<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
OR
--
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-13895
CONECTIV
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(Exact name of registrant as specified in its charter)
Delaware 51-0377417
------------------------ ----------
(State of incorporation) (I.R.S. Employer
Identification No.)
800 King Street, P.O. Box 231, Wilmington, Delaware 19899
--------------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 302-429-3114
------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Shares Outstanding at September 30, 2000
------------------------------------ ----------------------------------------
Common Stock, $0.01 par value 82,862,850
Class A Common Stock, $0.01 par value 5,742,315
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Conectiv
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Table of Contents
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<TABLE>
<CAPTION>
Page
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<S> <C>
Part I. Financial Information:
Item 1. Financial Statements
Consolidated Statements of Income for the three and nine months
ended September 30, 2000, and September 30, 1999................. 1-2
Consolidated Statements of Comprehensive Income for the three and
nine months ended September 30, 2000, and September 30, 1999..... 3
Consolidated Balance Sheets as of September 30, 2000, and
December 31, 1999................................................ 4-5
Consolidated Statements of Cash Flows for the
nine months ended September 30, 2000, and September 30, 1999..... 6
Notes to Consolidated Financial Statements....................... 7-19
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................. 20-34
Item 3. Quantitative and Qualitative Disclosures About Market Risk....... 34-35
Part II. Other Information
Item 1. Legal Proceedings................................................ 36
Item 5. Other Information................................................ 36
Item 6. Exhibits and Reports on Form 8-K................................. 36
Signature...................................................................... 37
</TABLE>
i
<PAGE>
PART I. FINANCIAL INFORMATION
CONECTIV
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CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Electric $ 915,020 $ 795,732 $2,230,156 $1,912,555
Gas 492,780 157,530 1,069,816 582,560
Other services 143,748 127,150 449,305 334,362
---------- ---------- ---------- ----------
1,551,548 1,080,412 3,749,277 2,829,477
---------- ---------- ---------- ----------
OPERATING EXPENSES
Electric fuel and purchased energy and capacity 517,967 373,184 1,235,290 909,729
Gas purchased 472,830 151,369 1,019,859 542,181
Other services' cost of sales 121,778 101,164 379,372 265,989
Special charges - 105,648 25,162 105,648
Operation and maintenance 147,367 149,868 463,193 443,631
Depreciation and amortization 65,163 68,384 193,192 203,558
Taxes other than income taxes 22,086 23,462 63,706 63,012
---------- ---------- ---------- ----------
1,347,191 973,079 3,379,774 2,533,748
---------- ---------- ---------- ----------
OPERATING INCOME 204,357 107,333 369,503 295,729
---------- ---------- ---------- ----------
OTHER INCOME 11,943 6,453 57,851 38,551
---------- ---------- ---------- ----------
INTEREST EXPENSE
Interest charges 57,364 48,154 167,322 131,103
Allowance for borrowed funds used during
construction and capitalized interest (2,778) (1,042) (6,924) (4,065)
---------- ---------- ---------- ----------
54,586 47,112 160,398 127,038
---------- ---------- ---------- ----------
PREFERRED STOCK DIVIDEND
REQUIREMENTS OF SUBSIDIARIES 5,110 5,117 15,268 14,843
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM 156,604 61,557 251,688 192,399
INCOME TAXES, EXCLUDING INCOME TAXES
APPLICABLE TO EXTRAORDINARY ITEM 66,988 41,318 111,174 92,106
---------- ---------- ---------- ----------
INCOME BEFORE EXTRAORDINARY ITEM 89,616 20,239 140,514 100,293
EXTRAORDINARY ITEM (Net of $160,193 of income taxes) - (271,106) - (271,106)
---------- ---------- ---------- ----------
NET INCOME (LOSS) $ 89,616 $ (250,867) $ 140,514 $ (170,813)
========== ========== ========== ==========
</TABLE>
(Continued on page 2)
See accompanying Notes to Consolidated Financial Statements.
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CONECTIV
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CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
(Continued from page 1)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- -----------------------------
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
EARNINGS (LOSS) APPLICABLE TO:
Common stock
Income before extraordinary item $ 83,406 $ 13,084 $ 135,760 $ 90,159
Extraordinary item, net of income taxes - (266,333) - (266,053)
------------- ------------- ------------- -------------
Total $ 83,406 $ (253,249) $ 135,760 $ (175,894)
Class A common stock
Income before extraordinary item $ 6,210 $ 7,155 $ 4,754 $ 10,134
Extraordinary item, net of income taxes - (4,773) - (5,053)
------------- ------------- ------------- -------------
Total $ 6,210 $ 2,382 $ 4,754 $ 5,081
============= ============= ============= =============
AVERAGE SHARES OUTSTANDING (000)
Common stock 82,701 87,711 84,015 95,454
Class A common stock 5,742 5,743 5,742 6,234
EARNINGS (LOSS) PER AVERAGE SHARE--basic and diluted
Common stock
Before extraordinary item $ 1.01 $ 0.15 $ 1.62 $ 0.94
Extraordinary item - (3.04) - (2.79)
------------- ------------- ------------- -------------
Total $ 1.01 $ (2.89) $ 1.62 $ (1.85)
============= ============= ============= =============
Class A common stock
Before extraordinary item $ 1.08 $ 1.25 $ 0.83 $ 1.63
Extraordinary item - (0.83) - (0.81)
------------- ------------- ------------- -------------
Total $ 1.08 $ 0.42 $ 0.83 $ 0.82
============= ============= ============= =============
DIVIDENDS DECLARED PER SHARE
Common stock $ 0.220 $ 0.220 $ 0.660 $ 0.825
Class A common stock $ 0.800 $ 0.800 $ 2.400 $ 2.400
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
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<PAGE>
CONECTIV
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- -----------------------------
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net Income (loss) $ 89,616 $ (250,867) $ 140,514 $ (170,813)
------------- ------------- ------------- -------------
Other comprehensive income (loss) -
Pre-tax income (loss) from unrealized gain
(loss) on marketable securities (449) - 382 -
Income taxes (157) - 134 -
------------- ------------- ------------- -------------
(292) - 248 -
------------- ------------- ------------- -------------
Comprehensive income (loss) $ 89,324 $ (250,867) $ 140,762 $ (170,813)
============= ============= ============= =============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
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<PAGE>
CONECTIV
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
September 30, December 31,
2000 1999
-------------- ------------
ASSETS
Current Assets
Cash and cash equivalents $92,074 $56,239
Accounts receivable, net of allowances of
$24,801 and $11,564, respectively 936,272 544,463
Inventories, at average cost
Fuel (coal, oil and gas) 62,977 65,360
Materials and supplies 56,598 58,177
Deferred energy supply costs 2,480 8,612
Prepaid New Jersey Sales and Excise Taxes 13,624 -
Prepaid income taxes - 15,674
Other prepayments 22,769 20,295
Deferred income taxes, net 28,644 25,175
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1,215,438 793,995
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Investments
Investment in leveraged leases 54,964 72,161
Funds held by trustee 188,636 173,247
Other investments 89,563 100,764
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333,163 346,172
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Property, Plant and Equipment
Electric generation 1,586,906 1,571,556
Electric transmission and distribution 2,695,890 2,633,375
Gas transmission and distribution 269,244 265,708
Other electric and gas facilities 393,641 405,303
Telecommunications, thermal systems, and other
property, plant, and equipment 255,132 238,229
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5,200,813 5,114,171
Less: Accumulated depreciation 2,221,782 2,097,529
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Net plant in service 2,979,031 3,016,642
Construction work-in-progress 322,182 199,390
Leased nuclear fuel, at amortized cost 56,156 55,983
Goodwill, net 347,088 369,468
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3,704,457 3,641,483
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Deferred Charges and Other Assets
Recoverable stranded costs, net 1,000,252 1,030,049
Deferred recoverable income taxes 89,169 93,853
Unrecovered purchased power costs 18,097 28,923
Unrecovered New Jersey state excise tax 13,497 22,567
Deferred debt refinancing costs 21,217 21,113
Deferred other postretirement benefit costs 30,605 32,479
Prepaid pension costs 61,673 35,005
Unamortized debt expense 26,633 28,045
License fees 22,300 23,331
Other 51,859 41,447
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1,335,302 1,356,812
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Total Assets $6,588,360 $6,138,462
============= ==========
See accompanying Notes to Consolidated Financial Statements.
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<PAGE>
CONECTIV
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
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<S> <C> <C>
CAPITALIZATION AND LIABILITIES
Current Liabilities
Short-term debt $ 715,394 $ 579,688
Long-term debt due within one year 43,043 48,937
Variable rate demand bonds 158,430 158,430
Accounts payable 524,824 307,764
Taxes accrued 76,889 -
Interest accrued 47,067 41,137
Dividends payable 26,753 27,545
Deferred energy supply costs 46,847 46,375
Current capital lease obligation 27,987 28,715
Above-market purchased energy contracts
and other electric restructuring liabilities 33,004 41,101
Other 99,541 91,353
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1,799,779 1,371,045
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Deferred Credits and Other Liabilities
Other postretirement benefits obligation 93,867 96,388
Deferred income taxes, net 778,782 730,987
Deferred investment tax credits 69,979 74,431
Regulatory liability for New Jersey income tax benefit 49,262 49,262
Above-market purchased energy contracts
and other electric restructuring liabilities 109,030 119,704
Deferred gain on termination of purchased energy contract 74,968 70,849
Long-term capital lease obligation 29,177 30,395
Other 53,315 47,447
------------- ------------
1,258,380 1,219,463
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Capitalization
Common stock: $0.01 per share par value;
150,000,000 shares authorized; shares outstanding - -
82,862,850 in 2000, and 86,173,169 in 1999 830 863
Class A common stock: $0.01 per share par value;
10,000,000 shares authorized; shares outstanding - -
5,742,315 in 2000 and 1999 57 57
Additional paid-in capital - - common stock 1,030,258 1,085,060
Additional paid-in capital - - Class A common stock 93,738 93,738
Retained earnings / (Accumulated deficit ) 35,240 (36,472)
Treasury shares, at cost:
116,233 shares in 2000; 167,514 shares in 1999 (2,392) (3,446)
Unearned compensation (1,530) (1,627)
Accumulated other comprehensive income 248 -
------------- ------------
Total common stockholders' equity 1,156,449 1,138,173
Preferred stock of subsidiaries:
Not subject to mandatory redemption 95,933 95,933
Subject to mandatory redemption 188,950 188,950
Long-term debt 2,088,869 2,124,898
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3,530,201 3,547,954
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Commitments and Contingencies (Note 13) - -
------------- ------------
Total Capitalization and Liabilities $6,588,360 $6,138,462
============= ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
-5-
<PAGE>
CONECTIV
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------
2000 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $140,514 $(170,813)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Extraordinary item, net of income taxes - 271,106
Special charges 25,162 105,648
Depreciation and amortization 211,002 221,942
Investment tax credit adjustments, net (4,452) (3,820)
Deferred income taxes, net 41,927 (19,345)
Non-cash earnings of equity method investee (34,140) (17,978)
Net change in:
Accounts receivable (390,187) (51,248)
Inventories 2,389 3,424
Accounts payable 216,049 11,209
Accrued / prepaid taxes 83,497 59,352
Other current assets & liabilities (1) 13,664 (2,366)
Other, net (16,269) (8,043)
---------- -----------
Net cash provided by operating activities 289,156 399,068
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CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of businesses, net of cash acquired (798) (17,098)
Capital expenditures (260,776) (221,483)
Investments in partnerships (4,090) (21,149)
Proceeds from assets sold 69,726 -
Deposits to nuclear decommissioning trust funds (738) (5,695)
(Increase) / Decrease in bond proceeds held in trust funds (9,028) 544
Leveraged leases, net 8,244 6,938
Other, net (5,819) 1,346
---------- -----------
Net cash used by investing activities (203,279) (256,597)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Common stock dividends paid (69,253) (112,386)
Common stock issued - 59
Common stock redeemed (54,651) (360,822)
Long-term debt issued 70,140 250,000
Long-term debt redeemed (111,664) (103,678)
Variable rate demand bonds issued - 33,330
Principal portion of capital lease payments (17,810) (17,558)
Net change in short-term debt 135,706 247,471
Cost of issuances and refinancings (2,510) (5,218)
---------- -----------
Net cash used by financing activities (50,042) (68,802)
---------- -----------
Net change in cash and cash equivalents 35,835 73,669
Cash and cash equivalents at beginning of period 56,239 65,884
----------- -----------
Cash and cash equivalents at end of period $ 92,074 $139,553
=========== ===========
</TABLE>
(1) Other than debt and deferred income taxes classified as current.
See accompanying Notes to Consolidated Financial Statements.
-6-
<PAGE>
CONECTIV
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(Unaudited)
Note 1. Financial Statement Presentation
------- --------------------------------
Conectiv's consolidated condensed interim financial statements contained herein
include the accounts of Conectiv and its majority-owned subsidiaries and reflect
all adjustments, consisting of only normal recurring adjustments, necessary in
the opinion of management for a fair presentation of interim results. In
accordance with regulations of the Securities and Exchange Commission (SEC),
disclosures which would substantially duplicate the disclosures in Conectiv's
1999 Annual Report on Form 10-K have been omitted. Accordingly, Conectiv's
consolidated condensed interim financial statements contained herein should be
read in conjunction with Conectiv's 1999 Annual Report on Form 10-K and Part II
of this Quarterly Report on Form 10-Q for additional relevant information.
Within the Consolidated Statements of Income, amounts previously reported for
the three and nine months ended September 30, 1999 as "Electric fuel and
purchased power" and "Purchased electric capacity" have been combined and
reported as "Electric fuel and purchased energy and capacity." Certain other
reclassifications of prior period data have been made to conform with the
current presentation.
Note 2. New Accounting Pronouncement
------- ----------------------------
Conectiv will implement the provisions of Statement of Financial Accounting
Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging
Activities," as amended, beginning in the first quarter of 2001. SFAS No. 133
establishes accounting and reporting standards for derivative instruments and
for hedging activities. SFAS No. 133 requires all derivative instruments,
within the scope of the statement, to be recognized as assets or liabilities on
the balance sheet at fair value. Changes in the fair value of derivatives that
are not hedges, under SFAS No. 133, are recognized in earnings. The gain or
loss on a derivative that hedges exposure to variable cash flow of a forecasted
transaction is initially recorded in other comprehensive income (a separate
component of common stockholders' equity) and is subsequently reclassified into
earnings when the forecasted transaction occurs. Changes in the fair value of
other hedging derivatives result in a change in the value of the asset,
liability, or firm commitment being hedged, to the extent the hedge is
effective. Any ineffective portion of a hedge is recognized in earnings
immediately.
The initial impact on Conectiv's financial statements of adopting SFAS No. 133
in the first quarter of 2001 is expected to include the following: (a)
recognition of assets or liabilities for the fair value of certain contracts
which will be classified as derivatives under SFAS No. 133; (b) derecognition
(or elimination) of deferred gains and losses on hedging derivatives; and (c) a
"cumulative effect" type of adjustment for the impact on comprehensive income,
which is expected to be partly recorded in other comprehensive income and partly
in earnings. Subsequent to initial adoption, SFAS No. 133 may cause increased
volatility in Conectiv's earnings, revenues and common stockholders' equity.
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<PAGE>
Note 3. Investment Income
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Investments in the EnerTech Funds
An indirect Conectiv subsidiary holds a limited partner interest in EnerTech
Capital Partners, L.P. and EnerTech Capital Partners II, L.P. (the EnerTech
funds). The EnerTech funds are venture capital funds that invest in energy-
related technology and Internet service companies. Due to the nature of the
investments of the EnerTech funds, the earnings of the funds may be volatile
from period to period. The EnerTech funds record their investments at fair
value and include gains and losses on changes in the fair value of their
investments in income in accordance with industry practice. Conectiv's
subsidiary accounts for its investment in the EnerTech funds on the equity
method of accounting. The pre-tax equity in earnings of the EnerTech funds are
reported as "Other income" in the Consolidated Statements of Income.
Conectiv's equity in earnings of the EnerTech funds for the three months ended
September 30, 2000 was $9.5 million ($6.2 million after income taxes or $0.07
per average common share outstanding). For the nine months ended September 30,
2000, Conectiv's equity in earnings of the EnerTech funds was $34.1 million
($22.2 million after income taxes or $0.26 per average common share
outstanding). The earnings of the EnerTech funds resulted primarily from an
unrealized gain on the initial public offering of common shares of Capstone
Turbine Corporation (Capstone). Capstone develops, designs, assembles, and
sells micro-turbines worldwide in the distributed power generation market and
hybrid electric vehicle market.
For the nine months ended September 30, 1999, Conectiv's equity in earnings of
the EnerTech funds was $18.0 million ($10.6 million after taxes or $0.11 per
average common share outstanding). For the three months ended September 30,
1999, Conectiv's equity in earnings of the EnerTech funds was insignificant.
The carrying amount of Conectiv's investment in the EnerTech funds was $53.8
million as of September 30, 2000, and $26.6 million as of December 31, 1999.
During the nine months ended September 30, 2000, Conectiv's subsidiary received
distributions of marketable securities ($9.0 million fair value on distribution
date) and cash ($3.2 million) from the EnerTech funds.
Other Investments
Primarily as a result of an other than temporary decline in the value of
marketable securities held by Conectiv, Conectiv's investments in marketable
securities and another venture capital fund, Tech Leaders II, resulted in a pre-
tax loss of $4.5 million ($2.9 million after income taxes, or $0.03 per average
common share outstanding) in the third quarter of 2000. For the nine months
ended September 30, 2000, Conectiv's investments in marketable securities and
Tech Leaders II resulted in pre-tax income of $1.3 million ($0.8 million after
income taxes, or $0.01 per average common share outstanding). The carrying
value of these investments was $6.3 million as of September 30, 2000.
Note 4. Agreements for the Sale of Electric Generating Plants
------- -----------------------------------------------------
For information concerning agreements for the sale of the nuclear and non-
strategic baseload fossil fuel-fired electric generating plants of Delmarva
Power & Light Company (DPL) and Atlantic City Electric Company (ACE), see Note
13 to the Consolidated Financial Statements included in Item 8 of Part II of
Conectiv's 1999 Annual Report on Form 10-K. The operating results of the
electric generating plants to be sold are included in the Energy business
segment shown in Note 15 to the Consolidated Financial Statements included
herein.
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<PAGE>
As discussed in Note 13 to the Consolidated Financial Statements included in
Item 8 of Part II of Conectiv's 1999 Annual Report on Form 10-K, consummation of
the sales of the nuclear and non-strategic baseload fossil fuel-fired electric
generating plants is subject to the receipt of required regulatory approvals.
In addition, the agreements for the sales of the electric generating plants
contemplated that the sales of the plants of ACE and DPL would occur
simultaneously. Appeals relating to certain deregulation matters in New Jersey
(see discussion under the caption "New Jersey Electric Utility Industry
Restructuring" in Note 8 to the Consolidated Financial Statements) have resulted
in delays in the issuance of required regulatory approvals and a delay of the
closings of the sales of the electric generating units. As a result, management
entered into discussions with the prospective purchasers of its interests in the
nuclear electric generating plants. See discussion below in Note 5 to the
Consolidated Financial Statements. Management currently expects the sale of
DPL's interests in the nuclear electric generating plants to take place during
the fourth quarter of 2000 or the first quarter of 2001, and the remainder of
the sales to take place during 2001. However, management cannot predict the
timing or outcome of such appeals, the effect thereof on the ability of ACE and
DPL to consummate the sales of various electric generating plants or the impact
thereof on ACE's ability to recover or securitize any related stranded costs.
Note 5. Subsequent Event, Wholesale Transaction Confirmation Letter Agreements
------- ----------------------------------------------------------------------
As discussed in Note 4 to the Consolidated Financial Statements, consummation of
the sales of the electric generating plants has been delayed. Subsequently, ACE
and DPL entered into Wholesale Transaction Confirmation letter agreements
(Letter Agreements) on October 3, 2000. The Letter Agreements provide for the
sale of the electricity output and capacity associated with the ownership
interests of ACE and DPL in the Peach Bottom Atomic Power Station (Peach Bottom)
and Salem Nuclear Generating Station (Salem), and the ownership interest of ACE
in the Hope Creek Nuclear Generating Station (Hope Creek). PECO Energy Company
(PECO) and PSEG Energy Resources & Trade LLC (PSER&T), an indirect subsidiary of
Public Service Enterprise Group, will purchase the electricity output and
capacity from ACE and DPL under the Letter Agreements, as shown in the table
below.
<TABLE>
<CAPTION>
Seller Electricity and Capacity Associated With Purchaser(s)
-------- ---------------------------------------- ---------------------------
<S> <C> <C>
ACE ACE's 7.51% interest in Peach Bottom PECO (50%) and PSER&T (50%)
DPL DPL's 7.51% interest in Peach Bottom PECO (50%) and PSER&T (50%)
ACE ACE's 7.41% interest in Salem PSER&T
DPL DPL's 7.41% interest in Salem PSER&T
ACE ACE's 5.0% interest in Hope Creek PSER&T
</TABLE>
The Letter Agreements became effective October 7, 2000, and will terminate, with
respect to the respective ACE and DPL interests in the electricity output and
capacity at a given nuclear electric generating plant, upon the earlier of (1)
the closing of the sale of that plant, (2) the termination in accordance with
its terms of the purchase agreement relating to the sale of such plant or (3)
September 30, 2001.
In exchange for the electricity output and capacity purchased from a given
plant, PECO and PSER&T will reimburse ACE or DPL for the nuclear fuel amortized
during the term of the Letter Agreements at each plant, and will be responsible
for the payment of operation and maintenance costs, inventories, capital
expenditures (subject, in certain circumstances, to reimbursement by ACE and
DPL) and certain other liabilities associated with the ownership interests of
ACE and DPL in each plant.
-9-
<PAGE>
In addition, ACE, DPL, PECO and PSEG Power LLC, a subsidiary of Public Service
Enterprise Group, amended the respective purchase agreements relating to the
sale of the nuclear electric generating plants, among other things, to give
effect to the transactions contemplated by the Letter Agreements and to permit
separate closings of the sales of the ACE and DPL interests in such plants.
Note 6. Extraordinary Item
------- ------------------
As previously reported in the third quarter of 1999, after receiving electric
utility industry restructuring orders from state regulatory commissions, ACE and
DPL discontinued applying SFAS No. 71, "Accounting for the Effects of Certain
Types of Regulation," to their electricity supply businesses during the third
quarter of 1999. As a result of discontinuing SFAS No. 71, DPL and ACE recorded
extraordinary charges, which reduced Conectiv's consolidated earnings for the
three and nine months ended September 30, 1999 by $271.1 million, after $160.2
million of income taxes. The extraordinary charge primarily resulted from
financial impairment of electric generating plants and certain other assets,
uneconomic energy contracts, and other effects of deregulation requiring loss
recognition. The extraordinary charge was decreased by a regulatory asset
established for the amount of stranded costs expected to be recovered through
regulated electricity delivery rates (Recoverable stranded costs, net).
<TABLE>
<CAPTION>
Note 7. Special Charges
------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -------------------
2000 1999 2000 1999
------- -------- ------- -------
(Dollars in Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C>
Special Charges
Before Income Taxes -- $105,648 $25,162 $105,648
After Income Taxes -- $ 71,562 $23,412 $ 71,562
Effect of Special Charges on Basic and
Diluted Earnings Per Average Share
Common Stock -- $ (0.80) $ (0.28) $ (0.73)
Class A Common Stock -- $ (0.30) -- $ (0.29)
</TABLE>
As discussed below, "Special charges" for the nine months ended September 30,
2000 resulted from provision for losses on the sales of Conectiv Services, Inc.
(CSI) and portions of Conectiv Thermal Systems (CTS). CSI provides heating,
ventilation, and air conditioning (HVAC) services and its results of operations
are presented as the "HVAC" business segment in Note 15 to the Consolidated
Financial Statements included herein. CTS constructs and operates district
heating and cooling systems and its results of operations are included in the
Energy business segment in Note 15 to the Consolidated Financial Statements
included herein.
In the second quarter of 2000, Conectiv recorded a loss of $25.2 million before
income taxes for the sales of CTS' 50% interest in two projects and for a loss
on the sale of CSI's operations. A portion of the loss resulted from a write-
off of goodwill which was not deductible for income tax purposes.
-10-
<PAGE>
As of September 30, 2000, several divisions of CSI and CTS' 50% interest in two
projects had been sold. Proceeds of $54 million have been received from the
sales of these operations, which had total assets of $72 million. Management
intends to sell CSI's sole remaining division within several months. As of
September 30, 2000, CTS had total assets of approximately $152 million.
Conectiv continues to seek purchasers for the remaining operations of CTS, but
may retain those operations if satisfactory offers are not obtained.
Special charges of $105.6 million for the three and nine months ended September
30, 1999 resulted from a write-down of goodwill associated with CSI's
operations, a write-down of investments in leveraged leases, employee separation
costs, and costs related to the merger by which ACE and DPL became wholly-owned
subsidiaries of Conectiv (the Merger). For additional information concerning
the $105.6 million of special charges for 1999, see Note 5 to the Consolidated
Financial Statements included in Item 8 of Part II of Conectiv's 1999 Annual
Report on Form 10-K.
Note 8. Rate Matters
------- ------------
An update to the information previously reported in Note 9 to the Consolidated
Financial Statements included in Item 8 of Part II of Conectiv's 1999 Annual
Report on Form 10-K is presented below.
New Jersey Electric Utility Industry Restructuring
As previously disclosed, the New Jersey Board of Public Utilities (NJBPU) issued
a Summary Order to ACE in July 1999 concerning restructuring ACE's electricity
supply business and indicated that a more detailed order would be issued at a
later time. Issuance of the NJBPU's final order for ACE has been delayed due to
appeals of the NJBPU's final order concerning restructuring the electricity
supply business of Public Service Electric and Gas Company (PSE&G). On April
13, 2000, the Superior Court of New Jersey, Appellate Division, issued its
decision on this matter, generally upholding the orders of the NJBPU.
The New Jersey Business Users and the Division of the Ratepayer Advocate,
appellants in the Superior Court proceeding, petitioned the New Jersey Supreme
Court to review the Superior Court's decision. The New Jersey Supreme Court
agreed to review the Superior Court's decision, setting a schedule for briefing
by the parties, with oral argument scheduled for November 8, 2000.
Management cannot predict the effect, if any, of the outcome of the appeals
discussed above upon ACE's final order for restructuring, or related matters,
such as securitization by ACE of its stranded costs and the sale of the electric
generating plants, as discussed in Note 4 to the Consolidated Financial
Statements.
ACE provides Basic Generation Service (BGS) to customers who have not selected
an alternative electricity provider. ACE's ability to recover its BGS supply
costs is subject to review by the NJBPU. ACE intends to manage BGS supply
requirements (net of sources otherwise available to it at any particular time)
through the use of a portfolio approach, including the use of competitive
bidding. To date, ACE has issued two requests for proposals (RFP) for BGS
supply. Neither RFP resulted in ACE entering into BGS supply contracts, and ACE
has procured BGS supplies through other means.
-11-
<PAGE>
Virginia Electric Utility Industry Restructuring
On June 29, 2000, the Virginia State Corporation Commission issued an order
that, among other things, approved DPL's plan for the functional separation of
its electric generation operations from transmission and distribution operations
and authorized the transfer of certain electric generating plants and related
assets to other Conectiv subsidiaries.
Note 9. Change in Estimated Pension and Other Postretirement Benefit Costs
------- ------------------------------------------------------------------
In the third quarter of 2000, management received a new actuarial estimate of
Conectiv's pension and other postretirement benefit costs for 2000. As a result
of lower than previously estimated annual costs, pre-tax income, net income, and
earnings per average common share outstanding increased by $3.9 million, $2.3
million, and $0.03, respectively, for the third quarter of 2000.
Note 10. Income Taxes
-------- ------------
For the three and nine months ended September 30, 2000, the amount computed by
multiplying "Income before income taxes" by the federal statutory rate is
reconciled in the table below to income tax expense.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 2000 September 30, 2000
-------------------- --------------------
Amount Rate Amount Rate
----------- ------- ------------ ------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Statutory federal income tax expense $54,811 35% $ 88,091 35%
State income taxes, net of federal benefit 10,826 7 20,249 8
Non-deductible goodwill 632 1 6,688 3
Plant basis differences 1,475 1 4,427 2
Amortization of investment tax credits (1,272) (1) (4,452) (2)
Resolution of income tax matters * - - (6,195) (3)
Other, net 516 - 2,366 1
------- -- -------- --
$66,988 43% $111,174 44%
======= == ======== ==
</TABLE>
* Reflects a change in an estimate of previously accrued income taxes due to
the resolution of matters with taxing authorities.
Note 11. Common Stockholders' Equity
-------- ---------------------------
(A) General
-------
As previously disclosed in Note 16 to the Consolidated Financial Statements
included in Item 8 of Part II of Conectiv's 1999 Annual Report on Form 10-K, as
a registered holding company under the Public Utility Holding Company Act of
1935 (PUHCA), Conectiv may not pay dividends on the shares of common stock and
Class A common stock from an accumulated deficit or paid-in-capital without SEC
approval. As of September 30, 2000, Conectiv's retained earnings balance was
$35.2 million.
-12-
<PAGE>
(B) Conectiv Common Stock
---------------------
During the nine months ended September 30, 2000, Conectiv purchased 3,411,100
shares of Conectiv common stock for $54.7 million. As of September 30, 2000,
2,760,700 shares of common stock remained authorized for purchase under a stock
purchase program.
Conectiv's Board of Directors declared quarterly dividends per share of common
stock of $0.22 for each of the first three quarters of 2000, or $0.66 for the
nine months ended September 30, 2000. For the nine months ended September 30,
2000, dividends declared per share of common stock represented approximately 41%
of earnings per average share of common stock outstanding of $1.62. For
additional information concerning dividends on common stock, see "Dividends on
Common Stock" on page II-7 in Management's Discussion and Analysis of Financial
Condition and Results of Operations (MD&A) included in Conectiv's 1999 Annual
Report on Form 10-K.
(C) Conectiv Class A Common Stock
-----------------------------
For general information concerning Class A common stock and information about
conversion and redemption provisions related to Class A common stock, refer to
Note 17 to the Consolidated Financial Statements included in Item 8 of Part II
of Conectiv's 1999 Annual Report on Form 10-K.
For the three months ended September 30, 2000, dividends declared per share of
Class A common stock were $0.80 compared to earnings per average share of Class
A common stock outstanding of $1.08. For the nine months ended September 30,
2000, dividends declared per share of Class A common stock were $2.40 compared
to earnings per average share of Class A common stock outstanding of $0.83. For
additional information concerning dividends on Class A common stock, see
"Dividends on Class A Common Stock" on page II-8 of the MD&A included in
Conectiv's 1999 Annual Report on Form 10-K.
Computation of Earnings Applicable to Conectiv Class A Common Stock
(Dollars in Thousands)(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
2000 1999 2000 1999
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Net earnings of ACE $ 27,621 $ 17,937 $ 42,242 $ 46,840
Exclude non-utility activities of ACE 46 (49) 92 (97)
Exclude Merger-related costs -- 837 -- 837
Net earnings of CAG (1) 5,079 -- 5,079 --
-------- -------- -------- --------
Net income of Atlantic Utility Group 32,746 18,725 47,413 47,580
Pro-rata portion of fixed notional charge
of $40 million per year (10,000) (10,000) (30,000) (30,000)
-------- -------- -------- --------
Company Net Income Attributable
to the Atlantic Utility Group 22,746 8,725 17,413 17,580
Percentage applicable to Class A Common Stock (2) 27.3% 27.3% 27.3% 28.9%
-------- -------- -------- --------
Earnings applicable to Class A Common Stock $ 6,210 $ 2,382 $ 4,754 $ 5,081
======== ======== ======== ========
Earnings applicable to Class A
Common Stock
Before extraordinary item (3) $ 6,210 $ 7,155 $ 4,754 $ 10,134
Extraordinary item (4) -- (4,773) -- (5,053)
-------- -------- -------- --------
$ 6,210 $ 2,382 $ 4,754 $ 5,081
======== ======== ======== ========
</TABLE>
-13-
<PAGE>
(1) Effective July 1, 2000, ACE contributed electric generation assets to a
newly formed subsidiary, Conectiv Atlantic Generation LLC (CAG), which
is part of the Atlantic Utility Group.
(2) For information concerning the percentage of "Company Net Income
Attributable to the Atlantic Utility Group" which is applicable to
Class A common stock, refer to Note 17 to the Consolidated Financial
Statements included in Item 8 of Part II of Conectiv's 1999 Annual
Report on Form 10-K.
(3) Includes "Special charges," as discussed in Note 7 to the Consolidated
Financial Statements, of $1.8 million and $1.9 million for the three
and nine months, respectively, ended September 30, 1999.
(4) Represents the portion of the $17.5 million extraordinary charge
recorded by ACE in the third quarter of 1999, which is applicable to
Class A common stock based on the percentage of "Company Net Income
Attributable to the Atlantic Utility Group" applicable to Class A
common stock for the reporting period. See Note 6 to the Consolidated
Financial Statements for information concerning the extraordinary item.
Summarized Combined Financial Information of ACE and CAG
(Dollars in Thousands)(unaudited)
<TABLE>
<CAPTION>
Income Statement Information
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- ---------------------
2000 1999 2000 1999
---------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Operating revenues $ 303,547 $ 351,372 $748,682 $842,354
Operating income $ 74,666 $ 85,300 $133,757 $159,301
Income before extraordinary item $ 33,234 $ 35,953 $ 48,920 $ 65,922
Extraordinary item, net of income taxes - $ (17,483) - $(17,483)
Earnings applicable to common stock $ 32,700 $ 17,937 $ 47,321 $ 46,840
Balance Sheet Information
September 30, December 31,
2000 1999
------------- ------------
Current assets $ 313,804 $ 340,774
Noncurrent assets 2,264,531 2,313,885
---------- ----------
Total assets $2,578,335 $2,654,659
========== ==========
Current liabilities $ 256,253 $ 300,837
Noncurrent liabilities 1,522,225 1,550,690
Preferred stock 125,181 125,181
Common stockholder's equity 674,676 677,951
---------- ----------
Total capitalization and liabilities $2,578,335 $2,654,659
========== ==========
</TABLE>
(D) Changes in Consolidated Common Stockholders' Equity
---------------------------------------------------
Conectiv's consolidated common stockholders' equity increased from $1,138.2
million as of December 31, 1999, to $1,156.5 million as of September 30, 2000.
The $18.3 million increase was primarily due to net income of $140.5 million,
partly offset by $68.8 million of common dividends declared and $54.7 million
for Conectiv's purchase of 3,411,100 shares of Conectiv common stock.
-14-
<PAGE>
Note 12. Debt
-------- ----
The $715.4 million of short-term debt outstanding as of September 30, 2000
primarily represented borrowings at the holding company level by Conectiv and
had an average interest rate of 6.9%. Conectiv (the holding company) has credit
agreements which provide short-term borrowing capability of up to $1.03 billion.
DPL has a $150 million revolving credit facility which provides liquidity for
DPL's $104.8 million of Variable Rate Demand Bonds and general corporate
purposes. DPL's credit facility expires January 31, 2003.
ACE redeemed $46.0 million of 6.83% Medium Term Notes at maturity on January 26,
2000. DPL redeemed $2.1 million of 7 1/8% Pollution Control Bonds on February
1, 2000 and $1.4 million of 6.95% Amortizing First Mortgage Bonds on June 1,
2000.
On behalf of DPL, the Delaware Economic Development Authority issued the bonds
listed below on July 7, 2000, and loaned the proceeds to DPL. The bonds are not
secured by a mortgage or security interest in property of DPL.
<TABLE>
<CAPTION>
Maturity Interest
Principal Series Date Rate
--------- --------------------------------------------------------- ---------------- ------------
($000)
<S> <C> <C> <C>
$11,150 Exempt Facilities Refunding Revenue Bonds, Series 2000A July 1, 2030 Variable (1)
27,750 Exempt Facilities Refunding Revenue Bonds, Series 2000B July 1, 2030 Variable (1)
15,000 Pollution Control Refunding Revenue Bonds, Series 2000C July 1, 2025 (2) 5.5%
16,240 Pollution Control Refunding Revenue Bonds, Series 2000D July 1, 2028 (2) 5.65%
-------
$70,140
=======
</TABLE>
(1) The interest rates on these bonds are set by either auction or remarketing
procedures for periods specified by DPL, which may be daily, weekly or other
periods, including long-term periods extending up to the bonds' maturity
date. The initial interest rate period selected was a 35 day auction
period. The bonds may be subject to optional redemption prior to maturity
as provided for in the indenture for the bonds.
(2) The bonds are subject to mandatory tender on July 1, 2010. All or a portion
of the tendered bonds may be redeemed and/or remarketed. After July 1, 2010,
the bonds may bear interest at a variable rate or fixed rate and may be
subject to optional redemption prior to maturity, as provided for in the
indenture for the bonds.
The proceeds from the issuance of the bonds listed above and additional cash
were used to redeem $70.17 million of bonds, which are listed below. On
September 1, 2000, $61.17 million of bonds with interest rates of 7.3% to 7.6%
were redeemed. On October 1, 2000, $9.0 million of bonds with a 7.5% interest
rate were redeemed. The bonds were called at 101.5% to 102% of their principal
amount.
<TABLE>
<CAPTION>
Redemption Interest
Principal Series Date Rate
--------- --------------------------------------------------------- ----------------- ---------
($000)
<S> <C> <C> <C>
$11,170 Exempt Facilities Revenue Bonds, Series 1985 September 1, 2000 7.3%
35,000 Exempt Facilities Revenue Bonds, Series 1990A September 1, 2000 7.6%
15,000 Pollution Control Refunding Revenue Bonds, Series 1990B September 1, 2000 7.3%
-------
61,170
9,000 Exempt Facilities Revenue Bonds, Series 1989 October 1, 2000 7.5%
-------
$70,170
=======
</TABLE>
-15-
<PAGE>
Note 13. Contingencies
-------- -------------
Environmental Matters
---------------------
Conectiv's subsidiaries are subject to regulation with respect to the
environmental effects of their operations, including air and water quality
control, solid and hazardous waste disposal, and limitations on land use by
various federal, regional, state, and local authorities. Federal and state
statutes authorize governmental agencies to compel responsible parties to clean
up certain abandoned or uncontrolled hazardous waste sites. Costs may be
incurred to clean up facilities found to be contaminated due to past disposal
practices. Conectiv's liability for clean-up costs is affected by the
activities of these governmental agencies and private land-owners, the nature of
past disposal practices, the activities of others (including whether they are
able to contribute to clean-up costs), and the scientific and other complexities
involved in resolving clean up-related issues (including whether a Conectiv
subsidiary or a corporate predecessor is responsible for conditions on a
particular parcel). Conectiv's current liabilities include $3.0 million as of
September 30, 2000 and December 31, 1999, respectively, for potential clean-up
and other costs related to sites at which a Conectiv subsidiary is a potentially
responsible party or alleged to be a third party contributor. Conectiv does not
expect such future costs to have a material effect on its financial position or
results of operations.
In December 1999, DPL discovered an oil leak at the Indian River power plant.
DPL took action to determine the source of the leak and cap it, contain the oil
to minimize impact to a nearby waterway and recover oil from the soil. Costs
incurred for this first phase of response are $2.6 million. In addition, DPL
paid $350,000 in penalties and $100,000 for an environmental improvement project
to the Delaware Department of Natural Resources and Environmental Control
(DNREC) in connection with the oil leak and another matter related to the Indian
River power plant. DPL is currently negotiating a consent agreement with DNREC
for clean-up of the area affected by the oil leak.
Nuclear Insurance
In conjunction with the ownership interests of DPL and ACE in Peach Bottom,
Salem, and Hope Creek, DPL and ACE could be assessed for a portion of any third-
party claims associated with an incident at any commercial nuclear power plant
in the United States. Under the provisions of the Price Anderson Act, if third-
party claims relating to such an incident exceed $200 million (the amount of
primary insurance), DPL and ACE could be assessed up to $57.0 million on an
aggregate basis for such third-party claims. In addition, Congress could impose
a revenue-raising measure on the nuclear industry to pay such claims.
The co-owners of Peach Bottom, Salem, and Hope Creek maintain property insurance
coverage of approximately $2.8 billion for each unit for loss or damage to the
units, including coverage for decontamination expense and premature
decommissioning. In addition, Conectiv is a member of an industry mutual
insurance company (NEIL), which provides replacement power cost coverage in the
event of a major accidental outage at a nuclear power plant. Under these
coverages, Conectiv is subject to potential retrospective loss experience
assessments of up to $7.3 million on an aggregate basis.
Under changes in NEIL's bye-laws approved on October 26, 2000, to be effective
December 31, 2000, subject to there being no pending legal action or claim by
any member of NEIL challenging the validity of such bye-law changes, member
account balances will no longer exist. NEIL members who sell their interests in
nuclear generating plants on or after December 31, 2000, may choose either (i)
to continue to receive certain policyholders' distributions from NEIL (if, as,
and when declared) over a 5-year period or (ii) to remain a NEIL member by
purchasing other insurance products from NEIL and thus remain eligible for
policyholders' distributions (if, as, and when declared) for a longer period.
In addition, NEIL
-16-
<PAGE>
members that sell their interests in nuclear generating plants on or before
December 30, 2000, may elect prior to February 28, 2001, as an alternative to be
paid their member account balances by NEIL as a result of terminating their NEIL
insurance coverages. As a result of the NEIL bye-law changes, the choices
available to ACE and DPL depend on whether and when the sale of ownership
interests in Peach Bottom, Salem and Hope Creek occur (see Note 4 to the
Consolidated Financial Statements) as well as management's analysis of the
choices then-available to each company, including the amounts of non-nuclear
insurance coverage that might be obtained from NEIL, the costs of that coverage,
and NEIL's prospects generally. Depending on timing of sale of interests in
nuclear units and option selected, management estimates that DPL could realize
between $0 and $16 million. Management is uncertain as to the amount, if any,
that could be realized by ACE, since sale of nuclear units is unlikely to be
completed on or before December 30, 2000 and the value of other options to ACE
is uncertain.
Other
-----
On October 24, 2000, the City of Vineland, New Jersey, filed an action in a New
Jersey Superior Court to acquire ACE electric distribution facilities located
within the City limits by eminent domain. The City has offered approximately
$11 million for these assets, including the right to provide electric service in
this area. ACE believes that, properly evaluated, the assets sought by the City
are worth approximately $40 million.
Note 14. Supplemental Cash Flow Information
-------- ----------------------------------
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------
2000 1999
-------- --------
<S> <C> <C>
(Dollars in Thousands)
Cash paid (received) for:
Interest, net of amounts capitalized $148,556 $113,142
Income taxes, net of refunds $(23,872) $ 62,910
</TABLE>
During the nine months ended September 30, 2000, Conectiv received $96.7 million
of income tax refunds. The income tax refunds were primarily related to the tax
benefit associated with ACE's payment of $228.5 million on December 28, 1999 to
terminate ACE's purchase of electricity under a contract with the Pedricktown
Co-generation Limited Partnership (Pedricktown). For additional information
concerning the contract termination, see Note 10 to the Consolidated Financial
Statements included in Item 8 of Part II of Conectiv's 1999 Annual Report on
Form 10-K.
-17-
<PAGE>
Note 15. Business Segments
-------- -----------------
The following information is presented in accordance with SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information."
Conectiv's business segments under SFAS No. 131 are as follows: "Energy"
represents (a) the generation, purchase, trading and sale of electricity,
including the obligations of DPL and ACE to supply electricity to customers who
do not choose an alternative electricity supplier; (b) gas and other energy
supply and trading activities, (c) power plant operation services, and (d)
district heating and cooling systems operation and construction services
provided by CTS; "Power Delivery" includes activities related to delivery of
electricity and gas to customers at regulated prices over transmission and
distribution systems; "Telecommunications" represents services provided by
Conectiv Communications Inc. (CCI), including local and long-distance telephone
service and Internet services; "HVAC" represents heating, ventilation, and air
conditioning services provided by CSI.
As discussed in Note 9 to the Consolidated Financial Statements included in Item
8 of Part II of Conectiv's 1999 Annual Report on Form 10-K, Conectiv's
electricity supply businesses were deregulated in the third quarter of 1999.
Prior to deregulation, amounts included in billings to electric customers for
electricity supply and delivery were not separately identified; during this
period, revenues were allocated directly to the Energy and Power Delivery
business segments based on the cost of services provided.
The operating results for business segments are evaluated based on "earnings
before interest and income taxes," which is generally equivalent to Operating
Income excluding Special Charges (see Note 7 to the Consolidated Financial
Statements) plus Other Income, less certain interest charges allocated to the
business segments. The "earnings before interest and income taxes" of "All
Other" business segments include the equity in earnings of the EnerTech funds
and other investment income, which are discussed in Note 3 to the Consolidated
Financial Statements.
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
September 30, 2000 September 30, 1999
-------------------------------- ---------------------------------
Earnings Earnings
Before Interest Before Interest
Business Segments Revenues and Taxes Revenues and Taxes
-------------------- -------------- ---------------- ---------------- ---------------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Energy (1) $ 1,588,592 $ 143,397 $ 867,252 $ 143,241
Power Delivery 212,174 83,881 212,371 89,434
Telecommunications 14,714 (10,965) 9,810 (8,177)
HVAC 17,203 (2,510) 37,697 (2,462)
All Other 1,923 (998) 1,742 (5,090)
------------- ----------- ------------- -----------
$ 1,834,606 (2) $ 212,805 (3) $ 1,128,872 (4) $ 216,946 (5)
============= =========== ============= ===========
</TABLE>
(1) Includes the operating results of non-strategic electric generating plants
which, subsequent to receipt of required regulatory approvals, are expected
to be sold.
(2) Includes intercompany revenues which are eliminated in consolidation as
follows: Energy business segment--$281,701; Telecommunications business
segment--$1,357.
(3) "Earnings before interest and income taxes" less $55,697 of interest expense
and preferred stock dividends and $504 of consolidation adjustments equals
consolidated income before income taxes.
(4) Includes intercompany revenues which are eliminated in consolidation as
follows: Energy business segment--$46,728; Telecommunications business
segment--$966; All Other business segments--$766.
(5) "Earnings before interest and income taxes" less $49,236 of interest expense
and preferred stock dividends, $105,648 of Special Charges, and $505 of
consolidation adjustments equals consolidated income before income taxes.
-18-
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
September 30, 2000 September 30, 1999
-------------------------------- ---------------------------------
Earnings Earnings
Before Interest Before Interest
Business Segments Revenues and Taxes Revenues and Taxes
-------------------- -------------- ---------------- ---------------- ----------------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Energy (1) $ 3,598,766 $ 269,903 $ 2,256,075 $ 229,404
Power Delivery 581,553 195,321 587,098 225,395
Telecommunications 41,590 (36,475) 24,922 (25,412)
HVAC 86,250 (7,315) 102,707 (7,768)
All Other 5,524 20,868 5,426 10,461
------------- ----------- ------------- -----------
$ 4,313,683 (2) $ 442,302 (3) $ 2,976,228 (4) $ 432,080 (5)
============= =========== ============= ===========
</TABLE>
(1) Includes the operating results of non-strategic electric generating plants
which, subsequent to receipt of required regulatory approvals, are expected
to be sold.
(2) Includes intercompany revenues which are eliminated in consolidation as
follows: Energy business segment--$558,429; Telecommunications business
segment--$4,475; All Other business segments--$1,502.
(3) "Earnings before interest and income taxes" less $163,940 of interest
expense and preferred stock dividends, $1,512 of consolidation adjustments,
and $25,162 of Special Charges equals consolidated income before income
taxes.
(4) Includes intercompany revenues which are eliminated in consolidation as
follows: Energy business segment--$142,029; Telecommunications business
segment--$2,578; All Other business segments--$2,144.
(5) "Earnings before interest and income taxes" less $132,673 of interest
expense and preferred stock dividends, $105,648 of Special Charges, and
$1,360 of consolidation adjustments equals consolidated income before income
taxes.
-19-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
---------------------------
The Private Securities Litigation Reform Act of 1995 (Litigation Reform Act)
provides a "safe harbor" for forward-looking statements to encourage such
disclosures without the threat of litigation, provided those statements are
identified as forward-looking and are accompanied by meaningful, cautionary
statements identifying important factors that could cause the actual results to
differ materially from those projected in the statement. Forward-looking
statements have been made in this report. Such statements are based on
management's beliefs as well as assumptions made by and information currently
available to management. When used herein, the words "intend," "will,"
"anticipate," "estimate," "expect," "believe," and similar expressions are
intended to identify forward-looking statements. In addition to any assumptions
and other factors referred to specifically in connection with such forward-
looking statements, factors that could cause actual results to differ materially
from those contemplated in any forward-looking statements include, among others,
the following: the effects of deregulation of energy supply and the unbundling
of delivery services; the ability to enter into purchased power agreements on
terms acceptable to Conectiv; market demand and prices for energy, capacity, and
fuel; weather variations affecting energy usage; operating performance of power
plants; an increasingly competitive marketplace; results of any asset sales;
sales retention and growth; federal and state regulatory actions; future
litigation results; costs of construction; operating restrictions; increased
costs and construction delays attributable to environmental regulations; nuclear
decommissioning and the availability of reprocessing and storage facilities for
spent nuclear fuel; and credit market concerns. Conectiv undertakes no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise. The foregoing list
of factors pursuant to the Litigation Reform Act should not be construed as
exhaustive or as any admission regarding the adequacy of disclosures made prior
to the effective date of the Litigation Reform Act.
Common Stock Earnings Summary
------------------------------
Earnings applicable to common stock were $83.4 million, or $1.01 per average
share of common stock outstanding (82,701,000 average shares outstanding) for
the third quarter of 2000, compared to a net loss applicable to common stock of
$253.2 million, or a loss of $2.89 per average share of common stock outstanding
(87,711,000 average shares outstanding) for the third quarter of 1999. The net
loss in the third quarter of 1999 resulted from (i) a $266.3 million
extraordinary charge applicable to common stock ($3.04 per average share of
common stock outstanding) for discontinuing the application of SFAS No. 71 to
the electricity supply businesses of ACE and DPL because of deregulation, and
(ii) $69.8 million of special charges applicable to common stock ($0.80 per
average share of common stock outstanding) primarily for write-downs of
investments in non-utility businesses and accrued employee separation costs.
For additional information concerning the extraordinary charge see Note 6 to the
Consolidated Financial Statements. For information concerning the special
charges, see the "Operating Expenses" section of the MD&A and Note 7 to the
Consolidated Financial Statements.
Earnings applicable to common stock for the nine months ended September 30, 2000
were $135.8 million, or $1.62 per average share of common stock outstanding
(84,015,000 average shares outstanding) and reflect special charges of $23.4
million after income taxes ($0.28 per average share of common stock outstanding)
for the sale of the HVAC business and two projects of CTS. For the nine months
ended September 30, 1999, a loss of $175.9 million was applicable to common
stock, or a loss of $1.85 per average share of common stock outstanding
(95,454,000 average shares outstanding). The net loss for the nine months ended
September 30, 1999 resulted from (i) the $266.1 million extraordinary charge
applicable to common stock ($2.79 per average share of common stock
outstanding), and (ii) $69.7
-20-
<PAGE>
million of special charges applicable to common stock ($0.73 per average share
of common stock outstanding).
Conectiv's Board of Directors declared quarterly dividends per share of common
stock of $0.22 for each of the first three quarters of 2000, or $0.66 for the
nine months ended September 30, 2000. For the nine months ended September 30,
2000, dividends declared per share of common stock represented approximately 41%
of earnings per average share of common stock outstanding of $1.62. For
additional information concerning dividends on common stock, see "Dividends on
Common Stock" on page II-7 in the MD&A included in Conectiv's 1999 Annual Report
on Form 10-K.
A summary of common stock earnings is shown in the table below.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
2000 1999 2000 1999
-------- -------- -------- --------
(Dollars in Millions, Except Per Share Amounts)
<S> <C> <C> <C> <C>
After-tax contribution to earnings (loss)
applicable to common stock
Income excluding Special Charges
and Extraordinary Item $ 83.4 $ 82.9 $159.2 $ 159.9
Special Charges - (69.8) (23.4) (69.7)
------- -------- ------- --------
Income Before Extraordinary Item $ 83.4 $ 13.1 $135.8 $ 90.2
Extraordinary Item - (266.3) - (266.1)
------- -------- ------- --------
Earnings (loss) applicable to common stock $ 83.4 $(253.2) $135.8 $(175.9)
======= ======== ======= ========
Average shares of common stock
outstanding (000) 82,701 87,711 84,015 95,454
------- -------- ------- --------
After-tax contribution to earnings (loss) per
average share of common stock
(1) CCI (telecommunications) $ (0.11) $ (0.07) $ (0.33) $ (0.18)
(2) CSI (HVAC) (0.03) (0.02) (0.08) (0.06)
(3) Investment income 0.04 - 0.27 0.11
(4) Energy, Power Delivery, and Other 1.11 1.04 2.04 1.80
------- -------- ------- --------
Income excluding Special Charges
and Extraordinary Item $ 1.01 $ 0.95 $ 1.90 $ 1.67
Special Charges - (0.80) (0.28) (0.73)
------- -------- ------- --------
Earnings (loss) per average
share of common stock:
Before Extraordinary Item $ 1.01 $ 0.15 $ 1.62 $ 0.94
Extraordinary Item - (3.04) - (2.79)
------- -------- ------- --------
Earnings (loss) per average share
of common stock $ 1.01 $ (2.89) $ 1.62 $ (1.85)
======= ======== ======= ========
</TABLE>
(1), (2), (3), and (4): See discussion beginning on the following page.
-21-
<PAGE>
(1) CCI (telecommunications)
------------------------
Conectiv continues to seek a strategic partner in the telecommunications
business.
As shown above, the loss per average share of common stock outstanding
which resulted from CCI's operations increased: (a) to $0.11 in the third
quarter of 2000 from $0.07 in the third quarter of 1999 and (b) to $0.33
for the nine months ended September 30, 2000 from $0.18 for the nine months
ended September 30, 1999. The higher losses per average share of common
stock outstanding resulted from increased interest, customer service, sales
and network operations expenses and fewer average shares outstanding of
common stock. Expenses increased as a result of expansion of CCI's
operations.
(2) CSI (HVAC)
----------
As discussed in Note 7 to the Consolidated Financial Statements, Conectiv
had sold several divisions of CSI as of September 30, 2000 and intends to
sell CSI's sole remaining division within several months. CSI's operations
resulted in a loss per average common share outstanding of $0.03 in the
third quarter of 2000 and $0.02 in the third quarter of 1999. For the nine-
month periods ended September 30, 2000 and September 30, 1999, CSI's
operations resulted in a loss per average common share outstanding of $0.08
and $0.06, respectively.
(3) Investment income
-----------------
As discussed in Note 3 to the Consolidated Financial Statements, Conectiv
earns investment income primarily from investments in three venture capital
funds, including the EnerTech funds and Tech Leaders II. Mainly as a result
of distributions of marketable securities received from these funds,
Conectiv also owns marketable securities.
Conectiv's equity in earnings of the EnerTech funds for the three and nine
months ended September 30, 2000 was $9.5 million ($6.2 million after-income
taxes or $0.07 per average common share outstanding) and $34.1 million
($22.2 million after-income taxes or $0.26 per average common share
outstanding), respectively. The earnings of the EnerTech funds resulted
primarily from an unrealized gain on the initial public offering of common
shares of Capstone. Capstone develops, designs, assembles, and sells micro-
turbines worldwide in the distributed power generation market and hybrid
electric vehicle market. For the nine months ended September 30, 1999,
Conectiv's equity in earnings of the EnerTech funds was $18.0 million
($10.6 million after taxes or $0.11 per average common share outstanding)
which resulted primarily from the initial public offering of common shares
of a business-to-business Internet company. For the third quarter of 1999,
Conectiv's equity in earnings of the EnerTech funds was insignificant. The
earnings of the EnerTech funds may be volatile from period to period due to
the nature of their investments in energy-related technology and Internet
service companies. As of September 30, 2000, the carrying amount of
Conectiv's investment in the EnerTech funds was $53.8 million.
Primarily as a result of an other than temporary decline in the value of
marketable securities held by Conectiv, Conectiv's investments in
marketable securities and Tech Leaders II resulted in a pre-tax loss of
$4.5 million ($2.9 million after income taxes, or $0.03 per average common
share outstanding) in the third quarter of 2000. For the nine months ended
September 30, 2000, Conectiv's investments in marketable securities and
Tech Leaders II resulted in pre-tax income of $1.3 million ($0.8 million
after income taxes, or $0.01 per average common share outstanding). The
carrying value of these investments was $6.3 million as of September 30,
2000.
-22-
<PAGE>
(4) Energy, Power Delivery, and Other
---------------------------------
As shown in the preceding table, the contribution to earnings per average
share of common stock outstanding by "Energy, Power Delivery, and Other"
increased as follows: (a) to $1.11 in the third quarter of 2000 from $1.04
in the third quarter of 1999 and (b) to $2.04 for the nine months ended
September 30, 2000 from $1.80 for the nine months ended September 30, 1999.
The increases in earnings per average common share outstanding of $0.07 for
the third quarter and $0.24 for nine-month period were primarily due to
higher profits from Conectiv's non-regulated wholesale energy marketing and
trading operations and fewer average common shares outstanding. These
positive variances were partly offset by the adverse effect of cooler
summer weather on regulated electricity sales, lower regulated Power
Delivery customer rates, lower earnings from competitive retail energy
sales, and higher customer service costs for regulated delivery customers.
Operating results for the third quarter of 2000 also reflect an increase of
$0.03 per average share of common stock outstanding due to a new actuarial
estimate of Conectiv's pension and other postretirement benefit costs for
2000.
Discontinuing the application of SFAS No. 71 benefited the Energy business
due to related decreases in purchased capacity and depreciation costs. On
the other hand, regulated energy adjustment clauses prior to deregulation
had generally eliminated the effect of seasonal and other energy price
fluctuations on costs expensed. The absence of the energy adjustment
clauses has unfavorably affected DPL's earnings in comparison to last year.
Conectiv's participation in energy markets results in exposure to commodity
market risk. Conectiv has controls in place that are intended to keep risk
exposures within certain management-approved risk tolerance levels. For
additional information concerning commodity market risk, see "Item 3.
Quantitative and Qualitative Disclosures About Market Risk," included
herein.
Class A Common Stock Earnings Summary
--------------------------------------
As provided in Conectiv's Restated Certificate of Incorporation, Class A common
stock has an interest in earnings of the Atlantic Utility Group (AUG) in excess
of a notional fixed charge of $40 million per year. The AUG includes the assets
and liabilities of the electric generation, transmission, and distribution
businesses of ACE which existed on August 9, 1996 and were regulated by the
NJBPU. For any reporting period, if the AUG earns less than the pro-rata
portion of the annual fixed notional charge, a loss will be applicable to Class
A common stock. For additional information concerning the computation of
earnings applicable to Class A common stock, see Note 11 to the Consolidated
Financial Statements. For other general information concerning Class A common
stock, including conversion and redemption provisions related to Class A common
stock, refer to Note 17 to the Consolidated Financial Statements included in
Item 8 of Part II of Conectiv's 1999 Annual Report on Form 10-K.
-23-
<PAGE>
A summary of Class A common stock earnings is shown in the table below.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
2000 1999 2000 1999
------ ------ ------ ------
(Dollars in Millions, Except Per Share Amounts)
<S> <C> <C> <C> <C>
After-tax contribution to earnings
applicable to Class A common stock
Income excluding Special Charges
and Extraordinary Item $ 6.2 $ 8.9 $ 4.8 $12.0
Special Charges - (1.7) - (1.8)
------ ------ ------ ------
Income Before Extraordinary Item $ 6.2 $ 7.2 $ 4.8 $10.2
Extraordinary Item - (4.8) - (5.1)
------ ------ ------ ------
Earnings applicable to
Class A common stock $ 6.2 $ 2.4 $ 4.8 $ 5.1
====== ====== ====== ======
Average shares of Class A common
stock outstanding (000) 5,742 5,743 5,742 6,234
------ ------ ------ ------
After-tax contribution to earnings per
average share of Class A common stock
Income excluding Special Charges
and Extraordinary Item $ 1.08 $ 1.55 $ 0.83 $ 1.92
Special Charges - (0.30) - (0.29)
------ ------ ------ ------
Earnings per average share of
Class A common stock:
Before Extraordinary Item $ 1.08 $ 1.25 $ 0.83 $ 1.63
Extraordinary Item - (0.83) (0.81)
------ ------ ------ ------
Earnings per average share
of Class A common stock $ 1.08 $ 0.42 $ 0.83 $ 0.82
====== ====== ====== ======
</TABLE>
Earnings applicable to Class A common stock were $6.2 million, or $1.08 per
average share of Class A common stock outstanding, for the third quarter of 2000
and $2.4 million, or $0.42 per average share of Class A common stock
outstanding, for the third quarter of 1999. Excluding the $4.8 million
extraordinary charge and $1.7 million of special charges applicable to Class A
common stock, earnings applicable to Class A common stock were $8.9 million, or
$1.55 per average share of Class A common stock outstanding for the third
quarter of 1999. Excluding the extraordinary item and special charges in the
third quarter of 1999, earnings per average share of Class A common stock
outstanding decreased $0.47. This decrease was mainly due to the adverse effect
of cooler summer weather on regulated electricity sales and customer rate
decreases associated with deregulation of ACE's electricity supply business,
partly offset by a lower effective income tax rate for ACE.
Earnings applicable to Class A common stock were $4.8 million, or $0.83 per
average share of Class A common stock outstanding, for the nine months ended
September 30, 2000 and $5.1 million, or $0.82 per average share of Class A
common stock outstanding, for the nine months ended September 30, 1999.
Excluding the $5.1 million extraordinary charge and $1.8 million of special
charges applicable to Class A common stock, earnings applicable to Class A
common stock were $12.0 million, or $1.92 per average
-24-
<PAGE>
share of Class A common stock outstanding for the nine months ended September
30, 1999. Excluding the extraordinary item and special charges for the nine
months ended September 30, 1999, earnings per average share of Class A common
stock outstanding decreased $1.09. This decrease was mainly due to the adverse
effect of cooler summer weather on regulated electricity sales and customer rate
decreases associated with deregulation of ACE's electricity supply business,
partly offset by a lower effective income tax rate for ACE.
For the three months ended September 30, 2000, dividends declared per share of
Class A common stock were $0.80 compared to earnings per average share of Class
A common stock outstanding of $1.08. For the nine months ended September 30,
2000, dividends declared per share of Class A common stock were $2.40 compared
to a earnings per average share of Class A common stock outstanding of $0.83.
For additional information concerning dividends on Class A common stock, see
"Dividends on Class A Common Stock" on page II-8 of the MD&A included in
Conectiv's 1999 Annual Report on Form 10-K.
Deregulated Generation and Agreements for the Sale of Electric Generating Plants
--------------------------------------------------------------------------------
As previously disclosed in the MD&A under "Deregulated Generation and Power
Plant Sales" on page II-12 of Conectiv's 1999 Annual Report on Form 10-K,
Conectiv is building combustion turbine and combined cycle units as part of its
mid-merit electric generation strategy. On September 21, 2000, Conectiv
announced that it had preserved the option to accelerate its strategy by
ordering 21 combustion turbine units from Siemens Westinghouse and General
Electric. These 21 combustion turbine units are currently expected to be
configured into 8 combined cycle units, with each combined cycle unit
representing approximately 500 megawatts (MW) of capacity. If the mid-merit
strategy were accelerated, construction would occur in phases and would be
completed by the end of 2004. Conectiv is actively working on developing sites
for these units within the region of the PJM Interconnection, L.L.C. (PJM). On
October 17, 2000, Conectiv received the Air Quality and Coastal Zone permits for
the 550 MW combined cycle unit under construction at the Hay Road site in
northern Delaware. The three new combustion turbines planned for the Hay Road
site are expected to be installed during the summer of 2001 (adding 330 MW of
capacity) and the waste heat recovery boiler and steam turbine needed for
combined cycle operation are expected to be installed by the third quarter of
2002 (resulting in 550 MW of total capacity).
As also previously disclosed in the MD&A under "Deregulated Generation and Power
Plant Sales" on page II-12 of Conectiv's 1999 Annual Report on Form 10-K, ACE
and DPL are selling their nuclear and non-strategic baseload fossil fuel-fired
electric generating plants. Consummation of the sales of the nuclear and non-
strategic baseload fossil fuel-fired electric generating plants is subject to
the receipt of required regulatory approvals. In addition, the agreements for
the sales of the electric generating plants contemplated that the sales of the
plants of ACE and DPL would occur simultaneously. Appeals relating to certain
deregulation matters in New Jersey (see discussion below under the caption "New
Jersey Electric Utility Industry Restructuring") have resulted in delays in the
issuance of required regulatory approvals and a delay of the closings of the
sales of the electric generating units. As a result, management entered into
discussions with the prospective purchasers of its interests in the nuclear
electric generating plants. See discussion below under "Wholesale Transaction
Confirmation Letter Agreements." Management currently expects the sale of DPL's
interests in the nuclear electric generating plants to take place during the
fourth quarter of 2000 or the first quarter of 2001, and the remainder of the
sales to take place during 2001. However, management cannot predict the timing
or outcome of such appeals, the effect thereof on the ability of ACE and DPL to
consummate the sales of various electric generating plants or the impact thereof
on ACE's ability to recover or securitize any related stranded costs.
-25-
<PAGE>
The sales of the electric generating plants may cause a decrease in the earnings
of Conectiv's Energy business because the electric generating plants will likely
be sold before combined cycle units with the same aggregate earnings potential
are phased into service. The proceeds from sales of the electric generating
plants are expected to be used for debt repayment, repurchases of common stock,
expansion of the mid-merit electric generation business, and general corporate
purposes.
Wholesale Transaction Confirmation Letter Agreements
----------------------------------------------------
As discussed above, consummation of the sales of the electric generating plants
has been delayed. ACE and DPL entered into Wholesale Transaction Confirmation
letter agreements (Letter Agreements) on October 3, 2000. The Letter Agreements
provide for the sale of the electricity output and capacity associated with the
ownership interests of ACE and DPL in Peach Bottom and Salem, and the ownership
interest of ACE in Hope Creek. PECO and PSER&T will purchase the electricity
output and capacity from ACE and DPL under the Letter Agreements, as shown in
the table below.
<TABLE>
<CAPTION>
Seller Electricity and Capacity Associated With Purchaser(s)
-------- ---------------------------------------- ----------------------------
<S> <C> <C>
ACE ACE's 7.51% interest in Peach Bottom PECO (50%) and PSER&T (50%)
DPL DPL's 7.51% interest in Peach Bottom PECO (50%) and PSER&T (50%)
ACE ACE's 7.41% interest in Salem PSER&T
DPL DPL's 7.41% interest in Salem PSER&T
ACE ACE's 5.0% interest in Hope Creek PSER&T
</TABLE>
The Letter Agreements became effective October 7, 2000, and will terminate, with
respect to the respective ACE and DPL interests in the electricity output and
capacity at a given nuclear electric generating plant, upon the earlier of (1)
the closing of the sale of that plant, (2) the termination in accordance with
its terms of the purchase agreement relating to the sale of such plant or (3)
September 30, 2001.
In exchange for the electricity output and capacity purchased from a given
plant, PECO and PSER&T will reimburse ACE or DPL for the nuclear fuel amortized
during the term of the Letter Agreements at each plant, and will be responsible
for the payment of operation and maintenance costs, inventories, capital
expenditures (subject, in certain circumstances, to reimbursement by ACE and
DPL) and certain other liabilities associated with the ownership interests of
ACE and DPL in each plant.
In addition, ACE, DPL, PECO and PSEG Power LLC, a subsidiary of Public Service
Enterprise Group, amended the respective purchase agreements relating to the
sale of the nuclear electric generating plants, among other things, to give
effect to the transactions contemplated by the Letter Agreements and to permit
separate closings of the sales of the ACE and DPL interests in such plants.
-26-
<PAGE>
New Jersey Electric Utility Industry Restructuring
--------------------------------------------------
As previously disclosed in the MD&A under "Electric Utility Industry
Restructuring," beginning on page II-9 of Conectiv's 1999 Annual Report on Form
10-K, the NJBPU issued a Summary Order to ACE in July 1999 concerning
restructuring ACE's electricity supply business and indicated that a more
detailed order would be issued at a later time. Issuance of the NJBPU's final
order for ACE has been delayed due to appeals of the NJBPU's final order
concerning restructuring the electricity supply business of Public Service
Electric and Gas Company (PSE&G). On April 13, 2000, the Superior Court of New
Jersey, Appellate Division, issued its decision on this matter, generally
upholding the orders of the NJBPU.
The New Jersey Business Users and the Division of the Ratepayer Advocate,
appellants in the Superior Court proceeding, petitioned the New Jersey Supreme
Court to review the Superior Court's decision. The New Jersey Supreme Court
agreed to review the Superior Court's decision, setting a schedule for briefing
by the parties, with oral argument scheduled for November 8, 2000.
Management cannot predict the effect, if any, of the outcome of the appeals
discussed above upon ACE's final order for restructuring, or related matters,
such as securitization by ACE of its stranded costs and the sale of the electric
generating plants, as discussed under "Deregulated Generation and Agreement for
the Sale of Electric Generating Plants" within the MD&A.
ACE provides Basic Generation Service (BGS) to customers who have not selected
an alternative electricity provider. ACE's ability to recover its BGS supply
costs is subject to review by the NJBPU. ACE intends to manage BGS supply
requirements (net of sources otherwise available to it at any particular time)
through the use of a portfolio approach, including the use of competitive
bidding. To date, ACE has issued two requests for proposals (RFP) for BGS
supply. Neither RFP resulted in ACE entering into BGS supply contracts, and ACE
has procured BGS supplies through other means.
<TABLE>
<CAPTION>
Electric Revenues
-----------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
2000 1999 2000 1999
-------- ------ -------- --------
(Dollars in millions)
<S> <C> <C> <C> <C>
Regulated electric revenues $559.6 $684.9 $1,510.8 $1,676.6
Non-regulated electric revenues 355.4 110.8 719.4 236.0
------ ------ -------- --------
Total electric revenues $915.0 $795.7 $2,230.2 $1,912.6
====== ====== ======== ========
</TABLE>
The table above shows the amounts of electric revenues earned that are subject
to price regulation (regulated) and that are not subject to price regulation
(non-regulated). "Regulated electric revenues" include revenues for delivery
(transmission and distribution) service and electricity supply service within
the service areas of DPL and ACE.
Regulated Electric Revenues
For the third quarter, "Regulated electric revenues" decreased by $125.3
million, from $684.9 million for the third quarter of 1999 to $559.6 million for
the third quarter of 2000. For the nine-month period, "regulated electric
revenues" decreased by $165.8 million, from $1,676.6 million for the nine months
ended September 30, 1999 to $1,510.8 million for the nine months ended September
30, 2000. Details of the variances in "regulated electric revenues" are shown
below.
-27-
<PAGE>
<TABLE>
<CAPTION>
Increase (Decrease) in
Regulated Electric Revenues
-----------------------------
Three Months Nine Months
-------------- -------------
(Dollars in millions)
<S> <C> <C>
Customers choosing alternative electricity suppliers $ (36.8) $ (89.0)
Decrease in retail rates for electric utility industry restructuring (17.4) (53.9)
Variance in volumes of interchange and resale sales (33.0) 5.5
Revenue adjustment related to BGS cost recovery (7.7) 1.0
Retail sales volume, sales mix, and all other * (30.4) (29.4)
------- -------
$(125.3) $(165.8)
======= =======
</TABLE>
* Includes the effect of lower regulated retail electricity sales in the third
quarter due to cooler summer weather.
As previously reported in the MD&A under "Electric Utility Industry
Restructuring" on page II-9 of Conectiv's 1999 Annual Report on Form 10-K,
effective July 1, 2000, DPL's Maryland electric customers had the option of
choosing an alternative electricity supplier. In Delaware, from October 1, 1999
through September 30, 2000, large customers could choose an alternative
electricity supplier, and effective October 1, 2000, all customers had the
option of choosing an alternative electricity supplier. Since August 1, 1999,
all of ACE's delivery customers could elect to choose an alternative electricity
supplier. Delivery customers representing approximately 6% of the combined 1999
peak loads of DPL and ACE were purchasing electricity from suppliers other than
Conectiv as of September 30, 2000. Customers representing approximately 5% of
the combined 1999 peak loads of DPL and ACE were purchasing electricity marketed
by "Conectiv Energy" (the trade name under which Conectiv subsidiaries market
competitive retail energy) as of September 30, 2000. Revenues from these
competitive retail sales by Conectiv Energy are included in non-regulated
electric revenues.
Non-regulated electric revenues
"Non-regulated electric revenues" result primarily from electricity trading
activities, bulk sales of electricity including sales of output from deregulated
electric generating plants, and competitive retail sales. For the nine months
ended September 30, 2000, electricity trading and strategic generation
electricity sales each provided about 40% of "non-regulated electric revenues,"
and the remaining approximate one-fifth of "non-regulated electric revenues" was
earned from competitive retail sales.
"Non-regulated electric revenues" increased by $244.6 million, from $110.8
million for the third quarter of 1999 to $355.4 million for the third quarter of
2000. For the nine-month period, "non-regulated electric revenues" increased by
$483.4 million, from $236.0 million for the nine months ended September 30, 1999
to $719.4 million for the nine months ended September 30, 2000. These revenue
increases resulted from higher wholesale sales of electricity generated by
deregulated power plants, increased volumes of electricity traded, and higher
competitive retail electricity sales. A significant portion of the revenue
increase is due to the timing of the deregulation of the electric generating
plants. Since DPL's electric generating plants were not deregulated until
October 1, 1999 in Delaware and July 1, 2000 in Maryland, the operations of the
DPL electric generating plants for the first nine months of 1999 did not result
in any non-regulated electric revenues. Similarly, since certain electric
generating plants of ACE began to operate on a deregulated basis effective
August 1, 1999, only two months of electricity sales from these plants were
included in non-regulated electric revenues for the third quarter of 1999 and
the nine months ended September 30, 1999.
-28-
<PAGE>
Sales of competitive retail electricity increased due to earlier marketing
efforts to large commercial and industrial customers outside Conectiv's service
area and sales to the delivery customers of DPL and ACE who selected "Conectiv
Energy" (trade name) as their alternative electricity supplier. In June 2000,
Conectiv announced that it would cease selling electricity to residential
customers in Pennsylvania. Conectiv will continue to evaluate market changes
and modify retail strategies as appropriate.
<TABLE>
<CAPTION>
Gas Revenues
------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2000 1999 2000 1999
------- ------ -------- -------
(Dollars in millions)
<S> <C> <C> <C> <C>
Regulated gas revenues $ 12.9 $ 12.0 $ 79.9 $ 87.5
Non-regulated gas revenues 479.9 145.5 989.9 495.1
------ ------ -------- ------
Total gas revenues $492.8 $157.5 $1,069.8 $582.6
====== ====== ======== ======
</TABLE>
DPL earns gas revenues from on-system natural gas sales, which generally are
subject to price regulation, and from the transportation of natural gas for
customers. Conectiv subsidiaries also trade and sell natural gas in
transactions which are not subject to price regulation. The table above shows
the amounts of gas revenues earned from sources which were subject to price
regulation (regulated) and which were not subject to price regulation (non-
regulated).
For the nine months ended September 30, 2000, "regulated gas revenues" decreased
$7.6 million primarily because some commercial and industrial customers elected
to buy gas from alternative suppliers. However, DPL's gross margin (gas
revenues less gas purchased) from supplying regulated gas customers is
insignificant, so the effect of the revenue decrease on pre-tax profits was
minimal.
"Non-regulated gas revenues" increased by $334.4 million for the three-month
period and $494.8 million for the nine-month period primarily due to higher
volumes of gas traded. Revenues from competitive retail gas sales also
increased; however, Conectiv Energy recently began phasing-out its competitive
retail gas business. The gross margin earned from "non-regulated gas revenues"
increased by $12.2 million in the third quarter and $9.2 million for the nine-
month period, primarily due to favorable gas trading results.
Other Services Revenues
------------------------
Other services revenues were comprised of the following:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2000 1999 2000 1999
------- ------- ------ --------
(Dollars in millions)
<S> <C> <C> <C> <C>
Fuel oil and gasoline $ 82.1 $ 56.2 $243.9 $139.5
CSI (HVAC) 17.2 37.7 86.3 102.7
CCI (Telecommunications) 14.7 9.8 41.6 24.9
Thermal systems 7.7 7.7 20.3 20.1
Operation of power plants 14.5 8.3 35.3 21.6
Solutions * 3.3 5.3 10.7 14.5
Other 4.2 2.1 11.2 11.1
------ ------ ------ ------
Total $143.7 $127.1 $449.3 $334.4
====== ====== ====== ======
</TABLE>
* Customized energy-related products and services
-29-
<PAGE>
"Other services" revenues increased $16.6 million and $114.9 million in the
three-month and nine-month periods, respectively, primarily due to higher
volumes and market prices for fuel oil and gasoline. Revenues from CCI's
telecommunications business and the operation of power plants also increased.
CCI continued to grow its telecommunications business, resulting in revenue
increases of $4.9 million for the three-month period and $16.7 million for the
nine-month period. CCI had sold approximately 105,000 access lines as of
September 30, 2000, which represented a 62% increase from a year ago. Revenues
from "Operation of power plants" increased $6.2 million and $13.7 million for
the three-month and nine-month periods, respectively, due to more power plants
being operated under additional contracts. Revenues from CSI's HVAC operations
decreased $20.5 million and $16.4 million for the three-month and nine-month
periods, respectively, mainly due to the sale of several divisions in the third
quarter of 2000, as discussed in Note 7 to the Consolidated Financial
Statements.
Operating Expenses
------------------
Electric Fuel and Purchased Energy and Capacity
"Electric fuel and purchased energy and capacity" increased $144.8 million for
the three-month period and $325.6 million for the nine-month period mainly due
to higher volumes. These increases primarily reflect greater amounts of
purchased power for expanded trading activities and supplying demand within the
service areas of ACE and DPL that were previously supplied by electric
generating plants which are now deregulated and selling their output in the open
market. The increases were mitigated by lower costs due to termination of the
Pedricktown purchased power contract in the fourth quarter of 1999 and lower
capacity costs due to discontinuance of SFAS No. 71 for the electricity supply
business.
Gas Purchased
Gas purchased increased by $321.5 million for the three-month period and $477.7
million for the nine-month period mainly due to higher volumes of non-regulated
natural gas trading activities and higher natural gas prices, partly offset by
lower volumes of gas supplied under regulated tariffs to commercial and
industrial customers in DPL's service area.
Other Services Cost of Sales
Other services cost of sales increased by $20.6 million for the three-month
period and $113.4 million for the nine-month period, primarily due to higher
volumes and market prices of fuel oil and gasoline purchased for resale. The
variances also reflect increases associated with higher volumes of
telecommunication and power plant operation services provided, and decreases
from the sale of several HVAC divisions in the third quarter of 2000.
Special Charges
As discussed in Note 7 to the Consolidated Financial Statement, "Special
charges" of $25.2 million before income taxes ($23.4 million after income taxes
or $0.28 per average common share) for the nine months ended September 30, 2000
resulted from provision for losses on sales of the businesses of CSI and two
projects of CTS. A portion of the loss resulted from a write-off of goodwill
which was not deductible for income tax purposes. As of September 30, 2000,
several divisions of CSI and CTS' 50% interest in two projects had been sold.
Proceeds of $54 million have been received from the sales of these businesses,
which had total assets of $72 million. Management intends to sell CSI's sole
remaining division within several months.
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<PAGE>
Special charges of $105.6 million for the three and nine months ended September
30, 1999 resulted from a write-down of goodwill associated with CSI's
businesses, a write-down of investments in leveraged leases, employee separation
costs, and costs related to the Merger. For additional information concerning
the $105.6 million of special charges for 1999, see Note 5 to the Consolidated
Financial Statements included in Item 8 of Part II of Conectiv's 1999 Annual
Report on Form 10-K.
Operation and Maintenance Expenses
Operation and maintenance expenses decreased by $2.5 million in the third
quarter due to lower costs of pension and other postretirement benefits and a
decrease from the sale of several HVAC divisions, partly offset by increased
costs of serving customers of the regulated utility businesses and higher
operating expenses of CCI's business. For the nine-month period, operation and
maintenance expenses increased $19.6 million due to higher expenses related to
expanding CCI's business, operating electric generating plants, and serving
customers of the regulated utility businesses, partly offset by lower pension
and other postretirement benefits costs.
Depreciation and amortization
Depreciation and amortization expenses decreased $3.2 million for the three-
month period and $10.4 million for the nine-month period mainly due to the
write-downs in the third and fourth quarters of 1999 of the electric generating
plants in connection with restructuring the electric utility industry in
Delaware, Maryland, and New Jersey. Depreciation of capital improvements to the
electric transmission and distribution systems recently placed in-service and
amortization of "Recoverable stranded costs" partly offset the decrease from
lower depreciation expense for power plants.
Other Income
------------
Other income increased $5.5 million in the third quarter mainly due to $9.5
million for Conectiv's equity in earnings of the EnerTech funds for the third
quarter of 2000, which resulted primarily from an unrealized gain on the common
shares of Capstone. The additional earnings from the EnerTech funds were partly
offset by a pre-tax loss of $4.5 million from other investments, largely due to
an other than temporary decline in the value of marketable securities held.
Other income increased $19.3 million for the nine-month period primarily due to
a $16.2 million increase from Conectiv's equity in earnings of the EnerTech
funds. The remaining $3.1 million net increase in other income for the nine-
month period was mainly due to a gain on the sale of an investment in a
leveraged lease and higher equity in earnings of a non-utility generation joint
venture, partly offset by the write-down of marketable securities in the third
quarter of 2000 and prior year income from implementation of mark-to-market
accounting for energy trading activities.
Financing Costs
---------------
Financing costs reflected in the Consolidated Statements of Income include
interest charges, allowance for funds used during construction, and preferred
stock dividend requirements of subsidiaries. Financing costs increased $7.7
million for the three-month period and $34.5 million for the nine-month period
mainly due to additional interest expense on borrowings to finance the
following: (1) purchases of Conectiv common stock; (2) the $228.5 million
payment in December 1999 to terminate the Pedricktown purchased power contract;
and (3) the operations of CCI and other nonutility subsidiaries. Higher short-
term interest rates also contributed to the increases in financing costs.
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<PAGE>
Income Taxes
------------
Income taxes as a percent of "Income before income taxes" decreased for the
three-month and nine-month periods primarily because more goodwill that was not
tax deductible was written-off in the prior year reporting periods.
New Accounting Pronouncements
-----------------------------
Conectiv will implement the provisions of SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended, beginning in the
first quarter of 2001. SFAS No. 133 establishes accounting and reporting
standards for derivative instruments and for hedging activities. SFAS No. 133
requires all derivative instruments, within the scope of the statement, to be
recognized as assets or liabilities on the balance sheet at fair value. Changes
in the fair value of derivatives that are not hedges, under SFAS No. 133, are
recognized in earnings. The gain or loss on a derivative that hedges exposure
to variable cash flow of a forecasted transaction is initially recorded in other
comprehensive income (a separate component of common stockholders' equity) and
is subsequently reclassified into earnings when the forecasted transaction
occurs. Changes in the fair value of other hedging derivatives result in a
change in the value of the asset, liability, or firm commitment being hedged, to
the extent the hedge is effective. Any ineffective portion of a hedge is
recognized in earnings immediately.
The initial impact on Conectiv's financial statements of adopting SFAS No. 133
in the first quarter of 2001 is expected to include the following: (a)
recognition of assets or liabilities for the fair value of certain contracts
which will be classified as derivatives under SFAS No. 133; (b) derecognition
(or elimination) of deferred gains and losses on hedging derivatives; and (c) a
"cumulative effect" type of adjustment for the impact on comprehensive income,
which is expected to be partly recorded in other comprehensive income and partly
in earnings. Subsequent to initial adoption, SFAS No. 133 may cause increased
volatility in Conectiv's earnings, revenues and common stockholders' equity.
Liquidity and Capital Resources
-------------------------------
Cash Flows From Operating Activities
Due to $289.2 million of cash provided by operating activities, $203.3 million
of cash used by investing activities, and $50.0 million of cash used by
financing activities, cash and cash equivalents increased by $35.8 million
during the nine months ended September 30, 2000.
Net cash provided by operating activities for the nine months ended September
30, 2000 included $96.7 million of income tax refunds which were primarily
related to the tax benefit associated with ACE's payment of $228.5 million on
December 28, 1999 to terminate the Pedricktown purchased power contract. After
excluding the $96.7 million of cash flow attributed to the income tax refunds
from operating cash flows for the nine months ended September 30, 2000, net cash
flow from operations decreased by $206.6 million, compared to same period last
year. This decrease in operating cash flow was due to working capital
requirements associated with energy trading, slower collection of accounts
receivable caused by conversion to a new customer billing system in December
1999, and higher interest expense payments.
Excluding changes due to reclassifications, accounts receivable as of September
30, 2000 increased by $390.2 million in comparison to December 31, 1999. This
increase was primarily due to higher natural gas and other energy trading
activities, and also reflects slower collections of accounts receivable caused
by conversion to a new customer billing system in December 1999. Increased
energy trading activities
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<PAGE>
was the primary reason for a $216.0 million increase (excluding
reclassifications) in the balance of accounts payable as of September 30, 2000,
compared to December 31, 1999.
Cash Flows From Investing Activities
Capital expenditures were $260.8 million for the nine months ended September 30,
2000 compared to $221.5 million for the nine months ended September 30, 1999.
Capital expenditures increased $39.3 million primarily due to the capital
requirements of Conectiv's mid-merit electric generation strategy, including
construction expenditures for combustion turbines, which are expected to be
configured into combined cycle units. Upgrades of the electric transmission and
distribution systems, which increased system reliability, also contributed to
the increase in capital expenditures.
The $69.7 million of cash proceeds for the nine months ended September 30, 2000
from "asset sales" includes proceeds from the sales of two projects of CTS,
several HVAC divisions, an aircraft which was owned through a leveraged lease,
and marketable securities.
Cash Flows From Financing Activities
Common dividends paid were $69.3 million for the nine months ended September 30,
2000 compared to $112.4 million for the nine months ended September 30, 1999.
The decrease in common dividends paid was due to fewer outstanding shares of
common stock and Class A common stock and lower dividends per share of common
stock. For information concerning the 1999 offer to purchase shares of common
stock and the 1999 reduction in dividends per share of common stock, see Note 16
to the Consolidated Financial Statements included in Item 8 of Part II of
Conectiv's 1999 Annual Report on Form 10-K.
As previously disclosed, as a registered holding company under PUHCA, Conectiv
may not pay dividends on the shares of common stock and Class A common stock
from an accumulated deficit or paid-in-capital without SEC approval. As of
September 30, 2000, Conectiv's retained earnings balance was $35.2 million.
During the nine months ended September 30, 2000, Conectiv purchased 3,411,100
shares of Conectiv common stock for $54.7 million. As of September 30, 2000,
2,760,700 shares of common stock remained authorized for purchase under a stock
purchase program.
As discussed in Note 12 to the Consolidated Financial Statements, on behalf of
DPL, the Delaware Economic Development Authority issued $70.14 million of bonds
on July 7, 2000 and loaned the proceeds to DPL. Of the bonds issued, $38.9
million have a variable interest rate and a maturity date of July 1, 2030, $15.0
million have a fixed interest rate of 5.5% and a maturity date of July 1, 2025,
and $16.24 million have a fixed interest rate of 5.65% and a maturity date of
July 1, 2028. The fixed interest rate bonds are subject to mandatory tender on
July 1, 2010, and DPL may choose to redeem and/or remarket all or a portion of
the tendered bonds. The $70.14 million of proceeds received by DPL on July 7,
2000 and additional cash were used to redeem $61.17 million of bonds (7.47%
average interest rate) on September 1, 2000 and $9.0 million of 7.5% bonds on
October 1, 2000.
The $111.7 million of long-term debt redemptions for the nine months ended
September 30, 2000 includes the $61.17 million of bonds (7.47% average interest
rate) refinanced by DPL on September 1, 2000 (as discussed above), the
redemption of $46.0 million of 6.83% Medium Term Notes at maturity on January
26, 2000 by ACE, and $4.5 million of other debt repayments.
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<PAGE>
Conectiv's short-term debt balance as of September 30, 2000 increased by $135.7
million from the balance as of December 31, 1999 primarily due to financing
capital expenditures and purchases of Conectiv common stock.
Conectiv's capital structure, including short-term debt, current maturities of
long-term debt, and variable rate demand bonds, is shown below.
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------ ------------
<S> <C> <C>
Common stockholders' equity 26.0% 26.2%
Preferred stock of subsidiaries 6.4% 6.6%
Long-term debt and variable rate demand bonds 50.5% 52.7%
Short-term debt and
current maturities of long-term debt 17.1% 14.5%
</TABLE>
Ratio of Earnings to Fixed Charges
Conectiv's ratio of earnings to fixed charges under the SEC Method is shown
below. See Exhibit 12, Ratio of Earnings to Fixed Charges, for additional
information.
12 Months
Ended Year Ended December 31,
September 30, ----------------------------------
2000 1999 1998 1997 1996 1995
------------- ------ ------ ------ ------ ------
Ratio of Earnings to
Fixed Charges (SEC Method) 2.08 1.98 2.38 2.63 2.83 2.92
Item 3. Quantitative and Qualitative Disclosures About Market Risk
------- ----------------------------------------------------------
As previously disclosed under "Quantitative and Qualitative Disclosures About
Market Risk" on pages II-24 to II-25 of Conectiv's 1999 Annual Report on Form
10-K, Conectiv is subject to market risks, including interest rate risk, equity
price risk, and commodity price risk. An update concerning Conectiv's commodity
and equity price risk appears below.
Equity Price Risk
As discussed in Note 3 to the Consolidated Financial Statements, Conectiv holds
investments in venture capital funds, which invest in securities of energy-
related technology and Internet service companies, and in marketable securities.
Conectiv is exposed to equity price risk through the securities invested in by
the venture capital funds and the marketable securities held directly by
Conectiv. The potential change in the fair value of these investments resulting
from a hypothetical 10% change in quoted securities prices was approximately
$6.0 million as of September 30, 2000.
Commodity Price Risk
Conectiv is exposed to the impact of market fluctuations in the price and
transportation costs of natural gas, electricity, and petroleum products.
Conectiv engages in commodity hedging activities to minimize the risk of market
fluctuations associated with the purchase and sale of energy commodities
(natural gas,
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<PAGE>
petroleum products and electricity). Some hedging activities are conducted using
energy derivatives (futures, options, and swaps). The remainder of Conectiv's
hedging activity is conducted by backing physical transactions with offsetting
physical positions. The hedging objectives include the assurance of stable and
known minimum cash flows and the fixing of favorable prices and margins when
they become available. Conectiv also engages in energy commodity trading and
arbitrage activities, which expose Conectiv to commodity market risk when, at
times, Conectiv creates net open energy commodity positions or allows net open
positions to continue. To the extent that Conectiv has net open positions,
controls are in place that are intended to keep risk exposures within
management-approved risk tolerance levels.
Conectiv uses a value-at-risk model to assess the market risk of its
electricity, gas, and petroleum products commodity activities. The model
includes fixed price sales commitments, physical forward contracts, and
commodity derivative instruments. Value-at-risk represents the potential gain
or loss on instruments or portfolios due to changes in market factors, for a
specified time period and confidence level. Conectiv estimates value-at-risk
across its power, gas, and petroleum commodity businesses using a delta-normal
variance/covariance model with a 95 percent confidence level and assuming a
five-day holding period. Conectiv's calculated value-at-risk with respect to
its commodity price exposure associated with contractual arrangements was
approximately $15.1 million as of September 30, 2000, in comparison to $4.0
million as of December 31, 1999. The increase in value-at-risk was primarily
due to increased hedging, with forward contracts, of the deregulated portion of
the electricity output of Conectiv's power plants.
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<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
------- -----------------
Information reported under the heading "Other" in Note 13 to the Consolidated
Financial Statements under Item 1 in Part I herein, concerning an action filed
in a New Jersey Superior Court by the City of Vineland, is incorporated by
reference.
Item 5. Other Information
------- -----------------
Executive Promotions
On September 25, 2000, Conectiv announced executive promotions intended to
strengthen the implementation of Conectiv's business strategy. Thomas S. Shaw,
formerly Executive Vice President, was promoted to President and Chief Operating
Officer of Conectiv. Mr. Shaw continues to report to Conectiv's Chairman of the
Board and Chief Executive Officer, Howard E. Cosgrove, and is responsible for
managing the day-to-day operations of Conectiv, including its two core
businesses: Energy and Power Delivery. In addition to Mr. Shaw's promotion,
Joseph M. Rigby and William H. Spence were promoted to Senior Vice President of
Conectiv. Mr. Rigby has 22 years of experience in the utility operations of ACE
and Conectiv and will continue to manage the Power Delivery business. Mr.
Spence has 22 years of energy industry experience, including 13 years with DPL
and Conectiv, and will continue to manage energy trading, power-plant
operations, and other non-regulated energy business activities.
Item 6. Exhibits and Reports on Form 8-K
------- --------------------------------
Exhibits
--------
Exhibit 12, Ratio of Earnings to Fixed Charges
Exhibit 27, Financial Data Schedule
Reports on Form 8-K
-------------------
On July 10, 2000, Conectiv filed a Current Report on Form 8-K dated June 28,
2000 reporting on Item 5, Other Events, and Item 7, Financial Statements, Pro
Forma Financial Information and Exhibits.
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<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Conectiv
------------
(Registrant)
Date: November 13, 2000 /s/ John C. van Roden
----------------- -----------------------------------------
John C. van Roden, Senior Vice President
and Chief Financial Officer
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<PAGE>
Exhibit Index
-------------
Exhibit 12, Ratio of Earnings to Fixed Charges
Exhibit 27, Financial Data Schedule
