adjustment to record the issuance of $350 million of additional
short-term debt at 5.75% to bring the Conectiv System total short-term
debt up to the maximum $500 million requested.
(t) Since it is anticipated that the issuance of common stock under the
Conectiv benefit plans will have little impact on the Conectiv System
financial statements in the first year it would be inappropriate to
prepare pro forma adjustments at this time.
(u) As necessary for fair presentation of the pro forma financial
statements, amounts previously reported by Atlantic and Delmarva have
been reclassified for consistency of presentation. The following
schedules show the amounts reclassified.
<PAGE> 66
DELMARVA POWER & LIGHT COMPANY
CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
REPORTED RECLASS ADJUSTED
AMOUNT ADJUSTMENTS AMOUNT
--------- ----------- ---------
<S> <C> <C> <C>
UTILITY PLANT, AT COST
Electric 3,036,671 (76,488)(1)(2) 2,960,183
Gas 233,414 - 233,414
Common 150,791 (2,648)(2) 148,143
--------- ----------- ---------
3,420,876 (79,136) 3,341,740
Less: Accumulated depreciation 1,317,651 (3,008)(2) 1,314,643
--------- ----------- ---------
Net utility plant in service 2,103,225 (76,128) 2,027,097
Construction work-in-progress 118,622 - 118,622
Leased property, net 29,901 1,258 (2) 31,159
Cost in excess of net assets acquired, net - 74,870 (1) 74,870
--------- ----------- ---------
2,251,748 - 2,251,748
--------- ----------- ---------
INVESTMENTS AND NONUTILITY PROPERTY
Nonutility property, net 88,757 - 88,757
Investment in leveraged leases 46,281 - 46,281
Funds held by trustee 36,954 - 36,954
Other investments 5,461 - 5,461
--------- ----------- ---------
177,453 - 177,453
--------- ----------- ---------
CURRENT ASSETS
Cash and cash equivalents 36,882 - 36,882
Accounts receivable 162,811 - 162,811
Deferred energy costs 17,351 - 17,351
Inventories, at average cost:
Fuel (coal, oil, and gas) 34,040 - 34,040
Materials and supplies 43,164 - 43,164
Prepayments 5,835 - 5,835
--------- ----------- ---------
300,083 - 300,083
--------- ----------- ---------
DEFERRED CHARGES AND OTHER ASSETS
Deferred recoverable income taxes 130,716 - 130,716
Deferred debt refinancing costs 20,063 - 20,063
Other regulatory assets - 31,002 (3) 31,002
Prepaid employee benefit costs 38,898 - 38,898
Unamortized debt expense 13,664 - 13,664
Other 59,181 (31,002)(3) 28,179
--------- ----------- ---------
262,522 - 262,522
--------- ----------- ---------
TOTAL ASSETS 2,991,806 - 2,991,806
========= =========== =========
</TABLE>
The accompanying Notes to the Consolidated Financial Statements are an
integral part of this statement.
<PAGE> 67
DELMARVA POWER & LIGHT COMPANY
CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
CAPITALIZATION AND LIABILITIES
REPORTED RECLASS ADJUSTED
AMOUNT ADJUSTMENTS AMOUNT
---------- ----------- ----------
<S> <C> <C> <C>
CAPITALIZATION
Common stock 138,399 - 138,399
Additional paid-in capital - common stock 520,572 - 520,572
Retained earnings 288,125 - 288,125
---------- ----------- ----------
947,096 - 947,096
TREASURY SHARES, AT COST (4,434) - (4,434)
Unearned compensation (340) - (340)
---------- ----------- ----------
Total common stockholders' equity 942,322 - 942,322
Preferred stock not subject to mandatory redemption 89,703 - 89,703
Preferred stock of subsidiaries:
Subject to mandatory redemption 70,000 - 70,000
Long-term debt 923,710 - 923,710
---------- ----------- ----------
2,025,735 - 2,025,735
---------- ----------- ----------
CURRENT LIABILITIES
Short-term debt 49,533 - 49,533
Long-term debt due within one year 52,792 - 52,792
Variable rate demand bonds 84,300 - 84,300
Accounts payable 75,186 - 75,186
Taxes accrued 1,798 - 1,798
Interest accrued 20,249 - 20,249
Dividends declared 24,475 - 24,475
Current capital lease obligation 12,708 - 12,708
Deferred income taxes, net 2,305 - 2,305
Other 32,057 - 32,057
---------- ----------- ----------
355,403 - 355,403
---------- ----------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred income taxes, net 518,989 - 518,989
Deferred investment tax credits 41,221 - 41,221
Long-term capital lease obligations 18,819 - 18,819
Other 31,639 - 31,639
---------- ----------- ----------
610,668 - 610,668
---------- ----------- ----------
TOTAL CAPITALIZATION AND LIABILITIES 2,991,806 - 2,991,806
========== =========== ==========
</TABLE>
The accompanying Notes to the Consolidated Financial Statements are an
integral part of this statement.
<PAGE> 68
ATLANTIC ENERGY, INC.
CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
REPORTED RECLASS ADJUSTED
AMOUNT ADJUSTMENTS AMOUNT
--------- ----------- ---------
<S> <C> <C> <C>
Electric utility plant
In service 2,540,498 5,604 (4) 2,546,102
--------- ----------- ---------
2,540,498 5,604 2,546,102
Less: Accumulated depreciation 894,176 - 894,176
--------- ----------- ---------
Net utility plant in service 1,646,322 5,604 1,651,926
Construction work-in-progress 102,360 - 102,360
Land Held for Future Use 5,604 (5,604)(4) -
Leased property, net 36,795 - 36,795
--------- ----------- ---------
1,791,081 - 1,791,081
--------- ----------- ---------
Investments and Nonutility Property
Nonutility property, net 73,252 - 73,252
Investment in leveraged leases 80,080 - 80,080
Funds held by trustee 76,528 12,776 (5) 89,304
Other investments 53,276 (12,776)(5) 40,500
--------- ----------- ---------
283,136 - 283,136
--------- ----------- ---------
Current Assets
Cash and cash equivalents 17,566 428 (6) 17,994
Accounts receivable 98,005 41,289 (7) 139,294
Unbilled revenues 41,289 (41,289)(7) -
Deferred energy costs 35,512 - 35,512
Inventories, at average cost:
Fuel (coal, oil, and gas) 27,887 - 27,887
Materials and supplies 23,477 14,643 (6) 38,120
Working funds 15,071 (15,071)(6) -
Prepayments 54,221 - 54,221
Other 14,545 (8,584)(8) 5,961
--------- ----------- ---------
327,573 (8,584) 318,989
--------- ----------- ---------
Deferred Charges and Other Assets
Unrecovered purchased power costs 74,837 - 74,837
Deferred recoverable income taxes 85,858 - 85,858
Unrecovered state excise taxes 49,703 - 49,703
Deferred debt refinancing costs 43,482 (14,536)(9) 28,946
Other regulatory assets 55,019 - 55,019
Prepaid employee benefit costs - 6,934 (8) 6,934
Unamortized debt expense - 14,536 (9) 14,536
Other 47,592 - 47,592
--------- ----------- ---------
356,491 6,934 363,425
--------- ----------- ---------
Total Assets 2,758,281 (1,650) 2,756,631
========= =========== =========
</TABLE>
The accompanying Notes to the Consolidated Financial Statements are an
integral part of this statement.
<PAGE> 69
ATLANTIC ENERGY, INC.
CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
(DOLLARS IN THOUSANDS)
(UNAUDITED)
CAPITALIZATION AND LIABILITIES
<TABLE>
<CAPTION>
REPORTED RECLASS ADJUSTED
AMOUNT ADJUSTMENTS AMOUNT
------------ ------------- ------------
<S> <C> <C> <C>
CAPITALIZATION
Common stock 562,686 - 562,686
Retained earnings 222,678 - 222,678
------------ ------------- ------------
785,364 - 785,364
Unearned compensation (2,676) - (2,676)
------------ ------------- ------------
Total common stockholders' equity 782,688 - 782,688
Preferred stock of subsidiaries:
Not subject to mandatory redemption 30,000 - 30,000
Subject to mandatory redemption 113,950 - 113,950
Long-term debt 786,187 - 786,187
------------ ------------- ------------
1,712,825 - 1,712,825
------------ ------------- ------------
CURRENT LIABILITIES
Short-term debt 100,900 - 100,900
Preferred stock redemption requirement 10,000 - 10,000
Long-term debt due within one year 197,675 - 197,675
Accounts payable 51,354 - 51,354
Taxes accrued 30,593 - 30,593
Interest accrued 21,133 - 21,133
Dividends declared 21,624 - 21,624
Current capital lease obligation 729 - 729
Deferred income taxes, net 3,013 - 3,013
Other 30,791 (1,650)(8) 29,141
------------ ------------- ------------
467,812 (1,650) 466,162
------------ ------------- ------------
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred income taxes, net 433,494 - 433,494
Deferred investment tax credits 45,310 - 45,310
Long-term capital lease obligations 36,066 - 36,066
Postretirement obligations - 35,609 (10) 35,609
Other 62,774 (35,609)(10) 27,165
------------ ------------- ------------
577,644 - 577,644
------------ ------------- ------------
TOTAL CAPITALIZATION AND LIABILITIES 2,758,281 (1,650) 2,756,631
============ ============= ============
</TABLE>
The accompanying Notes to the Consolidated Financial Statements are an
integral part of this statement.
<PAGE> 70
DELMARVA POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED JUNE 30, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
REPORTED RECLASS ADJUSTED
AMOUNT ADJUSTMENTS AMOUNT
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING REVENUES
Electric $ 1,018,358 $ -- $ 1,018,358
Gas 134,388 -- 134,388
Other services 103,474 -- 103,474
----------- ----------- -----------
1,256,220 -- 1,256,220
----------- ----------- -----------
OPERATING EXPENSES
Electric fuel and purchase energy 362,579 -- 362,579
Gas purchased 82,828 -- 82,828
Purchased electric capacity 29,129 -- 29,129
Operation and maintenance 368,507 -- 368,507
Depreciation and amortization 132,779 -- 132,779
Other taxes 36,508 -- 36,508
----------- ----------- -----------
1,012,330 -- 1,012,330
----------- ----------- -----------
OPERATING INCOME 243,890 -- 243,890
----------- ----------- -----------
OTHER INCOME
Allowance for equity funds used
during construction 857 -- 857
Other income 7,630 -- 7,630
----------- ----------- -----------
8,487 -- 8,487
----------- ----------- -----------
INTEREST EXPENSE
Interest charges 78,980 -- 78,980
Allowance for borrowed funds used
during construction and capitalized interest (4,713) -- (4,713)
----------- ----------- -----------
74,267 -- 74,267
----------- ----------- -----------
PREFERRED STOCK DIVIDEND
REQUIREMENTS OF SUBSIDIARIES 4,234 -- 4,234
----------- ----------- -----------
INCOME BEFORE INCOME TAXES 173,876 -- 173,876
INCOME TAXES 71,367 -- 71,367
----------- ----------- -----------
NET INCOME 102,509 -- 102,509
DIVIDENDS ON PREFERRED STOCK 6,372 -- 6,372
----------- ----------- -----------
EARNINGS APPLICABLE TO COMMON STOCK $ 96,137 $ -- $ 96,137
=========== =========== ===========
Average shares outstanding (000): 60,841 -- 60,841
Earnings per average share $ 1.58 $ -- $ 1.58
Dividends declared $ 1.54 $ -- $ 1.54
</TABLE>
The accompanying Notes to the Consolidated Financial Statements are an
integral part of this statement.
<PAGE> 71
ATLANTIC ENERGY, INC.
CONSOLIDATED STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED JUNE 30, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
REPORTED RECLASS ADJUSTED
AMOUNT ADJUSTMENTS AMOUNT
--------- ----------- ---------
<S> <C> <C> <C>
OPERATING REVENUES
Electric $ 970,220 $ -- $ 970,220
Other services -- 16,325(11) 16,325
--------- ----------- ---------
970,220 16,325 986,545
--------- ----------- ---------
OPERATING EXPENSES
Electric fuel and purchase energy 220,309 -- 220,309
Purchased electric capacity 195,787 -- 195,787
Operation and maintenance 179,754 15,749(11) 195,503
Depreciation and amortization 81,920 720(11) 82,640
State excise taxes 102,842 -- 102,842
Other taxes 9,744 -- 9,744
--------- ----------- ---------
790,356 16,469 806,825
--------- ----------- ---------
OPERATING INCOME 179,864 (144) 179,720
--------- ----------- ---------
OTHER INCOME
Allowance for equity funds used
during construction 931 -- 931
Other income 2,946 1,670(11) 4,616
--------- ----------- ---------
3,877 1,670 5,547
--------- ----------- ---------
INTEREST EXPENSE
Interest charges 64,564 5,104(11) 69,668
Allowance for borrowed funds used
during construction and capitalized interest (897) -- (897)
--------- ----------- ---------
63,667 5,104 68,771
--------- ----------- ---------
PREFERRED STOCK DIVIDEND
REQUIREMENTS OF SUBSIDIARIES 11,021 -- 11,021
--------- ----------- ---------
INCOME BEFORE INCOME TAXES 109,053 (3,578) 105,475
INCOME TAXES 40,595 (3,578)(11) 37,017
--------- ----------- ---------
NET INCOME $ 68,458 $ -- 68,458
========= =========== =========
Average shares outstanding (000) 52,603 -- 52,603
Earnings per average share $ 1.30 $ -- $ 1.30
Dividends declared $ 1.54 $ -- $ 1.54
</TABLE>
The accompanying Notes to the Consolidated Financial Statements are an
integral part of this statement.
<PAGE> 72
CONECTIV, INC.
PRO FORMA BALANCE SHEET
JUNE 30, 1997
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
CONECTIV, INC.
PRO FORMA FINANCING AFTER
MERGED PRO FORMA FINANCING
ASSETS CONECTIV, INC. ADJUSTMENTS ADJUSTMENTS
------------ ----------- --------------
<S> <C> <C> <C>
INVESTMENTS AND NONUTILITY PROPERTY
Investment in subsidiary companies $ 1,930,918(1) $ -- $ 1,930,918
Other investments 16(2) -- 16
------------ ----------- --------------
1,930,934 -- 1,930,934
------------ ----------- --------------
CURRENT ASSETS
Cash and cash equivalents 762(2) 849,567(9) 850,329
Accounts receivable 8,493(2) -- 8,493
Dividends receivable 43,896(3) -- 43,896
Intercompany receivable 26,376(2) -- 26,376
Prepayments 28(2) -- 28
------------ ----------- --------------
79,555 849,567 929,122
------------ ----------- --------------
DEFERRED CHARGES AND OTHER ASSETS
Other 101(2) -- 101
------------ ----------- --------------
------------ ----------- --------------
TOTAL ASSETS $ 2,010,590 $ 849,567 $ 2,860,157
============ =========== ==============
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common stock $ 1,007(4) $ 139(9) $ 1,146
Class A common stock 66(4) -- 66
Additional paid-in capital - common stock 1,460,714(4) 249,861(9) 1,710,575
Additional paid-in capital - Class A common stock 136,774(4) -- 136,774
Retained earnings 266,630(4) -- 266,630
------------ ----------- --------------
Total common stockholders' equity 1,865,191 250,000 2,115,191
Long-term debt -- 250,000(9) 250,000
------------ ----------- --------------
1,865,191 500,000 2,365,191
------------ ----------- --------------
CURRENT LIABILITIES
Short-term debt -- 349,567(9) 349,567
Long-term debt due within one year 51,500(2) -- 51,500
Intercompany accounts payable 12,770(5) -- 12,770
Taxes accrued 22,968(6) -- 22,968
Interest accrued 199(2) -- 199
Dividends declared 43,896(3) -- 43,896
Other 15,296(7) -- 15,296
------------ ----------- --------------
146,629 349,567 496,196
------------ ----------- --------------
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred income taxes, net (1,230)(8) -- (1,230)
------------ ----------- --------------
TOTAL CAPITALIZATION AND LIABILITIES $ 2,010,590 $ 849,567 $ 2,860,157
============ =========== ==============
</TABLE>
The accompanying notes to the unaudited pro forma balance sheet and statement
of income are an integral part of this statement.
<PAGE> 73
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Transfer goodwill for assets acquired after June 30, 1997 from Electric
plant to "Cost in excess of net assets acquired, net."
(2) Transfer capital leases, net to "Leased property, net."
(3) Transfer regulatory assets from "Other" to "Other regulatory assets."
(4) Transfer "Land held for future use" to "Electric utility plant in
service."
(5) Transfer $12,776 for Investment in Bond Escrow Trust from "Other
investments" to "Funds held by trustee."
(6) Transfer "Working funds" to "Cash" and to "Materials and supplies", as
appropriate.
(7) Transfer "Unbilled revenues" to "Accounts receivable."
(8) Transfer prepaid pension cost to a separate line.
(9) Transfer unamortized debt costs from "Deferred debt refinancing costs"
to "Unamortized debt expense."
(10) Transfer other postretirement benefits from "Other" to a separate line.
(11) Transfer net earnings of nonutility subsidiaries from "Other income" to
appropriate lines.
<PAGE> 74
CONECTIV, INC.
PRO FORMA BALANCE SHEET
JUNE 30, 1997
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
CONECTIV, INC.
PRO FORMA FINANCING AFTER
MERGED PRO FORMA FINANCING
ASSETS CONECTIV, INC. ADJUSTMENTS ADJUSTMENTS
------------ ----------- --------------
<S> <C> <C> <C>
INVESTMENTS AND NONUTILITY PROPERTY
Investment in subsidiary companies $ 1,930,918(1) $ -- $ 1,930,918
Other investments 16(2) -- 16
------------ ----------- --------------
1,930,934 -- 1,930,934
------------ ----------- --------------
CURRENT ASSETS
Cash and cash equivalents 762(2) 849,567(9) 850,329
Accounts receivable 8,493(2) -- 8,493
Dividends receivable 43,896(3) -- 43,896
Intercompany receivable 26,376(2) -- 26,376
Prepayments 28(2) -- 28
------------ ----------- --------------
79,555 849,567 929,122
------------ ----------- --------------
DEFERRED CHARGES AND OTHER ASSETS
Other 101(2) -- 101
------------ ----------- --------------
------------ ----------- --------------
TOTAL ASSETS $ 2,010,590 $ 849,567 $ 2,860,157
============ =========== ==============
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common stock $ 1,007(4) $ 139(9) $ 1,146
Class A common stock 66(4) -- 66
Additional paid-in capital - common stock 1,460,714(4) 249,861(9) 1,710,575
Additional paid-in capital - Class A common stock 136,774(4) -- 136,774
Retained earnings 266,630(4) -- 266,630
------------ ----------- --------------
Total common stockholders' equity 1,865,191 250,000 2,115,191
Long-term debt -- 250,000(9) 250,000
------------ ----------- --------------
1,865,191 500,000 2,365,191
------------ ----------- --------------
CURRENT LIABILITIES
Short-term debt -- 349,567(9) 349,567
Long-term debt due within one year 51,500(2) -- 51,500
Intercompany accounts payable 12,770(5) -- 12,770
Taxes accrued 22,968(6) -- 22,968
Interest accrued 199(2) -- 199
Dividends declared 43,896(3) -- 43,896
Other 15,296(7) -- 15,296
------------ ----------- --------------
146,629 349,567 496,196
------------ ----------- --------------
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred income taxes, net (1,230)(8) -- (1,230)
------------ ----------- --------------
TOTAL CAPITALIZATION AND LIABILITIES $ 2,010,590 $ 849,567 $ 2,860,157
============ =========== ==============
</TABLE>
The accompanying notes to the unaudited pro forma balance sheet and statement
of income are an integral part of this statement.
<PAGE> 75
CONECTIV, INC.
PRO FORMA STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED JUNE 30, 1997
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
CONECTIV, INC.
PRO FORMA FINANCING AFTER
MERGED PRO FORMA FINANCING
CONECTIV, INC. ADJUSTMENTS ADJUSTMENTS
------------- ------------ ------------
<S> <C> <C> <C>
OPERATING EXPENSES
Operation and maintenance $ 3,457(10) $ -- $ 3,457
Depreciation and amortization 5(10) -- 5
------------ ------------ ------------
3,462 -- 3,462
------------ ------------ ------------
OTHER INCOME
Equity in earnings of subsidiaries 175,514(11) -- 175,514
Other income 54(10) -- 54
------------ ------------ ------------
175,568 -- 175,568
------------ ------------ ------------
INTEREST CHARGES 2,215(10) 37,600(9) 39,815
PREFERRED STOCK DIVIDEND
Requirements of Subsidiaries 13,078(12) -- 13,078
------------ ------------ ------------
INCOME BEFORE INCOME TAXES 156,813 (37,600) 119,213
INCOME TAXES (2,015)(10) (13,160)(9) (15,175)
------------ ------------ ------------
NET INCOME $ 158,828 $ (24,440) $ 134,388
============ ============ ============
EARNINGS APPLICABLE TO COMMON STOCK:
Common stock $ 148,227 $ (24,440) $ 123,787
Class A common stock 10,601 -- 10,601
------------ ------------ ------------
$ 158,828 $ (24,440) $ 134,388
============ ============ ============
Average common shares outstanding (000)
Common stock 100,219 13,889 114,108
Class A common stock 6,563 -- 6,563
Earnings per average share outstanding of:
Common stock $ 1.48 $ 1.08
Class A common stock $ 1.62 $ 1.62
</TABLE>
The accompanying notes to the unaudited pro forma balance sheet and statement
of income are an integral part of this statement.
<PAGE> 76
NOTES TO PRO FORMA CONECTIV, INC. FINANCIAL STATEMENTS
The following notes should be read in conjunction with the notes to the pro
forma combined financial statements of consolidated Conectiv Inc.
(1) The details of Conectiv, Inc.'s initial investment in its subsidiary
companies are shown below, with dollar amounts shown in thousands.
<TABLE>
<S> <C> <C>
Delmarva common stockholders' equity
before pro forma adjustments $ 942,322
Pro forma adjustment for Delmarva employee separation costs (20,886)
Pro forma adjustment to eliminate unearned and
deferred compensation payable under employee
incentive plans at the time of the merger 424
------------
Adjusted Delmarva common stockholders' equity $ 921,860
Estimated direct acquisition costs of $25.015 million less
registration and issuance costs of $1.750 million (charged to
paid-in-capital) and less a deferred tax benefit of $1.230 million
for the tax deductible portion of the direct acquisition costs. 22,035
Net liabilities of Atlantic Energy, Inc. transferred to Conectiv, Inc.
at time of the merger (See note 2 below) 41,942
Consideration paid to Atlantic common shareholders 945,081
------------
Total investment in subsidiaries $ 1,930,918
------------
</TABLE>
(2) The amounts on the balance sheet of Atlantic Energy, Inc., which is
dissolved into Conectiv, Inc. at the time of the merger, are transferred
to Conectiv, Inc.
(3) On pro forma basis, common dividends of $20.214 million and $23.682
million are receivable from Atlantic City Electric and Delmarva,
respectively. Common dividends declared payable to holders of Conectiv
common stock and Class A common stock are equal to the total common
dividend receivable of $43.896 million.
(4) The details of Conectiv, Inc.'s common equity are shown below, with
dollar amounts shown in thousands. For additional information, refer to
the notes to the pro forma combined balance sheets of consolidated
Conectiv,Inc.
<TABLE>
<CAPTION>
Conectiv, Inc. Common Stock
and Class A Common Stock
issued to:
--------------------------- Registration
Delmarva Atlantic and issuance
Shareholders Shareholders costs Consolidated
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Common stock $ 613 $ 394 $ 1,007
Class A common stock 66 66
Additional paid-in capital:
Common stock 654,617 807,847 (1,750) 1,460,714
Class A common stock 136,774 136,774
Retained earnings 266,630 266,630
------------ ------------ ------------ ------------
Total common stockholders' equity $ 921,860 $ 945,081 $ (1,750) $ 1,865,191
============ ============ ============ ============
</TABLE>
(5) The intercompany accounts payable balance includes $11.272 million
payable to Delmarva for direct acquisi-
<PAGE> 77
tion costs paid by Delmarva on behalf of Conectiv, Inc. and also
includes Atlantic Energy, Inc.'s intercompany accounts payable balance
($1.498 million) to be transferred to Conectiv, Inc. at the time of the
merger.
(6) Taxes accrued includes Atlantic Energy, Inc.'s balance ($23.905 million)
to be transferred to Conectiv, Inc. at the time of the merger, partly
offset by the tax benefit ($0.937 million) of the pro forma expense
recognized to eliminate unearned and deferred compensation costs payable
under Atlantic's employee compensation plans at the time of the merger.
(7) Other current liabilities include $13.743 million for direct acquisition
costs and $1.553 million of Atlantic Energy, Inc.'s balances to be
transferred to Conectiv, Inc.
(8) The $1.230 million reduction in deferred income taxes represents the tax
benefit of the tax deductible portion of the direct merger costs.
(9) For information concerning the financing pro forma adjustments refer to
the notes to the pro forma combined balance sheets of consolidated
Conectiv, Inc.
(10) On a pro forma basis, the earnings and expenses of Atlantic Energy, Inc.
for the twelve months ended June 30, 1997 are reflected in the Conectiv,
Inc. statement of income because Atlantic Energy, Inc. is dissolved into
Conectiv, Inc. at the time of the merger.
(11) Equity in earnings of subsidiaries is comprised of the following items,
with dollar amounts shown in thousands.
<TABLE>
<S> <C> <C>
Net income of consolidated Atlantic as adjusted $ 68,458
Remove the net loss of Atlantic Energy, Inc. which is reflected in
the pro forma Conectiv, Inc. statement of income (see note 10 above) 3,608
Add back preferred dividend requirements of preferred stockholders of
Atlantic City Electric which are reflected as preferred dividend
requirements of subsidiaries of Conectiv, Inc. (see note 12 below) 6,706
Subtract the amortization of goodwill 5,767
--------------
Adjusted equity in earnings of Atlantic $ 73,005
Net income of Delmarva as adjusted 102,509
--------------
$ 175,514
==============
</TABLE>
(12) Preferred dividend requirements of subsidiaries include the preferred
dividends payable to preferred shareholders of Atlantic City Electric
($6.706 million) and Delmarva ($6.372 million).
<PAGE> 78
Page 1
EXHIBIT INDEX
A-4 Form of Conectiv Commercial Paper Note
A-6 Form of System Money Pool Evidence of Deposit
A-7 Form of System Money Pool Short-Term Grid Note
A-8 Draft Investment Guidelines
H-1 Proposed Notice
H-2 Financial Data Schedules
I-1 Summary of existing financing arrangements for Delmarva and subsidiaries
I-2 Summary of existing financing arrangements for Atlantic and subsidiaries
<PAGE> 1
PAGE 1
EXHIBIT A-4
CONECTIV, INC.
(Issuer)
COMMERCIAL PAPER MASTER NOTE
- ------------------------------------
(Date of Issuance)
Conectiv, Inc. (Issuer), a corporation organized and existing under the laws of
the State of Delaware, for value received hereby promises to pay to Cede & Co.
(Owner) or registered assigns on the maturity date of each commercial paper note
identified on the records of the Issuer (which records are maintained by (the
"Paying Agent")) the principal amount of each such commercial paper note.
Payment shall be made by wire transfer to the registered owner from the Paying
Agent without the necessity of presentation and surrender of this Master Note.
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS
MASTER NOTE SET FORTH ON THE REVERSE HEREOF.
The Master Note is a valid and binding obligation of the Issuer.
CONECTIV, INC.
By:______________________________________
Authorized Signatory
<PAGE> 2
PAGE 2
[REVERSE]
At the request of the registered owner, Conectiv, Inc. (Issuer) shall promptly
issue and deliver one or more separate note certificates evidencing each
commercial paper note evidenced by this Master Note. As of the date any such
note certificate or certificates are issued, the commercial paper notes which
are evidenced thereby shall no longer be evidenced by this Master Note. FOR
VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
_________________________________________(Name, Address and Taxpayer
Identification Number of Assignee) the Master Note and all rights thereunder,
hereby irrevocably constituting and appointing ________________
_______________Attorney to transfer said Master Note on the books of the Issuer
with full power of substitution in the premises.
Date:
_________________________________________
Signature
Signature(s) Guaranteed:
NOTICE: The signature on this assignment must
correspond with the name as written upon the
face of this Master Note, in every
particular, without alteration or enlargement
or any change whatsoever.
(The following shall appear as a legend)
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK) TO THE ISSUER OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OR CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS
MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.
<PAGE> 1
PAGE 1
EXHIBIT A-6
CONECTIV SYSTEM
INTRASYSTEM MONEY POOL
EVIDENCE OF DEPOSIT
$ (see attached schedule) Wilmington, Delaware
- ------------------------- --------------------
The undersigned, Support Conectiv, Inc., a Delaware corporation, in its
capacity as Agent of the funds invested in the Conectiv System's Intrasystem
Money Pool (the "Money Pool"), hereby acknowledges receipt of the aggregate
unpaid principal amount of all investments deposited in the Money Pool (that are
posted on the schedule annexed hereto and made a part hereof) made by the
investor to the undersigned pursuant to the short-term financing authorization
approved by the U.S. Securities and Exchange Commission.
Under the terms of Money Pool borrowing, the borrowing subsidiaries pay
interest on the unpaid principal amount of borrowings from time to time from the
date hereof at the rate per annum equal to the Money Pool's monthly borrowing
rate. All such interest earned will be allocated to any investing company based
on the ratio of each investing company's deposits to all deposits.
IN WITNESS WHEREOF Support Conectiv, Inc., pursuant to due
authorization, has caused this Evidence of Deposit to be executed on behalf of
the Money Pool by its duly authorized officers, all as of the date noted above.
(Conectiv Intrasystem Money Pool)
By:______________________________________
Title:___________________________________
<PAGE> 1
PAGE 1
EXHIBIT A-7
CONECTIV SYSTEM
INTRASYSTEM MONEY POOL ADVANCES
Wilmington, Delaware
--------------------
FOR VALUE RECEIVED, the undersigned, __________________________________,
a __________________ corporation, (the "Company"), hereby unconditionally
promises to pay on demand or in any event by _______________ to the order of
Support Conectiv, Inc.("Support Conectiv"), in its capacity as Agent of the
Conectiv System Intrasystem Money Pool (the "Money Pool") and for the benefit of
the Money Pool depositors, at the Office of Support Conectiv located at 800 King
Street, Wilmington, Delaware 19899, in lawful money of the United States of
America and in immediately available funds, the principal amount of the
aggregate unpaid principal amount of all Loans (that are posted on the schedule
annexed hereto and made a part hereof) made by the Money Pool to the undersigned
pursuant to the financing authorization approved by the U.S. Securities and
Exchange Commission.
The undersigned further agrees to pay interest in like money at such
office on the unpaid principal amount hereof from time to time from the date
hereof at the rate per annum equal to the Money Pool's monthly borrowing rate.
This rate is calculated by dividing the Money Pool's net monthly interest
expense (interest expense less interest income) by the Money Pool's average net
daily borrowing/investment position during the month. In the event that there
are no external borrowings or investments, the borrowing rate will be the prior
month's Federal Funds rate as published in the Federal Reserve Statistical
Release, Publication H.15 (519). Interest shall be payable monthly in arrears
and upon payment (including prepayment) in full of the unpaid principal amount
hereof. If applicable, a default rate equal to 2% per annum above the
pre-default rate on the unpaid principal amount will be assessed if any
interest or principal payment becomes past due.
This Note shall be governed by, and construed and interpreted in
accordance with, the Laws of the State of Delaware without regard to conflicts
of laws principles, except as preempted by Federal law.
IN WITNESS WHEREOF ______________________________, pursuant to due
authorization, has caused this Note to be executed in its name and on its behalf
by its duly authorized officers, all as of the date noted above.
_________________________________________
Company
By:______________________________________
Title:___________________________________
<PAGE> 1
PAGE 3
EXHIBIT A-8
SUPPORT CONECTIV, INC.
Short-Term Investment Guidelines
Adopted ______, 1997
AUTHORITY
The officers of Support Conectiv, Inc. ("Support Conectiv") received
authorization from its Board of Directors and the Board of Directors of
Conectiv, Inc. (the "Corporation") to execute any and all instruments and
agreements relating to the acquisition of securities in accordance with
Short-Term Investment Guidelines ("Guidelines"), for its own account and/or in
its capacity as administrator of the System Money Pool. The investment portfolio
is under the direction of the Chief Financial Officer of the Corporation.
Investments may be made by any of the following employees of Support Conectiv,
designated by name in writing by the Chief Financial Officer or Treasurer of the
Corporation: Assistant Treasurer in charge of Treasury Operations or any
Treasury Operations manager, supervisor or analyst.
GENERAL ASSUMPTIONS
These Guidelines have been established to insure that short-term
investments are made under the premises that safety of principal and liquidity
take precedence over return on investment. In order to recognize the
evolutionary nature of the money markets, the Guidelines will be submitted to
the Corporation's Chief Financial Officer for review and approval on an annual
basis or at any other time that the Chief Financial Officer deems that the size
or risk characteristics of the portfolio have changed significantly, that money
markets in general have changed or that the credit quality specified in the
Guidelines requires modification. Further, any exception to these Guidelines
must be approved by the Corporation's Chief Financial Officer in advance of any
such exceptional transaction.
Any investments in foreign entities will be U.S. dollar denominated and
delivered in U.S. dollars.
Investments will be made for maturities of 270 days or less, unless
specifically authorized by the Chief Financial Officer in writing.
CUSTODY
Support Conectiv may maintain custody accounts with banks approved by
its Treasurer. All securities (except book-entry securities) will be delivered
to or accounted for by one of these institutions.
<PAGE> 2
PAGE 2
INVESTMENTS
A. Support Conectiv may purchase bills, notes and bonds issued by the
United States Government or its sponsored agencies or instruments
supported by such securities, with maturities of up to one year.
B. Repurchase Agreements
Support Conectiv will only enter into repurchase agreements with A-rated
or higher commercial banks or with principal domestic securities
dealers.
Repurchase agreements will be supported by securities which are direct
obligations of the United States Government, or its sponsored agencies
or instruments supported by such securities.
Securities supporting repurchase agreements will be "marked to market"
at least monthly and the market value of such securities will not be
permitted to fall to less than 97% of the dollar amount of the
investment.
C. Commercial Paper/Bank Securities - Domestic Issuers
Support Conectiv may invest up to $10 million each, for periods of up to
270 days, in commercial paper issued by domestic corporations
maintaining commercial paper ratings of A-1 and/or P-1 with senior
long-term debt ratings of "A" or higher. Further, commercial paper
issued with a support agreement from an "A" rated affiliate or with
"direct pay" letter of credit from domestic commercial banks with "A"
rated long-term debt may be purchased in amounts not to exceed $10
million per support entity for periods of 270 days or less.
Support Conectiv may invest for up to 270 days, either directly or in
the secondary market, in time deposits, certificates of deposit, notes,
bankers acceptances or commercial paper issued by domestic banks or bank
holding companies which maintain a long-term debt rating of "A" or
higher on senior debt and, if commercial paper is purchased, a rating of
A-1 and/or P-1. No more than $10 million will be invested directly in
any one bank name.
D. Commercial Paper/Bank Securities - Foreign Issuers
Support Conectiv may invest up to $10 million per issuer ($U.S.
denominated), up to a maximum aggregate amount of the greater 40% of the
portfolio or $50 million at any time, for 270 days or less in commercial
paper and or bank securities. The Corporation may invest in commercial
paper issued by foreign corporations or governments maintaining
commercial paper ratings of A-1 and /or P-1 with senior long-term debt
ratings of "AA" and/or "Aa" rated affiliate or with "direct pay" letters
of credit from foreign commercial banks with "AA" and "Aa" long-term
debt may be purchased in amounts not to exceed $10 million per supported
entity.
<PAGE> 3
PAGE 3
Support Conectiv may invest either directly or in the secondary market,
in time deposits, certificates of deposit, notes, bankers acceptance or
commercial paper issued by foreign banks or bank holding companies which
maintain a long-term debt rating of "AA" and/or "Aa" or higher on senior
debt and, if commercial paper purchased, a rating of A-1 and/or P-1. No
more than $10 million will be invested directly in any one bank name.
E. Mutual Funds
Support Conectiv may invest in professionally managed Money Market Funds
whose portfolio of short-term or money market securities have daily
withdrawal privileges. Support Conectiv's ownership of any mutual fund
shall not exceed 5% of total mutual fund assets. Further, fund assets
must fall substantially within the guidelines set forth in items A-E
above.
NOTE: "Commercial Paper" includes commercial paper programs exempt under the
Securities Act by either Section 3(a)(3) or 4(2), project notes or other special
purpose instruments so long as they carry the same ratings and have the same
market attributes as conventional commercial paper.
Approved by:________________________________________ ______________________
Treasurer - Support Conectiv Date
Approved by:________________________________________ ______________________
Chief Financial Officer - Conectiv, Inc. Date
<PAGE> 1
PAGE 1
EXHIBIT H-1
SECURITIES AND EXCHANGE COMMISSION
Release No. 35-
Notice is hereby given that the following filing has been made with the
Commission pursuant to provisions of the Act and rules promulgated thereunder.
All interested persons are referred to the application(s) and/or declaration(s)
for complete statements of the proposed transaction(s) summarized below. The
application(s) and/or declaration(s) and any amendments thereto is/are available
for public inspection through the Commission's Office of Public Reference.
Interested persons wishing to comment or request a hearing on the
application(s) and/or declaration(s) should submit their views in writing by
____________, 1997 to the Secretary, Securities and Exchange Commission,
Washington D.C. 20549, and serve a copy on the relevant applicant(s) and/or
declarant(s) at the address(es) specified below. Proof of service (by affidavit
or, in case of an attorney at law, by certificate) should be filed with the
request. Any request for hearing shall identify specifically the issues of fact
or law that are disputed. A person who so requests will be notified or any
hearing, if ordered, and will receive a copy of any notice or in order issued in
the matter. After said date, the Application/Declaration, as filed or as
amended, may be granted and/or permitted to become effective.
Conectiv, Inc., a Delaware Corporation has previously filed an
Application-Declaration on Form U-1 with the U.S. Securities and Exchange
Commission (the "Commission") under Section 9(a)(2) of the Public Utility
Holding Company Act of 1935, as amended (the "Act"), seeking approvals relating
to the proposed acquisition by Conectiv of securities of Delmarva Power & Light
Company ("Delmarva"), a Delaware and Virginia utility corporation, and merger
into Conectiv of Atlantic Energy, Inc. ("Atlantic"), a New Jersey Corporation
and parent of Atlantic City Electric Company ("Atlantic Electric"), a New Jersey
utility corporation, (collectively, referred to as the "Merger") and for other
related transactions including the formation of Support Conectiv as a subsidiary
service company in accordance with the provisions of Rule 88 under the Act (File
No. 70-9069)(the "Merger U-1").1 Conectiv, Delmarva, Atlantic Electric (Delmarva
and Atlantic Electric are hereinafter referred to as the "Utility
Subsidiaries"), Support Conectiv and various direct and indirect Non-Utility
Subsidiaries2 of Conectiv (hereinafter referred to collectively as
"Applicants"), have filed an application-declaration ("Application") under
sections 6(a), 7, 9(a), 10, 12(b), and 12(c) of the Act and Rules 42, 43, 45,
46, 52, 53 and 54 under the Act. The Applicants seek authorization to engage in
various financing and related transactions through December 31, 2000 (the
"Authorization Period"), unless otherwise noted.
- ----------
(1) Upon consummation of the transactions described in the Merger U-1,
Conectiv will register as a holding company under the Act.
(2) Excluding the Utility Subsidiaries, Conectiv's direct and indirect
subsidiaries are "Non-Utility Subsidiaries." The Utility Subsidiaries, together
with Non-Utility Subsidiaries, are "Subsidiaries." Non-Utility Subsidiaries
include future subsidiaries formed pursuant to Commission order or pursuant to
Rule 58 and future exempt telecommunication companies, but do not include future
exempt wholesale generators or foreign utility companies.
<PAGE> 2
PAGE 2
As described more fully below, the Applicants seek authority for: (i)
external issuances by Conectiv of common stock (for cash and in exchange for
securities being acquired directly or through a Non-Utility Subsidiary) and long
term and short-term debt and other securities subject to a reservation of
jurisdiction over the terms of such other securities; (ii) the establishment of
an intrasystem money pool and guarantees between Conectiv and its Subsidiaries
and between Non-Utility Subsidiaries; (iii) issuance by the Subsidiaries of
types of securities not exempt under Rules 45 and 52; (iv) Conectiv and the
Utility Subsidiaries to enter into interest rate swaps and other risk management
instruments; (v) the Subsidiaries to alter their capital stock and Non-Utility
Subsidiaries to pay dividends out of capital or unearned surplus; (vi) the
Utility Subsidiaries' retention of two existing financing entities and the
formation of new financing entities and the issuance of securities by the new
financing entities and related guarantees. Jurisdiction is reserved over the
issuance of securities by the Subsidiaries to the extent Rule 52 does not exempt
the issue of the securities from prior Commission approval.
The proceeds from the financings will be used for general corporate
purposes, including (i) capital expenditures of Conectiv and the Subsidiaries,
(ii) the repayment, redemption, refunding or purchases of debt and capital stock
of Conectiv or the Subsidiaries without the need for prior Commission approval
pursuant to Rule 42 or a successor rule, (iii) working capital requirements of
the Conectiv system, (iv) investments in exempt wholesale generators ("EWGs")
and foreign utility companies ("FUCOs"), as defined in sections 32 and 33 of the
Act, respectively, and (v) other lawful corporate purposes including investments
in companies authorized under the Merger U-1 and in exempt telecommunications
companies pursuant to Section 34 of the Act. The Applicants also represent that
proceeds from the proposed financings will be used only in connection with their
respective existing businesses or to make an acquisition that has been
authorized by the Commission or is exempt from the requirement of prior
Commission approval.
1. External Financings by Conectiv
a. Common Stock
Conectiv proposes during the Authorization Period to issue and sell
shares of its common stock, par value $0.01 per share, in an amount, when
combined with long-term debt securities issued pursuant to this Application, not
to exceed $500 million. In addition, Conectiv proposes to issue up to an
additional 10 million shares of its common stock (and awards or options for the
common stock) to fund benefit and dividend reinvestment plans (collectively,
"Stock Plans"), described below, for a period of ten years from the date of the
Commission's order.
Securities may be sold through underwriters or dealers, through agents,
directly to a limited number of purchasers or a single purchaser, or directly to
employees (or to trusts established for their benefit) and other shareholders
through Conectiv's Stock Plans.
<PAGE> 3
PAGE 3
Conectiv common stock may be issued and sold pursuant to underwriting
agreements of a type generally standard in the industry. Public distributions
may be pursuant to negotiation with underwriters, dealers or agents or effected
through competitive bidding among underwriters. In addition, sales may be made
through private placements or other non-public offerings to one or more persons.
All such common stock sales will be at rates or prices and under conditions
negotiated or based upon, or otherwise determined by, competitive markets.
Delmarva and Atlantic currently have separate employee benefit plans
under which they issue and/or sell common stock to their employees. Following
the Merger, these plans will be replaced by the Conectiv Incentive Compensation
Plan. In addition, in the future, Conectiv may adopt other plans that may
provide for the issuance by Conectiv and/or sale of Conectiv common stock.
Conectiv may fund such plans with newly issued common stock, treasury shares or
shares purchased in the open market, and may engage in sales of treasury shares
for general business purposes. In addition, Conectiv proposes to adopt a
dividend reinvestment plan, pursuant to which shares of common stock may be
issued to stockholders reinvesting in the plan or to any individual making
optional cash investments. Shares of common stock for use under the dividend
reinvestment plan may either be newly issued shares, treasury shares or shares
purchased in the open market.
Conectiv requests authorization to issue common stock with an aggregate
market value of up to $100 million (this amount is included in authorization for
common stock above) in consideration for the acquisition by Conectiv or a
Non-Utility Subsidiary of the securities of a business, the acquisition of which
is exempt under Rule 58 or Section 34 of the Act or which has been authorized in
the Merger U-1. The Conectiv common stock would be valued at market value based
upon the closing price on the day before closing of the sale or based upon the
average high and low prices for a period prior to the closing of the sale as
negotiated by the parties.
b. Long-Term Debt
Conectiv proposes from time to time during the Authorization Period to
issue long-term debt securities in an amount, when combined with the proceeds of
issuances of common stock (other than for Stock Plans) pursuant to this
Application, not to exceed $500 million. Examples of such long-term debt
securities would include debentures, medium-term notes and notes issued under
the Conectiv Indenture or borrowings from banks or other financial institutions.
c. Short-Term Debt
Conectiv proposes from time to time through the Authorization Period to
issue short-term debt aggregating not more than $500 million outstanding an any
one time. Conectiv may sell commercial paper, from time to time, in established
domestic or European commercial paper markets. The commercial paper would be
sold to dealers at the discount rate prevailing at the date of issuance by
Conectiv for commercial paper of comparable quality and maturities sold to
commercial paper dealers generally. It is expected that the dealers acquiring
Conectiv's
<PAGE> 4
PAGE 4
commercial paper will reoffer it at a discount to corporate and institutional
investors, such as commercial banks, insurance companies, pension funds,
investment trusts, foundations, colleges and universities and finance companies,
and, with respect to European commercial paper, individual investors.
Conectiv anticipates entering into a revolving credit facility (the
"Credit Facility") with a group of banks on or before the effective date of the
Merger. A portion of the Credit Facility may be used to support letters of
credit issued by Conectiv or the Subsidiaries in the ordinary course of
business. The Credit Facility also may serve as backup for Conectiv's and the
Utility Subsidiary commercial paper programs.
Conectiv also proposes to enter into individual agreements ("Bid Note
Agreement") with one or more commercial banks which may or may not be lenders
under the Credit Facility. The maturity of the Bid Notes would not exceed 270
days and the total with all other forms of short-term debt will not exceed the
$500 million during the Authorization Period.
d. Interest Rate Risk Management Instruments
Conectiv requests authority to enter into, perform, purchase and sell
financial instruments intended to manage the volatility of interest rates,
including but not limited to interest rate swaps, caps, floors, collars and
forward agreements or any other similar agreements. Conectiv proposes to employ
interest rate swaps as a means of prudently managing the risk associated with
outstanding debt issued pursuant to this Application or an applicable exemption
by, in effect (i) converting variable rate debt to fixed rate debt, (ii)
converting fixed rate debt to variable rate debt and/or (iv) providing an option
to enter into interest rate swap transactions in future periods for planned
issuances of debt securities. In no case will the notional principal amount of
any interest rate swap exceed that of the underlying debt instrument related
interest rate exposure, i.e. Conectiv will not engage in "leveraged" or
"speculative" transactions. The underlying interest rate indices of such
interest rate swaps will closely correspond to the underlying interest rate
indices of each Utility Subsidiary's debt to which the interest rate swap
relates. Conectiv will only enter into interest rate swap agreements with
counterparties whose senior secured debt ratings, as published by Standard &
Poor's Corporation, are greater than or equal to "BBB+", or an equivalent rating
from Moody's Investor Service, Inc., Fitch Investor Service or Duff & Phelps.
2. Utility Subsidiary Financings
a. Securities
Delmarva has previously issued and there are currently outstanding
preferred stock, commercial paper notes, first mortgage bonds issued under a
Mortgage and Deed of Trust dated October 1, 1943, medium-term notes issued under
an Indenture dated November 1, 1988, unsecured subordinated debt securities
issued in connection with certain securities issued by a subsidiary trust and
various exempt revenue bonds and pollution control notes. Any future issue of
such securities would qualify for issuance without prior approval by this
Commission pursuant to Rule 52, except short-term debt securities which will
have been approved by the Virginia State
<PAGE> 5
PAGE 5
Corporation Commission ("VSCC")but not the Delaware Public Service Commission
("DPSC") and except for unsecured unsubordinated debt securities issued in
connection with securities issued by a subsidiary trust which involves
guarantees.
Atlantic Electric has previously issued and there are currently
outstanding preferred stock, first mortgage bonds issued under a Mortgage and
Deed of Trust dated January 15, 1937, medium-term notes issued under an
Indenture dated March 1, 1997, junior funded debt issued under an Indenture
dated February 1, 1966, pollution control notes, and notes under bank credit
lines and unsecured subordinated debt securities issued in connection with
certain securities issued by a subsidiary trust. Any future issue of similar
securities would be issued with the approval of the New Jersey Board of Public
Utilities ("NJBPU") and thus the issue would be exempt under the terms of Rule
52, except for the unsecured subordinated debt securities.
Delmarva and Atlantic Electric request authorization to retain the
existing financing entities (Delmarva Power Financing I and Atlantic Capital I)
and to establish new financing entities for the purpose of issuing similar
securities.
Delmarva requests authorization to issue up to $275 million of
short-term debt securities consisting of commercial paper, unsecured bank loans
and borrowings from the System Money Pool (as described below). Any short-term
borrowings by Delmarva, when combined with short-term borrowings by Conectiv
under this Application, will not exceed $500 million during the Authorization
Period.
b. Interest Rate Risk Management Instruments
The Utility Subsidiaries request authorization to enter into interest
rate risk management transactions of the same type and under the same conditions
requested by Conectiv above to the extent such transactions are not exempt
pursuant to Rule 52.
3. Non-Utility Subsidiary External Financings
The Non-Utility Subsidiaries expect to continue, as part of the Conectiv
system, to engage in the development and expansion of their businesses and to
finance authorized activities. The Applicants anticipate that the majority of
such financings will be exempt from prior Commission authorization under Rule
52(b).
4. Intrasystem Money Pool and Guarantees
Applicants seek to establish an intrasystem money pool (the "System
Money Pool") in which all Subsidiaries, including future subsidiaries acquired
pursuant to Commission Order, Rule 58 or Section 34 of the Act, may participate
as both borrowers and lenders. Interest expense (income) will be charged
(credited) monthly to all participants in the System Money Pool based on each
participant's daily average cash position. The cost of money for all advances
from the System Money Pool and the investment rate for moneys invested in the
System Money Pool will be the same. To derive this rate, the System Money
Pool's net monthly interest expense (expense less any income) generated by
<PAGE> 6
PAGE 6
external borrowings will be divided by the System Money Pool's average net
daily investment/borrowing position. In the event that, on a consolidated
basis, investments in the System Money Pool are exactly offset by borrowings
from the System Money Pool such that there are no external borrowings or
investments, the cost of money and the investment rate will be the prior
month's average Federal Funds Rate as published in the Federal Reserve
Statistical Release, Publication H.15 (519).
Conectiv also requests authorization to enter into guarantees, obtain
letters of credit, enter into expense agreements or otherwise provide credit
support for the obligations of its system companies, in an aggregate principal
amount not to exceed $350 million outstanding at any one time during the
Authorization Period. Guarantees that are exempt pursuant to rules under the Act
are not included in the limit.
The Non-Utility Subsidiaries propose to enter into guarantees and other
credit support arrangements with each other, similar to those described with
respect to Conectiv, in an aggregate principal amount that will not exceed $100
million outstanding at any one time during the Authorization Period.
The Applicants state that the aggregate limit for guarantees and other
credit support arrangements excludes such arrangements that are exempt pursuant
to rules under the Act. The Applicants also propose that the aggregate limits
for intrasystem guarantees and other credit support obligations not be included
in the aggregate limits applicable to the external financings.
5. Other Securities
Conectiv, the Utility Subsidiaries and the Non-Utility Subsidiaries
state that it may become necessary or desirable during the Authorization Period
to issue and sell, to associate and non-associate companies, other types of
securities ("Other Securities") that are not exempt under Rules 45 and 52 to
minimize financing costs or to obtain new capital under changing market
conditions. The Applicants request that the Commission reserve jurisdiction over
the issuance and amount of such Other Securities pending completion of the
record.
6. Changes in Capital Stock of Subsidiaries and Non-Utility Dividends Out of
Capital or Unearned Surplus
The Applicants state that they cannot ascertain at this time the portion
of an individual Subsidiary's aggregate financing to be effected through the
sale of capital stock to Conectiv or other immediate parent company during the
Authorization Period. They assert that circumstances may arise where the
proposed sale of capital stock would exceed the then authorized capital stock of
such Subsidiary. They also note that the Subsidiary may choose to use other
forms of capital stock or to decrease par value to lessen franchise taxes. As
needed to accommodate such proposed transactions and to provide for future
issues, the Applicants propose that each Subsidiary be authorized to increase
the amount of its authorized capital stock by an amount that it deems
appropriate and to change the par value, or change between par and no-par stock,
without additional Commission approval.
<PAGE> 7
PAGE 7
The Non-Utility Subsidiaries also request authorization to issue
dividends to a parent company (Conectiv or, in the case of an indirect
subsidiary, the intermediate parent) out of capital to the extent permitted by
state law of the state where the Non-Utility Subsidiary is incorporated.
7. Financing Entities
The Subsidiaries also propose to organize new corporations, trusts,
partnerships or other entities created to facilitate financings through the
issuance, to third parties, of authorized or otherwise exempt income preferred
securities or other securities. To the extent not exempt under Rule 52, the
Subsidiaries request authority for the financing entities to issue securities to
third parties. Additionally, the Subsidiaries request authorization to (i) issue
debentures or other evidences of indebtedness to a financing entity in return
for the proceeds of the financing, (ii) acquire voting interest or equity
securities issued by the financing entity to establish the Subsidiary's
ownership of the financing entity (the equity portion of the entity generally
being created through a capital contribution or the purchase of equity
securities, ranging from 1 to 3 percent of the capitalization of the financing
entity) and (iii) guarantee the financing entity's obligations in connection
with the financing activities. Each Subsidiary also requests authorization to
enter into expense agreements with its respective financing entity, pursuant to
which it would agree to pay all expenses of such entity.
8. Financing EWGs and FUCOs
Conectiv proposes, to the extent internally generated funds are not
available, to invest proceeds from financings in EWGs and FUCOs and to guarantee
the obligations of EWGs and FUCOs. Conectiv states that, unless otherwise
authorized by the Commission, its aggregate investment in EWGs and FUCOs will
not exceed 50% of its consolidated retained earnings, as defined in Rule 53, and
that at the time of each issuance, the proceeds of which will be used to invest
in EWGs or FUCOs, Conectiv will be in compliance with Rule 53.
9. Financing Parameters
The authorizations requested by the Applicants would be subject to the
following conditions: (1) the effective cost of money on long-term debt issuance
may not exceed at issuance 300 basis points over comparable term U.S. Treasury
securities and the effective cost of money on short-term debt financings may not
exceed at issuance 300 basis points over the London Interbank Offered Rate; (2)
maturities for long-term debt securities may not exceed 50 years(3); (3)
issuance expenses in connection with an offering of securities, including any
underwriting fees, commissions, or other similar compensation, may not exceed 5%
of the total amount of the
- ----------
(3) Any Security issued by a foreign subsidiary formed to invest in a FUCO or
EWG that is guaranteed by Conectiv or a Non-Utility Subsidiary will mature
within 30 years and will bear interest at a rate that would not exceed (a) the
greater of 250 basis points above the lending bank's or other recognized prime
rate and 50 basis points above the federal funds rate; (b) 400 basis points
above the specified LIBOR rate plus any applicable reserve rate; or, (c) 500
basis points above the 30 year current coupon U. S. treasury bond; or, if
foreign denominated, the interest rate will not exceed a fixed or floating rate
on a U. S. dollar denominated borrowing of identical average life of 10% over
the highest rate applicable U. S. dollar rate as determined above.
<PAGE> 8
PAGE 8
securities being issued; (4) the aggregate amount of external financing, not
including existing financing arrangements, will not exceed (i) $500 million from
any combination of Conectiv's issuance of common stock, excluding amounts from
the issuance of up to 10 million shares of common stock to fund the Stock Plans,
and long-term debt securities, and (ii) $500 million from Conectiv's issuance
and sale of short-term debt, and; (6) the aggregate amount of guarantees will
not exceed (i) $350 million for Conectiv to guarantee or provide credit support
for obligations of its Subsidiaries, and (ii) $100 million for Non-Utility
Subsidiaries to guarantee or provide credit support to other Subsidiaries.
10. Statements of Policy
The Applicants request authorization to deviate from the Commission's
Statement of Policy Regarding First Mortgage Bonds, HCAR No. 13105 (Feb. 16,
1956), as amended by HCAR No. 16369 (May 8, 1969), and Statement of Policy
Regarding Preferred Stock, HCAR No. 13106 (Feb. 16, 1956), as amended by HCAR
No. 16758 (June 22, 1970), as applicable, with respect to the proposed
financings.
<PAGE> 1
SUMMARY OF FINANCING ARRANGEMENTS
DELMARVA AND SUBSIDIARIES EXHIBIT I-1
<TABLE>
<CAPTION>
CONTROLLING AGENT/
COMPANY DOCUMENT(S) TRUSTEE/LENDER(S)
------- ----------- -----------------
<S> <C> <C>
Delmarva Power & Light Restated Certificate and Articles of Not applicable.
Company Incorporation
Credit Agreement dated as of March 14, Chase Manhattan Bank, as
1995, as amended agent for a group of banks
First Chicago, Issuing and
Paying Agent
Bid Note Agreements Various Banks
Mortgage and Deed of Trust dated Chase Manhattan Bank,
October 1, 1943, as amended and Trustee
supplemented
Indenture dated as of November 1, 1988, Chase Manhattan Bank,
as supplemented and amended Trustee
Indenture (For Unsecured Subordinated Wilmington Trust Company,
Debt Securities relating to Trust Trustee
Securities) dated as of October 1, 1996
Participation Agreement dated as of
June 1, 1988 (Merrill Creek)
Various Loan/Financing Agreements Various Trustees
Various Loan/Financing Agreements Various Trustees
</TABLE>
<TABLE>
<CAPTION>
TYPE OF SECURITIES/ OUTSTANDING
COMPANY ARRANGEMENT 6/30/97
------- ----------- -------
<S> <C> <C>
($ MILLIONS)
Delmarva Power & Light Preferred Stock and Preferred 89.7
Company Stock--$25 Par
Unsecured Notes 0.0
($200 available)
Commercial Paper Notes 35.2
Bid Notes 10.5
First Mortgage Bonds 574.3
Unsecured Notes/MTNs 329.2
Unsecured Subordinated Debt 70.0
Securities
Operating Lease N/A
Pollution Control Notes 9.1
Exempt Facilities Revenue Bonds 54.5
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
CONTROLLING AGENT/
COMPANY DOCUMENT(S) TRUSTEE/LENDER(S)
------- ----------- -----------------
<S> <C> <C>
Delmarva Services Note Agreement Dated 10/12/87 Massachusetts Mutual Life
Pine Grove Hauling Loan & Security PA National Bank
Company (Delcap is Agreement dated 12/29/92
guarantor)
Pine Grove Hauling Co. Credit Agreement Dated 12/1/94 CoreStates Bank
Pine Grove Reimbursement Agreement Dated 12/2/94. CoreStates Bank
Landfill/Delcap, DCI
I, DCI II, Pine Grove, Credit Agreement Dated 12/1/94
Inc. (non-recourse
guarantor), Pine Grove
Hauling (limited
guarantor)
Pine Grove Landfill Surety for Post-Closure Bonding USF&G
Requirement
Christiana Capital Business Loan Agreement Dated 9/13/94 CoreStates Bank
(Delcap is guarantor)
DCTC-Burney, Inc. Tri-Counties Bank
</TABLE>
<TABLE>
<CAPTION>
TYPE OF SECURITIES/ OUTSTANDING
COMPANY ARRANGEMENT 6/30/97
------- ----------- -------
<S> <C> <C>
($ MILLIONS)
Delmarva Services ISD Building Mortgage 5.8
Pine Grove Hauling Financing and LOCs for Coldren 0.6
Company (Delcap is and Knepper Acquisitions
guarantor)
Pine Grove Hauling Co. LOC for muni-hauling contracts 1.1
Pine Grove LOCs backing up tax-exempt bonds 13.0
Landfill/Delcap, DCI
I, DCI II, Pine Grove, Revolving line of credit:
Inc. (non-recourse 3.6
guarantor), Pine Grove (additional 4.7
Hauling (limited available)
guarantor)
Pine Grove Landfill Surety Bond 5.5
Christiana Capital Term loan secured by mortgage on 3.8
(Delcap is guarantor) Christiana Building, UOP
DCTC-Burney, Inc. Support Agreement - pledge of 2.1
equity distributions from Burney
project, if any
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
CONTROLLING AGENT/
COMPANY DOCUMENT(S) TRUSTEE/LENDER(S)
------- ----------- -----------------
<S> <C> <C>
Burney Forest Third Amended and Restated Fleet Bank
Products, a Joint Credit & Reimbursement
Venture Agreement Dated 10/24/91
Third Amended and Restated Fleet Bank
Credit & Reimbursement
Agreement Dated 10/24/91
Amended and Restated Senior DCTC-Burney
Subordinated Loan Agreement Among DCI,
DCTC-Burney and MetLife Capital dated
12/30/92
Bayshore Fuel Company Credit Agreement / Nuclear Fuel First Chicago
Contract
</TABLE>
<TABLE>
<CAPTION>
TYPE OF SECURITIES/ OUTSTANDING
COMPANY ARRANGEMENT 6/30/97
------- ----------- -------
<S> <C> <C>
($ MILLIONS)
Burney Forest Construction loan. Non-recourse 2.4
Products, a Joint to partners. Secured by all
Venture assets.
LOC backup for tax-exempt bonds. 30.7
Non-recourse to partners.
Senior Subordinated Debt. Second 8.0
lien on all assets.
Bayshore Fuel Company Revolving Credit Agreement for 30.7
financing nuclear fuel through
issuance of commercial paper.
</TABLE>
<PAGE> 1
ATLANTIC ENERGY AND SUBSIDIARIES EXHIBIT I-2
<TABLE>
<CAPTION>
CONTROLLING AGENT/
COMPANY DOCUMENT(S) TRUSTEE/LENDER(S)
------- ----------- -----------------
<S> <C> <C>
Atlantic Energy, Inc. Revolving Credit Agreement dated as Bank of New York, Agent
of September 28, 1995
Atlantic City Electric Agreement of Merger dated as of May Not applicable.
Company 24, 1949, as amended through May 3,
1991
Mortgage and Deed of Trust dated Bank of New York, Trustee
January 15, 1937, as amended and
supplemented
Chemical Bank, Issuing
Agent and Paying Agent
Indenture dated March 1, 1997 Bank of New York, Trustee
Indenture dated February 1, 1966 First Union Bank, Trustee
Indentures dated 7/15/84 and 3/1/91 Summit Bank
Various Agreements Various Banks
</TABLE>
<TABLE>
<CAPTION>
TYPE OF SECURITIES/ OUTSTANDING
COMPANY ARRANGEMENT 6/30/97
------- ----------- -------
<S> <C> <C>
($ MILLIONS)
Atlantic Energy, Inc. Unsecured Notes/Letters of Credit 62.9 (1)
(75 Available)
Atlantic City Electric Preferred Stock 84.0
Company
First Mortgage Bonds 680.0
Commercial Paper Notes 0.0
Unsecured Notes/MTNs 15.0
Debentures (Junior Funded Debt) 2.6
Pollution Control Notes 122.6
(Secured by FMBs)
Committed lines of credit (for CP 12.5
backup) (100 Available)
</TABLE>
(1) Includes borrowings of $51.5 million and LOCs of $11.4 million
<PAGE> 2
<TABLE>
<CAPTION>
CONTROLLING AGENT/
COMPANY DOCUMENT(S) TRUSTEE/LENDER(S)
------- ----------- -----------------
<S> <C> <C>
Atlantic City Electric Various Agreements Various Banks
Company (continued)
Indenture (For Unsecured Bank of New York, Trustee
Subordinated Debt Securities
relating to Trust Securities) dated
as of October 1, 1996.
Atlantic City Electric Scrubber Sale Leaseback dated ABN Amro Bank NV
Company (lessee) December 22, 1994
Atlantic Energy Guarantee Agreements Not applicable.
Enterprises
Not applicable.
ATE Investment Revolving Credit Agreement dated as Bank of New York
(with support of May 24, 1988
agreement from AEI)
Note Agreement dated October 15, 1992 Teachers
ATE Investment Guarantee Agreements Various
(Guaranteed by AEI)
Atlantic Generation, Guarantee Agreement Not applicable.
Inc.
</TABLE>
<TABLE>
<CAPTION>
TYPE OF SECURITIES/ OUTSTANDING
COMPANY ARRANGEMENT 6/30/97
------- ----------- -------
<S> <C> <C>
($ MILLIONS)
Atlantic City Electric Uncommitted lines of credit 88.4
Company (continued) (150 Available)
Unsecured Subordinated Debt 70.0
Securities
Atlantic City Electric Fully defeased cross border lease 0.0
Company (lessee)
Atlantic Energy Guarantee of payment to gas 4.0
Enterprises suppliers for Enerval
Pledge of assets to gas supplier 1.2
for Enerval
ATE Investment Revolving credit and term loan 9.5
(with support agreement (25 Available)
agreement from AEI)
Senior Notes 15.0
ATE Investment AEI guarantees performance of ATE N/A
(Guaranteed by AEI) Investments under airplane leases
Atlantic Generation, Guarantee of Vineland 9.0
Inc. Cogeneration Project expenses
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
CONTROLLING AGENT/
COMPANY DOCUMENT(S) TRUSTEE/LENDER(S)
------- ----------- -----------------
<S> <C> <C>
Atlantic Generation, Contracts Not applicable.
Inc. (continued)
Guarantee Agreement Not applicable.
Atlantic Generation, First Chicago
Inc.
Re: Binghampton
Atlantic Thermal Credit Agreement First Chicago, Agent
Systems
(with support
agreement from AEI)
Pearl Fuel Company Nuclear Fuel Agreement dated as of First Chicago and
February 1, 1990 Bank of New York
</TABLE>
<TABLE>
<CAPTION>
TYPE OF SECURITIES/ OUTSTANDING
COMPANY ARRANGEMENT 6/30/97
------- ----------- -------
<S> <C> <C>
($ MILLIONS)
Atlantic Generation, Guarantee of Vineland 1.4
Inc. (continued) Cogeneration Project take or pay
Binghamton Cogen take or pay 0.7
Atlantic Generation, Letter of Credit (expires 1/9/98) 6.0
Inc.
Re: Binghampton
Atlantic Thermal Unsecured Notes/ Letters of Credit 78.5 (1)
Systems (175 Available)
(with support
agreement from AEI)
Pearl Fuel Company Revolving loan agreement 35.5
financing nuclear fuel through
issuance of commercial paper.
</TABLE>
(1) Includes LOCs of $0.5 million
<PAGE> 4
LETTERS OF CREDIT UNDER AEI FACILITY (AS OF 6/30/97)
<TABLE>
<CAPTION>
COMPANY BENEFICIARY ISSUING BANK AMOUNT EXPIRATION
- ------- ----------- ------------ ------ ----------
<S> <C> <C> <C> <C>
($ THOUSANDS)
Atlantic Energy Vietnamese Government Bank of New York 62 7/15/97
International
Atlantic Energy Vietnamese Government Bank of New York 20 7/30/97
International
Atlantic Generation Fuji Bank Bank of New York 5,250 4/8/98
RE: Pedricktown
Atlantic Generation City of Vineland Bank of New York 4,200 6/1/98
Enerval Phillips Production Bank of New York 250 1/31/98
Enerval North Penn Gas Bank of New York 1,600 6/30/98
-----
11,382
LETTERS OF CREDIT UNDER ATS FACILITY (AS OF 6/30/97)
COMPANY BENEFICIARY ISSUING BANK AMOUNT EXPIRATION
- ------- ----------- ------------ ------ ----------
($ THOUSANDS)
Atlantic Thermal City of Atlantic City First Chicago 107 11/4/97
Atlantic Thermal Liberty Mutual First Chicago 400 1/3/98
Atlantic Thermal Atlantic City Sewage Co. First Chicago 20 4/30/98
--
527
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
DELMARVA
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<BOOK-VALUE> PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 2,027,097
<OTHER-PROPERTY-AND-INVEST> 177,453
<TOTAL-CURRENT-ASSETS> 300,083
<TOTAL-DEFERRED-CHARGES> 262,522
<OTHER-ASSETS> 224,651
<TOTAL-ASSETS> 2,991,806
<COMMON> 138,399
<CAPITAL-SURPLUS-PAID-IN> 520,572
<RETAINED-EARNINGS> 288,125
<TOTAL-COMMON-STOCKHOLDERS-EQ> 947,096
70,000
89,703
<LONG-TERM-DEBT-NET> 923,710
<SHORT-TERM-NOTES> 49,533
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 52,792
0
<CAPITAL-LEASE-OBLIGATIONS> 18,819
<LEASES-CURRENT> 12,708
<OTHER-ITEMS-CAPITAL-AND-LIAB> 827,445
<TOT-CAPITALIZATION-AND-LIAB> 2,991,806
<GROSS-OPERATING-REVENUE> 1,256,220
<INCOME-TAX-EXPENSE> 71,367
<OTHER-OPERATING-EXPENSES> 1,012,330
<TOTAL-OPERATING-EXPENSES> 1,083,697
<OPERATING-INCOME-LOSS> 172,523
<OTHER-INCOME-NET> 8,487
<INCOME-BEFORE-INTEREST-EXPEN> 181,010
<TOTAL-INTEREST-EXPENSE> 78,501
<NET-INCOME> 102,509
6,372
<EARNINGS-AVAILABLE-FOR-COMM> 96,137
<COMMON-STOCK-DIVIDENDS> 93,695
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 0
<EPS-PRIMARY> 1.58
<EPS-DILUTED> 1.58
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
ATLANTIC ENERGY
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<BOOK-VALUE> PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 1,651,926
<OTHER-PROPERTY-AND-INVEST> 283,136
<TOTAL-CURRENT-ASSETS> 318,989
<TOTAL-DEFERRED-CHARGES> 363,425
<OTHER-ASSETS> 139,155
<TOTAL-ASSETS> 2,756,631
<COMMON> 562,686
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 222,678
<TOTAL-COMMON-STOCKHOLDERS-EQ> 785,364
113,950
30,000
<LONG-TERM-DEBT-NET> 786,187
<SHORT-TERM-NOTES> 100,900
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 197,675
10,000
<CAPITAL-LEASE-OBLIGATIONS> 36,066
<LEASES-CURRENT> 729
<OTHER-ITEMS-CAPITAL-AND-LIAB> 695,760
<TOT-CAPITALIZATION-AND-LIAB> 2,756,631
<GROSS-OPERATING-REVENUE> 986,545
<INCOME-TAX-EXPENSE> 37,017
<OTHER-OPERATING-EXPENSES> 806,825
<TOTAL-OPERATING-EXPENSES> 843,842
<OPERATING-INCOME-LOSS> 142,703
<OTHER-INCOME-NET> 5,547
<INCOME-BEFORE-INTEREST-EXPEN> 148,250
<TOTAL-INTEREST-EXPENSE> 79,792
<NET-INCOME> 68,458
0
<EARNINGS-AVAILABLE-FOR-COMM> 68,458
<COMMON-STOCK-DIVIDENDS> 81,009
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 0
<EPS-PRIMARY> 1.30
<EPS-DILUTED> 1.30
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
CONNECTIV, INC.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<BOOK-VALUE> PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 0
<OTHER-PROPERTY-AND-INVEST> 1,930,934
<TOTAL-CURRENT-ASSETS> 929,122
<TOTAL-DEFERRED-CHARGES> 101
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 2,860,157
<COMMON> 1,212
<CAPITAL-SURPLUS-PAID-IN> 1,847,349
<RETAINED-EARNINGS> 266,630
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,115,191
0
0
<LONG-TERM-DEBT-NET> 250,000
<SHORT-TERM-NOTES> 349,567
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 51,500
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 93,899
<TOT-CAPITALIZATION-AND-LIAB> 2,860,157
<GROSS-OPERATING-REVENUE> 0
<INCOME-TAX-EXPENSE> (15,175)
<OTHER-OPERATING-EXPENSES> 3,462
<TOTAL-OPERATING-EXPENSES> (11,713)
<OPERATING-INCOME-LOSS> 11,713
<OTHER-INCOME-NET> 175,568
<INCOME-BEFORE-INTEREST-EXPEN> 187,281
<TOTAL-INTEREST-EXPENSE> 52,893
<NET-INCOME> 134,388
0
<EARNINGS-AVAILABLE-FOR-COMM> 134,388
<COMMON-STOCK-DIVIDENDS> 196,728
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 0
<EPS-PRIMARY> 1.08
<EPS-DILUTED> 1.08
</TABLE>
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
CONNECTIV CONSOLIDATED
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<BOOK-VALUE> PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 3,679,023
<OTHER-PROPERTY-AND-INVEST> 460,589
<TOTAL-CURRENT-ASSETS> 1,468,639
<TOTAL-DEFERRED-CHARGES> 636,401
<OTHER-ASSETS> 592,972
<TOTAL-ASSETS> 6,837,624
<COMMON> 1,212
<CAPITAL-SURPLUS-PAID-IN> 1,847,349
<RETAINED-EARNINGS> 266,630
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,115,191
183,950
119,703
<LONG-TERM-DEBT-NET> 1,959,897
<SHORT-TERM-NOTES> 500,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 250,467
10,000
<CAPITAL-LEASE-OBLIGATIONS> 54,885
<LEASES-CURRENT> 13,437
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,630,094
<TOT-CAPITALIZATION-AND-LIAB> 6,837,624
<GROSS-OPERATING-REVENUE> 2,242,765
<INCOME-TAX-EXPENSE> 95,224
<OTHER-OPERATING-EXPENSES> 1,824,922
<TOTAL-OPERATING-EXPENSES> 1,920,146
<OPERATING-INCOME-LOSS> 322,619
<OTHER-INCOME-NET> 14,034
<INCOME-BEFORE-INTEREST-EXPEN> 336,653
<TOTAL-INTEREST-EXPENSE> 202,265
<NET-INCOME> 134,388
0
<EARNINGS-AVAILABLE-FOR-COMM> 134,388
<COMMON-STOCK-DIVIDENDS> 196,728
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 0
<EPS-PRIMARY> 1.08
<EPS-DILUTED> 1.08
</TABLE>
