<TABLE>
NEW CON EDISON
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF MARCH 31, 2000
(DOLLARS IN THOUSANDS)
<CAPTION>
Con Edison Northeast Pro Forma Pro Forma
Historical Historical Adjustments Combined
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
------
Utility plant, net................................ $11,442,702 $ 4,301,035 $15,743,737
Other property and investments.................... 490,173 908,455 1,398,628
Cash and temporary cash investments............... 73,604 369,738 443,342
Accounts receivable, net.......................... 706,053 448,356 1,154,409
Other current assets.............................. 695,500 559,745 1,255,245
Regulatory assets and deferred charges............ 1,621,408 3,808,307 5,429,715
Goodwill.......................................... 424,691 345,372 $1,966,373 (B) 2,391,064
(345,372)(B)
----------- ----------- ---------- -----------
Total Assets...................................... $15,454,131 $10,741,008 $1,621,001 $27,816,140
=========== =========== ========== ===========
CAPITALIZATION AND LIABILITIES
------------------------------
Capitalization
Common shareholders' equity....................... $ 5,424,129 $ 2,363,999 $(396,499)(C) $ 7,391,629
Preferred stock subject to mandatory redemption... 37,050 119,789 156,839
Preferred stock not subject to mandatory
redemption...................................... 212,563 136,200 348,763
Long-term debt.................................... 4,375,030 2,443,989 1,967,500 (D) 8,786,519
----------- ----------- ---------- -----------
Total Capitalization.............................. 10,048,727 5,063,977 1,571,001 16,683,750
----------- ----------- ---------- -----------
Minority interest in consolidated subsidiaries.... - 100,000 100,000
Obligations under capital leases.................. 33,805 53,126 86,931
Other noncurrent liabilities...................... 332,521 - 332,521
Long-term debt due within one year................ 320,000 346,123 666,123
Other current liabilities......................... 1,759,416 1,850,455 50,000 (B) 3,659,871
Accumulated deferred federal income tax........... 2,327,477 1,721,263 4,048,740
Regulatory liabilities and deferred credits....... 632,140 1,606,064 2,238,204
----------- ----------- ---------- -----------
Total Capitalization and Liabilities.............. $15,454,131 $10,741,008 $1,621,001 $27,816,140
=========== =========== ========== ===========
The accompanying notes to the pro forma are an integral part of this statement.
</TABLE>
<TABLE>
NEW CON EDISON
UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE TWELVE MONTHS ENDED MARCH 31, 2000
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
Con Edison Northeast Pro Forma Pro Forma
Historical Pro Forma (A) Adjustments Combined
---------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
Operating Revenues
------------------
Electric..................................... $ 6,111,280 $ 4,655,213 $10,766,493
Gas.......................................... 1,088,334 382,721 1,471,055
Steam........................................ 369,552 - 369,552
Nonutility................................... 463,855 63,683 527,538
----------- ----------- ---------- -----------
Total operating revenues.................. 8,033,021 5,101,617 13,134,638
----------- ----------- ---------- -----------
Operating Expenses
------------------
Fuel and purchased power..................... 3,235,056 2,392,911 5,627,967
Other operations............................. 1,222,541 933,217 2,155,758
Maintenance.................................. 425,660 300,313 725,973
Depreciation and amortization................ 536,128 882,965 $ 49,159 (B) 1,459,618
(8,634)(B)
Taxes, other than federal income tax......... 1,170,496 272,908 1,443,404
Federal income tax........................... 399,406 226,304 (58,533)(E) 567,177
----------- ----------- ---------- -----------
Total operating expenses.................. 6,989,287 5,008,618 (18,008) 11,979,897
----------- ----------- ---------- -----------
Operating Income............................... 1,043,734 92,999 18,008 1,154,741
----------- ----------- ---------- -----------
Other Income (Deductions)
-------------------------
Investment income............................ 17,646 - 17,646
Allowance for equity funds used during
construction............................... 2,261 - 2,261
Other income less miscellaneous deductions... (12,961) 208,060 195,099
Federal income tax........................... 25,911 90,909 116,820
----------- ----------- ---------- -----------
Total other income........................ 32,857 298,969 - 331,826
----------- ----------- ---------- -----------
Income before interest charges................. 1,076,591 391,968 18,008 1,486,567
----------- ----------- ---------- -----------
Interest charges............................... 354,091 293,345 167,238 (F) 814,674
Allowance for borrowed funds used during
construction................................. (3,195) - (3,195)
----------- ----------- ---------- -----------
Net interest charges...................... 350,896 293,345 167,238 811,479
----------- ----------- ---------- -----------
Preferred stock dividend requirements.......... 13,593 21,573 35,166
----------- ----------- ---------- -----------
Net income for common stock.................... $ 712,102 $ 77,050 ($149,230) $ 639,922
=========== =========== ========== ===========
Common shares outstanding - average (000)...... 218,920 135,668 (87,702)(G) 266,886
=========== =========== ========== ===========
Basic earnings per share....................... $ 3.25 $ 0.57 $ 2.40(D)
=========== =========== ===========
The accompanying notes to the pro forma are an integral part of this statement.
</TABLE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
Note A. Unaudited Pro Forma Combined Condensed Income Statement
Reflects the combination of the historical information of Northeast
and Yankee to give effect to the acquisition of Yankee by Northeast
as if it occurred by April 1, 1999 instead of March 1, 2000.
Note B. Goodwill
Reflects adjustment to record the goodwill resulting from the merger:
Purchase of 148.5 million Northeast common shares $ 3,935,000
Estimated direct costs incurred in consummating
the merger 50,000
Elimination of Northeast Shareholders' equity
on March 31, 2000 (2,363,999)
Addition of Northeast goodwill to purchase price 345,372
-----------
Total goodwill created as a result of the merger $ 1,966,373
===========
Amortization of goodwill over 3-month period
(assuming straight-line method over 40 years) $ 12,290
Elimination of Northeast purchased goodwill (345,372)
Reversal of amortization of Northeast purchased
goodwill over 3-month period (2,159)
Amortization of goodwill over 1-year period
(assuming straight-line method over 40 years) $ 49,159
Elimination of Northeast purchased goodwill (345,372)
Reversal of amortization of Northeast purchased
goodwill over 1-year period (8,634)
Note C. Common Shareholders' Equity
Reflects payment of stock consideration in the merger as discussed
in Note D net of the elimination of Northeast shareholders' equity.
Elimination of Northeast shareholders' equity ($2,363,999)
Issuance of stock to purchase Northeast common shares 1,967,500
-----------
($396,499)
===========
Note D. Merger Consideration
The unaudited pro forma combined condensed financial statements assume
that 50 percent of the outstanding Northeast common shares were
exchanged for cash consideration of $26.50 and 50 percent of the
outstanding Northeast common shares were exchanged for .646 shares of
New Con Edison common stock. We have assumed that the cash payment to
Northeast shareholders will be financed through the issuance of
long-term debt. The merger consideration was determined assuming that
the merger would be consummated on December 31, 2000, the divestiture
condition relating to the Millstone nuclear facilities would be
satisfied, the average trading price of Con Edison common shares over
the specified period would be $41.00 and the value of the fraction of
a share of New Con Edison common stock delivered to Northeast
shareholders would remain at $26.50 at the time of delivery. A
closing at December 31, 2000, has been assumed because the date
represents the approximate midpoint as to when Con Edison and
Northeast expect to complete the regulatory approval process for the
merger. The satisfaction of the divestiture condition has been
assumed because although there can be no assurance, Con Edison and
Northeast believe it is more likely than not that the condition will
be satisfied. See "Risk Factors - Uncertainties Relating to Northeast
Nuclear Facilities Divestiture." A Con Edison share price of $41.00
has been assumed because it represents the midpoint of the price
collar established for Con Edison's share price.
Cash payment to Northeast shareholders $1,967,500
Stock payment to Northeast shareholders 1,967,500
----------
Purchase of 148.5 million Northeast common shares $3,935,000
==========
If the merger was to close on or before August 5, 2000, the
divestiture condition were not to be satisfied, and the average
trading price of Con Edison common shares was $41.00, the cash payment
would be $25.00 per share for 50% of the Northeast common shares and
the exchange ratio would be .610 shares of New Con Edison common stock
per Northeast common share for the other 50% of the Northeast common
shares. In this event, the pro forma earnings per share for the
twelve months ended March 31, 2000 would be $2.47.
Note E. Income Taxes
Reflects tax benefit, based on an assumed tax rate
of 35%, from the payments of twelve months of
interest charges described in Note F. ($ 58,533)
=========
Note F. Interest Charges
Reflects $1.9675 billion of long-term debt bearing
interest over twelve months at an effective interest
rate of 8.5% inclusive of costs of issuance, the
proceeds of which may be used to fund the cash
consideration to be paid to Northeast shareholders. $ 167,238
=========
A 1/8 of 1% variation in the interest rate would result in a $2.5
million change in interest expense.
Note G. Outstanding Shares
Reflects the issuance of 47,966,000 New Con Edison shares at an
issuance cost of $41.00 as described in Note D net of the elimination
of outstanding Northeast common shares.
Elimination of outstanding Northeast common shares (135,668)
Purchase of 50% of 148,500,000 Northeast common shares
at an exchange rate of .646 shares of New Con Edison
common stock per Northeast common share 47,966
--------
(87,702)
========
