<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________________________
POST-EFFECTIVE AMENDMENT NO. 7
To
FORM U-1
DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
CONECTIV
DELMARVA POWER & LIGHT COMPANY
CONECTIV RESOURCE PARTNERS, INC.
CONECTIV ENERGY SUPPLY, INC.
KING STREET ASSURANCE, LTD.
CONECTIV ENERGY, INC
800 King Street
Wilmington, DE 19899
<TABLE>
<S> <C>
DELMARVA CAPITAL INVESTMENTS, INC. ATLANTIC CITY ELECTRIC COMPANY
CONECTIV SERVICES, INC. 6801 Black Horse Pike
CONECTIV COMMUNICATIONS, INC. Egg Harbor Township, NJ 08234
DELMARVA SERVICES COMPANY
DCI I, INC. ATLANTIC GENERATION, INC.
DCI II, INC. ATLANTIC SOUTHERN PROPERTIES, INC
DCTC-BURNEY, INC. ATE INVESTMENT, INC
CONECTIV OPERATING SERVICES CO CONECTIV THERMAL SYSTEMS, INC.
CONECTIV SOLUTIONS, LLC BINGHAMTON GENERAL, INC.
CONECTIV PLUMBING LLC. BINGHAMTON LIMITED, INC.
252 Chapman Road PEDRICK GEN., INC
P.O. Box 6066 VINELAND LIMITED, INC.
Newark, DE 19714 VINELAND GENERAL, INC
ATLANTIC JERSEY THERMAL SYSTEMS, INC
ATS OPERATING SERVICES, INC.
5100 Harding Highway
Mays Landing, NJ 08330
</TABLE>
(Names of companies filing this statement
and address of principal executive offices)
Conectiv
(Name of top registered holding company parent)
Philip S. Reese
Treasurer
Conectiv
(address above)
(Name and address of agent of service)
The Commission is requested to send copies of all notices, orders and
communications in connection with this Application to:
<TABLE>
<S> <C>
Peter F. Clark Joyce Koria Hayes, Esquire
General Counsel 7 Graham Court
Conectiv Newark, DE 19711
(address above)
</TABLE>
<PAGE> 2
Item 1. Description of Proposed Transactions
(a) Furnish a reasonably detailed and precise description of the proposed
transaction, including a statement of the reason 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. BACKGROUND
Conectiv, a Delaware corporation, previously was authorized under
Section 9(a)(2) of the Public Utility Holding Company Act of 1935, as amended
(the "Act") to consummate certain transactions resulting in the acquisition by
Conectiv of all of the outstanding common stock of Delmarva Power & Light
Company, a Delaware and Virginia corporation and an operating public utility
company ("Delmarva"), and of Atlantic City Electric Company, a New Jersey
corporation and an operating public utility company ("ACE") (ACE and Delmarva
are collectively referred to as the "Utility Subsidiaries"), and of certain
direct and indirect nonutility subsidiaries ("Nonutility Subsidiaries"). Both
Utility and Nonutility Subsidiaries are referred to collectively as
"Subsidiaries". See HCAR No. 26832 dated February 25, 1998 (the "Merger Order")
in File No. 70-9069. Delmarva provides electric service in Delaware, Maryland
and Virginia and natural gas service in northern Delaware and ACE provides
electric service in New Jersey. Following the merger, Conectiv and its
Subsidiaries filed an Application/Declaration on Form U-1 in this File No.
70-9095 requesting authorization for financing transactions for the period
beginning with the effective date of an order issued in such proceeding through
December 31, 2000. Those financing transactions were approved by Order dated
February 26, 1998 (HCAR No. 26833) as supplemented by Orders dated August 21,
1998 (HCAR No. 26907), September 28, 1998 (HCAR No. 26921), October 21, 1998
(HCAR No. 26930), and November 13, 1998 (HCAR No. 26941) (the "Financing
Orders"). Further, in early 1999, Conectiv realized that certain write-downs
that might be required due to electric industry restructuring in the states of
New Jersey, Maryland, and Delaware might be sufficient to reduce retained
earnings to a level which would require that dividends be paid out of capital or
unearned surplus. A declaration on Form U-1 was filed in File No. 70-9499 (the
"Dividend File") seeking authority for Conectiv, Delmarva and ACE to issue
certain dividends out of capital or unearned surplus. In September, an order was
requested and issued permitting Conectiv to issue dividends aggregating no more
than $24 million out of capital or unearned surplus and jurisdiction was
reserved with respect to the issuance of future dividends by Conectiv, Delmarva
or ACE out of capital or unearned surplus (HCAR No. 35-27079 dated September 27,
1999).
Pursuant to the Financing Orders, during the period ending December 31,
2000, Conectiv is authorized, among other authorizations, 1) to issue short-term
debt aggregating no more than $800 million less any amount of short-term debt
issued by Delmarva under its authorization to issue up to $275 million of
short-term debt; 2) to issue up to $250 million of long-term debt with the
reservation of jurisdiction over an additional $250 million of long-term debt
(overall short-term and long-term debt thus aggregating $1.3 billion) and 3) to
issue common stock which when aggregated with any long-term debt issued does not
exceed $500 million in the aggregate.(1)
Also under the terms of the Financing Orders, the short-term
debt issued by Conectiv may be used to provide working capital for the general
corporate purposes of Conectiv and its Subsidiaries and to fund the capital
requirements of Conectiv's Subsidiaries until long-term financing can be
obtained.(2)
- ----------
(1) Conectiv currently does not envision the issuance of equity unless used as
consideration in connection with an acquisition as permitted under the
Financing Orders. The fair market value of any equity issued would reduce
the amount of long-term debt that may be issued pursuant to the
authorization requested herein.
(2) General corporate purposes could include interim funding of repurchase of
outstanding long-term securities.
<PAGE> 3
Financings authorized in the Financing Orders are subject to certain
limitations contained therein as follows:
i) Conectiv's consolidated common equity will be at least 30% of its
total consolidated capitalization ("Common Equity Ratio"), as adjusted
to reflect subsequent events that affect capitalization;
ii) the effective cost of money on long-term debt securities will not
exceed 300 basis points over comparable term U.S. Treasury securities
and the effective cost of money on short-term securities will not
exceed 300 basis points over the comparable term London Interbank
Offered Rate;
iii) maturity of indebtedness will not exceed 50 years; and
iv) the underwriting fees, commissions, or similar remuneration paid in
connection with the issue, sale or distribution of a security will not
exceed 5% of the principal amount of the financing.
The purpose of this filing is to request:
1. An extension of the effective period for all authorizations contained in
the Financing Orders to March 31, 2002 (the "Authorization Period") and
changes in certain authorizations as described below.(3)
2. An increase in the amount of short-term debt that Conectiv is authorized to
have outstanding during the Authorization Period from $800 million to $1.3
billion less any short-term debt issued by Delmarva, with Conectiv and
Delmarva permitted to issue securities during the Authorization Period so
long as the common Equity Ratio is at least 20%.
3. An increase in the level of long-term debt for which authorization is
requested from $500 million to $1 billion resulting in an increase in the
long-term debt that is subject to a request for a reservation of
jurisdiction from $250 million to $750 million with the understanding that
to the extent that any of the incremental $500 million is eventually
authorized and issued, the proceeds will be used to pay
- ----------
(3) Authorizations contained in the Financing Orders which are requested to be
extended but not amended include:
1) Conectiv's authorization to issue up to 10 million shares of Common Stock
pursuant to employee benefit plans and the Conectiv Dividend Reinvestment
Plan.
2) Conectiv's authority to issue up to $500 million of Common Stock less any
long-term debt issued (Since Conectiv has issued $250 million of long-term
debt, authorization remains only to issue up to an additional $250 million
aggregate value of common stock subject to further decrease for any future
long-term debt issued.)
3) Conectiv's and the Utility Subsidiaries' authority to enter into, perform,
purchase and sell financial instruments intended to manage the volatility
of interest rates.
4) Conectiv's authority to issue other securities subject to a reservation of
jurisdiction over the additional types of securities pending completion of
the record.
5) Delmarva's authority to issue up to $275 million of short-term debt and the
Utilities Subsidiaries' authority to issue securities which are not exempt
subject to a reservation of jurisdiction over these additional types of
securities pending completion of the record.
6) Nonutility Subsidiaries' authority to issue securities which are not exempt
subject to a reservation of jurisdiction over the issuance of additional
types and amounts of securities that are not exempt under Rule 52 (b)
pending completion of the record.
7) Conectiv's authority to enter into guarantees or otherwise provide credit
support with respect to the obligations of Subsidiaries in an amount not to
exceed $350 million except to the extent exempt under Rule 45 under the Act
and Nonutility Subsidiaries' authority to provide credit support to each
other in an aggregate amount not to exceed $100 million.
8) Authority of wholly-owned Nonutility Subsidiaries to change authorized
capital stock and to issue dividends out of capital without further
authorization of the Commission.
9) Authority of Subsidiaries to organize new corporations, trusts,
partnerships or other entities for the purpose of facilitating financings.
3
<PAGE> 4
down short-term debt. The aggregate debt that Conectiv would be permitted
to have outstanding prior to the removal of the reservation of jurisdiction
is $1.3 billion of short-term plus $250 million of long-term previously
issued. If the reservation of jurisdiction is removed, the aggregate debt
that Conectiv could have outstanding would total $800 million of short-term
and $1 billion of long-term debt for a total of $1.8 billion.
4. Authorization for investments in Exempt Wholesale Generators ("EWGs") in an
amount not exceeding 50% of the average consolidated retained earnings at
the end of the previous four quarters adjusted to include the amount of
retained earnings that were not available to Conectiv under the purchase
method of accounting for the Merger ($225 million).
5. Elimination of the $25 million maximum limit on borrowings by Nonutility
Subsidiaries from the Conectiv System Money Pool and the addition of King
Street Assurance, Ltd. to the Money Pool.
B. EXTENSION OF AUTHORIZATION PERIOD, INCREASE IN AUTHORIZED SHORT- AND
LONG-TERM DEBT AND IMPACT ON CAPITALIZATION.
1. INCREASE IN SHORT-TERM DEBT AUTHORIZATION FROM $800 MILLION TO $1.3
BILLION AT ANY ONE TIME OUTSTANDING DURING THE AUTHORIZATION PERIOD
AND INCREASE IN LONG-TERM DEBT SUBJECT TO RESERVATION OF JURISDICTION.
Conectiv herewith requests an extension of the Authorization Period to
March 31, 2002 and an increase in the aggregate amount of short-term debt at any
one time outstanding to no more than $1.3 billion. This additional $500 million
of short-term debt is required to fund the increased working capital and capital
expenditure needs of Conectiv and its Subsidiaries, including such expenditures
as a possible significant nonutility acquisition.
At the same time that Conectiv is required to fund the capital needs of
the nonutility companies, ACE will be issuing interim funding of the buy-out of
certain power purchase agreements with nonutility generators (the "NUG
Buyouts"). At a later date anticipated to be in mid 2000, debt will be issued by
a special purpose subsidiary of ACE and secured by regulatory assets created
under the New Jersey Electric Discount and Energy Competition Act ("Securitized
Debt"). The Securitized Debt will be issued pursuant to an order of the New
Jersey Board of Public Utilities ("NJBPU") and an order of this Commission
pursuant to an application to be filed later. It is not expected that the
Securitized Debt will be exempt from the requirement of Commission approval.
However, the interim financing of the NUG Buyouts will be issued directly by ACE
pursuant to order of the NJBPU and, therefore, will be exempt from the
requirements of Commission approval under Sections 9 and 10 of the Act by virtue
of Rule 52. The interim funding and the Securitized Debt will, however, be
included in total consolidated debt for purposes of calculating the Common
Equity Ratio.
Conectiv also requests authority to increase the aggregate amount of
long-term debt that may be issued during the Authorization Period to an
aggregate of $1 billion, but requests that the Commission continue to reserve
jurisdiction over the issuance of any long-term debt in excess of the $250
million previously authorized and issued. When the issuance of additional
long-term debt is authorized, proceeds of the incremental $500 million will be
used to pay down outstanding short-term debt that was issued to fund capital
expenditures. The financial statements included in this filing show the pro
forma effects of the issuance of an additional $500 million of short-term debt
over that which was previously authorized. The issuance of long-term debt over
which jurisdiction is requested to be reserved will be dealt with in the filing
requesting removal of the reservation of jurisdiction.
<PAGE> 5
It is Conectiv's understanding that an application by another registered
holding company for the issuance of long-term debt is pending before the
Commission for decision. That decision, when issued, will be precedent for
authorization for the issuance of additional long-term debt by Conectiv.
2. ANTICIPATED DECREASES IN THE COMMON EQUITY RATIO
As is discussed in detail in the Dividend File, each of the states in
which Delmarva and ACE operate as utilities enacted legislation restructuring
the electric utility industry in that state to provide retail choice of
electricity suppliers in the near future. Generally, with restructuring, the
supply component of the price charged to a customer for electricity would be
deregulated, and electricity suppliers would compete to supply electricity to
customers. Customers would continue to pay the local utility a regulated price
for the delivery of the electricity over the transmission and distribution
system. Stranded costs are costs which may not be recoverable in a competitive
energy supply market due to lower prices or customers choosing a different
supplier. Stranded costs generally include above-market costs associated with
generation facilities or long-term purchased power agreements, and regulatory
assets. As was disclosed initially in Conectiv's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1999, the total amount that could be charged to
Conectiv's earnings, on a consolidated basis, as a result of electric industry
restructuring includes (a) the impairment amount for the electric generating
plants of Delmarva and ACE, (b) the stranded cost amount for Delmarva's
purchased power contracts, and (c) regulatory assets of Delmarva and ACE related
to their electric generation businesses. The charge to earnings is reduced by
the estimated cost recovery through Delmarva's and ACE's regulated electricity
delivery rates. Based on this methodology (giving effect to estimated cost
recoveries), management estimated that future charges to earnings, after taxes,
as a result of electric utility industry restructuring could be within the
following ranges:
<TABLE>
<S> <C>
DPL $300 million to $425 million
ACE $50 million to $75 million
------------------------------
Consolidated Conectiv $350 million to $500 million
============================
</TABLE>
As of June 30, 1999, Conectiv had approximately $289 million in
retained earnings. As shown on Exhibit H-1 hereto, if Conectiv had been able to
use pooling rather than purchase accounting in connection with the Merger, the
ACE retained earnings would not have been excluded from Conectiv's consolidated
retained earnings and Conectiv's retained earnings would have been approximately
$225 million higher and better able to absorb the anticipated write-downs.
Although Conectiv has benefited from earnings for the third quarter so that
current retained earnings will be higher, write-downs in even the lowest of the
above ranges would eliminate all or substantially all of Conectiv's retained
earnings, drop the Common Equity Ratio below 30% and impact Conectiv's ability
to invest in EWGs as defined in Section 32 of the Act and Rule 53.
A second accounting convention contributes to the problem. Management
expects to sell certain of the electric generating plants of Delmarva and ACE.
Purchase and sale agreements have been executed for some assets, subject to the
receipt of certain regulatory approvals(4). Although sales of the impaired
electric generating plants are not expected to result in significant gains or
losses,(5) some of the electric generating plants that are not impaired may be
sold at a gain. Under GAAP, the write-down of an impaired asset is not reduced
by the expected future gain on sales of assets that are not impaired; the gain
on the sale of an asset is only recognized when the sale occurs.
- ----------
(4) On October 7, 1999, Conectiv, Delmarva and ACE each filed with the
Commission under cover of Form 8-K, Current Report, copies of a press
release dated September 30, 1999 announcing agreements for sale of the
Utility Subsidiaries' interests in three nuclear plants.
(5) Although no gain may be realized, a significant cash flow results which
benefits the utility system.
<PAGE> 6
Exhibit H-2, filed herewith under a request for confidential treatment,
is a consolidated capitalization forecast for the Conectiv System, by quarter
through December 31, 2000 and as of December 31, 2001. This Exhibit includes
estimates of the impacts of a) write-downs due to implementation of state
electric industry restructuring legislation equal to the lower end of the range
of estimates (which is the level currently anticipated), b) the interim
financing of the NUG Buyouts by ACE, c) short-term debt issued by Conectiv to
fund a possible significant nonutility acquisition, d) the issuance of
Securitized Debt that will refund the interim debt incurred to fund the NUG
Buy-out and to recover the stranded costs associated with the ACE generating
plants and e) the issue of short-term debt to fund increased investment in
exempt wholesale electric generation facilities. The exhibit also shows a "worst
case" scenario that includes an issuance of securitized debt to fund two
additional NUG Buyouts. The Exhibit indicates that under the worst case
scenario, the Common Equity Ratio for the Conectiv consolidated system is
projected to never be less than 20% during the Authorization Period. Conectiv
requests that it and Delmarva be permitted to issue securities pursuant to the
Financing Orders as supplemented by the Supplemental Order requested herein so
long as the Common Equity Ratio is at least 20%.
3. CONECTIV REMAINS A FINANCIALLY STRONG AND SECURE PARTICIPANT IN THE
EVOLVING ENERGY MARKET
Following the sales of the generating assets, the foundation of
Conectiv's near-term growth opportunities are considered to be its energy,
telecommunications and regulated electric and gas delivery businesses. These
areas allow the company to focus on vital services to the customer and allow
Conectiv to concentrate on deepening customer relationships within its growing
region. The energy business will be centered on 2,000 megawatts of flexible,
low-cost generation that back Conectiv's merchant capabilities. Conectiv also
will focus resources on growing its facilities-based telecommunications
business, taking advantage of the many high growth opportunities including
Internet and high speed DSL (digital subscriber line) that will be available to
customers in the near future.
Conectiv is in very sound financial condition, and will remain so
following any write-downs that occur. Following an early 1999 announcement of a
dividend reduction, a common stock self-tender and the future sale of generating
assets (discussed in detail in the Dividend File), both Standard and Poor's and
Moody's confirmed the stable ratings outlook for Conectiv, ACE and Delmarva.
Below are the ratings for unsecured long-term debt and short-term debt,
respectively:
<TABLE>
Agency Conectiv Delmarva ACE
------ -------- -------- ---
<S> <C> <C> <C>
Moody's Baa1/P-2 A3/P-1 Baa1/P-2
S & P BBB+/A-2 A-/A-1 BBB+ /A-2
</TABLE>
C. AUTHORIZATION TO INVEST IN EXEMPT WHOLESALE GENERATORS AN AMOUNT EQUAL TO
UP TO 50% OF AVERAGE CONSOLIDATED RETAINED EARNINGS ADJUSTED TO ADD BACK
RETAINED EARNINGS NOT AVAILABLE TO CONECTIV UNDER MERGER ACCOUNTING ($225
MILLION).
Under the Delaware electric industry restructuring legislation, Delmarva
is in the process of exiting the business of generating electricity. Some of the
generating facilities will be sold to third parties and some will be sold to an
affiliated generation company. Appropriate filings will be made with this
Commission under the Act related to both sales. Conectiv's strategic plan calls
for the retention and development of the flexible, low-cost generation that will
back Conectiv's merchant capabilities. Two such projects are in development. The
output of the projects will be sold at wholesale to the PJM
- ----------
<PAGE> 7
Interconnection Pool. Since Delmarva is currently in the process of exiting the
generating business and the new generation company is not as yet formed,
investments in the development of two "mid-merit" generating projects must be
and are appropriately made through an EWG. Conectiv Energy, Inc.("CEI"), a
previously inactive subsidiary, has been making investments in the development
of projects involving combustion turbine generating facilities that upon
operation will be eligible facilities which will qualify CEI as an exempt
wholesale generator under Section 32 of the Act.
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 Foreign Utility Company
("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. Rule 53(a) permits the Commission to authorize the
issuance of securities to fund the acquisition of EWGs(7) if the aggregate
investment does not exceed 50% of the average consolidated retained earnings as
reported for the four most recent quarterly periods on the holding company's
Form 10-K or 10-Q. However, under Rule 53(b)(2), if the average consolidated
retained earnings for the four most recent quarterly periods have decreased by
10% from the average for the previous four quarterly periods and the aggregate
investment in EWG's exceeds two per cent of the total capital invested in
utility operations, Rule 53(a) does not apply. Currently, Conectiv has
insignificant indirect interests in EWGs, DCTC-Burney, Inc., an indirect
subsidiary of Conectiv, holds a 45% direct and indirect interest in Burney
Forest Products, A Joint Venture, which is an EWG. There has been no additional
post-merger investment in this EWG by Conectiv or a subsidiary. CEI has invested
approximately $6 million as of September 30, 1999 in two generating projects
that will be eligible facilities.
Another result of the write-downs due to electric industry restructuring
will be that, under Rule 53(b)(2), Conectiv's ability to issue securities
pursuant to Rule 53 will disappear when the investment in EWGs (and FUCOs in
which there currently is no investment) exceeds an amount equal to 2% of
Conectiv's investment in utility operations. Current projections are that the
investments in the generating facilities could reach that level by the end of
January, 2000. If the amount of ACE retained earnings that were not allowed to
Conectiv under the merger accounting ($225 million) were added to retained
earnings at the end of each quarter for the purpose of calculating a limit to
50% of average consolidated retained earnings, Conectiv would have sufficient
authorization to make investments in the two projects planned for the
Authorization Period.
Conectiv is therefore requesting an order authorizing the use of the
proceeds from the issuance of the securities for investments in EWGs aggregating
no more than the average consolidated retained earnings as reported for the four
most recent quarterly periods on the holding company's Form 10-K or 10-Q plus
$225 million added to each quarter's retained earnings.
In all other ways, Conectiv meets the requirements of Rule 53.
Conectiv and its subsidiaries will maintain books and records to
identify the investments in 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
- ----------
(7) The 50% limitation applies to investments in foreign utility companies as
well; however, Conectiv is planning no such investments.
<PAGE> 8
records and financial statements as it may request. No more than 2% of the
employees of Conectiv's domestic public-utility companies will render services,
directly or indirectly, to any EWGs or FUCOs in which Conectiv, directly or
indirectly, has an interest, thereby satisfying Rule 53(a)(3).
Copies of this Post-effective Amendment and every certificate filed
pursuant to Rule 24 will be submitted to the New Jersey Board of Public
Utilities, the Delaware Public Service Commission, the Virginia State
Corporation Commission, and the Maryland Public Service Commission, the only
regulatory agencies having jurisdiction over the retail rates of the public
utility companies in the Conectiv System. Rule 53(a)(4) will be correspondingly
satisfied.
D. ELIMINATION OF LIMITATION ON PERMISSIBLE MONEY POOL BORROWING BY
NONUTILITIES AND ADDITION OF KING STREET ASSURANCE, LTD. TO MONEY POOL.
Under the terms of the Financing Order, the Money Pool was established to
permit Subsidiaries with excess funds to lend to the Money Pool and Subsidiaries
in need of funds to borrow from the Money Pool, thus utilizing all available
cash and limiting the System's need to use external short-term borrowing to fund
working capital needs. Only those Subsidiaries (other than Conectiv
Communications (an Exempt Telecommunications Company) and Conectiv Energy, Inc.
(an EWG)) that are specifically listed as parties to this
application/declaration may participate in the Money Pool. New subsidiaries may
only be added as participants pursuant to a Supplemental Order. Under the terms
of the Financing Order, borrowing by any one nonutility subsidiary is limited to
$25 million.
The limit on Nonutility Subsidiary borrowing has resulted in unnecessary
borrowing by the System when some Subsidiaries have money invested in the Money
Pool but other Nonutility Subsidiaries need to borrow more than $25 million. The
excess borrowing must be made directly from Conectiv with funds borrowed from
external sources while excess funds in the Money Pool are invested with third
parties. Since Conectiv guarantees the repayment of sums loaned to the Money
Pool, there is little increased risk to the lenders if the limit on Nonutility
borrowing is removed. Conectiv proposes that this limitation be eliminated.
King Street Assurance Ltd. ("KSA") is a new subsidiary that was formed as
an insurance company incorporated in Bermuda to reinsure appliance warranties
under the authority that KSA has as a Subsidiary of Conectiv Solutions, Inc.(8)
Authorization is requested to add KSA to the Money Pool. To the extent that the
laws governing insurance companies in Bermuda permit excess funds to be invested
in the Money Pool, KSA would invest excess funds in the Money Pool, which would
again decrease the need for outside borrowing by the Conectiv system.
- ----------
(8) By Order dated August 10, 1999 (Release No. 27059) Conectiv was authorized
to transfer the ownership of ATE Investment, Inc. ("ATE") to either
Conectiv Services, Inc ("CSI") or Conectiv Solutions, Inc. ("Solutions")
depending upon whether the merger of Solutions into CSI had occurred. On
August 11, 1999 Conectiv transferred all shares of Common Stock of ATE held
by Conectiv to Solutions as a capital contribution. Simultaneously, ATE
formed KSA for the purpose of reinsuring appliance warranties related to
the heating, air conditioning and ventilation business. Under the Merger
Order, Solutions is authorized to conduct such activities directly or
indirectly through subsidiaries. KSA was funded by the contribution to KSA
by ATE of the limited partnership interest in Enertech Capital Partners LP,
a venture capital fund investing in various energy-related and
telecommunications technologies as also authorized for Solutions or its
subsidiaries under the terms of the Merger Order. An
application-declaration will be filed shortly seeking authorization to
expand the reinsurance activities of KSA.
<PAGE> 9
E. SUMMARY OF REQUESTED ACTION:
Conectiv requests that this Commission authorize:
- - Extension of the Authorization Period to March 31, 2002 for all authorities
granted in the Financing Orders and amendment of certain authorities as
described below.
- - Increase in the amount of short-term debt that Conectiv is authorized to
have outstanding during the Authorization Period from $800 million to $1.3
billion with Conectiv and Delmarva permitted to issue securities during the
Authorization Period so long as the Common Equity Ratio is at least 20% of
consolidated capitalization.
- - An increase in the level of Conectiv's long-term debt authorization from
$500 million to $1 billion increasing the level of long-term debt subject
to the reservation of jurisdiction from $250 million to $750 million with
the understanding that to the extent that any of the incremental $500
million is eventually authorized and issued, the proceeds will be used to
pay down short-term debt.
- - Authorization for investments in EWGs in an amount not exceeding 50% of the
average consolidated retained earnings at the end of the previous four
quarters adjusted to add back the amount of retained earnings that were not
available to Conectiv under the purchase method of accounting for the
merger( $225 million).
- - Elimination of the $25 million maximum limitation on borrowings by
nonutilities from the Conectiv System Money Pool and the addition of KSA to
the Money Pool.
(b) Describe briefly, and where practicable state the approximate amount of, any
material interest in the proposed transaction, direct or indirect, of any
associate company or affiliate of the applicant or any affiliate of any such
associate company.
Not applicable.
(c) If the proposed transaction involves the acquisition of securities not
issued by a registered holding company or a subsidiary thereof, describe briefly
the business and property, present or proposed, of the issuer of such
securities.
Not applicable.
(d) If the proposed transaction involves the acquisition or disposition of
assets, describe briefly such assets, setting forth original cost, vendor's book
cost (including the basis of determination) and applicable valuation and
qualifying reserves.
Not applicable.
Item 2. Fees, Commissions and Expenses.
(a) The fees, commissions and expenses to be incurred, directly or indirectly,
by Conectiv or any associate company thereof in connection with the proposed
transactions are estimated as follows:
<TABLE>
<S> <C>
Fees of Conectiv Resource Partners, Inc. ...................... $*
Fees of outside counsel ....................................... $*
</TABLE>
<PAGE> 10
<TABLE>
<S> <C>
Miscellaneous expenses ........................................ $*
---
TOTAL ......................................................... $*
</TABLE>
* to be filed by amendment
(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.
The financial statements and other portions of this declaration were
prepared by personnel of Conectiv Resource Partners, Inc., whose time will be
charged to Conectiv at cost as appropriate.
Item 3. Applicable Statutory Provisions
(a) State the sections 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.
Sections 6, 7 and 32 of the Act and Rules 53 and 54 of the Act are
applicable to the issuance of the additional long- and short-term debt by
Conectiv for which authorization is sought. Sections 6, 7, 9 and 10 and Rule 52
are applicable to the issuance of evidences of deposit by Conectiv Resources and
the issuance of Money Pool Notes by borrowers from the System Money Pool and
sections 9 and 10 and Rule 52 are applicable to the receipt of said notes by
lenders other than Delmarva. Because Delmarva is incorporated in both Virginia
and Delaware and only Virginia has approved participation in the Money Pool,
Rule 52 is not applicable.
(b) If an applicant is not a registered holding company or a subsidiary
thereof, state the name of each public utility company of which it is an
affiliate, or of which it will become an affiliate as a result of the
proposed transactions, and the reasons why it is or will become such an
affiliate.
Not applicable.
Item 4. Regulatory Approval.
(a) State the nature and extent of the jurisdiction of any State commission or
any Federal commission (other than the Securities and Exchange Commission)
over the proposed transaction.
No other regulatory agency has jurisdiction over the proposed transactions.
(b) Describe the action taken or proposed to be taken before any commission
named in answer to paragraph (a) of this item in connection with the
proposed transaction
Not applicable.
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.
Conectiv requests that the Commission issue and publish not later than
October 22, 1999, the requisite notice under Rule 23 with respect to the filing
of this Declaration. Conectiv further requests
<PAGE> 11
that such notice specify a date not later than November 29, 1999, as the date
after which the Commission may issue an order granting this Application.
(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
Corporate Regulation 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.
Conectiv waives a recommended decision by a hearing officer or other
responsible officer of the Commission; consents that the Staff of the Division
of Investment Management may assist in the preparation of the Commission's
order; and requests that there be no waiting period between the issuance of the
Commission's order and its effectiveness.
Item 6. Exhibits and Financial Statements.
<TABLE>
<S> <C>
(a) Exhibits:
A Not applicable
B Not applicable
C Not applicable
D Not applicable
E Not applicable
F Preliminary opinion of counsel (to be filed by amendment)
G Form of Federal Register notice
H-1 Comparison of Impact on Retained Earnings of Purchase versus Pooling
Accounting for Merger
H-2 Conectiv Capitalization Forecast (Filed under request for confidential
treatment.)
(b) Financial Statements:
FS-1 Conectiv Consolidated Balance Sheet per books and per forma, dated
June 30, 1999.
FS-2 Conectiv Consolidated Income Statement per books and per forma for the
period ended June 30, 1999
FS-3 Conectiv Consolidated Financial Data Schedule (included in electronic
submission only)
</TABLE>
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. 4312(2)(C)). If the response to this item 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.
The Commission's action in this matter will not constitute major
federal action significantly affecting the quality of the human environment.
(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.
11
<PAGE> 12
No other federal agency has prepared or is preparing an environmental
impact statement with regard to the proposed transactions.
SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, the undersigned companies have duly caused this Post-Effective
Amendment No. 7 to Form U-1 to be signed on their behalf by the undersigned
thereunto duly authorized.
<TABLE>
<S> <C>
DATE: October 15, 1999 CONECTIV
DELMARVA POWER & LIGHT COMPANY
CONECTIV RESOURCE PARTNERS, INC.
CONECTIV ENERGY SUPPLY INC.
KING STREET ASSURANCE, LTD.
CONECTIV ENERGY, INC.
DELMARVA CAPITAL INVESTMENTS, INC.
CONECTIV SERVICES, INC.
CONECTIV COMMUNICATIONS, INC.
DELMARVA SERVICES COMPANY
DCI I, INC.
DCI II, INC.
DCTC-BURNEY, INC.
CONECTIV OPERATING SERVICES COMPANY
CONECTIV SOLUTIONS, LLC
CONECTIV PLUMBING, LLC
ATLANTIC CITY ELECTRIC COMPANY
ATLANTIC GENERATION, INC.
ATLANTIC SOUTHERN PROPERTIES, INC.
ATE INVESTMENT, INC.
CONECTIV THERMAL SYSTEMS, INC.
BINGHAMTON GENERAL, INC.
BINGHAMTON LIMITED, INC.
PEDRICK GEN., INC.
VINELAND LIMITED, INC.
VINELAND GENERAL, INC.
ATLANTIC JERSEY THERMAL SYSTEMS, INC.
ATS OPERATING SERVICES, INC.
/s/ Philip S. Reese
------------------
Philip S. Reese
Treasurer
</TABLE>
<PAGE> 1
Exhibit G
Conectiv et al., Notice of Proposal to Extend Authorization Period for the
Issuance of Securities, Issue Additional Long and Short-Term Debt, Eliminate
Limitation on Nonutility Borrowings from the Money Pool, Addition of New
Nonutility Subsidiary to Money Pool and Authorization to Add Back Retained
Earnings Disallowed on Merger Accounting for Purposes of Limitation on
Investments in Exempt Wholesale Generators.
Conectiv, a Delaware corporation and a registered public utility
holding company has filed an amendment to the application/declaration under
Sections 6, 7, 9 , 10 and 32 and Rule 53 of the Public Utility Holding Company
Act of 1935, as amended (the "Act").
Conectiv and its operating utility subsidiaries, Delmarva Power and
Light Company ("Delmarva") and Atlantic City Electric ("ACE") and certain direct
and indirect nonutility subsidiaries were authorized to issue securities for the
period beginning with the effective date of an order issued in such proceeding
through December 31, 2000 by Order dated February 26, 1998 (HCAR No. 26833) as
supplemented by Orders dated August 21, 1998 (HCAR No. 26907), September 28,
19998 (HCAR No. 26921), October 21, 1998 (HCAR No. 26930), and November 13, 1998
(HCAR No. 26941) (the "Financing Orders"). Further, in early 1999, Conectiv
realized that certain write-downs that might be required due to electric
industry restructuring in the states of New Jersey, Maryland, and Delaware might
be sufficient to reduce retained earnings to a level which would require that
dividends be paid out of capital. A declaration on Form U-1 was filed in File
No. 70-9499 seeking authority for Conectiv, Delmarva and ACE to issue certain
dividends out of capital or unearned surplus. In September, an order was
requested and issued permitting Conectiv to issue dividends aggregating no more
than $24 million out of capital or unearned surplus and jurisdiction was
reserved with respect to the issuance of future dividends by Conectiv, Delmarva
and ACE out of capital or unearned surplus (HCAR No. 35-27079 dated September
27, 1999).
Conectiv has estimated that the write-downs, after taxes, as a result of
electric utility industry restructuring could be within the following ranges:
<TABLE>
<S> <C>
DPL $300 million to $425 million
ACE $50 million to $75 million
-----------------------------
Consolidated Conectiv $350 million to $500 million
=============================
</TABLE>
As of June 30, 1999, Conectiv has approximately $289 million in
retained earnings, Although Conectiv has benefited from earnings for the third
quarter so that current retained earnings will be higher, write-downs in even
the lowest of the above ranges would eliminate all or substantially all retained
earnings, decrease consolidated common stock equity to below 30% of total
capitalization (the "Common Equity Ratio") and impact Conectiv's ability to
invest in exempt wholesale generators ("EWGs") as defined in Section 32 of the
Act and Rule 53.
Conectiv has filed estimates and projections of capitalization through December
31, 2001 that include the estimated impacts of a) write-downs due to
implementation of state electric industry restructuring legislation equal to
the lower end of the range of estimates, b) the interim financing of the
buy-outs by ACE of two power purchase agreements with nonutility generators, c)
the issuance of debt by a special purpose subsidiary of ACE to be secured by
regulatory assets created under the New Jersey Electric Discount and Energy
Competition Act ("Securitized Debt") to refund the interim debt incurred to
fund buy-out, recover the stranded costs associated with the ACE generating
plants and, possibly, fund two additional buyouts by ACE of power purchase
agreements with non-utility generators, d) short-term debt issued by Conectiv
to fund a possible significant nonutility acquisition, and e) the issuance of
short-term debt to fund increased investment in exempt wholesale electric
generation facilities. The exhibit indicates that on a worst case basis, the
Common Equity Ratio for the Conectiv consolidated system is
<PAGE> 2
not expected to be less than 20%.
Conectiv requests that an order be issued that would permit:
- - Extension of the Authorization Period for all authorities granted under the
previous Financing Orders to March 31, 2002* and amendment of certain
authorities as described below.
- - Increase in the amount of short-term debt that Conectiv is authorized to
have outstanding during the Authorization Period from $800 million to $1.3
billion with Conectiv and Delmarva permitted to issue securities during the
Authorization Period so long as common stock equity is at least 20% of
consolidated capitalization. The short-term debt issued by Conectiv may be
used to provide additional working capital for the general corporate
purposes of Conectiv and its subsidiaries and to fund the capital
requirements of Conectiv's subsidiaries until long-term financing can be
obtained.**
- - An increase in the total long-term debt for which Conectiv requests
authorization from $500 million to $1 billion which increases the level of
long-term debt that is subject to a reservation of jurisdiction from $250
million to $750 million with the understanding that to the extent that any
of the incremental $500 million is eventually authorized and issued, the
proceeds will be used to pay down short-term debt .
- - An increase in the amount which may be invested in Exempt Wholesale
Generators ("EWGs") to an amount equal to 50% of the total of the average
consolidated retained earnings at the end of the
- ----------
* Authorizations contained in the Financing Orders which are requested to be
extended but not amended include:
1) Conectiv's authorization to issue up to 10 million shares of Common Stock
pursuant to employee benefit plans and the Conectiv Dividend Reinvestment
Plan.
2) Conectiv's authority to issue up to $500 million of Common Stock less any
long-term debt issued (Since Conectiv has issued $250 million of long-term
debt, authorization remains only to issue up to an additional $250 million
less any future long-term debt issued.)
3) Conectiv's and the Utility Subsidiaries' authority to enter into, perform,
purchase and sell financial instruments intended to manage the volatility
of interest rates.
4) Conectiv's authority to issue other securities subject to a reservation of
jurisdiction over the additional types of securities pending completion of
the record.
5) Delmarva's authority to issue up to $275 million of short-term debt and the
utilities authority to issue securities which are not exempt
subject to a reservation of jurisdiction over these additional types of
securities pending completion of the record.
6) Nonutility Subsidiaries' authority to issue securities which are not exempt
subject to a reservation of jurisdiction over the issuance of additional
types and amounts of securities that are not exempt under Rule 52 (b)
pending completion of the record.
7) Conectiv's authority to enter into guarantees or otherwise provide credit
support with respect to the obligations of Subsidiaries in an amount not to
exceed $350 million except to the extent exempt under Rule 45 under the Act
and Nonutility Subsidiaries' able to provide credit support to each other
in an aggregate amount not to exceed $100 million.
8) Authority of wholly-owned Nonutilities to change authorized capital stock
and to issue dividends out of capital without further authorization of the
Commission.
9) Authority of Subsidiaries to organize new corporations, trusts,
partnerships or other entities for the purpose of facilitating financings.
** General corporate purposes could include interim funding of repurchase of
outstanding long-term securities.
<PAGE> 3
previous four quarters plus the amount of retained earnings that were not
available to Conectiv under the purchase method of accounting for the
Merger.
- - Elimination of a limitation to $25 million on borrowings by nonutilities
from the Conectiv System Money Pool and the addition to the Money Pool of
King Street Assurance, Ltd., A Bermudian insurance company subsidiary
formed to reinsure appliance warranties.
For the Commission, by the Division of Investment Management, pursuant
to delegated authority.
Jonathan G. Katz
Secretary
<PAGE> 1
EXHIBIT H-1
CONSOLIDATED CONECTIV COMMON STOCKHOLDERS' EQUITY ACCOUNTS ADJUSTED FROM
PURCHASED METHOD ACCOUNTING TO POOLING OF INTERESTS ACCOUNTING.
<TABLE>
<CAPTION>
(Dollars in Thousands) PAR VALUE PAID IN CAPITAL
----------------------------- -------------------------------
Common Common
Stock Class A Stock Class A
------------ ----------- --------------- -------------
<S> <C> <C> <C> <C>
BALANCE AS OF MARCH 31, 1999 $1,008 $66 $1,464,599 $107,095
ADJUSTMENTS TO POOLING
ACCOUNTING
(a) Remove goodwill which resulted from
valuing Atlantic Energy Inc. (AEI) based on its
stock price as of the merger
announcement (132,902)
(b) Recognize AEI's retained earnings on (224,663)
February 28, 1998 (the day prior to
the Merger)
(c) Recognize in earnings the direct merger costs
capitalized under purchase accounting
(d) Remove the earnings effect of amortizing goodwill
and purchase accounting adjustments related to
pension and other postretirement benefit obligations
PRO FORMA BALANCE AS OF MARCH 31, 1999, ASSUMING
----------- ------------ ---------------- ------------
POOLING ACCOUNTING $1,008 $66 $1,107,034 $107,095
----------- ------------- ---------------- ------------
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
TOTAL
(Dollars in Thousands) Retained Treasury Unearned COMMON
Earnings Stock Comp. EQUITY
-------- -------- -------- ------
<S> > <C> <C> <C> <C>
BALANCE AS OF MARCH 31, 1999 $281,682 $(3,819) $(2,421) $1,848,211
ADJUSTMENTS TO POOLING
ACCOUNTING
(a) Remove goodwill which resulted from
valuing Atlantic Energy Inc. (AEI) based
on its stock price as of the merger
announcement (132,902)
(b) Recognize AEI's retained earnings on
February 28, 1998 (the day prior to
the Merger) 224,663 --
(c) Recognize in earnings the direct merger
costs capitalized under purchase
accounting (50,728) (50,728)
(d) Remove the earnings effect of amortizing goodwill
and purchase accounting adjustments related to
pension and other postretirement benefit
obligations 3,606 3,606
PRO FORMA BALANCE AS OF MARCH 31, 1999, ASSUMING
---------- ---------- ---------- ----------
POOLING ACCOUNTING $459,224 $(3,819) $(2,421) $1,668,187
========== ========== ========== ==========
</TABLE>
Conectiv's merger of Delmarva Power and Atlantic City Electric was accounted for
using the purchase method of accounting for business combinations. Because of
the purchase method, the retained earnings of Atlantic as of the merger date are
excluded from Conectiv's consolidated retained earnings.
<PAGE> 1
Exhibit 99 H.2
CONECTIV CAPITALIZATION FORECAST
FILED WITH THE OFFICE OF THE SECRETARY UNDER A REQUEST FOR CONFIDENTIAL
TREATMENT
<PAGE> 1
EXHIBIT FS-1
CONECTIV AND SUBSIDIARIES
ACTUAL AND PRO FORMA CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1999
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Pro Forma
Actual Adjustments Pro Forma
------ ----------- ---------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $44,433 $729,992(1) $774,425
Accounts receivable 447,476 -- 447,476
Inventories, at average cost:
Fuel (coal, oil, and gas) 57,844 -- 57,844
Materials and supplies 78,935 -- 78,935
Prepaid New Jersey sales and excise taxes 40,234 -- 40,234
Other prepayments 13,142 -- 13,142
Deferred income taxes, net 33,099 -- 33,099
---------- ---------- ----------
715,163 729,992 1,445,155
---------- ---------- ----------
INVESTMENTS
Investment in leveraged leases 117,573 -- 117,573
Funds held by trustee 171,145 -- 171,145
Other investments 132,250 -- 132,250
---------- ---------- ----------
420,968 -- 420,968
---------- ---------- ----------
PROPERTY, PLANT, and EQUIPMENT
Electric utility plant 5,723,283 -- 5,723,283
Gas utility plant 254,262 -- 254,262
Common utility plant 182,544 -- 182,544
---------- ---------- ----------
6,160,089 -- 6,160,089
Less: Accumulated depreciation 2,603,257 -- 2,603,257
---------- ---------- ----------
Net utility plant in service 3,556,832 -- 3,556,832
Utility construction work-in-progress 226,281 -- 226,281
Leased nuclear fuel, at amortized cost 57,049 -- 57,049
Nonutility property, net 243,553 -- 243,553
Goodwill, net 409,297 -- 409,297
---------- ---------- ----------
4,493,012 -- 4,493,012
---------- ---------- ----------
DEFERRED CHARGES AND OTHER ASSETS
Unrecovered purchased power costs 38,891 -- 38,891
Deferred recoverable income taxes 184,245 -- 184,245
Unrecovered New Jersey state excise tax 30,814 -- 30,814
Deferred debt refinancing costs 42,014 -- 42,014
Deferred other postretirement benefit costs 33,728 -- 33,728
Prepaid employee benefits costs 24,937 -- 24,937
Unamortized debt expense 28,633 -- 28,633
License fees 24,018 -- 24,018
Other 81,334 -- 81,334
---------- ---------- ----------
488,614 -- 488,614
---------- ---------- ----------
TOTAL ASSETS $6,117,757 $729,992 $6,847,749
========== ========== ==========
</TABLE>
<PAGE> 2
EXHIBIT FS-1
CONECTIV AND SUBSIDIARIES
ACTUAL AND PRO FORMA CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1999
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Pro Forma
Actual Adjustments Pro Forma
------ ----------- ---------
<S> <C> <C> <C>
CAPITALIZATION AND LIABILITIES
CURRENT LIABILITIES
Short-term debt $ 600,008 $ 729,992(1) $ 1,330,000
Long-term debt due within one year 67,055 -- 67,055
Variable rate demand bonds 125,100 -- 125,100
Accounts payable 217,876 -- 217,876
Taxes accrued 34,257 -- 34,257
Interest accrued 42,915 -- 42,915
Dividends payable 27,442 -- 27,442
Deferred energy costs 49,243 -- 49,243
Current capital lease obligation 28,107 -- 28,107
Accrued employee separation and
other merger-related costs 4,856 -- 4,856
Other 66,315 -- 66,315
----------- ----------- -----------
1,263,174 729,992 1,993,166
----------- ----------- -----------
DEFERRED CREDITS AND OTHER LIABILITIES
Other postretirement benefits obligation 102,918 -- 102,918
Deferred income taxes, net 870,004 -- 870,004
Deferred investment tax credits 76,978 -- 76,978
Long-term capital lease obligation 30,244 -- 30,244
Other 62,600 -- 62,600
----------- ----------- -----------
1,142,744 -- 1,142,744
----------- ----------- -----------
CAPITALIZATION
Common stock: $0.01 par value;
150,000,000 shares authorized; shares outstanding--
87,822,737 actual and pro forma 1,021 -- 1,021
Class A common stock, $0.01 par value;
10,000,000 shares authorized; shares outstanding--
5,742,604 actual and pro forma 57 -- 57
Additional paid-in capital--common stock 1,477,336 -- 1,477,336
Additional paid-in capital--Class A common stock 93,742 -- 93,742
Retained earnings 289,139 -- 289,139
----------- ----------- -----------
1,861,295 -- 1,861,295
Treasury shares, at cost:
14,261,349 shares actual and pro forma (362,741) -- (362,741)
Unearned compensation (2,236) -- (2,236)
----------- ----------- -----------
Total common stockholders' equity 1,496,318 -- 1,496,318
Preferred stock of subsidiaries:
Not subject to mandatory redemption 95,933 -- 95,933
Subject to mandatory redemption 188,950 -- 188,950
Long-term debt 1,930,638 -- 1,930,638
----------- ----------- -----------
3,711,839 -- 3,711,839
----------- ----------- -----------
TOTAL CAPITALIZATION AND LIABILITIES $ 6,117,757 $ 729,992 $ 6,847,749
=========== =========== ===========
</TABLE>
<PAGE> 1
EXHIBIT FS-2
CONECTIV AND SUBSIDIARIES
ACTUAL AND PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
FOR THE TWELVE MONTHS ENDED JUNE 30, 1999
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Pro Forma
Actual Adjustments Pro Forma
------ ----------- ---------
<S> <C> <C> <C>
OPERATING REVENUES
Electric $ 2,440,041 $ -- $ 2,440,041
Gas 771,396 -- 771,396
Other services 421,604 -- 421,604
----------- ----------- -----------
3,633,041 -- 3,633,041
----------- ----------- -----------
OPERATING EXPENSES
Electric fuel and purchased energy 979,656 -- 979,656
Gas purchased 716,052 -- 716,052
Other services' cost of sales 338,816 -- 338,816
Purchased electric capacity 216,149 -- 216,149
Employee separation and other merger-related costs 1,358 -- 1,358
Operation and maintenance 587,652 -- 587,652
Depreciation 266,732 -- 266,732
Taxes other than income taxes 82,907 -- 82,907
----------- ----------- -----------
3,189,322 -- 3,189,322
----------- ----------- -----------
OPERATING INCOME 443,719 -- 443,719.00
----------- ----------- -----------
OTHER INCOME
Allowance for equity funds used
during construction 2,627 -- 2,627
Other income 60,543 -- 60,543
----------- ----------- -----------
63,170 -- 63,170
----------- ----------- -----------
INTEREST EXPENSE
Interest charges 169,147 43,800(2) 212,947
Allowance for borrowed funds used during
construction and capitalized interest (5,648) -- (5,648)
----------- ----------- -----------
163,499 43,800 207,299
----------- ----------- -----------
PREFERRED STOCK DIVIDEND
REQUIREMENTS OF SUBSIDIARIES 16,805 -- 16,805
----------- ----------- -----------
INCOME BEFORE INCOME TAXES 326,585 (43,800) 282,785
INCOME TAXES 128,696 (17,520)(3) 111,176
----------- ----------- -----------
NET INCOME $ 197,889 $ (26,280) $ 171,609
=========== =========== ===========
EARNINGS APPLICABLE TO COMMON STOCK
Common stock $ 185,542 $ (26,280) $ 159,262
Class A common stock 12,347 -- 12,347
----------- ----------- -----------
$ 197,889 $ (26,280) $ 171,609
=========== =========== ===========
COMMON STOCK
Average shares outstanding (000)
Common stock 100,064 100,064
Class A common stock 6,522 6,522
Earnings per average share--basic and diluted
Common stock $ 1.85 $ 1.59
Class A common stock $ 1.89 $ 1.89
Dividends declared per share
Common stock $ 1.375 $ 1.375
Class A common stock $ 3.20 $ 3.20
</TABLE>
<PAGE> 2
PRO FORMA NOTES
<TABLE>
<S> <C>
($000's)
--------
(1) Represents the issuance of short-term debt in the amount necessary to
bring Conectiv up to the $1.3 billion limit being requested (total
Conectiv consolidated short-term debt is increased to $1.33 billion since
the Atlantic City Electric Company has $30 million of short-term debt that
is not included under the financing order dated February 26, 1998 (HCAR
No. 26833)
(2) Represents the yearly interest expense on the additional short-term debt at 6%. $729,992
6%
--------
$ 43,800
========
(3) Represents the tax effect of the additional interest expense. $ 43,800
40%
--------
$ 17,520
========
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> OPUR1
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END>
<PERIOD-END> JUN-30-1999 JUN-30-1999
<BOOK-VALUE> PER-BOOK PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 3,556,832 3,556,832
<OTHER-PROPERTY-AND-INVEST> 664,521 664,521
<TOTAL-CURRENT-ASSETS> 715,163 1,445,155
<TOTAL-DEFERRED-CHARGES> 488,614 488,614
<OTHER-ASSETS> 692,627 692,627
<TOTAL-ASSETS> 6,117,757 6,847,749
<COMMON> 1,078 1,078
<CAPITAL-SURPLUS-PAID-IN> 1,571,078 1,571,078
<RETAINED-EARNINGS> 289,139 289,139
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,861,295 1,861,295
188,950 188,950
95,933 95,933
<LONG-TERM-DEBT-NET> 1,930,638 1,930,638
<SHORT-TERM-NOTES> 600,008 1,330,000
<LONG-TERM-NOTES-PAYABLE> 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0 0
<LONG-TERM-DEBT-CURRENT-PORT> 67,055 67,055
0 0
<CAPITAL-LEASE-OBLIGATIONS> 30,244 30,244
<LEASES-CURRENT> 28,107 28,107
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,315,527 1,315,527
<TOT-CAPITALIZATION-AND-LIAB> 6,117,757 6,847,749
<GROSS-OPERATING-REVENUE> 3,633,041 3,633,041
<INCOME-TAX-EXPENSE> 128,696 111,176
<OTHER-OPERATING-EXPENSES> 3,189,322 3,189,322
<TOTAL-OPERATING-EXPENSES> 3,318,018 3,300,498
<OPERATING-INCOME-LOSS> 315,023 332,543
<OTHER-INCOME-NET> 63,170 63,170
<INCOME-BEFORE-INTEREST-EXPEN> 378,193 395,713
<TOTAL-INTEREST-EXPENSE> 180,304 224,104
<NET-INCOME> 197,889 171,609
0 0
<EARNINGS-AVAILABLE-FOR-COMM> 197,889 171,609
<COMMON-STOCK-DIVIDENDS> 155,853 155,853
<TOTAL-INTEREST-ON-BONDS> 0 0
<CASH-FLOW-OPERATIONS> 474,958 0
<EPS-BASIC> 1.85 1.59
<EPS-DILUTED> 1.89 1.89
</TABLE>
