<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-1405
DELMARVA POWER & LIGHT COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE & VIRGINIA 51-0084283
(STATES OR OTHER JURISDICTIONS OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION) 19899
800 KING STREET, P. O. BOX 231 (ZIP CODE)
WILMINGTON, DELAWARE
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 302-429-3011
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
FIRST MORTGAGE BONDS (SERIES ISSUED NEW YORK STOCK EXCHANGE AND
PRIOR TO 1968) PHILADELPHIA STOCK EXCHANGE.
PREFERRED STOCK, CUMULATIVE, PAR VALUE PHILADELPHIA STOCK EXCHANGE
$100.00 (SERIES ISSUED PRIOR TO 1978)
NEW YORK STOCK EXCHANGE AND
COMMON STOCK, PAR VALUE $2.25 PHILADELPHIA STOCK EXCHANGE.
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
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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 BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO
THE BEST OF THE REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY
AMENDMENT TO THIS FORM 10-K. [X]
THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES OF THE
REGISTRANT AS OF JANUARY 31, 1994 WAS $1,311,729,482.
AS OF JANUARY 31, 1994, THERE WERE ISSUED AND OUTSTANDING 59,082,904 SHARES
OF THE REGISTRANT'S COMMON STOCK, PAR VALUE $2.25.
----------------
DOCUMENTS INCORPORATED BY REFERENCE
<TABLE>
<CAPTION>
PART OF FORM 10-K DOCUMENT INCORPORATED BY REFERENCE
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<S> <C>
I (ITEM 1-SEGMENT PORTIONS OF THE 1993 ANNUAL REPORT TO STOCKHOLDERS OF
INFORMATION) AND DELMARVA POWER & LIGHT COMPANY.
II (ITEMS 6, 7 AND 8)
III PORTIONS OF THE DEFINITIVE PROXY STATEMENT FOR THE ANNUAL
MEETING OF STOCKHOLDERS OF DELMARVA POWER & LIGHT
COMPANY, TO BE HELD MAY 26, 1994, WHICH DEFINITIVE PROXY
STATEMENT IS EXPECTED TO BE FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION ON OR ABOUT APRIL 21, 1994.
IV PORTIONS OF THE 1993 ANNUAL REPORT TO STOCKHOLDERS OF
DELMARVA POWER & LIGHT COMPANY
</TABLE>
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<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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<C> <S> <C>
PART I
Item 1. Business:
The Company.................................................. I-1
Segment Information.......................................... I-1
Competition.................................................. I-1
Electric Business.......................................... I-1
Gas Business............................................... I-3
Electric Operations.......................................... I-3
Installed Capacity......................................... I-3
Power Pool................................................. I-4
Reserve Margin............................................. I-4
Challenge 2000 Plan........................................ I-4
Power Plants................................................. I-6
Nuclear.................................................... I-6
Peach Bottom Units......................................... I-6
Salem Units................................................ I-7
Hay Road................................................... I-7
Life Extensions and Repowerings............................ I-7
Purchased Power.............................................. I-7
Cost of Output for Load...................................... I-8
Fuel Supply for Electric Generation.......................... I-8
Coal....................................................... I-8
Oil........................................................ I-8
Gas........................................................ I-8
Nuclear.................................................... I-9
Gas Operations............................................... I-10
Non-Regulated Utility Business (Steam Utility)............... I-10
Subsidiaries................................................. I-11
Regulatory and Rate Matters.................................. I-11
Base Rate Proceedings...................................... I-11
Fuel Adjustment Clauses.................................... I-13
Other Regulatory Matters................................... I-15
Construction and Financing Program........................... I-15
Environmental Matters........................................ I-17
Construction Expenditures.................................. I-17
Clean Air Act.............................................. I-17
Salem Nuclear Generating Station........................... I-18
Water Quality Regulations.................................. I-18
Hazardous Substances....................................... I-19
Emerging Environmental Issues.............................. I-20
Subsidiaries............................................... I-20
Retail Franchises............................................ I-20
Number of Employees.......................................... I-20
Executive Officers of the Registrant......................... I-21
Item 2. Properties....................................................... I-22
Item 3. Legal Proceedings................................................ I-23
Item 4. Submission of Matters to a Vote of Security Holders.............. I-24
</TABLE>
i
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TABLE OF CONTENTS
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PAGE
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<C> <S> <C>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.................................................... II-1
Item 6. Selected Financial Data....................................... II-1
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................. II-1
Item 8. Financial Statements and Supplementary Data................... II-1
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure................................... II-1
Report of Independent Accountants...................................... II-2
PART III
Item 10. Directors and Executive Officers of the Registrant............ III-1
Item 11. Executive Compensation........................................ III-1
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................. III-1
Item 13. Certain Relationships and Related Transactions................ III-1
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K........................................................ IV-1
Signatures............................................................. IV-15
</TABLE>
ii
<PAGE>
PART I
ITEM 1. BUSINESS
THE COMPANY
Delmarva Power & Light Company (the Company) was incorporated in Delaware in
1909 and in Virginia in 1979. The Company's wholly-owned subsidiaries, also
incorporated in Delaware, include Delmarva Energy Company, Delmarva Industries,
Inc., Delmarva Services Company, and Delmarva Capital Investments, Inc. For a
discussion of the Company's subsidiaries, see "Subsidiaries" on page I-11.
The Company is a public utility which provides electric service on the
Delmarva Peninsula in an area consisting of about 5,700 square miles with a
population of approximately one million. The Company also provides gas service
in an area consisting of about 275 square miles with a population of
approximately 457,000 in northern Delaware, including the City of Wilmington.
SEGMENT INFORMATION
See Note 17 of the Notes to Consolidated Financial Statements contained in
the Company's 1993 Annual Report to Stockholders filed as Exhibit 13.
COMPETITION
Competition is increasing for certain electric and gas energy markets
historically served by regulated utilities. In recent years, changing laws and
governmental regulations, interest in self-generation, and competition from
nonregulated energy suppliers are providing some utility customers with
alternative sources to satisfy their electric and gas needs.
Electric Business
The Public Utility Regulatory Policies Act of 1978 (PURPA) facilitated the
entry of potential competitors into the electric generation business. Under
PURPA, a utility may be required to purchase the electricity generated by
qualifying facilities at prices reflecting the utility's avoided cost as
determined by utility procedures or state regulatory bodies.
The Energy Policy Act of 1992 (the Energy Act) enabled the Federal Energy
Regulatory Commission (FERC) to order the provision of transmission service
(wheeling of electricity) for wholesale (resale) electricity producers and also
provided for the creation of a new category of electric power producers called
exempt wholesale generators (EWGs). These provisions of the Energy Act have
enhanced the ability of utilities and non-utility generators to compete to
serve resale customers currently served by a particular utility. Partly as a
result of the Energy Act, industry-wide resale markets are experiencing
increased competition. In 1993, gross electric revenues from the Company's
resale business were $105.0 million or 13.0% of billed electric sales revenues.
In response to the changing environment in the electric utility industry, the
Company has modified existing strategies and also developed new strategies.
From a customer or market perspective, the Company has concluded that focusing
on growing the retail portion of the business provides the best opportunity to
meet the twin objectives of satisfying customers' needs while providing a fair
return to shareholders. During 1993, the Company began to develop new products
and services for its retail markets and to hold preliminary discussions with
certain municipalities in Delaware to either purchase their electric systems or
enter into long-term supply contracts. In December 1993, the Company offered
$103.5 million to purchase the electric system of the City of Dover, Delaware
(Dover). Dover has approximately 18,500 electric customers and annual revenues
from electricity sales of about $37 million. Although the Company expects that
the impact on earnings from the potential purchase would be minimal over the
first year or two, incremental earnings are
I-1
<PAGE>
expected once economies of scale are achieved. It is the Company's
understanding that other parties have shown interest in the generation segment
of Dover's business, but none have shown interest in purchasing Dover's entire
electric system. In February 1994, PECO Energy Company (PECO), formerly known
as Philadelphia Electric Company, announced that it is evaluating its strategic
alternatives with respect to Conowingo Power Company (COPCO), its Maryland
subsidiary, including determining the level of interest that other companies
may have in acquiring COPCO. The Company has expressed an interest to PECO in
acquiring COPCO and will seek to participate in an acquisition process if such
a process is commenced. See "Other Regulatory Matters--Conowingo Power Company"
on page I-15 for a further discussion of certain regulatory proceedings related
to COPCO in which the Company has intervened.
Although the Energy Act permits competition for wholesale customers only,
competitive forces exist within the retail market and are expected to increase.
Large retail customers (i.e. commercial and industrial customers) have choices
to reduce their energy costs, including self-generation and relocation to the
service territories of other utilities with lower rates. In addition,
regulatory authorities may permit the retail wheeling of electricity, thereby
permitting utilities and non-utility generators to compete to serve large
retail customers currently served by a particular utility. The Company is
positioned well for these competitive forces. The Company's prices for large
retail customers are among the lowest in the region and are competitive with
alternative sources of energy such as self-generation. The Company's average
price for commercial customers in 1992 was 7.04 cents per kilowatt hour (kwh)
compared to a regional average of 8.64 cents per kwh. The Company's average
price for industrial customers in 1992 was 4.63 cents per kwh compared to a
regional average of 6.59 cents per kwh. These regional averages are based on
1992 data for 27 utilities within a 300 mile radius of the Company. In order to
keep customer prices competitive, the Company is stepping up its efforts to
reduce costs.
The Company believes it should have the ability to offer flexible pricing in
order to compete to serve large retail customers. Such changes in pricing
methods could require modification to the existing regulatory process. In
Delaware, the Governor has convened a task force "to recommend reforms to the
existing regulatory process, structure and organization that will improve
utility efficiency and encourage utility innovation, while assuring continued
availability of utility services at affordable and competitive prices." The
task force includes representatives from the Delaware Public Service Commission
(DPSC), utilities (including the Company), industrial customers, government,
and the public. The task force plans to issue recommendations that can be
introduced as legislation in June 1994 in the General Assembly.
In the resale market, the Company is seeking to reduce the risk associated
with a customer switching energy suppliers on short notice because providing
electricity service requires investments in capital-intensive facilities which
have long lives and require long lead-times for construction. In the Company's
most recent resale base rate case, its resale customers agreed to provide a
two-year notice for load reductions up to 30% and a five-year notice for load
reductions greater than 30%.
Prior to this agreement, Old Dominion Electric Cooperative (ODEC), a resale
customer, advised the Company that it would purchase up to 150 megawatts (MW)
from another utility, beginning January 1, 1995. The Company is continuing to
negotiate a partial-requirements service agreement (to serve the balance of
ODEC's load) and a transmission service agreement (to transport the electricity
ODEC plans to purchase from another utility) to become effective January 1,
1995. The maximum reduction in annual non-fuel revenues that could result from
ODEC's purchase of 150 MW from another utility is estimated to be about $24
million or $0.24 per share based on projected shares outstanding in 1995. To
mitigate the potential impact of this loss of business and expected increases
in operating costs, the Company is pursuing off-system sales of capacity and
energy (targeted increase in revenues: $10-$20 million), intensifying cost
control efforts (targeted decrease in costs: $15-$20 million), and if
necessary, may apply for increases in customer rates (targeted increase in
revenues: $10-$15 million). The Company expects that some combination of these
strategies will reduce, or possibly eliminate, the adverse earnings per share
effect; however, the ultimate effect on future earnings depends on the degree
of success experienced by the Company in implementing its strategies.
I-2
<PAGE>
Gas Business
As a result of FERC initiatives, the interstate gas pipeline system has been
opened further to permit the transportation of natural gas by end users,
including the Company's gas customers. The Company has in place local
transportation tariffs to complement this interstate pipeline service. As a
result, some Company gas customers now buy gas directly from producers and
transport the gas to their facilities in Delaware, paying a transportation fee
to the Company for the use of the Company's gas transmission and distribution
facilities.
An issue contested in the Company's most recent gas base rate case involved
the conditions under which firm customers would be able to switch to non-firm
service such as Interruptible Gas Transportation (IGT) service. The Company's
tariff in effect prior to this case did not allow firm customers to switch to
non-firm service. The Company had proposed in this case to allow firm customers
to switch to non-firm service with three years' advance notice. Intervenors in
the case, comprised of a group of large firm and non-firm industrial gas
customers, sought DPSC approval to allow switching to non-firm service with
little or no prior notice. In July 1993, the DPSC approved a three-year notice
requirement for firm customers switching to non-firm service. This notice
period will mitigate the effect on the Company's results of operations of
customers switching from firm to non-firm service.
In a related matter, during the proceedings in the Company's most recent gas
base rate case, the Company's largest firm gas customer filed a complaint in
the Delaware Chancery Court seeking rescission of its current firm service
agreement with the Company and other relief, including non-firm service as an
IGT customer. This case was settled in October 1993, with the customer agreeing
for a three-year period to transport or pay for a minimum amount of gas equal
to 75% of the average amount of gas it has taken over the past three years.
This settlement will not have a material impact on the Company's results of
operations.
ELECTRIC OPERATIONS
Installed Capacity
The net installed summer electric generating capacity available to the
Company to serve its peak load as of December 31, 1993 is presented below. The
Company plans to maintain a balanced approach to energy supply, including
conservation and load management, purchases of capacity and energy from other
utilities and nonutility generators, and construction of new generating
capacity. For a discussion of the energy supply plan, see "Challenge 2000 Plan"
which begins on page I-4.
<TABLE>
<CAPTION>
% OF
INSTALLED SUMMER CAPACITY MEGAWATTS TOTAL
------------------------- --------- -----
<S> <C> <C>
Coal Fired................................................. 1,141 40
Oil-Fired.................................................. 595 21
Combustion Turbines/Combined Cycle......................... 511 18
Nuclear.................................................... 321 11
Peaking Units.............................................. 183 6
Purchased Capacity......................................... 48 2
Customer-owned Capacity.................................... 57 2
----- ---
Total.................................................... 2,856 100
===== ===
</TABLE>
The net generating capacity available for operations at any time may be less
than the total net installed generating capacity due to generating units being
temporarily out of service for inspection, maintenance, repairs, or unforeseen
circumstances. See "Item 2--Properties" on page I-22 for a detailed listing of
net installed generating capacity by station.
I-3
<PAGE>
Power Pool
The Company is a member of the Pennsylvania-New Jersey-Maryland
Interconnection Association (PJM Interconnection). Under the PJM
Interconnection Agreement, the Company's generation and transmission facilities
are operated on an integrated basis with those of seven other utilities in
Pennsylvania, New Jersey, Maryland, and the District of Columbia. This power
pool was formed for the purpose of improving the reliability and operating
economies of the systems in the group and to provide capital economies by
permitting the sharing of reserve requirements on a group basis. The Company
estimates that its fuel savings associated with energy transactions within the
pool amounted to $9.0 million during 1993.
The PJM Interconnection's installed capacity as of December 31, 1993 was
55,575 MW. The PJM Interconnection experienced a new all time peak demand of
46,429 MW on July 8, 1993, which resulted in a summer reserve margin of 19.4%
(based on installed capacity of 55,440 MW on that date). The previous all-time
peak demand of 45,870 MW was set on July 23, 1991.
The Company is also a party to the Mid-Atlantic Area Coordination Agreement
which provides for review and evaluation of plans for generation and
transmission facilities and other matters relevant to the reliability of the
bulk electric supply systems in the Mid-Atlantic area.
Reserve Margin
The Company's peak load in 1993 was 2,544 MW on July 9th, which surpassed the
Company's previous peak demand of 2,430 MW on July 23, 1991. Because adequate
generation was available at the time, this peak does not reflect full
implementation of the Company's demand-side programs, including the curtailment
of large interruptible customers. The Company's PJM Interconnection reserve
obligation is based on normal weather conditions and full implementation of its
demand-side programs, which the Company estimates would have resulted in a peak
of 2,329 MW. Based upon this estimated peak and the Company's installed
generating capacity of 2,856 MW at the time, the Company's reserve margin would
have been 22.6%. The Company's PJM Interconnection reserve obligation varies
from year to year but is typically around 18%.
The Company's installed capacity obligation is established under the PJM
Interconnection Agreement. Capacity deficiency charges may be incurred under
the agreement if a member's installed capacity is less than its obligation. As
a result of unpredicted changes in both load and capacity availability
experienced during the previous PJM Interconnection planning period (June 1,
1992 through May 31, 1993), the Company expects to incur a capacity deficiency
charge for the 1992-93 period. The Company has accrued a liability of $570,000
for the estimated amount of the charge. The Company limited this charge by
purchasing PJM Interconnection capacity credits from one utility and trading
capacity credits with another utility. The trade provided the Company with a
credit towards 1992-93 PJM Interconnection capacity requirements and, in
return, the Company will provide an equivalent credit to the other utility in a
future period. The Company does not expect to incur a capacity deficiency
charge during the 1993-94 PJM Interconnection planning period; however, the
Company has entered into an agreement with another utility to acquire up to 85
MW of capacity credit for the period, should the need arise.
Challenge 2000 Plan
The Challenge 2000 Plan reflects the Company's strategy for meeting
customers' energy needs while minimizing adverse impacts on the environment and
keeping prices competitive. The key elements of the Challenge 2000 Plan are
flexibility and balance. The plan can be accelerated, slowed, or modified to
respond to changing energy demands, changing markets including the effects of
competition, fluctuating fuel prices, emerging technologies, and changing laws
and governmental regulations. The plan combines customer-oriented program
alternatives, called demand-side options, and generation alternatives using
emerging and existing technologies, called supply-side options. The strategy
can be characterized as "Save Some, Buy Some, Build Some."
I-4
<PAGE>
As of the end of 1993, the demand-side programs ("Save Some") of the
Challenge 2000 Plan had enrolled about 66,000 residential customers and about
500 commercial and industrial customers who in aggregate provide the Company
with the ability to reduce its peak by approximately 225 MW. During 1992, for
residential customers, the Company developed four new conservation programs,
which include the sale of energy efficient products at below market prices
(e.g., compact fluorescent bulbs and water heating accessories) and rebates for
the installation of high efficiency central air conditioning and heat pumps.
For commercial and industrial customers, the Company also developed four new
conservation programs, which include rebates for energy efficient new
commercial construction and motors. Following Maryland Public Service
Commission (MPSC) approval in November 1992, the Company began implementing the
programs in Maryland effective January 1, 1993. Following DPSC approval in
September 1993, the Company began implementing the programs in Delaware
effective January 1, 1994. In November 1993, the Company filed for approval of
these new conservation programs with the Virginia State Corporation Commission
(VSCC). The Company expects a decision by the VSCC in April 1994.
The supply-side portion of the Challenge 2000 Plan combines the use of power
purchased from utility and nonutility generating companies ("Buy Some") and the
construction of new generating capacity by the Company ("Build Some").
In 1992, as part of the "Buy Some" portion of the Challenge 2000 Plan, the
Company began the purchase of 48 MW of peaking capacity for 26 years from the
Delaware City Power Plant owned by Star Enterprise (Star). In December 1992,
the Company filed with the DPSC and MPSC for the approval of two agreements for
the purchase of 198 MW of baseload capacity for 30 years from two non-utility
generators--165 MW from the Delaware Clean Energy Project (DCEP) beginning at
the Company's option in 1996 or 1997 and 33 MW from National Energy Resources
Corporation (NERC) beginning in 1997. The MPSC approved the agreements in March
1993. In April 1993, the DPSC issued an order which neither approved nor
disapproved the agreements. In June 1993, the Company terminated the NERC
contract because the project's sponsor failed to post a security deposit
required under the contract. In response to changes in the Company's load
forecast, in November 1993, the Company and DCEP amended their agreement to
delay the purchase of the capacity, while preserving an option (until November
1, 1994) to cancel the agreement. Purchases from other non-utility generators
to start near the year 2000 are being considered.
In May 1993, as part of the "Build Some" portion of the Challenge 2000 Plan,
the Company placed into service a 175 MW combined cycle addition to the Hay
Road combustion turbines (CTs). Also in January 1994, the MPSC granted
conditionally to the Company a Certificate of Public Convenience and Necessity
(CPCN). The CPCN preserves the Company's option to construct and operate a 300
MW pulverized coal baseload unit in Dorchester County, Maryland, which would be
placed in commercial operation by the year 2000 or later. The power plant, as
currently planned, has an estimated construction cost of $566 million,
excluding $129 million of allowance for funds used during construction (AFUDC).
The Company also has a power plant life extension program and repowering plans
to extend the operating lives of certain generating units. For a further
discussion of the Company's "Build Some" plans, see "Life Extensions and
Repowerings" on page I-7.
The table on the following page summarizes the latest peak load and capacity
forecast of the Challenge 2000 Plan over the current and next five PJM
Interconnection planning years, which began on June 1, 1993. The Company
periodically reviews and updates its forecast to reflect changes in peak load
and capacity estimates. The Company expects to meet PJM Interconnection
capacity reserve obligations in these future planning years.
I-5
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<TABLE>
<CAPTION>
PEAK LOAD (MW) CAPACITY (MW)
PJM --------------------- ----------------------
PLANNING GROSS NET
YEAR SUMMER TOTAL SUMMER TOTAL TOTAL TOTAL RESERVE
BEGINNING COMPANY "SAVE COMPANY "BUY "BUILD INSTALLED MARGIN
JUNE 1 PEAK SOME" PEAK SOME" SOME" CAPACITY (%)
--------- ------- ----- ------- ----- ------ --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1993 2,555 226 2,329 48 2,808 2,856 22.6%
1994 2,618 237 2,381 48 2,758* 2,806* 17.8%
1995 2,530 243 2,287 48 2,814 2,862 25.1%
1996 2,593 251 2,342 48 2,818 2,866 22.4%
1997 2,654 260 2,394 48 2,818 2,866 19.7%
1998 2,719 269 2,450 48 2,818 2,866 17.0%
</TABLE>
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* The 50 MW reduction is due to capacity provided to another utility in
accordance with a capacity trade agreement.
POWER PLANTS
Nuclear
The Company's nuclear capacity is provided by Peach Bottom Atomic Power
Station (Peach Bottom) Units 2 and 3 and by Salem Nuclear Generating Station
(Salem) Units 1 and 2. The Company jointly owns these units, as tenants in
common, with PECO, Atlantic City Electric Company (AE), and Public Service
Electric and Gas Company (PSE&G). The Peach Bottom units are operated by PECO
and have a combined summer capacity of 2,086 MW, of which the Company is
entitled to 157 MW (7.51%). The Salem units are operated by PSE&G and have a
combined summer capacity of 2,212 MW, of which the Company is entitled to 164
MW (7.41%).
The operation of nuclear generating units is regulated by the Nuclear
Regulatory Commission (NRC). Such regulation requires that all aspects of plant
operation be conducted in accordance with NRC safety and environmental
requirements, and continuous demonstrations to the NRC that plant operations
meet applicable requirements. The NRC has the ultimate authority to determine
whether any nuclear generating unit may operate.
For a discussion of the Company's funding of its share of the estimated
future cost of decommissioning the Peach Bottom and Salem nuclear reactors, see
Note 6 of the Notes to Consolidated Financial Statements contained in the
Company's 1993 Annual Report to Stockholders filed as Exhibit 13.
Peach Bottom Units
On March 19, 1993, the NRC issued its Systematic Assessment of Licensee
Performance (SALP) Report on the performance of activities at Peach Bottom for
the period August 4, 1991 through October 31, 1992. A SALP Report evaluates
seven functional areas which are assigned ratings of "1", "2", or "3", with "1"
being the highest rating and "3" the lowest rating, although still acceptable.
Peach Bottom earned a rating of "1" in the areas of Emergency Preparedness and
Security and Safeguards, a rating of "2, Improving" in the areas of Plant
Operations and Radiological Controls, and a rating of "2" in the other three
functional areas. These numerical results were the same as the last SALP Report
except the areas of Plant Operations and Radiological Controls, which showed an
improving trend. The SALP Report stated that both units continued to operate in
a safe manner and that performance improvements and the correction of
previously identified deficiencies were indicated in most areas. The SALP
Report also noted several weaknesses warranting continued management attention,
including the areas of plant performance monitoring and engineering and
technical support.
In July 1992, the NRC issued an information notice alerting utilities owning
boiling water reactors (BWRs), including the owners of Peach Bottom, to
potential inaccuracies in water-level instrumentation during and after rapid
depressurization events. In May 1993, the NRC issued a bulletin requiring BWR
owners to, among other things, install instrumentation modifications during the
first cold shutdown of the
I-6
<PAGE>
plant occurring after July 30, 1993. These modifications were implemented on
Unit 2 in August 1993 and on Unit 3 in November 1993.
Salem Units
On September 1, 1993, the NRC issued its SALP Report on the performance of
activities at Salem for the period December 29, 1991 through June 19, 1993. The
NRC assigned ratings of "1" to Security and Radiological Controls, "1,
Declining" to Emergency Preparedness, and "2" to the four other functional
areas. These numerical results were the same as the last SALP Report except for
the areas of Radiological Controls, which improved from "2, Improving" to "1",
and Emergency Preparedness, which showed a declining trend. The NRC noted that
Salem's performance during the period was good; however, a substantial number
of operational challenges occurred which warranted additional management
attention.
In order to improve Salem's materiel condition, plant and personnel
performance, and to address the NRC's concerns in its October 1990 SALP Report,
the Salem owners, including the Company, are in the process of augmenting plans
to improve Salem's materiel condition, upgrade procedures, and enhance
personnel performance. The Company's share of these planned plant additions and
improvements for 1994-1998 are reflected in the Company's estimates of
construction expenditures for such periods. The planned improvements are
expected to coincide with plant operating schedules.
See page I-18 for a discussion on the cooling systems at Salem.
Hay Road
On June 1, 1993, Hay Road Unit 4, with a capacity of 175 MW, was placed in
service at a total cost of $137.6 million, excluding $12.4 million of AFUDC.
Hay Road Unit 4 is a combined cycle unit which uses exhaust heat from the three
existing Hay Road CTs as its energy source. With the addition of Hay Road Unit
4, the entire Hay Road facility provides 511 MW of capacity, or approximately
18% of the Company's installed capacity.
Life Extensions and Repowerings
The Company is conducting a life extension program on its older major
generating units to extend the operating life of each unit by a minimum of 20
years beyond the normal unit 30-year design life. Continued operation of these
units will defer the construction of new capacity and will help to meet PJM
Interconnection generating reserve margin obligations. Surveys of Indian River
Units 1, 2, and 3 and Edge Moor Units 3 and 4 have been completed. Projects
identified during the surveys are being implemented during scheduled
maintenance outages. Edge Moor Unit 5 and Vienna Unit 8 will undergo
conditional assessment surveys beginning in 1996. Construction expenditures on
these projects for the five-year period 1994-1998 are expected to total
approximately $29 million, excluding AFUDC.
The Company also plans to repower Indian River Units 1 and 2 utilizing
circulating fluidized bed technology. The units will be repowered in a phased-
construction approach and are expected to be completed in 2003. The repowering
will extend the operating life of each unit by 30 years and also will reduce
emissions. Construction expenditures on these projects for the five-year period
1994-1998 are expected to be approximately $36 million, excluding AFUDC.
PURCHASED POWER
The Company purchases coal-fired energy from the Allegheny Power System (APS)
on an economic basis to replace higher-cost generation from the Company's oil-
fired units. The Company also purchases 200 MW of energy from PECO under a
short-term agreement, extending through December 31, 1994. The
I-7
<PAGE>
Company receives additional energy from PECO (above 200 MW) as the energy is
available. The Company's estimated fuel savings from these purchases amounted
to $4.1 million during 1993.
The Company also has purchased 48 MW of long-term capacity as discussed under
"Challenge 2000 Plan" which begins on page I-4.
COST OF OUTPUT FOR LOAD
The following table sets forth the Company's annual generation output, fuel
cost per megawatt hour (MWh), and generation mix by unit fuel type for all
Company-owned facilities. The Company uses coal as its predominant fuel source.
Corresponding values for purchased power and for net interchange (purchases
less sales) as a member of the PJM Interconnection are also listed.
<TABLE>
<CAPTION>
GENERATION 1993 1992 1991
---------- ---------------- -------------- --------------
1,000 $/ 1,000 $/ 1,000 $/
UNIT FUEL TYPE MWH MWH % MWH MWH % MWH MWH %
-------------- ------ --- --- ------ --- --- ------ --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Coal-fired................... 6,028 18 47 4,696 19 39 5,499 20 45
Oil-fired.................... 2,343 24 18 1,713 26 14 1,761 30 15
Nuclear...................... 1,883 7 14 1,696 7 14 1,827 8 15
Natural Gas.................. 1,010 23 8 443 32 4 866 26 7
------ --- --- ------ --- --- ------ --- ---
Total Company Generation... 11,264 18 87 8,548 18 71 9,953 20 82
<CAPTION>
PURCHASES/INTERCHANGE
---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Purchases.................... 3,200 22 25 2,826 22 23 1,595 23 13
Net Interchange.............. (1,568) (30) (12) 755 7 6 562 4 5
------ --- --- ------ --- --- ------ --- ---
Total Output for Load...... 12,896 18 100 12,129 19 100 12,110 19 100
====== === === ====== === === ====== === ===
</TABLE>
FUEL SUPPLY FOR ELECTRIC GENERATION
The Company's electric generating capacity by fuel type is shown under
"Electric Operations--Installed Capacity" on page I-3.
Coal
Edge Moor Units 3 and 4, and the Indian River, Keystone and Conemaugh
generating stations are coal-fired. As of December 31, 1993, a maximum of 97%
of the Company's coal requirements were under supply contracts. During 1993,
21% of the coal was purchased under short-term contracts (less than three
years), 70% under long-term contracts (up to ten years), and the balance was
obtained through spot purchases. The Company does not anticipate any difficulty
in obtaining adequate amounts of coal at reasonable prices.
Oil
From 75% to 100% of the residual oil used in Edge Moor Unit 5 is currently
being supplied under a two-year contract which expires in 1994. The Company
expects to negotiate a new contract in 1994 with similar terms. Any amount over
75% of requirements may be purchased in the spot market. Natural gas is
utilized when economically feasible. The fuel supply contract for the Vienna
Generating Station, which expires in 1995, provides from 70% to 100% of that
station's requirements. Any amount over 70% of requirements may be purchased in
the spot market.
Gas
Natural gas, which is the primary fuel for the three CTs at the Company's Hay
Road site and a secondary fuel at Edge Moor Unit 5, is supplied partly through
contracts described under "Gas Operations" on page I-10.
I-8
<PAGE>
Additional natural gas is purchased on an interruptible basis from one of the
Company's pipeline suppliers. The secondary fuel for the Hay Road CTs is
kerosene which is purchased in the spot market.
Nuclear
The cycle of production and use of nuclear fuel involves the mining and
milling of uranium ore to uranium concentrate, conversion of the uranium
concentrate to uranium hexaflouride, enrichment of that gas, conversion of the
enriched gas to fuel pellets, fabrication of fuel assemblies, and the use of
the fuel assemblies in the generating station reactor. After spent fuel is
removed from a nuclear reactor, it is placed in temporary storage for cooling
in a spent fuel pool at the nuclear station site. The Federal Government has an
obligation for the transportation and ultimate disposal of the spent fuel, as
discussed below.
PECO has informed the Company that it has contracts for uranium concentrates
which will satisfy the fuel requirements of Peach Bottom through 1996. PSE&G
has informed the Company that it has contracts for uranium concentrates which
will satisfy the fuel requirements of Salem fully through 2000 and, thereafter,
60% through 2002. The table below summarizes the years through which PECO and
PSE&G have contracted for the other segments of the nuclear fuel supply cycle.
<TABLE>
<CAPTION>
CONVERSION ENRICHMENT FABRICATION
---------- ---------- -----------
<S> <C> <C> <C>
Peach Bottom Unit 2........................ 1997 2008(1) 1999
Peach Bottom Unit 3........................ 1997 2008(1) 1998
Salem Unit 1............................... 2000 1998(2) 2004
Salem Unit 2............................... 2000 1998(2) 2005
</TABLE>
- --------
(1) PECO has exercised its option to remain uncommitted under the United States
Enrichment Corporation (USEC) enrichment contract from 2000-2002; however,
this action does not exclude USEC enrichment services from consideration
during this period. PECO does not anticipate any difficulties in obtaining
necessary enrichment services for Peach Bottom.
(2) 100% coverage through 1998 and 30% through 2001. PSE&G has exercised its
option to remain uncommitted under the USEC enrichment contract from 1999-
2002; however, this action does not exclude USEC enrichment services from
consideration during this period. PSE&G does not anticipate any
difficulties in obtaining necessary enrichment services for Salem.
In conformity with the Nuclear Waste Policy Act (NWPA), PECO and PSE&G
entered into contracts with the United States Department of Energy (DOE) on
behalf of the joint owners providing that the Federal Government shall for a
fee take title to, transport, and dispose of spent nuclear fuel and high level
radioactive waste from the Salem and Peach Bottom reactors. The Company is
collecting a tenth of one cent per kilowatthour (kWh) of nuclear generation
from electric customers through fuel rates to provide for the future cost of
spent nuclear fuel disposal and is paying such amounts to the DOE. The DOE may
revise this charge as necessary to ensure full cost recovery of nuclear fuel
disposal. Under the NWPA, the Federal Government was to begin accepting spent
fuel for permanent offsite storage no later than 1998. However, in December
1989, the DOE announced that it would not be able to open a permanent, high-
level nuclear waste storage facility until 2010, at the earliest. The DOE has
stated that it would seek legislation from Congress for the temporary storage
of spent nuclear fuel for utilities beginning in 1998 or soon thereafter. The
Company cannot predict when the temporary or permanent storage sites will
become available.
PECO has advised the Company that Peach Bottom has adequate on-site temporary
storage capability until 1998 for Unit 2 and 1999 for Unit 3. Options for
expansion of storage capacity are being investigated by PECO. PSE&G has advised
the Company that Salem has adequate on-site temporary storage capability
through March 1998 for Unit 1 and March 2002 for Unit 2. PSE&G expects to
extend storage capacity at Salem Units 1 and 2 through March 2008 and March
2012, respectively, through a reracking project it began in 1992.
I-9
<PAGE>
The Energy Act provides, among other things, for the creation of a
Decontamination & Decommissioning (D&D) Fund to pay for the future cleanup of
DOE gaseous diffusion enrichment facilities. This plan is to be funded by both
domestic utilities and the Federal Government. Domestic utilities will pay an
aggregate amount of $150 million each year, adjusted annually for inflation,
into the D&D Fund based on their past purchases from the DOE Uranium Enrichment
Enterprise. This will continue for 15 years or until $2.25 billion, adjusted
annually for inflation, is collected. The Company accrued a liability and
corresponding regulatory asset of $8.1 million, representing its share of the
$2.25 billion. The Energy Act provides that this cost is to be recoverable in
the same manner as other fuel costs. The Company recovers fuel costs through
fuel adjustment clause revenues as discussed on page I-13. In 1993, the Company
made its first fund payment and began amortizing the D&D Fund cost to fuel
expense. The DPSC issued an order approving recovery of these costs through the
fuel adjustment clause. The MPSC, VSCC, and FERC have not yet addressed these
costs. The liability accrued for the Company's share of the D&D Fund cost was
$7.6 million as of December 31, 1993.
GAS OPERATIONS
During 1993, the average production cost of all gas sold was $3.22 per
thousand cubic feet (Mcf), compared with $2.70 per Mcf in 1992 and $2.69 per
Mcf in 1991. The Company's maximum 24-hour system capability, including natural
gas purchases, storage deliveries, and the planned send out of its local peak
shaving plant, is 145,591 Mcf. The maximum 1993 daily firm sendout, which
occurred on February 19, 1993, was 118,186 Mcf. The Company experienced a new
all-time peak daily firm sendout of 158,512 Mcf on January 19, 1994. Emergency
peak shaving equipment was used to meet the peak demand. The Company's previous
all-time peak daily firm sendout of 119,284 Mcf had occurred on January 21,
1985.
The gas requirements of the Company are purchased primarily under contracts
with three pipeline suppliers. The Company is entitled to receive the following
volumes of gas per day under its various contracts.
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION DAILY
CONTRACTS DATES MCF
--------- ---------- -------
<S> <C> <C> <C>
Supply.......................................... 4 1996-2004 21,615
Transportation.................................. 2 2004 56,544
Storage......................................... 4 1995-2004 42,432
Local Peak Shaving.............................. -- -- 25,000
-------
Total......................................... 145,591
=======
</TABLE>
The Company also purchases gas from pipelines and producers primarily under
one- to five-year agreements. To provide supplemental gas, the Company has its
own liquefied natural gas plant for liquefaction, storage, and re-gasification
of natural gas. The plant has a maximum planned daily sendout of 25,000 Mcf.
In 1992, the FERC issued Order No. 636 which requires the "unbundling" of
interstate pipeline services, thereby giving gas distribution companies (such
as the Company) greater options for gas supply, transportation, and storage.
The Company has restructured its gas portfolio in response to FERC Order No.
636 but no major changes were required. FERC Order No. 636 also permits
pipeline companies to include in their rates the transition costs of unbundling
their services. The Company estimates that such transition costs will be
approximately $2 million, in aggregate, and expects such costs to be collected
from its gas customers.
NON-REGULATED UTILITY BUSINESS (STEAM UTILITY)
Through 1991, the Company owned and operated an electric generating plant
which supplied electricity and steam to an adjacent refinery owned by Star at
Delaware City, Delaware. As previously reported, the Company sold this plant to
Star in 1991. The Company entered into a contract with Star to operate the
power
I-10
<PAGE>
plant for a fee from January 1992 through June 1995. Commencing in January
1993, the power plant is being operated through one of the Company's
nonregulated subsidiaries. If the contract with Star is not renewed, there
would not be a material impact on the Company's results of operations. See page
I-24 for a discussion of litigation instituted by Star against the Company
related to the operations of the plant prior to its sale to Star.
The Company also sells process steam to the DuPont Company's Edge Moor,
Delaware manufacturing plant via a pipeline from the Company's Edge Moor Power
Plant.
SUBSIDIARIES
Delmarva Energy Company and Delmarva Industries, Inc. are wholly-owned
subsidiaries of the Company and are partners in joint venture oil and gas
exploration and development programs in New York, Ohio, and Pennsylvania. As of
December 31, 1993, the combined stockholder's equity of Delmarva Energy Company
and Delmarva Industries, Inc. was $3.4 million.
Delmarva Services Company, a wholly-owned subsidiary, leases an office
building to the Company. As of December 31, 1993, the stockholder's equity of
Delmarva Services Company was $5.1 million.
Delmarva Capital Investments, Inc. (Delcap) is a wholly-owned subsidiary of
the Company that has invested in leveraged equipment leases, alternative energy
projects, real estate projects, landfill and waste-hauling companies and has
also undertaken operation and maintenance contracts for alternative energy and
related projects. Opportunities to grow Delcap's operating businesses and
participate in other energy-related businesses, in conjunction with Company
goals, are being pursued. Certain Company contributions have and may be
required in pursuit of these opportunities. During 1993, Delcap made dividend
payments of $3 million to the Company. As of December 31, 1993, the
stockholder's equity of Delcap was $37.0 million. Of this amount, landfill and
waste-hauling represented the largest component at about $21.3 million. The
balance consisted primarily of investments in leveraged leases, limited
partnerships, and real estate.
For a further discussion of the Company's subsidiaries see the Nonutility
Subsidiaries section of Management's Discussion and Analysis of Financial
Condition and Results of Operations and Note 16 of the Notes to Consolidated
Financial Statements of the 1993 Annual Report to Stockholders filed as Exhibit
13.
REGULATORY AND RATE MATTERS
The Company is subject to regulation with respect to its retail sales of
electricity by the DPSC, MPSC, and the VSCC, each of which have broad powers
over rate matters, accounting, and terms of service. Gas sales are subject to
regulation by the DPSC. In limited respects concerning properties and
operations in New Jersey and Pennsylvania, the Company is subject to regulation
by the utility commissions in those states. FERC exercises jurisdiction with
respect to the Company's accounting systems and policies, and the wholesale
(resale) transmission and sale of electric energy. FERC also regulates the
price and other terms of transportation of natural gas purchased by the
Company. The percentage of utility operating revenues (electric and gas)
regulated by each Commission for the year ended December 31, 1993 was as
follows: DPSC 64%; MPSC 22%; VSCC 3%; and FERC 11%.
BASE RATE PROCEEDINGS
The Company's most recent filings for electric base rate increases were made
on October 30, 1992 in its Delaware retail, Maryland retail, and resale (FERC)
jurisdictions and on May 7, 1993 in its Virginia retail jurisdiction. These
increases, as filed, reflected a requested 12.5% return on common equity
(12.23% for Virginia retail) and recovery of higher costs, including: the cost
of the new Hay Road Unit 4 combined-cycle power plant; the expense increase
associated with the cost of postretirement benefits under Statement of
Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions;" and other items including general
inflation. The increases which have resulted from these filings are being
mitigated by fuel savings attributed to Hay Road Unit 4 combined cycle
operation.
I-11
<PAGE>
These base rate proceedings, as well as other material base rate proceedings
in process since January 1, 1993, are discussed on the following pages.
The Company does not anticipate filing for an increase in electric base rates
which would become effective in 1994 in any of its jurisdictions. The Company
plans to file for an increase in gas base rates during the second quarter of
1994.
Delaware Electric Rates
DOCKET NO. 92-85
On October 30, 1992, partly based on forecasted data, the Company filed an
application for an annual $41.6 million increase in base rates. This increase
was expected to be offset by estimated fuel savings of approximately $5.2
million related to Hay Road Unit 4 combined cycle operation, resulting in a net
increase of $36.4 million or 8.5%. During the rate case, the Company lowered
its rate increase request to $36.6 million (before fuel savings) based on
updated information and a 12% return on equity.
On October 5, 1993, the DPSC approved a settlement for a $24.9 million
increase which reflects an 11.5% return on equity. When offset by the fuel
savings associated with Hay Road Unit 4, which were included in the lower fuel
rates that became effective in June 1993, customer rates increased
approximately 3.7%.
Delaware Gas Rates
DOCKET NO. 91-24
On July 2, 1991, the Company filed an application for an annual $4.8 million
or 6.5% increase in base rates. The requested increase became effective
February 2, 1992, subject to refund. On June 8, 1993, the DPSC approved an
increase of $4.1 million or 5.6%, reflecting a 12.5% return on equity.
An issue contested in this case involved the conditions under which firm
customers would be able to switch to non-firm service such as Interruptible Gas
Transportation (IGT) service. For a discussion of the outcome of this issue,
see "Competition--Gas Business" on page I-3.
Maryland Electric Rates
CASE NO. 8492
On October 30, 1992, partly based on forecasted data, the Company filed an
application for an annual $14.6 million increase in base rates. When updated
for actual data, the revenue request was $12.0 million. On April 1, 1993, the
MPSC approved a settlement agreement for a $7.8 million increase effective
April 1, 1993, two months earlier than expected. Although a specific return on
equity was not specified in the settlement agreement, the Company believes that
the implied return on equity approaches 12%. When offset by the fuel savings
associated with Hay Road Unit 4, which were included in the lower fuel rates
that became effective in April 1993, customer rates increased 2.3%.
Virginia Electric Rates
CASE NO. PUE920040
On May 27, 1992, the Company filed an application for an expedited $1.5
million annual increase in base rates. This request became effective on July 1,
1992, subject to refund. On April 7, 1993, the VSCC approved an increase of
$1.15 million or 5.1%, reflecting an 11.5% return on equity.
I-12
<PAGE>
CASE NO. PUE930036
On May 7, 1993, the Company filed an application for an annual $2.3 million
increase in base rates. The requested increase became effective October 5,
1993, subject to refund. On February 23, 1994, the VSCC approved a settlement
for an increase of $1.3 million or 7.2%, reflecting an 11.05% return on equity.
Resale Electric Rates
DOCKET NO. ER92-236-000
On December 20, 1991, the Company filed an application with FERC for an
annual $5 million or 5.3% increase in base rates. On February 18, 1992, FERC
issued an order permitting the Company to put a base rate increase of $4.8
million into effect on February 19, 1992, subject to refund. On June 29, 1993,
the FERC approved a settlement agreement for an increase of $4.125 million or
4.4% effective February 19, 1992. A specific return on equity was not stated in
the settlement agreement approved by FERC.
DOCKET NO. ER93-96-000
On October 30, 1992, the Company filed an application with FERC for an annual
$5.6 million increase in base rates. This increase was expected to be offset by
fuel savings of approximately $1.6 million related to Hay Road Unit 4 combined
cycle operation, resulting in a net increase of approximately $4.0 million or
3.8%. On June 3, 1993, at the Company's request, an interim increase of $4.0
million became effective, subject to refund. The Company has reached settlement
agreements with all of its resale customers allowing for an increase of $1.5
million or 1.5%. The difference between the amount reached in the settlement
agreements and the Company's original request is primarily due to a lower
return on equity. The settlement agreements also provide for a moratorium on
rate design and longer termination notice periods. The resale customers agreed
to provide a two-year notice for up to a 30% load reduction and a five-year
notice for greater than a 30% load reduction. The FERC is expected to rule on
these agreements during the second quarter of 1994.
FUEL ADJUSTMENT CLAUSES
The Company's tariffs include fuel adjustment clauses that permit the
collection of the costs of fuel burned in generating stations and the variable
(energy) costs of purchased and net interchange power from the Company's retail
and resale electric customers, and the costs of natural gas from its gas
customers. Fuel costs are deferred and charged to operations on the basis of
fuel costs included in customer billings under the Company's tariffs. For the
Delaware, Virginia, and FERC jurisdictional customers, the clauses are based
upon estimated annual fuel costs. For the Maryland jurisdictional customers,
the clause is based on historical average costs. Supporting data are filed with
and audited by the various commissions and formal hearings are held at periodic
intervals as required by law. Fixed costs (capacity or demand charges)
associated with purchased power transactions entered into for reliability
reasons are generally subject to base rate recovery. The present status or
results of significant fuel rate issues are discussed below. As of December 31,
1993, the Company had accrued fuel disallowance reserves which adequately
provide for any disallowances of fuel costs and penalties related to the issues
discussed below.
Delaware
The DPSC has a Power Plant Performance Program (PPPP) under which the Company
can receive financial rewards or penalties based on the performance of its 15
major generating units. The maximum level or "cap" for penalties and rewards is
limited to two percent (2%) of the total equity investment in the 15 units or
approximately $3.2 million. The PPPP compares actual performance (defined as
the three-year average equivalent availability factor (EAF) for fossil units or
capacity factor (CF) for nuclear units) with a predetermined EAF/CF target for
each generating unit.
I-13
<PAGE>
Results under the PPPP for calendar year 1992 were a penalty of $514,000,
primarily due to an extended outage at Indian River Unit 4 from September 28,
1992 through January 13, 1993. Results under the PPPP for 1993 are expected to
result in a reward of approximately $80,000.
In November 1992, the Company made its annual retail fuel adjustment filing
for 1993. This case was settled in October 1993 and resulted in the
disallowance of $515,000 of net replacement power costs associated with the
Salem Unit 2 turbine overspeed outage which lasted from November 9, 1991
through May 10, 1992. The settlement also provides for the avoidance of
penalties under the PPPP for Salem Unit 2 estimated at $265,000 for the years
1992-1994. Thus, the net incremental replacement power costs which the Company
will absorb through this settlement, based on its estimates, are $250,000.
The DPSC has a three-year gas incentive program which was scheduled to end in
July 1993. In a filing made in September 1993, the Company recommended that the
gas incentive program be continued. It is expected that the DPSC will make a
ruling in the second quarter of 1994. Under the program, the Company can
receive a maximum $300,000 annual reward (penalty) if unaccounted-for gas
volumes are below (above) 2.5% of total gas sendout volumes with a deadband of
plus or minus 0.5%. The most recent period subject to this program was the
twelve months ended July 1993. Since unaccounted-for gas volumes were within
the deadband, there was neither a reward nor a penalty.
Maryland
The MPSC has a Generating Unit Performance Program (GUPP) for the Company's
15 major generating units. The GUPP does not have automatic rewards or
penalties. It is used to assess the overall performance of these units. When
the aggregate performance of these units equals or exceeds a predetermined
system standard, as established by the MPSC, there is a rebuttable presumption
of satisfactory performance. When the overall system standard is not met, the
individual performance of each unit is compared to its specific performance
standard. The MPSC could then institute an investigation into the performance
levels of those units that operated below their respective standards and
disallow certain fuel costs.
The Company's 1992 GUPP results indicated that the system performance
standard was not met, primarily due to Indian River Unit 4 and Salem Unit 2 not
meeting their individual performance standards. These results were addressed in
the Company's June 1993 retail fuel adjustment filing. On March 8, 1994, the
MPSC issued an order approving a settlement agreement resulting in a $164,000
disallowance of replacement power costs.
In February 1994, the Company filed its calculation of the 1993 GUPP results
indicating that the system performance result met the aggregate performance
standard.
As previously reported, in April 1992 the Company made a retail fuel
adjustment filing. The single contested issue was the methodology used by the
Company to price natural gas burned for electric generation. Other parties had
recommended disallowances ranging from $0.8--$1.2 million for the period May
1989 through December 1992. A settlement was reached in 1993 resulting in a
$60,000 disallowance of fuel costs.
Resale
The Company has incurred certain mine closing costs that it has been
recovering from resale customers through its wholesale fuel adjustment clause
(FAC). FERC staff has issued a preliminary audit report which recommends that
the Company recompute the cost of fuel used in FAC billings to wholesale
customers by eliminating the mine closing costs beginning in 1989 and make
refunds with interest for any overbilled amounts. In the event of an
unfavorable ruling, the amount subject to refund would be approximately
$600,000.
On May 19, 1993, the Company's municipal customers filed a complaint with the
FERC seeking a $5.3 million refund of alleged excessive fuel and replacement
power costs related to coal procurement practices and the operating performance
of certain electric power plants. The Company believes the complaint is without
merit and has filed an answer which includes a motion seeking dismissal of the
complaint.
I-14
<PAGE>
OTHER REGULATORY MATTERS
Conowingo Power Company
In September 1993, the MPSC initiated a proceeding to investigate COPCO's
practice of purchasing all of its wholesale electric requirements from its
parent PECO, which is the sole owner of COPCO. In October
1993, PECO and its affiliate Susquehanna Electric Company (SE) filed a rate
schedule with the FERC which seeks to recover the costs of "stranded
investment" in the event COPCO purchases electricity from sources other than
PECO and SE. Also in November 1993, PECO and SE filed tariffs with the FERC
which seek to establish charges for electricity supplied by sources other than
PECO and SE and transmitted across PECO and SE's transmission lines. As a
potential supplier of electricity to COPCO, the Company has intervened in the
Maryland and the FERC proceedings described above. On March 10, 1994, in the
FERC proceeding related to the establishment of a "stranded investment" charge,
PECO made a settlement offer which provides that, among other matters, it would
conduct a solicitation for COPCO's long-term power supply needs effective
January 2006, enter into a power supply agreement with COPCO effective January
1996 with a rate discounted from PECO's current rate, and withdraw its
"stranded investment" filing with the FERC. Following a review of the offer, on
March 22, 1994, the Company responded to PECO's proposal with an offer in which
the Company, among other matters, offered to purchase COPCO and enter into a
long-term supply contract with PECO for at least 100 MW based on current market
prices. The Company is unable to predict the outcome of the proceedings at the
MPSC or at the FERC.
Maryland Management Audit
In March 1993, the MPSC began a focused management audit of seven areas of
the Company's management and operations: affiliated transactions, the Company's
relationship with the Maryland jurisdiction, management and organization,
strategic planning, compensation and benefits, conservation efforts, and
customer service. Focused management audits are conducted periodically by state
public service commissions as part of the overall regulatory process. The
Company last underwent such an audit in 1978 by the DPSC.
The MPSC focused management audit was completed in August 1993. The overall
assessment of the Company, in the areas reviewed, was that "Delmarva has
successfully created a corporate culture that has resulted in the achievement
of its long-term goals. The findings and the conduct experienced throughout the
study reflect a well-managed company." The audit also supported the Company's
efforts to fully develop and implement a market-oriented strategy in order to
effectively face the unprecedented changes occurring in the utility industry.
Findings in all seven audit areas generally were favorable. Thirty-one
recommendations were made to the Company and thirty were accepted by the
Company for follow-up.
Delaware Task Force on Regulation
For a discussion of the Public Utility Regulatory Task Force which is
reviewing the regulatory process in Delaware, see "Competition--Electric
Business" which begins on page I-1.
CONSTRUCTION AND FINANCING PROGRAM
Construction expenditures for the period 1991-1993, excluding $26 million of
AFUDC, and estimated construction expenditures for the period 1994-1998,
excluding $29 million of AFUDC, are shown in the following table:
<TABLE>
<CAPTION>
CALENDAR YEAR (DOLLARS IN THOUSANDS)
-----------------------------------------------------
1996-
1991 1992 1993 1994 1995 1998
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Electric Facilities:
Production.......... $ 97,300 $125,800 $ 69,100 $ 59,400 $ 71,300 $222,600
Transmission........ 14,900 12,200 17,300 23,300 14,600 54,000
Distribution........ 41,200 43,000 40,300 40,300 49,400 155,500
Gas Facilities........ 17,900 14,300 17,000 16,900 18,200 59,500
General Facilities.... 10,500 12,100 16,300 15,400 25,400 69,100
-------- -------- -------- -------- -------- --------
$181,800 $207,400 $160,000 $155,300 $178,900 $560,700
======== ======== ======== ======== ======== ========
</TABLE>
I-15
<PAGE>
Capital requirements for the period 1994-1995 are estimated to be $395
million, including $25 million for the maturity of First Mortgage Bonds in 1994
and $334 million for utility construction (excluding AFUDC). The Company
anticipates that during the period 1994-1995 approximately $250 million will be
generated internally, which represents 63% of total capital requirements and
75% of construction requirements. Capital requirements for the period 1996-1998
are estimated to be $677 million, including $57 million for the maturity of
long-term debt and $561 million for utility construction (excluding AFUDC). The
Company anticipates that during the period 1996-1998 $431 million will be
generated internally, which represents 64% of total capital requirements and
77% of construction requirements. The balance for both periods is expected to
be provided by the sale of long-term debt and equity securities. The types,
amounts, and times of such sales will depend upon future market conditions and
the Company's target capital structure.
The issuance of unsecured debt is limited by certain provisions in the
Company's Restated Certificate and Articles of Incorporation, as amended (the
Charter), to 20% of the Company's total capitalization excluding unsecured
debt. As of December 31, 1993, these provisions would have permitted the
Company to issue approximately $107 million of additional unsecured debt.
The issuance of First Mortgage Bonds by the Company is limited by a covenant
in its Mortgage and Deed of Trust dated October 1, 1943, as supplemented and
amended (the Mortgage), with Chemical Bank (Trustee) requiring the pro forma
ratio of consolidated earnings to interest on First Mortgage Bonds for any
twelve consecutive months within the fifteen months preceding such issuance to
be not less than 2.00. This ratio for the twelve months ended December 31, 1993
was 7.19. The issuance of First Mortgage Bonds by the Company also is limited
in the Mortgage by the bondable value of property additions.
Certain provisions in the Company's Charter limit the issuance of preferred
stock. The most restrictive of these provisions requires that the pro forma
ratio of consolidated earnings to fixed charges and preferred stock dividend
requirements combined for any twelve consecutive months within the fifteen
months preceding an issuance of preferred stock be 1.50 or greater. This ratio
was 2.62 for the twelve months ended December 31, 1993.
The Company does not expect that any of these limitations will restrict its
ability to issue unsecured debt, First Mortgage Bonds, and preferred stock in
the amounts necessary to meet its anticipated capital requirements.
The Company's ratios of earnings to fixed charges and earnings to fixed
charges and preferred dividends under the Securities and Exchange Commission
(SEC) Methods for 1989-1993 are shown below.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges (SEC Meth-
od)........................................... 3.47X 3.03X 2.58X 2.03X 3.01X
Ratio of Earnings to Fixed Charges and Pre-
ferred Dividends (SEC Method)................. 2.88X 2.51X 2.24X 1.69X 2.52X
</TABLE>
Under the SEC Methods, earnings, including AFUDC, have been computed by
adding the amount of income taxes and fixed charges to net income. For the
ratio of earnings to fixed charges and preferred dividends, preferred dividends
represent annualized preferred dividend requirements multiplied by the ratio
that pre-tax income bears to net income. Fixed charges include gross interest
expense and the estimated interest component of rentals. Excluding the write-
off of an investment in certain non-regulated subsidiary projects, the ratios
of earnings to fixed charges and earnings to fixed charges and preferred
dividends for the year ended December 31, 1990 would be 2.89X and 2.41X,
respectively. Net income and income taxes related to the cumulative effect of a
change in accounting for unbilled revenues recorded in 1991 are excluded from
the computation of these ratios. Excluding the gain from the Company's share of
a settlement reached in the lawsuit against PECO in connection with the
shutdown of Peach Bottom, the ratios of earnings to fixed charges and earnings
to fixed charges and preferred dividends for the year ended December 31, 1992
would be 2.78X and 2.30X, respectively.
I-16
<PAGE>
For further information on the Company's financing program, see Notes 7
through 9 of the Notes to Consolidated Financial Statements and the Liquidity
and Capital Resources section of Management's Discussion and Analysis of
Financial Condition and Results of Operations of the 1993 Annual Report to
Stockholders filed as Exhibit 13.
ENVIRONMENTAL MATTERS
The Company is subject to regulation with respect to the environmental
effects of its operations, including air and water quality control, solid
waste disposal, and limitation on land use by various federal, regional,
state, and local authorities. Permits are required for the Company's
construction projects and existing facilities. The Company has incurred, and
expects to continue to incur, construction expenditures and operating costs
because of environmental considerations and requirements. The Company is
engaged in a continuing program to assure compliance with the environmental
standards adopted by various regulatory authorities.
Construction Expenditures
Construction expenditures for environmental compliance, primarily with the
Clean Air Act Amendments of 1990 (The Clean Air Act), for the years 1994-1995
are estimated at $44 million (excluding AFUDC) and for the years 1996-1998 are
estimated at $65 million (excluding AFUDC). These amounts have been included
in the Company's estimates of construction expenditures under "Construction
and Financing Program" which begins on page I-15.
Clean Air Act
Title IV, Acid Rain Provisions, will require sulfur dioxide (SO/2/) and
oxides of nitrogen (NOx) emission reductions from some wholly and jointly-
owned generating units in two phases. Phase I and Phase II implementation will
be in 1995 and 2000, respectively. Regarding SO/2/ reductions, the two coal
fired units at the jointly-owned Conemaugh Power Plant are the Company's only
Phase I units. Flue gas desulfurization (FGD) units are under construction at
the facility and are expected to be completed in December 1994 and November
1995. The current project forecast is $377 million, of which the Company's
share is $14 million. The remainder of the Company's wholly and jointly-owned
fossil fired units are expected to meet Phase II emission limits through some
combination of fuel switching, FGD, repowering, environmental dispatch and/or
SO/2/ allowance trading.
In addition to SO/2/ reductions, NOx emissions from coal units are limited
by Title IV. Draft regulations for Phase I coal-fired units have been issued
by the Environmental Protection Agency (EPA) and can be satisfied through
operational changes and the use of low-NOx burner technology. Compliance for
the two coal fired units at the Conemaugh Power Plant, which are the Company's
only Phase I NOx units, is included in the SO/2/ compliance project discussed
above. Phase II NOx control regulations will not be promulgated by the EPA
until 1997. It is likely that the NOx reductions required under this title of
the Clean Air Act will be achieved through compliance with Title I
requirements as discussed below.
Control of NOx emissions from major stationary sources will also be required
by the Title I ozone nonattainment provisions of the Clean Air Act. In order
to attain the national ambient air quality standard for ozone, the States of
Delaware, Maryland, and Virginia are required by the EPA to promulgate
Reasonably Available Control Technology (RACT) regulations for existing
sources that are located within ozone nonattainment regions or are within the
Northeast Ozone Transport Region. These regulations would require additional
equipment on certain generating facilities. The Company's generating
facilities in Virginia are not anticipated to be affected by RACT rules, as
they are located in ozone attainment areas and are outside the Northeast Ozone
Transport Region.
The Delaware Department of Natural Resources and Environmental Control
(DNREC) promulgated NOx RACT regulations in January 1993. The Company, along
with several other affected parties, appealed the regulations. Pursuant to a
settlement between the appellants and DNREC, DNREC issued amended regulations
in November 1993, which are satisfactory to the Company. These regulations are
subject to
I-17
<PAGE>
approval by the EPA. In order to comply with the DNREC NOx RACT regulations, in
November 1993 the Company filed a proposal with DNREC to make operating changes
in, and to install additional equipment on, certain generating facilities,
including installation of low NOx burner technology on Edge Moor Units 4 and 5
and Indian River Units 3 and 4. The generating capacities of these plants are
not expected to be affected by these changes.
In Maryland, RACT regulations were promulgated in the fall of 1992. The
Company has submitted a RACT proposal for its Maryland facilities which relies
on improving existing combustion system operations to minimize NOx emissions.
The anticipated capital cost for compliance with the Company's Delaware and
Maryland RACT proposals is approximately $35 million. Because of uncertainties
as to the final RACT regulations and as to the revisions which may be required
to the Company's RACT proposals, it is possible that additional costs will be
incurred at these and other facilities to further control NOx emissions.
However, the Company cannot predict the additional costs, if any, that may be
incurred.
The Company is in the process of installing continuous emissions monitoring
equipment on its affected Title IV units and units subject to certain Title I
NOx RACT rules by December 31, 1994. It is estimated that the construction
expenditures for such monitors will be approximately $7 million.
The Clean Air Act also imposes operating permit fees on affected sources. The
Company's permit fees are anticipated to be approximately $750,000 per year,
when the program is fully implemented in the mid-1990's.
To help attain ambient air quality standards, the Clean Air Act mandates that
the emission of certain air pollutants associated with the construction of new
sources or modifications to existing facilities be offset by reductions in
similar emissions from existing sources. Such requirements may affect the
Company's ability to locate, construct, and expand generating facilities in the
future.
The Company anticipates that the costs of complying with the Clean Air Act
will be recoverable from its customers.
Salem Nuclear Generating Station
In June 1993, the New Jersey Department of Environmental Protection and
Energy (NJDEPE) issued a draft permit that would require PSE&G to undertake
various measures to protect aquatic life in the Delaware Estuary and to provide
broad-ranging ecological benefits. Such measures include the restoration and/or
enhancement of 10,000 acres of marshlands, modifications to Salem's intake
screens, and a comprehensive biological monitoring program. The draft permit
would not require PSE&G to construct closed-cycle cooling towers, as was
originally proposed under a 1990 NJDEPE draft permit and which PSE&G believes
are unnecessary. The estimated cost of compliance with the draft permit is
approximately $90 million of which the Company's share would be $6.7 million.
The estimated cost for closed-cycle cooling towers, based on natural draft and
forced draft technologies, range from $720 million to $2 billion, including the
cost of replacement power while the units are shut down during construction, of
which the Company's share would be from $53 to $148 million.
The NJDEPE received a substantial number of comments on the draft permit
including a large number of suggestions that the draft permit be changed to
require closed-cycle cooling towers. The comments to the NJDEPE also made a
variety of claims as to alleged legal defects in the draft permit. NJDEPE has
stated that it intends to issue a final permit in the second quarter of 1994.
The EPA has authority to veto the issuance of a final permit by the NJDEPE, and
action by the EPA cannot be predicted. If a final permit is issued which
maintains the terms of the draft permit, additional permits from various
agencies will be required for implementation, as to which no assurance can be
given. The Company cannot predict the outcome of this matter.
Water Quality Regulations
DNREC and the Maryland Department of the Environment (MDE) have proposed
major changes to water quality regulations which emphasize increased control of
toxic pollutants and signal a shift away from
I-18
<PAGE>
existing technology-based standards. In addition, DNREC has proposed increased
restrictions on thermal discharge limits. In Delaware, regulations have been
issued and are in effect. In Maryland, the MDE has issued proposed regulations
for comment. As part of this process, one discharge from the Indian River Power
Plant was included on a Delaware list of suspected toxic pollutant discharges
and one discharge from the Vienna Power Plant was added to the Maryland toxic
discharge list by the EPA. National Pollutant Discharge Elimination System
(NPDES) permit modifications for each plant are expected in 1994. The cost of
complying with the final modified Delaware and Maryland regulations is not
expected to be material.
The Clean Water Act requires that the cooling water intake and discharge
systems at the Edge Moor and Indian River Power Plants minimize adverse
environmental impact. Between 1976 and 1979, the Company submitted to DNREC the
results of environmental impact studies which demonstrated compliance with the
Act. DNREC is in the process of updating the Company's studies to determine if
the systems are in compliance. These studies are expected to take one to two
years. If it should be determined that the intake and/or discharge systems are
not in compliance with the Act, construction expenditures to modify the systems
could be from $3 to $47 million.
Hazardous Substances
The disposal of Company-generated hazardous substances can result in costs to
clean up facilities found to be contaminated due to past disposal practices.
Federal and State statutes authorize governmental agencies to compel
responsible parties to remediate certain abandoned or uncontrolled hazardous
waste sites. The Company's exposure is minimized by adherence to environmental
standards for Company-owned facilities and through a contractor screening and
audit process.
The Company currently is a potentially responsible party (PRP) at one federal
Superfund site in Philadelphia, Pennsylvania (the Metal Bank/Cottman Avenue
site) where it had sent scrap transformers for reclamation. The site is alleged
to be contaminated with PCBs and other hazardous wastes. The Company and other
utilities formed a PRP group and signed an Administrative Order on Consent with
the EPA to finance and conduct a Remedial Investigation/Feasibility Study
(RI/FS) to determine the need for any additional cleanup. The study is expected
to be completed in the fall of 1994. The Company's allocated share of the PRP
group is 0.24 percent. The total cost of the RI/FS is estimated to be
approximately $5.2 million, making the Company's share approximately $12,000.
The cleanup remedy and total costs are not yet known; however, based on the
Company's allocated share of the potential liability, total cleanup costs to be
incurred by the Company are not expected to be material.
The Company also is alleged to be a third-party contributor at two other
federal Superfund sites: the Bridgeport Rental and Oil Services site in Logan
Township, New Jersey, and the Berks Associates site in Douglassville,
Pennsylvania. In the past, the Company allegedly had contracted with certain
waste haulers to dispose of waste oil. These waste haulers contend that certain
volumes of waste oil that they sent to these sites originated from the Company.
Because evidence linking the Company to the sites is weak and the volume of
waste oil purportedly sent to the sites is small, the Company does not expect
its share of total cleanup costs, if any, for both sites to exceed $75,000.
The Company's former coal gasification sites in Wilmington and New Castle
have been placed on Delaware's list of state superfund sites by DNREC. Also,
the Company's former coal gasification site in Cambridge has been placed on
Maryland's list of state superfund sites by MDE. Until investigations are
completed, it cannot be determined whether remediation at the New Castle and
Cambridge sites will be necessary and, if so, what the resultant costs will be.
The Company completed its own investigation and risk assessment of the
Wilmington coal gasification site in 1987. Based on the results of that study,
which were submitted to DNREC, the Company determined that the site posed a
minimal risk to the environment and the surrounding community. DNREC has now
advised the Company that additional field sampling will be required so that an
updated risk assessment of the site and other adjacent areas can be completed.
The Company is cooperating with DNREC in developing and conducting the
assessment, which is expected to be completed in the fall of 1994 at a total
cost of approximately $250,000. If sufficient site contamination and/or risk to
the environment is identified, the
I-19
<PAGE>
Company may be required to incur costs for site remediation. If remediation
should consist of paving the site, the cost would be approximately $500,000.
Additional costs could be incurred if paving the site is not sufficient to
mitigate contamination. However, until the risk assessment is completed, the
Company cannot predict what actions and related costs, if any, may be required
to remediate the site.
The Company anticipates that risk assessment and any remediation costs will
be recoverable from its customers.
Emerging Environmental Issues
An environmental issue that could affect the electric utility industry is
that of potential health risks associated with exposure to electric and
magnetic fields (EMF) from electric transmission lines and other facilities.
Studies present conflicting evidence and inconclusive results. Although no
direct link between EMF and human health has been identified, the Company
supports further research. The outcome of future studies may affect the
Company's design, location, and cost of electric power facilities. However, the
Company cannot predict the outcome of this issue.
Another environmental issue that could affect the electric utility industry
is the emission of "greenhouse gases," in particular the release of carbon
dioxide from generating facilities into the atmosphere which has been
associated with the potential for global warming. Despite scientific
uncertainties and disagreements regarding the effects of global warming, the
Company is exploring cost-effective ways to reduce greenhouse gas emissions
while satisfying its customers' growing demand for energy. Specific actions
include supporting scientific research, continuing its balanced environmental
stewardship/energy resource plans (the Challenge 2000 Plan), and enhancing
energy conservation in the Company's operations. President Clinton's Climate
Change Action Plan introduced in October 1993 relies primarily on voluntary
initiatives. Should mandatory emissions limitations or a "carbon tax" be
imposed, the Company's operations could be affected. However, the Company
cannot predict the outcome of this issue.
Subsidiaries
Certain of the Company's subsidiaries are also subject to regulations with
respect to the environmental effects of their operations, including air and
water quality control, solid waste disposal, and limitation on land use by
various federal, regional, state, and local authorities. The Company believes
that its subsidiaries are in substantial compliance with all environmental
regulations.
RETAIL FRANCHISES
The Company holds franchises, which are for the most part unlimited in time,
for the rendition of retail electric and gas service in certain designated
areas and municipalities in the State of Delaware, pursuant to legislative
enactments of the General Assembly and to consents, orders, and permits from
various public bodies and municipal authorities.
The Company generally has perpetual franchises for the rendition of retail
electric service in all of its assigned territories in the State of Maryland,
pursuant to Maryland law and appropriate orders of the MPSC.
The Company has perpetual franchises for the rendition of retail electric
service in certain designated areas of the Commonwealth of Virginia, pursuant
to appropriate orders of the VSCC under the Virginia Public Utility Facilities
Act. It also has franchises for the rendition of retail electric service within
other municipalities which are not perpetual, but which are expected to be
renewed at their expiration dates.
In Pennsylvania, the Company holds certificates of public convenience from
the Pennsylvania Public Utility Commission to own and exercise rights with
respect to its interests in certain electric generating stations and
transmission lines located in the State.
NUMBER OF EMPLOYEES
The number of full time employees of the Company at December 31, 1993 was
2,810.
A total of 1,613 employees are represented by the International Brotherhood
of Electrical Workers Locals 1238 (Northern) and 1307 (Southern). Local 1238
and 1307 contracts with the Company expire on December 15, 1994 and June 25,
1995, respectively.
I-20
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
The names, ages, and positions of all of the executive officers of the
Company as of December 31, 1993 are listed below along with their business
experience during the past five years. Officers are elected annually by the
Board of Directors at the meeting of directors immediately following the Annual
Meeting of Stockholders. There are no family relationships among these
officers, nor any arrangement or understanding between any officer and any
other person pursuant to which the officer was selected.
EXECUTIVE OFFICERS OF THE REGISTRANT
(AS OF DECEMBER 31, 1993)
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE
NAME, AGE AND POSITION DURING PAST 5 YEARS
---------------------- -------------------
<S> <C>
Howard E. Cosgrove, 50................. Elected 1992. President and Chief Operating Officer
Chairman of the Board, President, and from 1991 to 1992; Executive Vice President from 1985
Chief Executive Officer and Director to 1991.
H. Ray Landon, 58...................... Elected 1988.
Executive Vice President and Director
Ralph E. Klesius, 51................... Elected 1992. Vice President, Engineering from 1988
Senior Vice President and to 1992.
Environmental Compliance Officer
Thomas S. Shaw, 46..................... Elected 1992. Vice President/President, Delmarva
Senior Vice President/President, Capital Investments, Inc. from 1991 to 1992;
Delmarva Capital Investments, Inc. Vice President, Gas Division from 1990 to 1991;
Vice President, Production from 1984 to 1990.
Barbara S. Graham, 45.................. Elected 1992. Treasurer from 1987 to 1992.
Vice President and Chief Financial
Officer
Donald E. Cain, 48..................... Elected 1988.
Vice President, Administration
Paul S. Gerritsen, 48.................. Elected 1992. Vice President and Chief Financial Officer
Vice President, Strategic Energy from 1987 to 1992.
Markets, Pricing and Regulation
Kenneth K. Jones, 57................... Elected 1987.
Vice President, Planning
Wayne A. Lyons, 54..................... Elected 1990. Vice President from 1985 to 1990.
Vice President, Division Operations
Frank J. Perry, 50..................... Elected 1990. Vice President, Gas Division from
Vice President, Production 1986 to 1990.
Jack Urban, 50......................... Elected 1991. General Manager, Production Services
Vice President, Gas Division from 1990 to 1991; General Manager, Fuel Supply from
1984 to 1990.
James P. Lavin, 46..................... Elected 1993. Comptroller-Corporate and Chief
Comptroller and Chief Accounting Accounting Officer from 1989 to 1993; Assistant
Officer Comptroller from 1983 to 1989.
</TABLE>
I-21
<PAGE>
ITEM 2. PROPERTIES
Substantially all utility plants and properties of the Company are subject to
the lien of the Mortgage under which the Company's First Mortgage Bonds are
issued.
The Company's electric properties are located in Delaware, Maryland,
Virginia, Pennsylvania, and New Jersey. The following table sets forth the net
installed generating capacity available to the Company to serve its peak load
as of December 31, 1993.
<TABLE>
<CAPTION>
NET INSTALLED
SUMMER
GENERATING
CAPACITY
STATION LOCATION (KILOWATTS)
------- -------- -------------
<S> <C> <C>
COAL-FIRED
Edge Moor...................... Wilmington, DE.................. 251,000
Indian River................... Millsboro, DE................... 764,000
Conemaugh...................... New Florence, PA................ 63,000(A)
Keystone....................... Shelocta, PA.................... 63,000(A)
---------
1,141,000
---------
OIL-FIRED
Edge Moor...................... Wilmington, DE.................. 444,000
Vienna......................... Vienna, MD...................... 151,000
---------
595,000
---------
COMBUSTION TURBINES/COMBINED CY-
CLE
Hay Road....................... Wilmington, DE.................. 511,000
---------
NUCLEAR
Peach Bottom................... Peach Bottom Twp., PA........... 157,000(A)
Salem.......................... Lower Alloways Creek Twp., NJ... 164,000(A)
---------
321,000
---------
PEAKING UNITS
Christiana..................... Wilmington, DE.................. 45,000
Edge Moor...................... Wilmington, DE.................. 13,000
Madison Street................. Wilmington, DE.................. 11,000
West........................... Marshallton, DE................. 14,000
Delaware City.................. Delaware City, DE............... 14,000
Indian River................... Millsboro, DE................... 17,000
Vienna......................... Vienna, MD...................... 17,000
Tasley......................... Tasley, VA...................... 26,000
Salem.......................... Lower Alloways Creek Twp., NJ... 3,000(A)
Crisfield...................... Crisfield, MD................... 10,000
Bayview........................ Bayview, VA..................... 12,000
Keystone....................... Shelocta, PA.................... 400(A)
Conemaugh...................... New Florence, PA................ 400(A)
---------
182,800
---------
PURCHASED CAPACITY............... Delaware City, DE............... 48,000
CUSTOMER-OWNED CAPACITY.......... Delaware City, DE............... 57,000(B)
---------
Total.......................... 2,855,800
=========
</TABLE>
- --------
(A) Company portion of jointly owned plants.
(B) Represents capacity owned by a refinery customer which is available to the
Company to serve its peak load.
I-22
<PAGE>
Major transmission and distribution lines owned and in service are as
follows:
<TABLE>
<CAPTION>
VOLTAGE CIRCUIT MILES
------- -------------
<S> <C>
Transmission:
500 kV..................................................... 16
230 kV..................................................... 247
138 kV..................................................... 426
69 kV..................................................... 714
Distribution:
34 kV..................................................... 109
25 kV and below........................................... 8,999
</TABLE>
The Company's electric transmission and distribution system includes 1,338
transmission poleline miles of overhead lines, 5 transmission cable miles of
underground cables, 6,634 distribution poleline miles of overhead lines, and
4,294 cable miles of distribution underground cables.
The Company has a liquefied natural gas plant located in Wilmington, Delaware
with a storage capacity of 3.045 million gallons and a planned sendout capacity
of 25,000 Mcf per day.
The Company also owns four natural gas city gate stations at various
locations in its gas service territory. These stations have a total sendout
capacity of 125,000 Mcf per day.
The following table sets forth the Company's gas pipeline miles:
<TABLE>
<S> <C>
Transmission Mains...................................... 111*
Distribution Mains...................................... 1,284
Service Lines........................................... 1,012
</TABLE>
--------
* Includes 11 miles of joint-use gas pipeline that is used 10%
for gas and 90% for electric.
The Company owns and occupies office buildings in Wilmington and Christiana,
Delaware and Salisbury, Maryland, and also owns elsewhere in its service area a
number of properties that are used for office, service, and other purposes.
ITEM 3. LEGAL PROCEEDINGS
In October 1992, the Company's largest firm gas customer filed a complaint in
the Delaware Chancery Court seeking rescission of its current firm service
agreement with the Company and other relief, including non-firm service as an
interruptible Gas Transportation customer. For a discussion of the outcome of
this case, see "Competition--Gas Business" on page I-3.
In November 1992, DCTC-Glendon, Inc., a subsidiary of the Company, filed a
lawsuit in the U.S. District Court for the Eastern District of Pennsylvania
against Energenics/Glendon, Inc. (EGI) and Joseph M. Reibman (Reibman), the
sole shareholder of EGI. In July 1993, the court entered an order granting
EGI's and Reibman's motion to file omitted counterclaims and add counterclaim
defendants, including the Company, various subsidiaries of the Company, and
certain individual officers and employees of the Company and its subsidiaries.
In February 1994, DCTC-Glendon, Inc., Delcap, Reibman and the counterclaim
defendants settled the litigation and all claims made by the parties were
dismissed with prejudice.
In June 1993, the Delaware Coastal Zone Industrial Control Board (the
"Board") adopted regulations (the "Regulations") under Delaware's Coastal Zone
Act which would, among other things, prohibit the Company from constructing new
power-generating facilities or expanding any of its existing power-generating
facilities outside a designated boundary. In July 1993, the Company filed a
complaint in the Delaware Superior Court seeking to have the Regulations
declared null and void. In addition, the Company joined with
I-23
<PAGE>
other affected parties in filing a complaint in July 1993 in the Delaware
Chancery Court. The Chancery Court complaint alleges procedural violations of
the Freedom of Information Act by the Board in the passage of the Regulations
and requests that the Regulations be declared null and void. The Company cannot
predict the outcome of either of these lawsuits.
On December 14, 1993, Star filed a complaint against the Company in Delaware
Chancery Court alleging that the Company overcharged it for pension and tax-
related costs under a contract entered into by the parties' predecessors in
1955. The complaint asks for a refund and damages totalling $9.3 million. While
the Company believes that it did not overcharge Star and is defending its
position, it cannot predict the outcome of the lawsuit.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of the fiscal year covered
by this report to a vote of security holders, through the solicitation of
proxies or otherwise.
I-24
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is listed on the New York and Philadelphia Stock
Exchanges and has unlisted trading privileges on the Cincinnati, Midwest, and
Pacific Stock Exchanges and had the following dividends declared and high/low
prices by quarter for the years 1993 and 1992.
<TABLE>
<CAPTION>
1993 1992
---------------------- -----------------------
PRICE PRICE
DIVIDEND ------------- DIVIDEND --------------
DECLARED HIGH LOW DECLARED HIGH LOW
-------- ------ ------ -------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
First Quarter.................... $.38 1/2 $24 22 1/8 $.38 1/2 $21 1/2 $20
Second Quarter................... .38 1/2 24 1/8 21 1/2 .38 1/2 22 7/8 20 1/2
Third Quarter.................... .38 1/2 25 7/8 23 1/8 .38 1/2 23 3/4 22 1/2
Fourth Quarter................... .38 1/2 25 5/8 21 1/4 .38 1/2 23 7/8 22 1/8
</TABLE>
The Company had 58,225 registered holders of common stock as of December 31,
1993.
The Charter and the Mortgage securing the Company's outstanding bonds contain
restrictions on the payment of dividends on common stock which would become
applicable if its capital and retained earnings fall below certain specific
levels or if preferred stock dividends are in arrears.
The retained earnings available for dividends on common stock as of December
31, 1993 were approximately $223,814,000 under the most restrictive of these
provisions.
While the Board of Directors intends to continue the practice of paying
dividends quarterly, amounts and dates of such dividends as may be declared
will necessarily be dependent upon the Company's future earnings, financial
requirements, and other factors. For a further discussion of dividends, refer
to the "Dividends" section of Management's Discussion and Analysis of Financial
Condition and Results of Operations included in the 1993 Annual Report to
Stockholders, incorporated by reference herein.
ITEM 6. SELECTED FINANCIAL DATA
This information is contained on page 18 of the 1993 Annual Report to
Stockholders filed herein as Exhibit 13, which portion of such Annual Report is
hereby incorporated by reference herein.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This information is contained on pages 19 through 26 of the 1993 Annual
Report to Stockholders filed herein as Exhibit 13, which portion of such Annual
Report is hereby incorporated by reference herein. Refer to the "Competition"
section of Part I herein for an update to the disclosure included in the
"Competition" section of Management's Discussion and Analysis of Financial
Condition and Results of Operations concerning strategies to mitigate the
expected loss of revenues in 1995 due to the decision of a resale customer
(ODEC) to purchase up to 150 MW from another utility.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements, notes 1 through 18 to consolidated
financial statements, and related report thereon of Coopers & Lybrand,
independent accountants, appear on pages 27 through 46 of the 1993 Annual
Report to Stockholders filed herein as Exhibit 13, which portion of such Annual
Report is hereby incorporated by reference herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
II-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Delmarva Power & Light Company
Wilmington, Delaware
Our report, which includes an explanatory paragraph regarding the Company's
changes in its methods of accounting for unbilled revenues, income taxes, and
postretirement benefits other than pensions, on the consolidated financial
statements of Delmarva Power & Light Company has been incorporated by reference
in this Form 10-K from page 27 of the 1993 Annual Report to Stockholders of
Delmarva Power & Light Company. In connection with our audits of such financial
statements, we have also audited the related financial statement schedules
listed in the index in Item 14 of this Form 10-K.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
Coopers & Lybrand
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 4, 1994
II-2
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
"Proposal No. 1 -- Election of Directors" is incorporated by reference herein
from the Definitive Proxy Statement which is expected to be filed on or about
April 21, 1994, and information about the executive officers of the registrant
is included under Item 1.
ITEM 11. EXECUTIVE COMPENSATION
"Executive Compensation" is incorporated by reference herein from the
Definitive Proxy Statement which is expected to be filed on or about April 21,
1994.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
"Proposal No. 1 -- Election of Directors" is incorporated by reference herein
from the Definitive Proxy Statement which is expected to be filed on or about
April 21, 1994.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
III-1
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements--The following financial statements are contained
in the Company's 1993 Annual Report to Stockholders filed as Exhibit 13
hereto and incorporated herein by reference.
<TABLE>
<CAPTION>
1993
ANNUAL REPORT
FINANCIAL STATEMENT (PAGE)
------------------- -------------
<S> <C>
Consolidated Statements of Income for the three years ended
December 31, 1993............................................ 28
Consolidated Statements of Cash Flows for the three years
ended December 31, 1993...................................... 29
Consolidated Balance Sheets as of December 31, 1993 and 1992.. 30 and 31
Consolidated Statements of Capitalization as of December 31,
1993 and 1992................................................ 32
Consolidated Statements of Changes in Common Stockholders' Eq-
uity for the three years ended December 31, 1993............. 33
Notes to Consolidated Financial Statements.................... 34 to 46
</TABLE>
2. Financial Statement Schedules--The following financial statement
schedules are contained in Part IV of this report.
<TABLE>
<CAPTION>
1993
FORM 10K
SCHEDULE (PAGE)
-------- -------------
<S> <C>
V Utility Plant Property for the three years ended December
31, 1993................................................... IV-3 to IV-8
VI Consolidated Accumulated Depreciation and Amortization
(Utility Plant) for the
three years ended December 31, 1993........................ IV-9 to IV-11
IX Short-Term Borrowings for the three years ended December
31, 1993................................................... IV-12
X Supplemental Income Statement Information for the three
years ended December 31, 1993.............................. IV-13
</TABLE>
All other schedules have been omitted since the required information is
not present or not present in amounts sufficient to require submission of
the schedule or because the information required is included in the
respective financial statements or the notes thereto.
3. Schedule of Operating Statistics for the three years ended December
31, 1993 can be found on page IV-14 of this report.
4. Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
-------
<C> <S>
3-A Copy of the Restated Certificate and Articles of Incorporation
effective as of April 12, 1990. (Filed with Registration Statement
No. 33-50453.)
3-B Copy of the Company's Certificate of Designation and Articles of
Amendment establishing the 7 3/4% Preferred Stock--$25 Par. (Filed
with Registration Statement No. 33-50453.)
3-C Copy of the Company's Certificate of Designation and Articles of
Amendment establishing the 6 3/4% Preferred Stock.
3-D Copy of the Company's By-Laws as amended September 30, 1993.
4-A Copy of the Mortgage and Deed of Trust of Delaware Power & Light
Company to the New York Trust Company, Trustee, (Chemical Bank,
successor Trustee) dated as of October 1, 1943 and copies of the
First through Sixty-Eighth Supplemental Indentures thereto. (Filed
with Registration Statement No. 33-1763.)
4-B Copy of the Sixty-Ninth Supplemental Indenture. (Filed with
Registation Statement No. 33-39756.)
4-C Copies of the Seventieth through Seventy-Fourth Supplemental
Indentures. (Filed with Registration Statement No. 33-24955.)
</TABLE>
IV-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
-------
<C> <S>
4-D Copies of the Seventy-Fifth through the Seventy-Seventh Supplemental
Indentures. (Filed with Registration Statement No. 33-39756.)
4-E Copies of the Seventy-Eighth and Seventy-Ninth Supplemental
Indentures. (Filed with Registration Statement No. 33-46892.)
4-F Copy of the Eightieth Supplemental Indenture. (Filed with
Registration Statement No. 33-49750.)
4-G Copy of the Eighty-First Supplemental Indenture. (Filed with
Registration Statement No. 33-57652.)
4-H Copy of the Eighty-Second Supplemental Indenture. (Filed with Form
10-K for the year ended December 31, 1992.)
4-I Copy of the Eighty-Third Supplemental Indenture. (Filed with
Registration Statement No. 33-50453.)
4-J Copy of the Eighty-Fourth Supplemental Indenture.
4-K Copy of the Eighty-Fifth Supplemental Indenture.
10-A Copy of the Management Incentive Compensation Plan amended and
restated as of January 1, 1992. (Filed with Form 10-K for the year
ended December 31, 1991.)
10-B Copy of an amendment to the Management Incentive Compensation Plan
adopted by the Board of Directors on January 28, 1993, effective as
of January 1, 1993. (Filed with Form 10-K for the year ended
December 31, 1992.)
10-C Copy of the Supplemental Executive Retirement Plan, revised as of
October 29, 1991. (Filed with Form 10-K for the year ended December
31, 1992.)
10-D Copy of the Long Term Incentive Plan amended and restated as of
January 1, 1992. (Filed with Form 10-K for the year ended December
31, 1991.)
10-E Copy of an amendment to the Long Term Incentive Plan adopted by the
Board of Directors on January 28, 1993, effective as of January 1,
1993. (Filed with Form 10-K for the year ended December 31, 1992.)
10-F Copy of the severance agreement with members of management.
10-G Copy of the current listing of members of management who have signed
the severance agreement.
10-H Copy of the Management Life Insurance Plan amended and restated as
of January 1, 1992. (Filed with Form 10-K for the year ended
December 31, 1991.)
12-A Computation of ratio of earnings to fixed charges.
12-B Computation of ratio of earnings to fixed charges and preferred
dividends.
13 Certain portions of the 1993 Annual Report to Stockholders which are
incorporated by reference in this Form 10-K.
23 Consent of Independent Accountants.
</TABLE>
b) Reports on Form 8-K (filed during the reporting period):
A Report on Form 8-K dated October 28, 1993, containing a press release
of the Company concerning third quarter earnings, was filed with the
Commission.
IV-2
<PAGE>
DELMARVA POWER & LIGHT COMPANY
SCHEDULE V--UTILITY PLANT PROPERTY
FOR THE YEAR ENDED DECEMBER 31, 1993
(THOUSANDS OF DOLLARS)
<TABLE>
- ------------------------------------------------------------------------------------------------
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- ------------------------------------------------------------------------------------------------
OTHER CHANGES--DEBIT
AND/OR (CREDIT)
----------------------------
ADJUST-
TRANSFERS MENTS OF
BALANCE AT ADDITIONS RETIRE- BETWEEN PRIOR YEARS' BALANCE AT
BEGINNING OF AT COST MENTS OR ACCOUNTS ADDITIONS OR CLOSE OF
CLASSIFICATION PERIOD (A) SALES (B) RETIREMENTS(E) PERIOD
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Utility Plant:
Electric:
Plant in Service:
Intangible........... $ 7,564 $ 6 $ -- $ -- $ (3) $ 7,567
Production........... 1,295,963 180,297 9,827 2,754 (893) 1,468,294
Transmission......... 329,029 15,964 1,698 1,517 251 345,063
Distribution......... 653,109 37,626 6,000 214 336 685,285
General.............. 58,962 4,093 7,426 (1,877) 423 54,175
Construction work in
progress............. 174,395 134,130 -- (239,568)(c) 2,684 71,641
Plant held for future
use.................. 732 3,403 -- (3,317) (86) 732
Electric plant
acquisition
adjustment........... 510 -- -- -- (119)(d) 391
Salem nuclear fuel.... 8,289 -- -- -- -- 8,289
Nuclear fuel lease.... 85,893 7,384 -- -- -- 93,277
---------- -------- ------- --------- ------ ----------
2,614,446 382,903 24,951 (240,277) 2,593 2,734,714
---------- -------- ------- --------- ------ ----------
Gas:
Plant in Service:
Intangible........... 1,135 -- -- -- -- 1,135
Production........... -- -- -- -- -- --
Storage.............. 8,447 148 -- -- (1) 8,594
Transmission......... 17,032 865 73 25 2 17,851
Distribution......... 132,803 12,486 740 (25) 26 144,550
General.............. 3,722 338 153 130 -- 4,037
Construction work in
progress............. 3,159 16,053 -- (13,687)(c) 875 6,400
---------- -------- ------- --------- ------ ----------
$ 166,298 $ 29,890 $ 966 $ (13,557) $ 902 $ 182,567
---------- -------- ------- --------- ------ ----------
</TABLE>
IV-3
<PAGE>
DELMARVA POWER & LIGHT COMPANY
SCHEDULE V -- UTILITY PLANT PROPERTY -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1993
(THOUSANDS OF DOLLARS)
<TABLE>
- ------------------------------------------------------------------------------------------------
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- ------------------------------------------------------------------------------------------------
OTHER CHANGES--DEBIT
AND/OR (CREDIT)
----------------------------
ADJUST-
TRANSFERS MENTS OF
BALANCE AT ADDITIONS RETIRE- BETWEEN PRIOR YEARS' BALANCE AT
BEGINNING OF AT COST MENTS OR ACCOUNTS ADDITIONS OR CLOSE OF
CLASSIFICATION PERIOD (A) SALES (B) RETIREMENTS(E) PERIOD
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Common:
Plant in Service:
Organization.......... $ 736 $ -- $ -- $ -- $ -- $ 736
Intangible............ 20,667 198 -- (11) -- 20,854
Land and land rights.. 2,334 254 -- (37) -- 2,551
Structures and
improvements......... 45,319 466 270 (6) -- 45,509
Office furniture and
equipment............ 42,077 6,581 14,600 1,202 (25) 35,235
Transportation and
power operated
equipment............ 2,090 50 69 -- -- 2,071
Stores equipment...... 178 -- 12 -- -- 166
Tools, shop and garage
equipment............ 855 288 32 -- -- 1,111
Communications
equipment............ 13,441 952 1,151 646 (106) 13,782
Miscellaneous equip-
ment................. 155 19 7 -- -- 167
Construction work in
progress.............. 10,290 13,268 -- (10,726)(c) 128 12,960
---------- -------- ------- --------- ------ ----------
138,142 22,076 16,141 (8,932) (3) 135,142
---------- -------- ------- --------- ------ ----------
Total............... $2,918,886 $434,869 $42,058 $(262,766) $3,492 $3,052,423
========== ======== ======= ========= ====== ==========
</TABLE>
- --------
(a) Construction and nuclear fuel expenditures, including AFUDC.
(b) Includes transfers from construction work in progress and transfers of
land and facilities to/from non-utility property, plant held for future
use or other functions.
(c) Transfers to plant in service.
(d) Amortization of acquisition adjustment which is charged against utility
operating income.
(e) Includes transfers between functions and adjustments to prior closings.
IV-4
<PAGE>
DELMARVA POWER & LIGHT COMPANY
SCHEDULE V -- UTILITY PLANT PROPERTY
FOR THE YEAR ENDED DECEMBER 31, 1992
(THOUSANDS OF DOLLARS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- -------------------------------------------------------------------------------------------------
OTHER CHANGES--DEBIT
AND/OR (CREDIT)
----------------------------
ADJUST-
TRANSFERS MENTS OF
BALANCE AT ADDITIONS RETIRE- BETWEEN PRIOR YEARS' BALANCE AT
BEGINNING OF AT COST MENTS OR ACCOUNTS ADDITIONS OR CLOSE OF
CLASSIFICATION PERIOD (A) SALES (B) RETIREMENTS(E) PERIOD
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Utility Plant:
Electric:
Plant in Service:
Intangible........... $ 7,711 $ 2 $ 149 $ -- $ -- $ 7,564
Production........... 1,259,582 39,234 3,221 14 354 1,295,963
Transmission......... 326,078 6,141 853 (2,129) (208) 329,029
Distribution......... 614,207 41,224 6,624 3,811 491 653,109
General.............. 55,362 5,489 152 (1,687) (50) 58,962
Construction work in
progress............. 78,129 193,060 -- (92,797)(c) (3,997) 174,395
Plant held for future
use.................. 631 336 -- (235) -- 732
Electric plant
acquisition
adjustment........... 629 -- -- -- (119)(d) 510
Salem nuclear fuel.... 8,289 -- -- -- -- 8,289
Nuclear fuel lease.... 78,765 7,128 -- -- -- 85,893
---------- -------- ------- -------- ------- ----------
2,429,383 292,614 10,999 (93,023) (3,529) 2,614,446
---------- -------- ------- -------- ------- ----------
Gas:
Plant in Service:
Intangible........... 1,186 -- 51 -- -- 1,135
Production........... -- -- -- -- -- --
Storage.............. 7,584 863 -- -- -- 8,447
Transmission......... 15,298 1,832 90 (8) -- 17,032
Distribution......... 118,582 15,273 1,060 8 -- 132,803
General.............. 3,614 61 -- 47 -- 3,722
Construction work in
progress............. 6,768 14,079 -- (18,043)(c) 355 3,159
---------- -------- ------- -------- ------- ----------
153,032 32,108 1,201 (17,996) 355 166,298
---------- -------- ------- -------- ------- ----------
Steam:
Plant in Service:
Production........... -- -- -- -- -- --
Transmission......... 108 -- -- (108) -- --
Distribution......... -- -- -- -- -- --
General.............. -- -- -- -- -- --
Construction work in
progress............. 74 -- -- -- (74)(f) --
---------- -------- ------- -------- ------- ----------
$ 182 $ -- $ -- $ (108) $ (74) $ --
---------- -------- ------- -------- ------- ----------
</TABLE>
IV-5
<PAGE>
DELMARVA POWER & LIGHT COMPANY
SCHEDULE V -- UTILITY PLANT PROPERTY -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1992
(THOUSANDS OF DOLLARS)
<TABLE>
- ------------------------------------------------------------------------------------------------
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- ------------------------------------------------------------------------------------------------
OTHER CHANGES--DEBIT
AND/OR (CREDIT)
----------------------------
ADJUST-
TRANSFERS MENTS OF
BALANCE AT ADDITIONS RETIRE- BETWEEN PRIOR YEARS' BALANCE AT
BEGINNING OF AT COST MENTS OR ACCOUNTS ADDITIONS OR CLOSE OF
CLASSIFICATION PERIOD (A) SALES (B) RETIREMENTS(E) PERIOD
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Common:
Plant in Service:
Organization.......... $ 736 $ -- $ -- $ -- $ -- $ 736
Intangible............ 22,881 168 2,467 -- 85 20,667
Land and land rights.. 2,354 -- -- -- (20) 2,334
Structures and
improvements......... 45,156 163 -- -- -- 45,319
Office furniture and
equipment............ 41,258 858 -- (4) (35) 42,077
Transportation and
power operated
equipment............ 2,723 -- 633 -- -- 2,090
Stores equipment...... 178 -- -- -- -- 178
Tools, shop and garage
equipment............ 907 7 -- (59) -- 855
Communications
equipment............ 13,301 140 -- -- -- 13,441
Miscellaneous
equipment............ 119 10 -- 26 -- 155
Construction work in
progress.............. 1,728 10,415 -- (1,360)(c) (493) 10,290
---------- -------- ------- --------- ------- ----------
131,341 11,761 3,100 (1,397) (463) 138,142
---------- -------- ------- --------- ------- ----------
Total............... $2,713,938 $336,483 $15,300 $(112,524) $(3,711) $2,918,886
========== ======== ======= ========= ======= ==========
</TABLE>
- --------
(a) Construction and nuclear fuel expenditures, including AFUDC.
(b) Includes transfers from construction work in progress and transfers of
land and facilities to/from non-utility property, plant held for future
use or other functions.
(c) Transfers to plant in service.
(d) Amortization of acquisition adjustment which is charged against utility
operating income.
(e) Includes transfers between functions and adjustments to prior closings.
(f) Reclassified to other property for financial reporting purposes.
IV-6
<PAGE>
DELMARVA POWER & LIGHT COMPANY
SCHEDULE V -- UTILITY PLANT PROPERTY
FOR THE YEAR ENDED DECEMBER 31, 1991
(THOUSANDS OF DOLLARS)
<TABLE>
- ----------------------------------------------------------------------------------------------------
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- ----------------------------------------------------------------------------------------------------
OTHER CHANGES--DEBIT
AND OR (CREDIT)
----------------------------
ADJUST-
TRANSFERS MENTS OF
BALANCE AT ADDITIONS RETIRE- BETWEEN PRIOR YEARS' BALANCE AT
BEGINNING OF AT COST MENTS OR ACCOUNTS ADDITIONS OR CLOSE OF
CLASSIFICATION PERIOD (A) SALES (B) RETIREMENTS(E) PERIOD
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Utility Plant:
Electric:
Plant in Service:
Intangible........... $ 7,661 $ 50 $ -- $ -- $ -- $ 7,711
Production........... 1,158,377 115,049 13,752 (58) (34) 1,259,582
Transmission......... 309,927 16,513 196 (318) 152 326,078
Distribution......... 582,099 36,912 6,271 (70) 1,537 614,207
General.............. 52,745 3,143 206 (214) (106) 55,362
Construction work in
progress............. 90,198 146,092 -- (170,710)(c) 12,549 78,129
Plant held for future
use.................. 559 74 -- -- (2) 631
Electric plant
acquisition
adjustment........... 829 -- -- -- (200)(d) 629
Salem nuclear fuel.... 8,289 -- -- -- -- 8,289
Nuclear fuel lease.... 71,412 7,353 -- -- -- 78,765
---------- -------- ------- --------- ------- ----------
2,282,096 325,186 20,425 (171,370) 13,896 2,429,383
---------- -------- ------- --------- ------- ----------
Gas:
Plant in Service:
Intangible........... 1,186 -- -- -- -- 1,186
Production........... 1,957 51 1,599 (409) -- --
Storage.............. 7,475 103 30 36 -- 7,584
Transmission......... 13,569 1,814 49 (20) (16) 15,298
Distribution......... 106,945 11,958 715 278 116 118,582
General.............. 3,179 105 -- 330 -- 3,614
Construction work in
progress............. 3,098 17,601 -- (14,033)(c) 102 6,768
---------- -------- ------- --------- ------- ----------
137,409 31,632 2,393 (13,818) 202 153,032
---------- -------- ------- --------- ------- ----------
Steam:
Plant in Service:
Production........... 23,738 284 24,022 -- -- --
Transmission......... 458 -- 350 -- -- 108
Distribution......... 746 -- 746 -- -- --
General.............. 40 -- 40 -- -- --
Construction work in
progress............. 239 1,681 -- (284)(c) (1,562) 74
---------- -------- ------- --------- ------- ----------
$ 25,221 $ 1,965 $25,185(f) $ (284) $(1,562) $ 182
---------- -------- ------- --------- ------- ----------
</TABLE>
IV-7
<PAGE>
DELMARVA POWER & LIGHT COMPANY
SCHEDULE V -- UTILITY PLANT PROPERTY -- (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1991
(THOUSANDS OF DOLLARS)
<TABLE>
- ------------------------------------------------------------------------------------------------
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- ------------------------------------------------------------------------------------------------
OTHER CHANGES--DEBIT
AND/OR (CREDIT)
----------------------------
ADJUST-
TRANSFERS MENTS OF
BALANCE AT ADDITIONS RETIRE- BETWEEN PRIOR YEARS' BALANCE AT
BEGINNING OF AT COST MENTS OR ACCOUNTS ADDITIONS OR CLOSE OF
CLASSIFICATION PERIOD (A) SALES (B) RETIREMENTS(E) PERIOD
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Common:
Plant in Service:
Organization.......... $ 736 $ -- $ -- $ -- $ -- $ 736
Intangible............ 20,917 1,964 -- -- -- 22,881
Land and land rights.. 2,350 4 -- -- -- 2,354
Structures and
improvements......... 44,931 241 5 -- (11) 45,156
Office furniture and
equipment............ 38,147 3,275 -- 383 (547) 41,258
Transportation and
power operated
equipment............ 3,584 -- 818 (43) -- 2,723
Stores equipment...... 173 5 -- -- -- 178
Tools, shop and garage
equipment............ 747 121 4 43 -- 907
Communications
equipment............ 11,495 1,329 -- -- 477 13,301
Miscellaneous
equipment............ 120 -- -- -- (1) 119
Construction work in
progress.............. 2,375 7,012 -- (7,971)(c) 312 1,728
---------- -------- ------- --------- ------- ----------
125,575 13,951 827 (7,588) 230 131,341
---------- -------- ------- --------- ------- ----------
Total............... $2,570,301 $372,734 $48,803 $(193,060) $12,766 $2,713,938
========== ======== ======= ========= ======= ==========
</TABLE>
- --------
(a) Construction and nuclear fuel expenditures, including AFUDC.
(b) Includes transfers from construction work in progress and transfers of
land and facilities to/from non-utility property, plant held for future
use or other functions.
(c) Transfers to plant in service.
(d) Amortization of acquisition adjustment which is charged against utility
operating income.
(e) Includes transfers between functions and adjustments to prior closings.
(f) Includes sale of Delaware City Plant.
IV-8
<PAGE>
DELMARVA POWER & LIGHT COMPANY
SCHEDULE VI -- CONSOLIDATED ACCUMULATED DEPRECIATION AND AMORTIZATION
(UTILITY PLANT)
FOR THE YEAR ENDED DECEMBER 31, 1993
(THOUSANDS OF DOLLARS)
<TABLE>
- ------------------------------------------------------------------------------------------
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- ------------------------------------------------------------------------------------------
ADDITIONS
------------------------
CHARGED TO
OPERATING
BALANCE AT EXPENSES IN CHARGED TO BALANCE AT
BEGINNING STATEMENT OF OTHER RETIRE- OTHER CLOSE OF
DESCRIPTION OF PERIOD INCOME ACCOUNTS(A) MENTS(B) CHANGES PERIOD
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Depreciation -- Utility
Plant:
Electric............... $806,025 $ 84,514 $894 $25,342 $677 $866,768
Gas.................... 47,616 5,551 -- 1,254 (2) 51,911
Common................. 41,140 9,281 (2) 15,987 150 34,582
-------- -------- ---- ------- ---- --------
894,781 99,346 892(a) 42,583 825 953,261
Amortization of Electric
Plant in Service....... 13,213 299 -- -- -- 13,512
Amortization of Gas
Plant in Service....... 1,135 -- -- -- -- 1,135
Amortization of Common
Plant in Service....... 20,740 772 -- 69 -- 21,443
-------- -------- ---- ------- ---- --------
$929,869 $100,417 $892 $42,652 $825 $989,351
======== ======== ==== ======= ==== ========
Amortization of Nuclear
Fuel Assemblies........ $ 8,289 $ -- $ -- $ -- $ -- $ 8,289
Amortization of Nuclear
Fuel Lease............. 49,111 10,261 -- -- -- 59,372
-------- -------- ---- ------- ---- --------
$ 57,400 $ 10,261 $ -- $ -- $ -- $ 67,661
======== ======== ==== ======= ==== ========
</TABLE>
- --------
(a) Charged to clearing accounts for which subsequent distribution was made
to operating and other accounts.
(b) Includes removal cost net of salvage.
IV-9
<PAGE>
DELMARVA POWER & LIGHT COMPANY
SCHEDULE VI -- CONSOLIDATED ACCUMULATED DEPRECIATION AND AMORTIZATION (UTILITY
PLANT)
FOR THE YEAR ENDED DECEMBER 31, 1992
(THOUSANDS OF DOLLARS)
<TABLE>
- -------------------------------------------------------------------------------------------
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- -------------------------------------------------------------------------------------------
ADDITIONS
------------------------
CHARGED TO
OPERATING
BALANCE AT EXPENSES IN CHARGED TO BALANCE AT
BEGINNING STATEMENT OF OTHER RETIRE- OTHER CLOSE OF
DESCRIPTION OF PERIOD INCOME ACCOUNTS(A) MENTS(B) CHANGES PERIOD
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Description -- Utility
Plant:
Electric............... $735,617 $78,267 $854 $12,911 $ 4,198 $806,025
Gas.................... 43,950 5,109 -- 1,445 2 47,616
Steam & Electric
(Refinery
Service).............. 107 -- -- -- (107) --
Common................. 32,786 8,371 -- 16 (1) 41,140
-------- ------- ---- ------- ------- --------
812,460 91,747 854 14,372 4,092 894,781
Amortization of Electric
Plant in Service....... 13,072 289 -- 148 -- 13,213
Amortization of Gas
Plant in Service....... 1,186 -- -- 51 -- 1,135
Amortization of Common
Plant in Service....... 23,134 700 -- 3,094 -- 20,740
-------- ------- ---- ------- ------- --------
$849,852 $92,736 $854 $17,665 $ 4,092 $929,869
======== ======= ==== ======= ======= ========
Amortization of Nuclear
Fuel Assemblies........ $ 8,289 $ -- $ -- $ -- $ -- $ 8,289
Amortization of Nuclear
Fuel Lease............. 38,880 10,231 -- -- -- 49,111
-------- ------- ---- ------- ------- --------
$ 47,169 $10,231 $ -- $ -- $ -- $ 57,400
======== ======= ==== ======= ======= ========
</TABLE>
- --------
(a) Charged to clearing accounts for which subsequent distribution was made
to operating and other accounts.
(b) Includes removal cost net of salvage.
IV-10
<PAGE>
DELMARVA POWER & LIGHT COMPANY
SCHEDULE VI -- CONSOLIDATED ACCUMULATED DEPRECIATION AND AMORTIZATION (UTILITY
PLANT)
FOR THE YEAR ENDED DECEMBER 31, 1991
(THOUSANDS OF DOLLARS)
<TABLE>
- ----------------------------------------------------------------------------------------------
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- ----------------------------------------------------------------------------------------------
ADDITIONS
------------------------
CHARGED TO
OPERATING
BALANCE AT EXPENSES IN CHARGED TO BALANCE AT
BEGINNING STATEMENT OF OTHER RETIRE- OTHER CLOSE OF
DESCRIPTION OF PERIOD INCOME ACCOUNTS(A) MENTS(B) CHANGES PERIOD
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Depreciation -- Utility
Plant:
Electric............... $683,476 $73,693 $374 $21,496 $ (430) $735,617
Gas.................... 41,845 4,739 -- 2,833 199 43,950
Steam and Electric
(Refinery Service).... 24,913 7 -- 24,813(c) -- 107
Common................. 25,288 7,513 (4) 10 (1) 32,786
-------- ------- ---- ------- ------- --------
775,522 85,952 370 49,152 (232) 812,460
Amortization of Electric
Plant in Service....... 12,341 731 -- -- -- 13,072
Amortization of Gas
Plant in Service....... 1,186 -- -- -- -- 1,186
Amortization of Common
Plant in Service....... 23,370 561 -- 797 -- 23,134
-------- ------- ---- ------- ------- --------
$812,419 $87,244 $370 $49,949 $ (232) $849,852
======== ======= ==== ======= ======= ========
Amortization of Nuclear
Fuel Assemblies........ $ 8,289 $ -- $ -- $ -- $ -- $ 8,289
Amortization of Nuclear
Fuel Lease............. 28,638 10,242 -- -- -- 38,880
-------- ------- ---- ------- ------- --------
$ 36,927 $10,242 $ -- $ -- $ -- $ 47,169
======== ======= ==== ======= ======= ========
</TABLE>
- --------
(a) Charged to clearing accounts for which subsequent distribution was made
to operating and other accounts.
(b) Includes removal cost net of salvage.
(c) Includes sale of Delaware City Plant.
IV-11
<PAGE>
DELMARVA POWER & LIGHT COMPANY
SCHEDULE IX -- SHORT-TERM BORROWINGS
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- ---------------------------------------------------------------------------------------------------------------------
CATEGORY OF BALANCE WEIGHTED MAXIMUM AMOUNT AVERAGE AMOUNT WEIGHTED AVERAGE
SHORT-TERM AT END AVERAGE OUTSTANDING OUTSTANDING INTEREST RATE
BORROWINGS OF YEAR INTEREST RATE DURING THE YEAR DURING THE YEAR DURING THE YEAR
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Year Ended
December 31,
1993... Commercial Paper 0 0 $24,400,000 $2,553,469 3.21%
LPA (c) 0 0 $23,000,000 $4,381,071 3.21%
Bank Loans (d) 0 0 0 0 0
1992... Commercial Paper 0 0 $16,000,000 $2,808,778 3.93%
LPA (c) $17,000,000 3.34% $21,500,000 $2,461,128 3.82%
Bank Loans (d) 0 0 $11,050,000 $1,681,000 8.14%
1991... Commercial Paper 0 0 $18,000,000 $2,149,000 6.26%
LPA (c) 0 0 $19,000,000 $2,844,000 6.76%
Bank Loans (d) $11,050,000 8.69% $11,050,000 $8,863,000 9.50%
</TABLE>
- --------
(a) Average daily balance based on 365 days.
(b) Weighted average monthly rates for debt outstanding.
(c) Loan Participation Agreements--Short-term bank loans which are
remarketed to investors.
(d) Subsidiary debt.
IV-12
<PAGE>
DELMARVA POWER & LIGHT COMPANY
SCHEDULE X -- SUPPLEMENTAL INCOME STATEMENT INFORMATION FOR THE THREE YEARS
ENDED DECEMBER 31, 1993 (THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
COLUMN A COLUMN B
- --------------------------------------------------------------------------------
1993 1992 1991
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Maintenance............................................. $74,196 $75,215 $67,130
======= ======= =======
Taxes other than income taxes:
Delaware utility tax.................................. $12,587 $11,732 $11,473
Property taxes........................................ 10,771 10,165 9,069
Payroll taxes......................................... 6,619 6,591 6,424
Gross receipts taxes.................................. 5,753 5,382 5,086
Franchise and other taxes............................. 1,689 3,167 2,866
------- ------- -------
Total............................................... $37,419 $37,037 $34,918
======= ======= =======
</TABLE>
- --------
Note: Other information has been omitted since the required information either
is not present in amounts sufficient to require submission or is included
in the respective financial statements or the notes thereto.
IV-13
<PAGE>
DELMARVA POWER & LIGHT COMPANY
OPERATING STATISTICS
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
The table below sets forth selected financial and operating statistics for
the electric and gas divisions for the three years ended December 31, 1993.
<TABLE>
<CAPTION>
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
ELECTRIC:
Electricity generated and purchased (MWh):
Generated................................ 11,264,540 8,548,233 9,952,596
Purchased................................ 3,857,133 4,579,521 3,270,816
Interchange deliveries................... (2,225,384) (998,679) (1,113,423)
---------- ---------- ----------
Total output for load................... 12,896,289 12,129,075 12,109,989
========== ========== ==========
Electric sales (MWh):
Residential.............................. 3,499,387 3,228,237 3,236,616
Commercial............................... 3,336,847 3,140,149 3,098,599
Industrial............................... 3,232,233 3,115,677 3,105,338
Other sales of electricity............... 2,211,763 2,036,748 2,019,727
---------- ---------- ----------
Total sales............................. 12,280,230 11,520,811 11,460,280
Losses and miscellaneous system uses...... 616,059 608,264 649,709
---------- ---------- ----------
Total disposition of energy.............. 12,896,289 12,129,075 12,109,989
========== ========== ==========
Operating revenue (thousands):
Residential.............................. $305,446 $273,463 $275,888
Commercial............................... 237,785 220,659 218,558
Industrial............................... 150,178 144,094 144,272
Other sales of electricity............... 111,781 102,690 104,819
Interchange deliveries................... 61,437 30,606 33,523
Other electric revenues.................. 9,036 8,663 7,539
---------- ---------- ----------
Total revenues.......................... $875,663 $780,175 $784,599
========== ========== ==========
Number of customers (end of period):
Residential.............................. 342,710 336,076 330,632
Commercial............................... 43,324 42,427 41,539
Industrial............................... 715 726 753
Other.................................... 605 590 578
---------- ---------- ----------
Total customers......................... 387,354 379,819 373,502
========== ========== ==========
Average annual use per residential cus-
tomer (kWh)(1)........................... 10,336 9,680 9,843
Average annual revenue per residential
customer (1)............................. $902.14 $820.02 $838.98
Average revenue per kWh (cents):
Residential.............................. 8.7 8.5 8.5
Commercial............................... 7.1 7.0 7.1
Industrial............................... 4.6 4.6 4.6
GAS:
Gas sales (Mcf)........................... 18,066 17,013 15,574
Gas transported (Mcf)..................... 1,539 3,155 2,610
Gas revenue (thousands)................... $94,944 $83,869 $71,222
Number of customers (end of period):
Residential.............................. 86,027 82,996 80,874
Commercial............................... 6,751 6,500 6,313
Industrial............................... 150 152 154
Other.................................... 12 11 10
---------- ---------- ----------
Total customers......................... 92,940 89,659 87,351
========== ========== ==========
Residential gas service:
Average annual use per customer (Mcf)(1). 86.85 88.71 80.24
Average annual revenue per customer (1).. $558.59 $526.94 $446.07
Average revenue per Mcf.................. $6.43 $5.94 $5.56
</TABLE>
- --------
(1) Based on average number of customers during period.
IV-14
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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.
Delmarva Power & Light Company
(Registrant)
Dated: March 22, 1994 /s/ Barbara S. Graham
By__________________________________
(Barbara S. Graham, Vice President
and Chief Financial Officer)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATE INDICATED.
SIGNATURE TITLE DATE
/s/ (Howard E. Cosgrove) Chairman of the Board, March 22, 1994
..................................... President, Chief
(Howard E. Cosgrove) Executive Officer,
and Director
/s/ (H. Ray Landon) Executive Vice March 22, 1994
..................................... President and
(H. Ray Landon) Director
/s/ (Barbara S. Graham) Vice President and March 22, 1994
..................................... Chief Financial
(Barbara S. Graham) Officer
/s/ (James P. Lavin) Comptroller and Chief March 22, 1994
..................................... Accounting Officer
(James P. Lavin)
/s/ (Michael G. Abercrombie) Director March 22, 1994
.....................................
(Michael G. Abercrombie)
/s/ (Elwood P. Blanchard, Jr.) Director March 22, 1994
.....................................
(Elwood P. Blanchard, Jr.)
/s/ (Robert D. Burris) Director March 22, 1994
.....................................
(Robert D. Burris)
/s/ (Audrey K. Doberstein) Director March 22, 1994
.....................................
(Audrey K. Doberstein)
/s/ (James H. Gilliam, Jr.) Director March 22, 1994
.....................................
(James H. Gilliam, Jr.)
/s/ (Sarah I. Gore) Director March 22, 1994
.....................................
(Sarah I. Gore)
/s/ (James C. Johnson, III) Director March 22, 1994
.....................................
(James C. Johnson, III)
/s/ (James T. McKinstry) Director March 22, 1994
.....................................
(James T. McKinstry)
IV-15
<PAGE>
DELMARVA POWER & LIGHT COMPANY
1993 ANNUAL REPORT ON FORM 10-K
EXHIBIT INDEX
Exhibit Page
Number Description Number
- ------ ----------- ------
3-C Copy of the Company's Certificate of
Designation and Articles of Amendment
establishing the 6 3/4% Preferred Stock.
3-D Copy of the Company's By-laws as amended
September 30, 1993.
4-J Copy of the Eighty-Fourth Supplemental
Indenture.
4-K Copy of the Eighty-Fifth Supplemental
Indenture.
10-F Copy of the severance agreement with
members of management.
10-G Copy of the current listing of members
of management who have signed the severance
agreement.
12-A Computation of ratio of earnings to fixed
charges.
12-B Computation of ratio of earnings to fixed
charges and preferred dividends.
13 Certain portions of the 1993 Annual Report
to Stockholders which are incorporated by
reference in this Form 10-K.
23 Consent of Independent Accountants.
<PAGE>
CERTIFICATE OF DESIGNATION
AND
ARTICLES OF AMENDMENT
OF
BOARD OF DIRECTORS
OF
DELMARVA POWER & LIGHT COMPANY
ESTABLISHING
A SERIES OF PREFERRED STOCK DESIGNATED 6 3/4% PREFERRED STOCK AND FIXING THE
DIVIDEND RATE, REDEMPTION PRICES AND OTHER SPECIAL RIGHTS AND TERMS OF SUCH
SERIES.
We, H. E. Cosgrove, President, and D. P. Connelly, Secretary, of Delmarva
Power & Light Company, a corporation duly organized and existing under and by
virtue of the laws of the State of Delaware and Commonwealth of Virginia, DO
HEREBY CERTIFY:
That the name of the corporation is Delmarva Power & Light Company (the
"Company");
That pursuant to authority expressly vested in it by the provisions of its
Restated Certificate and Articles of Incorporation, as amended, the Board of
Directors of Delmarva Power & Light Company, at a meeting duly held and convened
on October 28, 1993, duly adopted the following resolutions:
RESOLVED, That the Company hereby designates, creates and amends its
Restated Certificate and Articles of Incorporation, as amended, to establish
$20,000,000 aggregate par value of a new series of its authorized Preferred
Stock, which shall be designated as "6 3/4% Preferred Stock", consisting
initially of 200,000 shares of the par value of $100 per share; and
FURTHER RESOLVED, That the terms of the 6 3/4% Preferred Stock in the
respects in which the shares of such series may vary from shares of other series
of the Preferred Stock shall be as follows:
(1) The dividend rate shall be 6 3/4% per annum on the par value thereof,
and November 4, 1993, shall be the date from which dividends shall be cumulative
on all shares issued on or prior to the record date for the dividend payable
December 31, 1993; and
(2) Dividends shall be payable quarter-yearly on the last days of March,
June, September and December; and
(3) The 6 3/4% Preferred Stock will not be redeemable prior to November 1,
2003; and
(4) Beginning on November 1, 2003, the 6 3/4% Preferred Stock will be
redeemable at any time at the option of the Company in whole or in part at $100
per share, together with dividends accumulated and unpaid to the redemption
date; and
(5) The amount per share payable in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Company shall be
$100.00 per share; and
(6) In the case of the redemption of a part only of the 6 3/4% Preferred
Stock, the Company shall select by lot the shares so to be redeemed.
* * * *
<PAGE>
IN WITNESS WHEREOF, Delmarva Power & Light Company has caused its corporate
seal to be hereunto affixed and this certificate to be signed by its President
and its Secretary this 28th day of October, 1993.
DELMARVA POWER & LIGHT COMPANY
By: /s/ H. E.Cosgrove
-----------------
H. E. Cosgrove
SEAL President
By: /s/ D. P. Connelly
------------------
D. P. Connelly
Secretary
STATE OF DELAWARE )
COUNTY OF NEW CASTLE ) SS.
I, Jacqueline D. Butler, a Notary Public in and for the State and County
aforesaid, hereby certify that this day appeared before me H. E. Cosgrove and D.
P. Connelly, who, being by me duly sworn, made oath and said that they were
President and Secretary, respectively, of Delmarva Power & Light Company, that
they each executed the foregoing Certificate of Designation and Articles of
Amendment for and on behalf of Delmarva Power & Light Company, that they each
are familiar with such instrument and the contents thereof, and that the facts
set forth therein are true to the best of their knowledge, information and
belief.
Given under my hand and notarized seal this 28th day of October, 1993.
/s/ Jacqueline D. Butler
------------------------
Notary Public
SEAL My Commission expires on
April 3, 1996
-------------
LEGAL\CDL\PRFSTK93\CERTDESI.DOC
2
<PAGE>
DELMARVA POWER
&
LIGHT COMPANY
BY-LAWS
As amended September 30, 1993
<PAGE>
DELMARVA POWER & LIGHT COMPANY
BYLAWS
ARTICLE I
Offices
Section 1. The principal office of the Company in the State of Delaware
shall be at 800 King Street in the City of Wilmington and County of New Castle.
The Company may also have offices at such other places as the Board of Directors
may from time to time determine.
ARTICLE II
Meetings of Stockholders
Section 1. The Annual Meeting of the stockholders of the Company shall be
held for the purpose of electing directors and for the transaction of only such
business as is properly brought before the meeting in accordance with the By-
Laws. The Annual Meeting shall take place at such time and location as
determined by resolution of the Board of Directors on the last Thursday of May
in each year, unless such day is a legal holiday, in which case it shall be held
on the first day thereafter which is not a legal holiday, and on any subsequent
day or days to which such meeting may be adjourned. In case the Annual Meeting
of Stockholders should not be held on the day fixed therefor, or should be
finally adjourned without completing the election of directors, such election
may be held subsequently at a special stockholders' meeting, called as
hereinafter provided. The time and place for said annual meeting shall be set
at least sixty (60) days prior to the date of each annual meeting. A notice of
the time and place shall be given to each stockholder entitled to vote at least
twenty (20) days before the date of the meeting, in person or by letter mailed
to his last known post office address.
To be properly brought before the Annual Meeting, business must be either
(a) specified in the notice of meeting (or any supplement thereto) given by or
at the direction of the Board, or (b) otherwise properly brought before the
meeting by or at the direction of the Board, or (c) otherwise properly brought
before the meeting by a stockholder. In addition to any other applicable
requirements, for business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing to
the Secretary of the Company. To be timely, a stockholder's notice must be
<PAGE>
2
delivered to or mailed and received at the principal executive offices of the
Company, not less than fifty (50) days nor more than seventy-five (75) days
prior to the meeting; provided, however, that in the event that less than sixty
five (65) days' notice or prior public disclosure of the date of the meeting is
given or made to stockholders, notice by the stockholder to be timely must be so
received not later than the close of business on the fifteenth (15th) day
following the day on which such notice of the date of the Annual Meeting was
mailed or such public disclosure was made, whichever first occurs. A
stockholder's notice to the secretary shall set forth as to each matter the
stockholder proposes to bring before the Annual Meeting (i) a brief description
of the business desired to be brought before the Annual Meeting and the reasons
for conducting such business at the Annual Meeting, (ii) the name and record
address of the stockholder proposing such business, (iii) the class and number
of shares of the Company which are beneficially owned by the stockholder, and
(iv) any material interest of the stockholder in such business.
No business shall be conducted at the Annual Meeting except in accordance
with the procedures set forth in this Article I, provided, however, that nothing
in this Article I shall be deemed to preclude discussion by any stockholder of
any business properly brought before the annual meeting.
The Chairman/Chairwoman of an annual meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the foregoing procedures, and if he/she
should so determine, he/she shall so declare to the meeting and any such
business not properly brought before the meeting shall not be transacted.
Section 2. The directors shall be divided into three classes, designated
Class I, Class II, and Class III. Each Class shall consist, as nearly as may be
possible, of one-third of the total number of Directors constituting the entire
Board of Directors. At each Annual Meeting of stockholders, successors to the
class of directors whose term expires at the Annual Meeting shall be elected for
a three-year term. If the number of directors is changed, any increase or
decrease shall be apportioned among the classes so as to maintain the number of
directors in each class as nearly as possible, but in no case will a decrease in
the number of directors shorten the term of any incumbent director. A director
shall hold office until the Annual Meeting for the year in which his or her term
expires and until his or her successor shall be elected and shall qualify,
subject, however, to prior death, resignation, retirement, disqualification or
removal from office.
<PAGE>
3
Only persons who are nominated in accordance with the following procedures
shall be eligible for election as directors. Nominations of persons for
election to the Board of Directors of the Company may be made at a meeting of
stockholders by the Board of Directors, at the direction of the Board by any
nominating committee or person appointed by the Board, or by any stockholder of
the Company entitled to vote for the election of Directors at the meeting who
complies with the notice procedures set forth in this Section 2. Such
nominations, other than those made by or at the direction of the Board, shall be
made pursuant to timely notice in writing to the Secretary of the Company. To
be timely, a stockholder's notice shall be delivered to or mailed and received
at the principal executive offices of the Company not less than fifty (50) days
nor more than ninety (90) days prior to the meeting; provided, however, that in
the event that less than sixty-five (65) days' notice or prior public disclosure
of the date of the meeting is given or made to stockholders, notice by the
stockholder to be timely must be so received not later than the close of
business on the fifteenth (15th) day following the day on which such notice of
the date of the meeting was mailed or such public disclosure was made, whichever
first occurs. Such stockholder's notice to the Secretary shall set forth (a) as
to each person whom the stockholder proposes to nominate for election or re-
election as a director, (i) the name, age, business address and residence
address of the person, (ii) the principal occupation or employment of the
person, (iii) the class and number of shares of capital stock of the Company
which are beneficially owned by the person and (iv) any other information
relating to the person that is required to be disclosed in solicitations for
proxies for election of directors pursuant to Rule 14A under the Securities
Exchange Act of 1934, as amended; and (b) as to the stockholder giving the
notice (i) the name and record address of such stockholder and (ii) the class
and number of shares of capital stock of the Company which are beneficially
owned by such stockholder. The Company may require any proposed nominee to
furnish such other information as may reasonably be required by the Company to
determine the eligibility of such proposed nominee to serve as a director of the
Company. No person shall be eligible for election as a director of the Company
unless nominated in accordance with the procedures set forth herein.
The Chairman/Chairwoman of the meeting shall, if the facts warrant,
determine and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure and if he/she should so determine,
he/she shall so declare to the meeting and the defective nomination shall be
disregarded.
<PAGE>
4
Section 3. At each Annual Meeting of the stockholders of the Company,
independent public accountants shall be appointed by vote of the holders of
shares of the Common Stock, to audit the accounts and records of the Company and
its subsidiaries and to report on the financial statements for the current
fiscal year.
Section 4. At least ten (10) days before every election a complete list of
stockholders entitled to vote, arranged in alphabetical order, shall be prepared
and shall be open at the place where said election is to be held and at the
Company's principal place of business for said ten (10) days to the inspection
of any stockholder, and shall be produced and kept at the time and place of
election during the whole time thereof and subject to the inspection of any
stockholder who may be present.
Section 5. Except as otherwise required by law, a representation of at
least a majority of the outstanding capital stock of the Company issued and
entitled to vote shall constitute a quorum requisite for the transaction of
business at all meetings of the stockholders; less than such quorum, however,
shall have power to adjourn any meeting from time to time without notice.
Section 6. Each stockholder of record having the right to vote at meetings
shall be entitled to one vote for each share of stock standing in his name upon
the books of the Company, to be voted by the stockholder in person, or by duly
authorized proxy or attorney. The record date for determining stockholders
entitled to vote shall be fixed under the provisions of Section 3 of Article XIV
hereof, provided that if the transfer books are not closed and no record date is
fixed, the date on which the notice of the meeting is given, as provided for in
Section 9 of this Article II, shall be the record date for determining
stockholders entitled to vote. No authority as proxy or attorney shall be valid
unless executed in writing and dated not more than eleven (11) months prior to
the meeting at which it is to be used, except as otherwise provided by law.
Section 7. All questions shall be decided by vote of a majority of the
stock present or represented and entitled to vote, unless otherwise especially
provided by law.
Section 8. Special meetings of the stockholders may be held outside the
State of Delaware and may be called by the Chairman/Chairwoman, the President,
or the Board of Directors.
<PAGE>
5
Section 9. In addition to any notice which may be required by law, notice
of the Annual Meeting for the election of directors and of all special meetings
of the stockholders shall be given by delivering or sending by mail written or
printed notice thereof, stating the object of such meeting, to each stockholder
appearing as such on the books of The Company and entitled to vote at such
meeting, and in case of mailing at the address given on such books, at least ten
(10) days prior to an annual meeting or a special meeting; but meetings may be
held without notice if all stockholders are present in person or represented by
proxy or if notice is waived, whether before or after the time stated therein,
by those not present in person or represented by proxy. Except as required by
statute, no notice need be given of any adjourned meeting of stockholders.
Section 10. At each meeting of the stockholders the polls shall be opened
and closed and the proxies and ballots shall be received and taken in charge of
and all questions touching on the qualifications of voters and the validity of
proxies and the acceptance and rejection of votes shall be decided by two (2)
Inspectors of Election. The Inspectors of Election shall also, if so directed
by the presiding officer of the meeting, decide and report upon the presence of
a quorum. Such Inspectors of Election shall be appointed by the Board of
Directors before or at the meeting, and if no such appointment shall have been
made, then by the presiding officer of the meeting. If for any reason any of
the Inspectors of Election previously appointed shall fail to attend or refuse
or be unable to serve, Inspectors of Election in place of any so failing to
attend or refusing or unable to serve shall be appointed either by the Board of
Directors or by the presiding officer of the meeting. No Inspector of Election
shall enter on the duties of his office or appointment until he takes and
subscribes an oath or affirmation before some person qualified by law to
administer oaths that he will faithfully, honestly, and impartially perform his
duties as an Inspector of Election to the best of this skill and ability.
ARTICLE III
Directors and Officers
Section 1. The business and affairs of the Company shall be managed under
the direction of a Board of Directors consisting of not less than three (3) nor
more than fifteen (15) directors, the exact number of directors to be determined
from time to time by resolution adopted by the affirmative vote of a majority of
the directors then in office or two-thirds of the shares, represented by proxy
or in person, entitled to vote and a meeting at which a quorum is present.
<PAGE>
6
Section 2. Any director of the Company may resign at any time by giving
written notice to the President or the Secretary of the Company. Such
resignation shall take effect at the time specified therein; and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
Section 3. The officers shall be a Chairman/Chairwoman of the Board, a
President, one or more Vice Presidents, a Secretary and one or more Assistant
Secretaries, a Treasurer and one or more Assistant Treasurers, one or more
Comptrollers and one or more Assistant Comptrollers, and such other officers as
the Board of Directors may from time to time deem necessary. One person may
hold more than one office, except that the same person shall not be President
and a Vice President, or President and Secretary, or President and Treasurer.
ARTICLE IV
Powers and Duties of Directors
Section 1. The Board of Directors shall choose the Chairman/Chairwoman of
the Board and the President from among their number. Vacancies in the Board,
except those caused by an increase in the number of directors authorized by more
than two (2), may be filled by a majority of the then members of the Board of
Directors, though less than a quorum.
Section 2. The Board of Directors shall elect the Vice Presidents, a
Secretary, a Treasurer, one or more Comptrollers, one or more Assistant
Secretaries, one or more Assistant Treasurers, and one or more Assistant
Comptrollers and shall have the power to constitute and appoint such other
officers as may be found necessary and the interests of the Company may require
and to fix, or delegate the power to fix, the compensation and define the duties
of all such officers.
Section 3. All the officers of the Company shall be subject to the orders
of the Board and may be removed by the Board at discretion.
Section 4. The Board of Directors may appoint from among its members an
Executive Committee by vote of a majority of the number of the directors fixed
by these By-Laws. A majority of the Committee shall be necessary to constitute
a quorum for the transaction of business. Regular meetings of the Committee may
be held on such days, and at such time as may be determined by a majority vote
of its members. Additional meetings shall be held as the Chairman/Chairwoman of
the Committee, or any two (2) members thereof shall from time to time call.
Except as otherwise provided by law, the
<PAGE>
7
Committee shall have power to consider and decide upon all questions concerning
the management and the affairs of the Company, including all proposed
liabilities, expenditures and contracts, together with such other business as
may be submitted to it from time to time by the officers of the Company between
meetings of the Board of Directors, and such business shall be finally disposed
of by the Committee; provided, however, that the Committee shall preserve
minutes of its meetings, which shall be submitted to the Board of Directors at
its regular meetings; and provided that the Committee shall have no power or
authority to amend the Certificate of Incorporation or By-Laws, to adopt an
agreement of merger, exchange or consolidation, to sell, lease, pledge or
exchange all or substantially all of the Company's assets, to adopt or revoke a
plan of dissolution, or, unless the Board expressly so provides by resolutions,
to declare a dividend or issue stock.
ARTICLE V
Meetings of Directors
Section 1. The Board of Directors shall at the next regular meeting
following the Annual Meeting of the stockholders, or at a special meeting called
for that purpose, elect and appoint officers to serve for the ensuing year, and
may transact such other business as may properly come before the meeting.
Section 2. All other regular meetings of the Board of Directors shall be
held at such time and place as shall be from time to time determined by
resolution of the Board of Directors. Notice shall not be required of any
regular meeting of the Board of Directors.
Section 3. Special meetings of the Board of Directors may be held at any
place upon the call of the Chairman/Chairwoman of the Board or the President.
The Secretary shall also call such meetings on written request of two (2)
directors.
Section 4. Any meeting of the Board of Directors may be held outside of the
State of Delaware.
Section 5. A written or printed notice of all special meetings of the Board
of Directors, delivered personally or mailed or telegraphed on or before the
second day preceding the date of meeting, addressed to a director at his/her
usual place of residence or such other place as he/she may designate, shall be
sufficient notice of such meetings. No notice shall be required to any director
<PAGE>
8
who shall be personally present at any meeting or who shall waive notice,
whether before or after the time stated therein. A meeting may be held at any
time when all of the Directors are present.
Section 6. A quorum of the Board competent to transact business shall
consist of the smallest number of directors necessary to constitute a majority
of the full Board. Less than a quorum may adjourn from time to time without
notice.
Section 7. All questions shall be decided by vote of a majority of the
Directors present, unless otherwise specifically provided by law or by these By-
Laws. The yeas and nays on any question shall be taken and recorded on the
minutes at the request of any Director.
ARTICLE VI
Chairman/Chairwoman of the Board
Section 1. The Chairman/Chairwoman of the Board shall, when present,
preside at all meetings of the Directors and of the stockholders. He/She shall
also generally have the power and perform the duties which by law and general
usage appertain to the office. He/She shall be the chief executive officer of
the Company and have charge of its business and affairs when so designated by
resolution of the Board of Directors.
ARTICLE VII
President
Section 1. The President shall be the chief operating officer of the
Company and shall direct the ordinary business operations of the Company.
He/She shall also be the chief executive officer of the Company and have charge
of its business and affairs unless the Board of Directors has by resolution
designated the Chairman/Chairwoman of the Board to be chief executive officer.
He/She shall, when present, in the absence of the Chairman/Chairwoman of the
Board, preside at all meetings of the Directors and of the stockholders. He/She
shall affix the corporate seal of the Company to instruments required by law,
these By-Laws, or by resolution of the Board of Directors to have the seal
affixed by the President. He/She shall sign certificates of stock and
obligations, and shall execute contracts and other instruments in behalf of the
corporation except as otherwise provided for by the Board of Directors. The
President shall also generally have the powers and perform the
<PAGE>
9
duties which by law and general usage appertain to the office. He/She shall
employ, or delegate the power to employ, such agents, managers and employees as
may be necessary and the interest of the Company may require and shall fix, or
delegate the power to fix, the compensation and define, or delegate the power to
define, the duties of all such agents, managers and employees.
ARTICLE VIII
Vice President
Section 1. A Vice President shall in the absence or disability or at the
request of the President, perform the duties of the President, and perform such
other duties as shall, from time to time, be imposed upon him/her by the Board.
The performance of any such duty by a Vice President shall be conclusive
evidence of his/her right to act.
ARTICLE IX
Secretary
Section 1. The Secretary shall keep, in proper books provided for that
purpose, a record of all meetings and proceedings of the Board of Directors, and
also the minutes of the stockholders' meetings. He/She shall record all votes
of the corporation. He/She shall carefully preserve and keep in his custody in
the office of the Company all letters, contracts, leases, assignments, deeds and
other instruments in writing and documents not properly belonging to the office
of the Treasurer; shall attend to such correspondence of the Company as the
Board of Directors shall direct, and shall perform such other duties as he/she
may be charged with by the Board of Directors or by law or as by general usage
appertain to his/her office.
ARTICLE X
Assistant Secretaries
Section 1. An Assistant Secretary shall, in the absence or disability or at
the request of the Secretary, perform the duties of the Secretary, and perform
such other duties as shall, from time to time, be imposed upon him/her by the
Board. The performance of any such duty by an Assistant Secretary shall be
conclusive evidence of his/her right to act.
<PAGE>
10
ARTICLE XI
Treasurer
Section 1. The Treasurer shall have charge of all receipts and
disbursements of the Company, and shall be the custodian of the Company's funds.
He/She shall have full authority to receive and give receipts for all money due
and payable to the Company from any source whatever, and to endorse checks,
drafts and warrants in its name and on its behalf, and to give full discharge
for the same. He/She shall sign all certificates of stock, checks, notes and
drafts, except as otherwise provided for by The Board of Directors. He/She
shall also affix the seal of the Company to all certificates of stock and other
instruments of writing required or directed by law, these By-Laws, or by
resolution of the Board of Directors to have the seal affixed by him/her.
He/She shall also perform such other duties as he/she may be charged with by the
Board or Directors or by law or as by general usage appertain to his/her office.
Section 2. The Treasurer shall execute, if required by the Board, a bond in
the penalty fixed by the Board, with such surety as the Board may approve,
conditioned for the delivery to the President, or according to the order of the
Board, in case of his/her (Treasurer's) decease, resignation or discharge, of
all moneys, bonds, evidences of debt, vouchers, accounts, books, writings, and
papers belonging to the Company, received by him/her or in his/her possession,
charge or custody, and for the faithful performance of all duties of his/her
office.
ARTICLE XII
Assistant Treasurer
Section 1. An Assistant Treasurer shall, in the absence or disability or at
the request of the Treasurer, perform the duties of the Treasurer and perform
such other duties as shall, from time to time, be imposed upon him/her by the
Board. The performance of any such duty shall be conclusive evidence of his/her
right to act. He/She shall execute, if required by the Board, a bond in the
same manner as the Treasurer, as provided in Section 2, Article XI, of these By-
Laws.
ARTICLE XIII
Comptroller
Section 1. The Comptroller shall be the chief accounting officer of the
Company. He/She shall cause to be kept full and accurate books and accounts of
all assets, liabilities and transactions of the Company. He/She shall develop
<PAGE>
11
and establish systems and procedures to maintain internal controls, to report on
operations, and to provide financial statements. The Comptroller shall also
perform such other duties as he/she may be charged with by the Board of
Directors or by law or as by general usage appertain to his/her office.
ARTICLE XIV
Assistant Comptroller
Section 1. An Assistant Comptroller shall, in the absence or disability or
at the request of the Comptroller, perform the duties of the Comptroller and
perform such other duties as shall from time to time be imposed upon him/her by
the Board. The performance of any such duty shall be conclusive evidence of
his/her right to act.
ARTICLE XV
Corporate Seal
Section 1. The Company shall have a corporate seal, which shall be
circular in form, with the name of the Company on the circumference, and
"Delaware" in the center.
ARTICLE XVI
Certificates of Stock and Transfer Thereof
Section 1. Each stockholder of the Company shall be entitled to receive a
certificate of the number of shares standing to his, her or their credit on the
books of the Company, which certificate shall be signed by the President or a
Vice President or other officer designated by the Board of Directors,
countersigned by the Treasurer or an Assistant Treasurer and sealed with the
common seal of the Company. The signature, countersignature and seal, or any of
them, required by this Section, may be executed in facsimile, engraved or
printed, if the certificate of stock is countersigned by a transfer agent or
registered by a registrar appointed by the Board of Directors which shall not be
the Company or an employee of the Company. In case any such officer, who has
signed or countersigned or whose facsimile signature or countersignature has
been placed upon such certificate, shall have ceased to be such before such
certificate is issued, it may be issued by the Company with the same effect as
if such officer had not ceased to be such at the date of its issue. Said
certificates shall be in such form as the Board of Directors shall from time to
time prescribe.
<PAGE>
12
Section 2. The shares may be transferred on the books of the Company, by
the holder thereof in person or by duly authorized attorney, upon surrender of
the certificates properly endorsed.
Section 3. The Board of Directors shall have power to close the stock
transfer books of the Company for a period not exceeding forty (40) days
preceding the date of any meeting of the stockholders or the date for payment of
any dividend or the date for the allotment of rights or the date when any change
or conversion or exchange of capital stock shall go into effect, or for a period
of not exceeding forty (40) days in connection with obtaining the consent of
stockholders for any purpose; provided, however, that in lieu of closing the
stock transfer books as aforesaid, the Board of Directors may fix in advance a
date not exceeding forty (40) days preceding the date of any meeting of
stockholders or the date for the payment of any dividend or the date for the
allotment of rights or the date when any change or conversion or exchange of
capital stock shall go into effect, or a date in connection with obtaining such
consent as a record date for the determination of the stockholders entitled to
notice of, and to vote at any such meeting and any adjournment thereof, or
entitled to receive payment of any such dividend, or to any such allotment of
rights, or to exercise the rights in respect of any such change, conversion or
exchange of capital stock, or to give such consent, and in such case only such
stockholders as shall be stockholders of record on the date so fixed shall be
entitled to such notice of, and to vote at, such meeting and any adjournment
thereof, or to receive payment of such dividend, or to receive such allotment of
rights, or to exercise such rights, or to give such consent, as the case may be,
notwithstanding any transfer of any stock on the books of the Company after any
such record date fixed as aforesaid.
Section 4. Where a certificate for capital stock of the Company has been
lost or destroyed, the proper officers of the Company may execute and issue a
new certificate therefor upon satisfactory proof of such loss or destruction and
upon giving of a bond, with or without surety, to protect the Company from any
liability or expense which it may incur by reason of the original certificate
remaining outstanding.
<PAGE>
13
ARTICLE XVII
Fiscal Year
Section 1. The fiscal year of this Company shall be the calendar year.
ARTICLE XVIII
Amendments
Section 1. These By-Laws may be altered, added to or repealed at any annual
or special meeting of the stockholders or at any regular or special meeting of
the Board of Directors.
<PAGE>
CONFORMED COPY
This Instrument Prepared By
/s/ Sandra Kaufmann Battaglia
---------------------------------
Sandra Kaufmann Battaglia, Esquire
Potter Anderson & Corroon
350 Delaware Trust Building
Wilmington, Delaware 19801
================================================================================
DELMARVA POWER & LIGHT COMPANY
TO
CHEMICAL BANK,
Trustee.
EIGHTY-FOURTH SUPPLEMENTAL
INDENTURE
================================================================================
Effective as of June 1, 1993
(but executed on the dates shown on the execution page)
<PAGE>
DELMARVA POWER & LIGHT COMPANY
Eighty-Fourth Supplemental Indenture
Effective as of June 1, 1993
TABLE OF CONTENTS*
<TABLE>
<CAPTION>
PAGE
<S> <C>
Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Recitals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Form of Bond of the 1993 Series . . . . . . . . . . . . . . . . . 2
Recitals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Granting Clauses. . . . . . . . . . . . . . . . . . . . . . . . . 9
Description of Property . . . . . . . . . . . . . . . . . . . . . 11
Appurtenances . . . . . . . . . . . . . . . . . . . . . . . . . . 14
After Acquired Property Clause . . . . . . . . . . . . . . . . . 15
Properties Excepted from Lien and Operation of Indenture . . . . 15
Habendum . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Subject Clause . . . . . . . . . . . . . . . . . . . . . . . . . 16
Grant in Trust . . . . . . . . . . . . . . . . . . . . . . . . . 16
<CAPTION>
ARTICLE I
DESIGNATIONS, PROVISIONS, DENOMINATIONS AND ISSUANCE OF
BONDS OF THE 1993 GAS FACILITIES SERIES
<S> <C>
Sec. 1. Designations and Provisions of the Bonds . . . . . . . . 16
Sec. 2. Bonds Issued to State Trustee as Collateral . . . . . . 17
Sec. 3. Payment of the Bonds . . . . . . . . . . . . . . . . . . 17
Sec. 4. Redemption of the Bonds Prior to Maturity . . . . . . . 18
Sec. 5. Waiver of Notice of Redemption . . . . . . . . . . . . . 18
Sec. 6. Denominations and Exchange of the Bonds . . . . . . . . 19
* The Table of Contents and recording data are not part of the
Eighty-Fourth Supplemental Indenture as executed.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Sec. 7. Limitation of Principal Amount of Bonds . . . . . . . . 19
Sec. 8. Issuance of Bonds . . . . . . . . . . . . . . . . . . . 19
</TABLE>
<TABLE>
<CAPTION>
ARTICLE II
DESIGNATIONS, PROVISIONS, DENOMINATIONS AND ISSUANCE OF
BONDS OF THE 1993 POLLUTION CONTROL REFUNDING SERIES
<S> <C>
Sec. 1. Designations and Provisions of the Bonds . . . . . . . . 19
Sec. 2. Bonds Issued to State Trustee as Collateral . . . . . . 20
Sec. 3. Payment of the Bonds . . . . . . . . . . . . . . . . . . 20
Sec. 4. Redemption of the Bonds Prior to Maturity . . . . . . . 21
Sec. 5. Waiver of Notice of Redemption . . . . . . . . . . . . . 22
Sec. 6. Denominations and Exchange of the Bonds . . . . . . . . 22
Sec. 7. Limitation of Principal Amount of Bonds . . . . . . . . 22
Sec. 8. Issuance of Bonds . . . . . . . . . . . . . . . . . . . 22
</TABLE>
<TABLE>
<CAPTION>
ARTICLE III
MISCELLANEOUS
<S> <C>
Sec. 1. Indenture Affirmed as Supplemented . . . . . . . . . . 22
Sec. 2. Execution of Counterparts . . . . . . . . . . . . . . . 22
Sec. 3. Recitals are by Company . . . . . . . . . . . . . . . . 23
Sec. 4. Names and Addresses of Debtor and Secured Party . . . . 23
Sec. 5. Reliance on Certificates of State Trustee . . . . . . . 23
Sec. 6. Receipt by the Company . . . . . . . . . . . . . . . . 23
Signatures and Seals . . . . . . . . . . . . . . . . . . . . . . 23
Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . 24
Certificate of Residence . . . . . . . . . . . . . . . . . . . . 26
Recordation Data . . . . . . . . . . . . . . . . . . . . . . . . 27
</TABLE>
<PAGE>
This EIGHTY-FOURTH SUPPLEMENTAL INDENTURE, effective as of the 1st day
of June, 1993 (but executed on the dates hereinafter shown), made and entered
into by and between DELMARVA POWER & LIGHT COMPANY, a corporation of the State
of Delaware and the Commonwealth of Virginia, hereinafter called the Company,
party of the first part, and CHEMICAL BANK, a corporation of the State of New
York, hereinafter called the Trustee, party of the second part;
WITNESSETH:
WHEREAS, the Company heretofore executed and delivered its Indenture
of Mortgage and Deed of Trust (hereinafter in this Eighty-Fourth Supplemental
Indenture called the "Original Indenture"), dated as of October 1, 1943, to the
New York Trust Company, a corporation of the State of New York, as Trustee, to
which Chemical Bank is successor Trustee, to secure the First Mortgage Bonds of
the Company, unlimited in aggregate principal amount and issuable in series,
from time to time, in the manner and subject to the conditions set forth in the
Original Indenture granted and conveyed unto the Trustee, upon the trusts, uses
and purposes specifically therein set forth, certain real estate, franchises and
other property therein described, including property acquired after the date
thereof, except as therein otherwise provided; and
WHEREAS, the Original Indenture has been supplemented by eighty four
supplemental indentures specifically subjecting to the lien of the Original
Indenture as though included in the granting clause thereof certain property in
said supplemental indentures specifically described and amending and modifying
the provisions of the Original Indenture (the Original Indenture, as amended,
modified and supplemented by all of the indentures supplemental thereto,
including this Supplemental Indenture, is hereinafter in this Supplemental
Indenture called the "Indenture"); and
WHEREAS, the Original Indenture provides for the issuance of bonds
thereunder in one or more series, the form of each series of bonds and of the
coupons to be attached to any coupon bonds to be substantially in the forms set
forth therein with such omissions, variations and insertions as are authorized
or permitted by the Original Indenture and determined and specified by the Board
of Directors of the Company; and
WHEREAS, the Company is constructing improvements to its gas
facilities in its utility service area which will be financed through the
issuance by The Delaware Economic Development Authority (the "Authority") of its
revenue bonds designated Gas Facilities Revenue Bonds (Delmarva Power & Light
Company Project) Series 1993A pursuant to the terms of a Financing Agreement
between the Authority and the Company which
<PAGE>
will require the Company to deliver its First Mortgage Bonds to provide for
and secure the payment of such Gas Facilities Revenue Bonds; and
WHEREAS, the Company is refinancing certain indebtedness incurred in
connection with bonds previously issued by the Authority's predecessor, to
finance certain pollution control facilities of the Company, said refinancing to
be accomplished through the issuance by the Authority of a separate issue of its
revenue bonds designated Pollution Control Refunding Revenue Bonds (Delmarva
Power & Light Company Project) Series 1993B pursuant to the terms of a separate
Financing Agreement between the Authority and the Company which requires the
Company to deliver its First Mortgage Bonds to provide for and secure the
payment of such Pollution Control Refunding Revenue Bonds; and
WHEREAS, the Company, by appropriate corporate action in conformity
with the terms of the Indenture, has duly determined to create a series of bonds
to be designated as First Mortgage Bonds, Gas Facilities Series 1993A due
June 1, 2032 (hereinafter sometimes referred to as the "1993 Gas Facilities
Bonds" or the "bonds of the 1993 Gas Facilities Series") and has duly
determined to create a series of bonds to be designated as First Mortgage
Bonds, Pollution Control Refunding Series 1993B due June 1, 2021 (hereinafter
sometimes referred to as the "1993 Pollution Control Refunding Bonds" or the
"bonds of the 1993 Pollution Control Refunding Series") (the 1993 Gas
Facilities Bonds and the 1993 Pollution Control Refunding Bonds being herein
sometimes referred to collectively as the "bonds of the 1993 Series"), which
said bonds of the 1993 Series are to be substantially in the following form
with such additional identification as may be advisable to distinguish each
separate series:
[FORM OF FACE OF BOND]
DELMARVA POWER & LIGHT COMPANY
FIRST MORTGAGE BOND
__________ Series 1993___
Due June 1, ________
Number:
Maturity Date: June 1, ______
Interest Rate:
Registered Owner:
Principal Amount: Dollars
-2-
<PAGE>
DELMARVA POWER & LIGHT COMPANY, a corporation of the State of Delaware
and the Commonwealth of Virginia (hereinafter called the Company), for value
received, hereby promises to pay to the Owner identified above, or registered
assigns as hereinafter provided, on the Maturity Date identified above, the
Principal Amount identified above, and to pay interest on said Principal Amount
until payment of said Principal Amount has been made or duly provided for at the
Interest Rate identified above, on June 1 and December 1 of each year,
commencing on December 1, 1993, and to pay interest on overdue principal and, to
the extent permitted by law, on overdue interest at the rate borne by this Bond,
except as the provisions hereinafter set forth with respect to redemption prior
to maturity may become applicable hereto, the principal of, premium, if any, and
interest on, this Bond being payable in lawful money of the United States of
America at the corporate trust office of the State Trustee (as hereinafter
defined). Interest on this bond shall be computed on the basis of a 360-day
year consisting of twelve 30-day months from the first day of June or December,
as the case may be, to which interest has been paid (or is deemed to have been
paid), unless no interest has been paid (or is deemed to have been paid) hereon,
in which case from June 1, 1993, until this bond shall be paid or the payment
hereof shall have been duly provided for.
The provisions of this bond are continued on the reverse hereof and
such continued provisions shall for all purposes have the same effect as though
fully set forth at this place.
This bond shall not become valid or obligatory for any purpose until
CHEMICAL BANK, the Trustee under the Mortgage, or its successor thereunder,
shall have signed the certificate of authentication endorsed hereon.
IN WITNESS WHEREOF, DELMARVA POWER & LIGHT COMPANY has caused this
bond to be signed in its name with the manual or facsimile signature of its
President or one of its Vice Presidents and its corporate seal, or a facsimile
thereof, to be affixed hereto and attested by the manual signature of its
Secretary or one of its Assistant Secretaries.
Dated: June 1, 1993
Seal:
Attest: DELMARVA POWER & LIGHT COMPANY
____________________________ By______________________________
Secretary President
-3-
<PAGE>
This bond is one of the bonds of the series herein
designated, provided for in the within-mentioned mortgage.
Chemical Bank, Trustee
By__________________________
Authorized Officer
-4-
<PAGE>
[FORM OF REVERSE OF BOND]
DELMARVA POWER & LIGHT COMPANY
FIRST MORTGAGE BOND
____________ Series 1993 _____
Due June 1, ______
This bond is one of an issue of bonds of the Company (herein referred
to as the "bonds"), not limited in principal amount, issuable in series, which
different series may mature at different times, may bear interest at different
rates, and may otherwise vary as in the Mortgage hereinafter mentioned provided,
and is one of a series known as First Mortgage Bonds, _______ Series 1993___ due
June 1, _____ (herein sometimes referred to as "bonds of the 1993_____ Series").
All bonds of all series issued and to be issued under and equally and ratably
secured (except insofar as any sinking fund, established in accordance with
the provisions of the Mortgage hereinafter mentioned, may afford additional
security for the bonds of any particular series) by the Mortgage and Deed of
Trust, dated as of October 1, 1943, executed by the Company to THE NEW YORK
TRUST COMPANY, as Trustee, to which CHEMICAL BANK, a corporation of the State
of New York, is successor Trustee (herein, together with any indentures
supplemental thereto, including an Eighty-Fourth Supplemental Indenture, dated
as of June 1, 1993, called the "Mortgage"), to which reference is made for a
description of the property mortgaged and pledged, the nature and extent of
the security, the rights and limitations of rights of the holders of the bonds
and of the Company in respect thereof, the rights, duties and immunities of
the Trustee, and the terms and conditions upon which the bonds are, and are to
be, issued and secured. The Mortgage contains provisions permitting the
Company and the Trustee, with the consent of the holders of not less than
seventy-five percent (75%) in principal amount of all the bonds at the time
outstanding (determined as provided in the Mortgage), evidenced as in the
Mortgage provided, or in case the rights under the Mortgage of the holders of
the bonds of one or more, but less than all, of the series of bonds
outstanding shall be affected, then with the consent of the holders of not
less than seventy-five percent (75%) in principal amount of the bonds at the
time outstanding of the one or more series, taken in the aggregate, affected
(determined as provided in the Mortgage), evidenced as in the Mortgage
provided, to execute supplemental indentures adding any provisions to or
changing in any manner or eliminating any of the provisions of the Mortgage or
modifying in any manner the rights of the holders of the bonds and coupons;
provided, however, that no such supplemental indenture shall (i) extend the
fixed maturity of any bonds, or reduce the rate or extend the time of payment
of interest thereon, or reduce the principal amount thereof, without the
consent of the holder of each bond so affected, or (ii) reduce the aforesaid
percentage of bonds, the holders of which are
-5-
<PAGE>
required to consent to any such supplemental indenture without the consent of
the holders of all bonds then outstanding. Any such consent by the registered
holder of this bond (unless effectively revoked as provided in the Mortgage)
shall be conclusive and binding upon such holder and upon all future holders of
this bond, irrespective of whether or not any notation of such consent is made
upon this bond. No reference herein to the Mortgage and no provision of this
bond or of the Mortgage shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of, premium, if any,
and interest on, this bond at the time and place, at the rate and in the coin or
currency herein prescribed.
The fully registered bonds of the 1993 ______________ Series are
issuable in denominations of $5,000 and any integral multiple thereof. At the
office or agency to be maintained by the Company in the Borough of Manhattan,
The City of New York and in the manner and subject to the limitations provided
in the Mortgage, fully registered bonds of such series may be exchanged for a
like aggregate principal amount of fully registered bonds of such series of
other authorized denominations, and in each case without payment of any service
or other similar charge as provided in said Eighty-Fourth Supplemental
Indenture.
Concurrently with the issuance of the bonds of the 1993 __________
Series, The Delaware Economic Development Authority (the "Authority") is issuing
its ________________ Revenue Bonds (Delmarva Power & Light Company Project)
Series 1993___ (the "State Revenue Bonds") under and pursuant to an indenture
(the "State Indenture") between the Authority and Delaware Trust Company, as
trustee (the "State Trustee"), which term shall include its successors in trust,
if any, under the State Indenture). The bonds of the 1993 ________________
Series are issued to the State Trustee under a Pledge Agreement, between the
Company and the State Trustee, to provide for and secure the payment of the
State Revenue Bonds, the proceeds of which will be loaned to the Company to
finance or refinance certain facilities under a Financing Agreement between the
Authority and the Company.
Whenever payment or provision therefor has been made in respect of the
principal of, and premium, if any, and interest on, all or any portion of the
State Revenue Bonds in accordance with the State Indenture, the corresponding
amount of principal of, and premium, if any, and interest on, the bonds of the
1993 _________ Series issued as security therefor, shall be deemed to have been
paid.
If and whenever the Trustee is notified pursuant to Section 802 of the
State Indenture (i) that an event of default, as defined in Section 801 of such
State Indenture, has occurred and is continuing, (ii) that the principal of all
State Revenue Bonds then outstanding and the interest accrued thereon has been
declared due and payable, and (iii) that
-6-
<PAGE>
redemption of all of the bonds of the 1993 _____________ Series issued as
security therefor is demanded, then, as soon as practicable and in any event
within five (5) days of having received notice of such default and of such
declaration and such demand, the Trustee shall so notify the Company and, upon
receipt of sufficient funds, shall redeem all of such bonds of the 1993
________________ Series then outstanding by payment of the principal amount
thereof together with accrued interest to the redemption date; provided,
however, that such requirement of redemption shall be deemed to be waived if,
prior to the date fixed for such redemption, the State Trustee has notified the
Trustee in writing that such event of default under such State Indenture is
waived or cured and the accelerated maturity of such State Revenue Bonds ceases
to be effective. The Company covenants that, upon receipt of notice of such
redemption from the Trustee, it shall immediately deposit with the Trustee
sufficient funds to enable the Trustee to redeem all of the bonds of the 1993
______________ Series. The bonds of the 1993 ______________ Series also shall
be subject to redemption in whole and in part as provided in the Mortgage.
The holder of this bond, by the acceptance hereof, waives any right to
notice of redemption of this bond, in whole or in part, which it may have under
any provisions of the Mortgage.
The Mortgage provides that if the Company shall deposit with the
Trustee in trust for the purpose funds sufficient to pay the principal of all of
the bonds of any series, or such of the bonds of any series as have been or are
to be called for redemption, and premium, if any, thereon, and all interest
payable on such bonds to the date on which they become due and payable at
maturity or upon redemption or otherwise, and shall comply with the other
provisions of the Mortgage in respect thereof, then from the date of such
deposit such bonds shall no longer be entitled to any lien or benefit under the
Mortgage.
The principal hereof may be declared or may become due prior to the
express date of the maturity hereof on the conditions, in the manner and at the
time set forth in the Mortgage, upon the occurrence of a completed default as in
the Mortgage provided.
This bond is transferable as prescribed in the Mortgage by the
registered holder hereof in person, or by his duly authorized attorney, at the
office or agency of the Company in said Borough of Manhattan, upon surrender and
cancellation of this bond, and thereupon a new fully registered bond or bonds of
authorized denominations of the same series and for the same aggregate principal
amount will be issued to the transferee in exchange herefore as provided in the
Mortgage, and in each case without payment of any service or other similar
charge as provided in said Eighty-Fourth Supplemental Indenture. The Company
and the Trustee, any paying agent and any bond registrar may deem and treat the
-7-
<PAGE>
person in whose name this bond is registered as the absolute owner hereof,
whether or not this bond shall be overdue, for the purpose of receiving payment
and for all other purposes and neither the Company nor the Trustee nor any
paying agent nor any bond registrar shall be affected by any notice to the
contrary.
No recourse shall be had for the payment of the principal of, premium,
if any, and interest on, this bond, or for any claim based hereon, or otherwise
in respect hereof, or based on, or in respect of, the Mortgage, against any
incorporator or any past, present or future subscriber to the capital stock,
stockholder, officer or director, as such, of the Company or of any successor
corporation, either directly or through the Company or any successor
corporation, under any rule of law, statute or constitution or by the
enforcement of any assessment or otherwise, all such liability of incorporators,
subscribers, stockholders, officers and directors, as such, being waived and
released by the holder and owner hereof by the acceptance of this bond and being
likewise waived and released by the terms of the Mortgage; and
[END OF BOND FORM]
WHEREAS, all acts and things prescribed by law and by the charter and
bylaws of the Company necessary to make the bonds of the 1993 Series, when
executed by the Company and authenticated by the Trustee, as in the Indenture
provided, valid, binding and legal obligations of the Company, entitled in all
respects to the security of the Indenture, have been performed; and
WHEREAS, provision is made in Sections 5.11 and 17.01 of the Original
Indenture for such further instruments and indentures, supplemental to the
Original Indenture, as may be necessary or proper to carry out more effectually
the purposes of the Original Indenture, and to subject to the lien of the
Original Indenture any property acquired after the date of the Original
Indenture and intended to be covered thereby, with the same force and effect as
though included in the granting clause thereof, and to add such further
covenants, restrictions or conditions for the protection of the mortgaged and
pledged property and the holders of the bonds as the Board of Directors of the
Company and the Trustee shall consider to be for the protection of the holders
of the bonds, and to set forth the terms and provisions of any series of bonds
to be issued under the Original Indenture and the form of the bonds and coupons
of such series; and the Company since the date of the Original Indenture has
acquired additional property not heretofore specifically subjected to the lien
of the Original Indenture; and it is desired to add certain further covenants,
restrictions and conditions for the protection of the mortgaged and pledged
property and the holders of the bonds, as provided in this Eighty-Fourth
Supplemental Indenture, which the Board of Directors of the Company and the
Trustee consider to be for the protection of the holders of the bonds; and the
Company
-8-
<PAGE>
desires to issue the bonds of the 1993 Series; and the Company therefore deems
it advisable to enter into this Eighty-Fourth Supplemental Indenture in the form
and terms hereof; and
WHEREAS, the execution and delivery of this Eighty-Fourth Supplemental
Indenture has been duly authorized by the Board of Directors of the Company at a
meeting duly called and held according to law, and all conditions and
requirements necessary to make this Eighty-Fourth Supplemental Indenture a
valid, binding and legal instrument in accordance with its terms, for the
purposes herein expressed, and the execution and delivery hereof, in the form
and terms hereof, have been in all respects duly authorized;
NOW, THEREFORE, in order further to secure the payment of the
principal and interest and premium, if any, of all bonds issued and to be issued
under the Original Indenture and any indentures supplemental thereto, including
this Eighty-Fourth Supplemental Indenture, according to their tenor, purport and
effect and the performance and observance of all the covenants and conditions in
said bonds and the Original Indenture and any indentures supplemental thereto,
including this Eighty-Fourth Supplemental Indenture, contained and to subject to
the lien of the Original Indenture, as so supplemented, with the same force and
effect as though included in the granting clause thereof, additional property
now owned by the Company, and for and in consideration of the premises and of
the sum of One Dollar ($1.00), lawful money of the United States of America, to
the Company duly paid by the Trustee at or before the ensealing and delivery
hereof, and other valuable considerations, the receipt whereof is hereby
acknowledged, and intending to be legally bound hereby, the Company has executed
and delivered this Eighty-Fourth Supplemental Indenture, and hath granted,
bargained, sold, released, conveyed, assigned, transferred, mortgaged, pledged,
set over and confirmed, and granted a security interest therein, and by these
presents doth grant, bargain, sell release, convey, assign, transfer, mortgage,
pledge, set over and confirm, and grant a security interest therein, subject to
the provisions of the Indenture, unto CHEMICAL BANK, as trustee, and to its
successors in trust and to its and their assigns forever, all the following
described properties of the Company, and doth hereby confirm that the Company
will not cause or consent to a partition, either voluntary or through legal
proceedings, of property, whether herein described or heretofore or hereafter
acquired, in which its ownership shall be as tenants in common, except as
permitted by, and in conformity with, the provision of the Indenture and
particularly of Article IX of the Original Indenture:
All property, real, personal and mixed, tangible and intangible, owned
by the Company on the date of the execution hereof or which may be hereafter
acquired by it (except such property as in the Original Indenture expressly
excepted from the lien and operation of the Indenture).
-9-
<PAGE>
The property covered by this Eighty-Fourth Supplemental Indenture
shall include particularly, among other property, without prejudice to the
generality of the language hereinbefore or hereinafter contained, the following
described property:
All the electric generating stations, station sites, stations,
electric reserve generating stations, substations, substation sites, gas
manufacturing plants, ice and cold storage plants, steam plants, hot water
plants, hydro-electric stations, hydro-electric station sites, electric
transmission lines, electric distribution systems, gas transportation mains, gas
distribution systems, steam distribution systems, hot water distribution
systems, regulator stations, regulator station sites, office buildings,
storeroom buildings, warehouse buildings, boiler houses, plants, plant sites,
service plants, coal storage yards, and poleyards now or hereafter owned by the
Company, including all electric works, power houses, generators, turbines,
boilers, engines, furnaces, retorts, dynamos, buildings, structures,
transformers, meters, towers, poles, tower lines, cables, pole lines, tanks,
storage holders, regulators, gas works, pipes, pipe lines, mains, pipe fittings,
valves, drips, connections, tunnels, conduits, gates, motors, wires, switch
racks, switches, brackets, insulators, and all equipment, improvements,
machinery, appliances, devices, appurtenances, supplies and miscellaneous
property for generating, producing, transforming, converting, storing and
distributing electric energy, gas, ice, steam and hot water, and furnishing cold
storage, now or hereafter owned by the Company, together with all furniture and
fixtures located in the aforesaid buildings, and all land now or hereafter owned
by the Company on which the same or any part thereof are situated, and all of
the real estate, leases, leaseholds (except the last day of the term of each
lease and leasehold), and lands now or hereafter owned by the Company, including
land located on or adjacent to any river, stream or other water, together with
all flowage rights, flooding rights, water rights, riparian rights, dams and dam
sites and rights, flumes, canals, races, raceways, head works and diversion
works, and all of the municipal and other franchises, licenses, consents,
ordinances, permits, privileges, rights, servitudes, easements and rights-of-
way and other rights in or relating to real estate or the occupancy of the same
now or hereafter owned by the Company, and all of the other property, real,
personal or mixed, now or hereafter owned by the Company, forming a part of any
of the foregoing property or used or enjoyed or capable of being used or enjoyed
in connection therewith or in anywise appertaining thereto, whether developed or
undeveloped, or partially developed, or whether now equipped and operating or
not and wherever situated, and all of the Company's presently held or hereafter
acquired right, title and interest in and to the land on which the same or any
part thereof are situated or adjacent thereto, and all rights for or relating to
the construction, maintenance or operation of any of the foregoing property
through, over, under or upon any public streets or highways or other lands,
public or private, and (except as hereinafter expressly
-10-
<PAGE>
excepted) all the right, title and interest of the Company presently held or
hereafter acquired in and to all other property of any kind or nature
appertaining to and/or used and/or occupied and/or enjoyed in connection with
any property hereinbefore described, and, as to all of the foregoing, whether
now owned by the Company or hereafter acquired by the Company.
Without limitation of the generality of the foregoing, the easements
and rights of way and other rights in or relating to real estate or the
occupancy of the same owned by the Company, and whether used or not used in
connection with the Company's operations, which were conveyed to the Company and
recorded in the following Real Property Deed Records to which reference is made
for a more particular description, to wit:
<TABLE>
<CAPTION>
State and County
- ----------------
DELAWARE
New Castle
Received Deed Records Received Deed Records
for Record Book Page for Record Book Page
<S> <C> <C> <C> <C> <C>
11/13/92 1428 0265 01/25/93 1464 0034
12/16/92 1444 0082 01/25/93 1464 0036
12/22/92 1447 0231 01/25/93 1464 0038
01/25/93 1463 0154 01/25/93 1464 0040
01/25/93 1463 0157 01/25/93 1464 0042
01/25/93 1463 0160 01/25/93 1464 0044
01/25/93 1463 0294 01/25/93 1464 0047
01/25/93 1463 0298 01/25/93 1464 0050
01/25/93 1463 0301 01/25/93 1464 0052
01/25/93 1463 0304 01/25/93 1464 0054
01/25/93 1463 0307 01/25/93 1464 0056
01/25/93 1463 0309 01/25/93 1464 0058
01/25/93 1463 0311 01/25/93 1464 0060
01/25/93 1463 0313 01/25/93 1464 0062
01/25/93 1463 0315 01/25/93 1464 0066
01/25/93 1463 0317 01/25/93 1464 0070
01/25/93 1463 0319 01/25/93 1464 0079
01/25/93 1463 0321 01/25/93 1464 0090
01/25/93 1463 0323 01/25/93 1464 0095
01/25/93 1463 0325 02/17/93 1474 0026
01/25/93 1463 0327 02/17/93 1474 0301
01/25/93 1463 0329 02/17/93 1474 0304
01/25/93 1463 0331 02/17/93 1474 0307
01/25/93 1463 0333 02/17/93 1474 0310
01/25/93 1463 0335 02/17/93 1474 0312
01/25/93 1463 0337 02/17/93 1474 0314
01/25/93 1463 0339 02/17/93 1474 0316
01/25/93 1463 0342 02/17/93 1474 0318
01/25/93 1463 0345 02/17/93 1474 0320
01/25/93 1464 0001 02/17/93 1474 0322
01/25/93 1464 0004 02/17/93 1474 0324
01/25/93 1464 0006 02/17/93 1474 0328
</TABLE>
-11-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
01/25/93 1464 0014 02/17/93 1474 0330
01/25/93 1464 0016 02/17/93 1474 0332
01/25/93 1464 0018 02/17/93 1474 0334
01/25/93 1464 0020 03/08/93 1486 0009
01/25/93 1464 0022 03/08/93 1486 0017
01/25/93 1464 0024 03/08/93 1486 0019
01/25/93 1464 0026 03/08/93 1486 0021
01/25/93 1464 0028 03/08/93 1486 0023
01/25/93 1464 0030 03/08/93 1486 0026
01/25/93 1464 0032
</TABLE>
<TABLE>
<CAPTION>
State and County
- ----------------
DELAWARE
Sussex
Received Deed Records Received Deed Records
for Record Book Page for Record Book Page
<S> <C> <C> <C> <C> <C>
01/07/93 DDG 1891 0150 01/07/93 DDG 1891 0158
01/07/93 DDG 1891 0152 01/07/93 DDG 1891 0160
01/07/93 DDG 1891 0154 01/07/93 DDG 1891 0162
01/07/93 DDG 1891 0156 01/07/93 DDG 1891 0164
</TABLE>
<TABLE>
<CAPTION>
State and County
- ----------------
MARYLAND
Caroline
Received Deed Records Received Deed Records
for Record Book Page for Record Book Page
<S> <C> <C> <C> <C> <C>
10/13/92 FDM 250 0599 12/24/92 FDM 251 0374
12/24/92 FDM 251 0372
</TABLE>
<TABLE>
<CAPTION>
State and County
- ----------------
MARYLAND
Kent
Received Deed Records Received Deed Records
for Record Book Page for Record Book Page
<S> <C> <C> <C> <C> <C>
10/14/92 MLM 029 0278 11/12/92 MLM 031 0114
10/14/92 MLM 029 0280 11/12/92 MLM 031 0116
10/14/92 MLM 029 0282 12/14/92 MLM 033 0054
10/14/92 MLM 029 0284 12/14/92 MLM 033 0056
10/14/92 MLM 029 0286 12/14/92 MLM 033 0058
10/14/92 MLM 029 0288 12/14/92 MLM 033 0060
10/14/92 MLM 029 0290 12/14/92 MLM 033 0062
</TABLE>
-12-
<PAGE>
<TABLE>
<CAPTION>
State and County
- ----------------
MARYLAND
Queen Annes
Received Deed Records Received Deed Records
for Record Book Page for Record Book Page
<S> <C> <C> <C> <C> <C>
11/12/92 MWM 0411 0020 11/12/92 MWM 0411 0052
11/12/92 MWM 0411 0022 11/24/92 MWM 0412 0491
11/12/92 MWM 0411 0024 11/24/92 MWM 0412 0493
11/12/92 MWM 0411 0026 11/24/92 MWM 0412 0495
11/12/92 MWM 0411 0028 12/14/92 MWM 0414 0269
11/12/92 MWM 0411 0030 12/14/92 MWM 0414 0271
11/12/92 MWM 0411 0032 12/14/92 MWM 0414 0273
11/12/92 MWM 0411 0034 12/14/92 MWM 0414 0275
11/12/92 MWM 0411 0036 12/14/92 MWM 0414 0277
11/12/92 MWM 0411 0038 12/14/92 MWM 0414 0279
11/12/92 MWM 0411 0040 12/14/92 MWM 0414 0281
11/12/92 MWM 0411 0042 12/14/92 MWM 0414 0283
11/12/92 MWM 0411 0044 12/14/92 MWM 0414 0285
11/12/92 MWM 0411 0046 12/14/92 MWM 0414 0287
11/12/92 MWM 0411 0048 12/14/92 MWM 0414 0289
11/12/92 MWM 0411 0050
</TABLE>
<TABLE>
<CAPTION>
State and County
- ----------------
MARYLAND
Somerset
Received Deed Records Received Deed Records
for Record Book Page for Record Book Page
<S> <C> <C> <C> <C> <C>
11/12/92 ITP 0407 1080 11/12/92 ITP 0407 1082
</TABLE>
<TABLE>
<CAPTION>
State and County
- ----------------
MARYLAND
Talbot
Received Deed Records Received Deed Records
for Record Book Page for Record Book Page
<S> <C> <C> <C> <C> <C>
12/17/92 MAS 0740 0487 01/21/93 MAS 0743 0410
12/17/92 MAS 0740 0489 01/21/93 MAS 0743 0412
12/17/92 MAS 0740 0491 01/21/93 MAS 0743 0414
12/17/92 MAS 0740 0493 01/21/93 MAS 0743 0416
01/21/93 MAS 0743 0408 01/21/93 MAS 0743 0418
</TABLE>
-13-
<PAGE>
<TABLE>
<CAPTION>
State and County
- ----------------
MARYLAND
- --------
Wicomico
Received Deed Records Received Deed Records
for Record Book Page for Record Book Page
<S> <C> <C> <C> <C> <C>
10/14/92 MSB 1310 0303 11/12/92 MSB 1314 0414
10/14/92 MSB 1310 0305 11/12/92 MSB 1314 0416
10/14/92 MSB 1310 0307 11/12/92 MSB 1314 0418
11/12/92 MSB 1314 0406 11/12/92 MSB 1314 0420
11/12/92 MSB 1314 0408 11/12/92 MSB 1314 0422
11/12/92 MSB 1314 0410 12/14/92 MSB 1318 0373
11/12/92 MSB 1314 0412 12/14/92 MSB 1318 0375
</TABLE>
<TABLE>
<CAPTION>
State and County
- ----------------
MARYLAND
Worcester
Received Deed Records Received Deed Records
for Record Book Page for Record Book Page
<S> <C> <C> <C> <C> <C>
10/13/92 RHO 1868 0432
</TABLE>
<TABLE>
<CAPTION>
State and County
- ----------------
VIRGINIA
Accomack
Received Deed Records Received Deed Records
for Record Book Page for Record Book Page
<S> <C> <C> <C> <C> <C>
12/14/92 SHC 0633 00251 01/19/93 SHC 0635 00125
12/14/92 SHC 0633 00254 01/19/93 SHC 0635 00128
01/19/93 SHC 0635 00116 01/19/93 SHC 0635 00131
01/19/93 SHC 0635 00119 01/19/93 SHC 0635 00134
01/19/93 SHC 0635 00122
</TABLE>
<TABLE>
<CAPTION>
State and County
- ----------------
VIRGINIA
Northampton
Received Deed Records Received Deed Records
for Record Book Page for Record Book Page
<S> <C> <C> <C> <C> <C>
10/13/92 KFA 257 0758 10/13/92 KFA 257 0760
</TABLE>
Together with all and singular the tenements, hereditaments and
appurtenances belonging or in anywise appertaining to the aforesaid property or
any part thereof, with the reversion and reversions, remainder and remainders
and (subject to the provisions of Section 9.01 of the Original Indenture) the
tolls, rents, revenues, issues, earnings,
-14-
<PAGE>
income, product and profits thereof, and all the estate, right, title and
interest and claim whatsoever, at law as well as in equity, which the Company
now has or may hereafter acquire in and to the aforesaid property and franchises
and every part and parcel thereof.
IT IS HEREBY AGREED by the Company that all property, rights and
franchises acquired by the Company after the date hereof (except any in the
Original Indenture expressly excepted) shall (subject to the provisions of
Section 9.01 of the Original Indenture and to the extent permitted by law) be as
fully embraced within the lien of the Original Indenture and any indentures
supplemental thereto, including this Eighty-Fourth Supplemental Indenture, as if
such property, rights and franchises were at the time of the execution of the
Original Indenture owned by the Company and/or specifically described therein
and conveyed thereby and as if such property, rights and franchises were now
owned by the Company and/or specifically described herein and conveyed hereby;
Provided that, in addition to the reservations and exceptions herein
elsewhere contained, the following are not and are not intended to be granted,
bargained, sold, released, conveyed, assigned, transferred, mortgaged, pledged,
set over or confirmed hereunder and are hereby expressly excepted from the lien
and operation of the Original Indenture and any indentures supplemental thereto,
including this Eighty-Fourth Supplemental Indenture, viz.: (1) cash and shares
of stock and certificates or evidence of interest therein and obligations
(including bonds, notes and other securities) not, in or pursuant to the
Original Indenture or any indenture supplemental thereto, including this Eighty-
Fourth Supplemental Indenture, specifically pledged or deposited or delivered or
therein covenanted so to be; (2) any goods, wares, merchandise, equipment,
materials or supplies held or acquired for the purpose of sale or resale in the
usual course of business or for consumption in the operation of any properties
of the Company; and (3) all judgments, contracts, accounts and choses in action,
the proceeds of which the Company is not obligated as in the Original Indenture
provided to deposit with the Trustee hereunder; provided, however, that the
property and rights expressly excepted from the lien and operation of the
Original Indenture and any indentures supplemental thereto, including this
Eighty-Fourth Supplemental Indenture, in the above subdivisions (2) and (3)
shall (to the extent permitted by law) cease to be so excepted, in the event
that the Trustee or a receiver or trustee shall take possession of the mortgaged
and pledged property in the manner provided in Article X of the Original
Indenture, by reason of the occurrence of a completed default, as defined in
said Article X of the Original Indenture.
TO HAVE AND TO HOLD all such properties, real, personal, or mixed,
granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged,
pledged, set over or confirmed by the Company as aforesaid, or intended so to
be,
-15-
<PAGE>
unto the Trustee and its successors in the trusts created in the Indenture and
its and their assigns foreover;
SUBJECT, HOWEVER, to any reservations, exceptions, conditions,
limitations and restrictions contained in several deeds, servitudes, franchises
and contracts or other instruments through which the Company acquired, and/or
claims title to and/or enjoys the use of the aforesaid properties; and subject
also to encumbrances of the character defined in the Original Indenture as
"excepted encumbrances" in so far as the same may attach to any of the property
embraced herein;
IN TRUST NEVERTHELESS upon the terms, trusts, uses and purposes
specifically set forth in the Indenture; this Eighty-Fourth Supplemental
Indenture being made for the purpose inter alia, of subjecting the real estate
and premises and other property above described to the lien and operation of the
Indenture, so that the same shall be held specifically by the Trustee under and
subject to the terms and conditions of the Indenture in identically the same
manner and for the same trusts, uses and purposes, as though the said real
estate and premises and other property had been specifically described in the
Original Indenture.
AND IT IS HEREBY FURTHER COVENANTED AND AGREED and the Company and the
Trustee have mutually agreed, in consideration of the premises, as follows:
ARTICLE I
DESIGNATION, PROVISIONS, DENOMINATIONS AND ISSUANCE
OF BONDS OF THE 1993 GAS FACILITIES SERIES
SECTION 1. A series of bonds of the Company issuable and secured by
the Indenture is hereby created and authorized, which series shall be designated
"First Mortgage Bonds, Gas Facilities Series 1993A due June 1, 2032" and
sometimes referred to as the "1993 Gas Facilities Bonds" or the "bonds of the
1993 Gas Facilities Series". All bonds of the 1993 Gas Facilities Series shall
be fully registered bonds.
Each bond of the 1993 Gas Facilities Series shall be dated as of
June 1, 1993, and shall mature, subject to prior redemption, upon the terms
and conditions hereinafter set forth, on June 1, 2032. All such bonds shall
bear interest at the rate of six and five hundredths percent (6.05%) per annum
from and including the date thereof until payment of the principal or
redemption price thereof shall have been made or provided for in accordance
with the provisions hereof, whether at maturity, upon redemption or otherwise.
Interest on such bonds shall be payable semi-annually on each June 1 and
December 1 commencing December 1, 1993. Interest on such bonds shall be
computed upon the basis of a 360-day year, consisting of twelve (12) thirty
(30) day months from the first day of June or December, as the case may be, to
which interest has
-16-
<PAGE>
been paid (or is deemed to have been paid), unless no interest has been paid (or
is deemed to have been paid) thereon, in which case from June 1, 1993, until all
such bonds shall be paid or the payment thereof shall have been duly provided
for. Each such bond shall bear interest on overdue principal and, to the extent
permitted by law, on overdue interest at the rate borne by such bonds.
The principal of, and premium, if any, and interest on, the bonds of
the 1993 Gas Facilities Series shall be payable in any coin or currency of the
United States of America which, at the respective dates of payment thereof, is
legal tender for the payment of public and private debts, and such principal,
premium, if any, and interest shall be payable at the corporate trust office of
the State Trustee, as hereinafter defined.
SECTION 2. The bonds of the 1993 Gas Facilities Series shall be
registered in the name of the State Trustee, as hereinafter defined, under an
Indenture of Trust, dated as of June 1, 1993 (for the purpose of this Article I
the "State Indenture"), between the Authority and Delaware Trust Company (for
the purpose of this Article I, including its successors in trust, if any, under
the State Indenture, the "State Trustee"), relating to the Authority's Gas
Facilities Revenue Bonds (Delmarva Power & Light Company Project) Series 1993A
(for the purpose of this Article I the "State Revenue Bonds"). The bonds of the
1993 Gas Facilities Series are issued to provide for, and secure, the payment of
the State Revenue Bonds, the proceeds of which will be used to finance certain
gas facilities located or to be located in the Company's gas distribution system
in New Castle County, Delaware, under a Financing Agreement dated as of June 1,
1993 (for the purpose of this Article I the "Agreement"), between the Authority
and the Company. The principal of, and premium, if any, and interest on, the
State Revenue Bonds are payable from payments made by the Company of principal
of, and premium, if any, and interest on, the bonds of the 1993 Gas Facilities
Series.
SECTION 3. Whenever payment or provision therefor has been made in
respect of the principal of, and premium, if any, and interest on, all or any
portion of the State Revenue Bonds in accordance with the State Indenture, the
corresponding amount of principal of, and premium, if any, and interest on, the
bonds of the 1993 Gas Facilities Series issued as security therefor, shall be
deemed to have been paid.
The Trustee may conclusively assume that the obligation of the Company
to make payments on the bonds of the 1993 Gas Facilities Series shall have been
fully satisfied and discharged in a timely manner unless and until the Trustee
shall have received a written notice to the contrary from the State Trustee,
which notice shall state the date such payment was due, the amount of such
payment, and the purpose for which such payment was to have been made.
-17-
<PAGE>
SECTION 4. (a) Mandatory Redemption Upon Redemption of State Revenue
-----------------------------------------------------
Bonds. On any date on which the State Revenue Bonds shall be redeemed in whole
- -----
or in part, the bonds of the 1993 Gas Facilities Series shall be redeemed in
like principal amount at the same redemption price plus the same accrued
interest as shall be payable on the State Revenue Bonds then to be redeemed.
The Company covenants that it shall deposit with the Trustee sufficient funds to
enable the Trustee to redeem all of the bonds of the 1993 Gas Facilities Series
so to be redeemed on each date on which they are to be redeemed.
(b) Mandatory Redemption upon Acceleration of State Revenue Bonds.
-------------------------------------------------------------
If and whenever the Trustee is notified pursuant to Section 802 of the State
Indenture (i) that an event of default, as defined in Section 801 of the State
Indenture, has occurred and is continuing, (ii) that the principal of all State
Revenue Bonds then outstanding and the interest accrued thereon has been
declared due and payable and (iii) that the redemption of the bonds of the 1993
Gas Facilities Series is demanded, then as soon as practicable, and in any event
within five (5) days of having received notice of such default and of such
declaration and such demand, the Trustee shall so notify the Company and, upon
receipt of sufficient funds, shall redeem all of the bonds of the 1993 Gas
Facilities Series then outstanding upon payment of the principal amount thereof
together with accrued interest to the redemption date; provided, however, that
such requirement of redemption shall be deemed to be waived, if, prior to the
date fixed for such redemption, the State Trustee has notified the Trustee in
writing that such event of default under the State Indenture is waived or cured
and the accelerated maturity of the State Revenue Bonds ceases to be effective.
The Company covenants that, upon receipt of notice of such redemption from the
Trustee, it shall immediately deposit with the Trustee sufficient funds to
enable the Trustee to redeem all of the bonds of the 1993 Gas Facilities Series.
(c) The Trustee shall not be deemed to have received a redemption
notice and demand from the State Trustee under Section 4(b), unless such notice
and demand shall have been signed by the President, a Vice President, an
Assistant Vice President, a Trust Officer or an Assistant Trust Officer of the
State Trustee and shall have been delivered to the Trustee at its principal
corporate trust office addressed to the attention of its Corporate Trustee
Administration Department.
(d) Notwithstanding any other provisions of the Indenture, the bonds
of the 1993 Gas Facilities Series are subject to redemption only as provided in
this Section 4.
SECTION 5. Each holder of bonds of the 1993 Gas Facilities Series, by
the acceptance thereof, has waived any rights to notice of redemption of such
bonds. Therefore, the Trustee shall not give notice to the holder of such
bonds, notwithstanding any other provisions of the Indenture.
-18-
<PAGE>
SECTION 6. Bonds of the 1993 Gas Facilities Series shall be issuable
in the denominations of $5,000 and integral multiples thereof. Bonds of the
1993 Gas Facilities Series may be exchanged at the option of the holders
thereof, for a like aggregate principal amount of fully registered bonds of such
series of other authorized denominations.
No service or other similar charge shall be made for any exchange,
transfer, or registration of the bonds of 1993 Gas Facilities Series, but the
Company may require payment of a sum sufficient to cover any tax or taxes or
other governmental charges required to be paid by the Company in relation
thereto.
SECTION 7. The principal amount of the bonds of the 1993 Gas
Facilities Series which may be authenticated and delivered hereunder is limited
in aggregate principal amount to $15,000,000.
SECTION 8. Bonds of the 1993 Gas Facilities Series in the aggregate
principal amount of $15,000,000 shall forthwith be executed by the Company and
delivered to the Trustee and shall be authenticated by the Trustee and
delivered, either before or after the recording hereof, in accordance with the
request of the Company, signed in the name of the Company by its President, or
one of its Vice Presidents and its Treasurer or one of its Assistant Treasurers,
upon compliance by the Company with the applicable provisions of Articles III
and IV of the Original Indenture, as amended.
ARTICLE II
DESIGNATION, PROVISIONS, DENOMINATIONS AND ISSUANCE
OF BONDS OF THE 1993 POLLUTION CONTROL REFUNDING SERIES
SECTION 1. A series of bonds of the Company issuable and secured by
the Indenture is hereby created and authorized, which series shall be designated
"First Mortgage Bonds, Pollution Control Refunding Series 1993B due June 1,
2021" and sometimes referred to as the "1993 Pollution Control Refunding Bonds"
or the "bonds of the 1993 Pollution Control Refunding Series". All bonds of the
1993 Pollution Control Refunding Series shall be fully registered bonds.
Each bond of the 1993 Pollution Control Refunding Series shall be
dated as of June 1, 1993, and shall mature, subject to prior redemption, upon
the terms and conditions hereinafter set forth, on June 1, 2021. All such bonds
shall bear interest at the rate of five and ninety hundredths percent (5.90%)
per annum from and including the date thereof until payment of the principal or
redemption price thereof shall have been made or provided for in accordance with
the provisions hereof, whether at maturity, upon redemption or otherwise.
Interest on such bonds shall be payable semi-annually on each June 1 and
December 1 commencing December 1, 1993. Interest on such bonds shall be
computed upon the basis of a 360-day year,
-19-
<PAGE>
consisting of twelve (12) thirty (30) day months from the first day of June or
December, as the case may be, to which interest has been paid (or is deemed to
have been paid), unless no interest has been paid (or is deemed to have been
paid) thereon, in which case from June 1, 1993, until all such bonds shall be
paid or the payment thereof shall have been duly provided for. Each such bond
shall bear interest on overdue principal and, to the extent permitted by law, on
overdue interest at the rate borne by such bonds.
The principal of, and premium, if any, and interest on, the bonds of
the 1993 Pollution Control Refunding Series shall be payable in any coin or
currency of the United States of America which, at the respective dates of
payment thereof, is legal tender for the payment of public and private debts,
and such principal, premium, if any, and interest shall be payable at the
corporate trust office of the State Trustee, as hereinafter defined.
SECTION 2. The bonds of the 1993 Pollution Control Refunding Series
shall be registered in the name of the State Trustee, as hereinafter defined,
under an Indenture of Trust, dated as of June 1, 1993 (for the purpose of this
Article II the "State Indenture"), between the Authority and Delaware Trust
Company (for the purpose of this Article II, including its successors in trust,
if any, under the State Indenture, the "State Trustee"), relating to the
Authority's Pollution Control Refunding Revenue Bonds (Delmarva Power & Light
Company Project) Series 1993B (for the purpose of this Article II the "State
Revenue Bonds"). The bonds of the 1993 Pollution Control Refunding Series are
issued to provide for, and secure, the payment of the State Revenue Bonds, the
proceeds of which will be used to refinance certain pollution control facilities
under a Financing Agreement dated as of June 1, 1993 (for the purpose of this
Article II the "Agreement"), between the Authority and the Company. The
principal of, and premium, if any, and interest on, the State Revenue Bonds are
payable from payments made by the Company of principal of, and premium, if any,
and interest on, the bonds of the 1993 Pollution Control Refunding Series.
SECTION 3. Whenever payment or provision therefor has been made in
respect of the principal of, and premium, if any, and interest on, all or any
portion of the State Revenue Bonds in accordance with the State Indenture, the
corresponding amount of principal of, and premium, if any, and interest on, the
bonds of the 1993 Pollution Control Refunding Series issued as security
therefor, shall be deemed to have been paid.
The Trustee may conclusively assume that the obligation of the Company
to make payments on the bonds of the 1993 Pollution Control Refunding Series
shall have been fully satisfied and discharged in a timely manner unless and
until the Trustee shall have received a written notice to the contrary from the
State Trustee, which notice shall state the
-20-
<PAGE>
date such payment was due, the amount of such payment, and the purpose for which
such payment was to have been made.
SECTION 4. (a) Mandatory Redemption Upon Redemption of State Revenue
-----------------------------------------------------
Bonds. On any date on which the State Revenue Bonds shall be redeemed in whole
- -----
or in part, the bonds of the 1993 Pollution Control Refunding Series shall be
redeemed in like principal amount at the same redemption price plus the same
accrued interest as shall be payable on the State Revenue Bonds then to be
redeemed. The Company covenants that it shall deposit with the Trustee
sufficient funds to enable the Trustee to redeem all of the bonds of the 1993
Pollution Control Refunding Series so to be redeemed on each date on which they
are to be redeemed.
(b) Mandatory Redemption upon Acceleration of State Revenue Bonds.
-------------------------------------------------------------
If and whenever the Trustee is notified pursuant to Section 802 of the State
Indenture (i) that an event of default, as defined in Section 801 of the State
Indenture, has occurred and is continuing, (ii) that the principal of all State
Revenue Bonds then outstanding and the interest accrued thereon has been
declared due and payable and (iii) that the redemption of the bonds of the 1993
Pollution Control Refunding Series is demanded, then as soon as practicable, and
in any event within five (5) days of having received notice of such default and
of such declaration and such demand, the Trustee shall so notify the Company,
and upon receipt of sufficient funds, shall redeem all of the bonds of the 1993
Pollution Control Refunding Series then outstanding upon payment of the
principal amount thereof together with accrued interest to the redemption date;
provided, however, that such requirement of redemption shall be deemed to be
waived, if, prior to the date fixed for such redemption, the State Trustee has
notified the Trustee in writing that such event of default under the State
Indenture is waived or cured and the accelerated maturity of the State Revenue
Bonds ceases to be effective. The Company covenants that, upon receipt of
notice of such redemption from the Trustee, it shall immediately deposit with
the Trustee sufficient funds to enable the Trustee to redeem all of the bonds of
the 1993 Pollution Control Refunding Series.
(c) The Trustee shall not be deemed to have received a redemption
notice and demand from the State Trustee under Section 4(b), unless such notice
and demand shall have been signed by the President, a Vice President, an
Assistant Vice President, a Trust Officer or an Assistant Trust Officer of the
State Trustee and shall have been delivered to the Trustee at its principal
corporate trust office addressed to the attention of its Corporate Trustee
Administration Department.
(d) Notwithstanding any other provisions of the Indenture, the bonds
of the 1993 Pollution Control Refunding Series are subject to redemption only as
provided in this Section 4.
-21-
<PAGE>
SECTION 5. Each holder of bonds of the 1993 Pollution Control
Refunding Series, by the acceptance thereof, has waived any rights to notice of
redemption of such bonds. Therefore, the Trustee shall not give notice to the
holder of such bonds, notwithstanding any other provisions of the Indenture.
SECTION 6. Bonds of the 1993 Pollution Control Refunding Series shall
be issuable in the denominations of $5,000 and integral multiples thereof.
Bonds of the 1993 Pollution Control Refunding Series may be exchanged at the
option of the holders thereof, for a like aggregate principal amount of fully
registered bonds of such series of other authorized denominations.
No service or other similar charge shall be made for any exchange,
transfer, or registration of the bonds of 1993 Pollution Control Refunding
Series, but the Company may require payment of a sum sufficient to cover any tax
or taxes or other governmental charges required to be paid by the Company in
relation thereto.
SECTION 7. The principal amount of the bonds of the 1993 Pollution
Control Refunding Series which may be authenticated and delivered hereunder is
limited in aggregate principal amount to $18,200,000.
SECTION 8. Bonds of the 1993 Pollution Control Refunding Series in
the aggregate principal amount of $18,200,000 shall forthwith be executed by the
Company and delivered to the Trustee and shall be authenticated by the Trustee
and delivered, either before or after the recording hereof, in accordance with
the request of the Company, signed in the name of the Company by its President,
or one of its Vice Presidents and its Treasurer or one of its Assistant
Treasurers, upon compliance by the Company with the applicable provisions of
Articles III and IV of the Original Indenture, as amended.
ARTICLE III
MISCELLANEOUS
SECTION 1. As supplemented and amended by the aforesaid supplemental
indentures and as supplemented and amended by this Eighty-Fourth Supplemental
Indenture, the Original Indenture is in all respects ratified and confirmed and
the Original Indenture and the aforesaid supplemental indentures and this
Eighty-Fourth Supplemental Indenture shall be read, taken and construed as one
and the same instrument.
SECTION 2. This Eighty-Fourth Supplemental Indenture shall be
simultaneously executed in several counterparts, and all such counterparts
executed and delivered, each as an original, shall constitute but one and the
same instrument.
-22-
<PAGE>
SECTION 3. The recitals of fact contained herein shall be taken as
the statements of the Company, and the Trustee assumes no responsibility for the
correctness of the same.
SECTION 4. The debtor and its mailing address are Delmarva Power &
Light Company, 800 King Street, P.O. Box 231, Wilmington, Delaware 19899. The
secured party and its address, from which information concerning the security
interest hereunder may be obtained, are Chemical Bank, 450 W. 33rd Street, 9th
Floor, New York, New York 10001, Attn: Corporate Trustee Administration
Department.
SECTION 5. The Trustee may conclusively rely on, and shall be
protected in acting upon, any certificate, opinion, notice, demand, waiver,
request, consent, report, or other paper or document signed by the President, a
Vice President, or a Trust Officer of the State Trustee.
SECTION 6. The Company acknowledges that it received a true and
correct copy of this Eighty-Fourth Supplemental Indenture.
IN WITNESS WHEREOF, the Company has caused this instrument to be
signed in its name and behalf by its Vice President and its corporate seal to be
hereunto affixed and attested by its Secretary and the Trustee has caused this
instrument to be signed in its name and behalf by one of its Vice Presidents and
its corporate seal to be hereunto affixed and attested by a Trust Officer,
effective as of the 1st day of June, 1993.
DELMARVA POWER & LIGHT COMPANY
Date of Execution By /s/ B. S. Graham
-------------------------------
May 28, 1993 B. S. GRAHAM, VICE PRESIDENT
[Seal]
Attest:
/s/ D. P. Connelly
-------------------------------
D. P. CONNELLY, SECRETARY
CHEMICAL BANK
Date of Execution By /s/ F. J. Farrell
-------------------------------
May 28, 1993 F. J. FARRELL, VICE PRESIDENT
[Seal]
Attest:
/s/ R. Bishop
-------------------------------
R. BISHOP, TRUST OFFICER
-23-
<PAGE>
STATE OF DELAWARE )
) SS.
NEW CASTLE COUNTY )
BE IT REMEMBERED that on this 28th day of May
--------- -------------
A.D. 1993, personally came before me, a notary public for the State of Delaware,
B. S. Graham, Vice President of DELMARVA POWER & LIGHT COMPANY, a corporation of
the State of Delaware and the Commonwealth of Virginia, party to the foregoing
instrument, known to me personally to be such, and acknowledged the said
instrument to be her own act and deed and the act and deed of said corporation;
that the signature of said Vice President is in her own proper handwriting; that
the seal affixed is the common or corporate seal of the said corporation; and
that her act of signing, sealing, executing and delivering said instrument was
duly authorized by resolution of the Board of Directors of said corporation.
GIVEN under my hand and official seal the day and year aforesaid.
/s/ Sheryl R. Hynson
-----------------------------------
Notary Public
My Commission expires
March 16, 1995
[Seal]
-24-
<PAGE>
STATE OF NEW YORK )
) SS.
COUNTY OF NEW YORK )
BE IT REMEMBERED that on this 28th day of May A.D. 1993,
-------- -------
personally came before me, a Notary Public for the State of New York, F. J.
Farrell, Vice President of CHEMICAL BANK, a corporation of the State of New
York, party to the foregoing instrument, known to me personally to be such,
and acknowledged the said instrument to be his own act and deed and the act
and deed of said corporation; that the signature of said Vice President is his
own proper handwriting; that the seal affixed is the common or corporate seal
of said corporation; and that his act of signing, sealing, executing and
delivering said instrument was duly authorized by resolution of the Board of
Directors of said Corporation.
GIVEN under my hand and official seal the day and year aforesaid.
/s/ Emily Fayan
----------------------------------
Notary Public
Notary Public, State of New York
No. 24-4737006
Qualified in Kings County
Certificate Filed in New York County
Commission Expires December 31, 1993
[Seal]
-25-
<PAGE>
CERTIFICATE OF RESIDENCE
CHEMICAL BANK, successor Trustee to the Trustee within named, by
merger, hereby certifies that its precise residence is 450 W. 33rd Street,
in the Borough of Manhattan, in The City of New York, in the State of New York.
CHEMICAL BANK
By: /s/ R. Bishop
-------------------------------
R. Bishop
Trust Officer
-26-
<PAGE>
RECORDATION DATA
Executed Counterparts of the Eighty-Fourth Supplemental Indenture were
recorded in Real Property Mortgage Records as follows:
<TABLE>
<CAPTION>
Received Mortgage Records
State and County for Record Book Page
---------- ---- ----
<S> <C> <C> <C>
DELAWARE:
New Castle 06/03/93 2863 316
Kent 06/02/93 X045 131
Sussex 06/02/93 1766 113
PENNSYLVANIA:
Armstrong 06/02/93 1298 162
Adams 06/01/93 731 302
Bedford 06/01/93 520 591
Blair 06/01/93 1072 385
Cambria 06/02/93 831 789
Cumberland 06/01/93 1138 1191
Delaware 06/02/93 1099 1543
Franklin 06/02/93 883 565
Huntingdon 06/02/93 326 512
Indiana 06/01/93 469 018
Lancaster 06/01/93 3908 563
Westmoreland 06/01/93 3133 196
York 06/01/93 641 803
NEW JERSEY:
Burlington 07/21/93 5088 241
Camden 06/02/93 3990 614
Gloucester 07/21/93 2425 116
Mercer 06/02/93 2775 010
Middlesex 06/02/93 4457 405
Salem 06/02/93 0714 040
Somerset 06/02/93 2263 506
Warren 06/02/93 1403 120
MARYLAND:
Caroline 06/03/93 215 352
Cecil 06/04/93 437 001
Dorchester 06/02/93 288 592
Kent 06/04/93 040 468
Queen Anne's 06/02/93 428 559
Somerset 06/02/93 411 1080
Talbot 06/03/93 752 345
Wicomico 06/01/93 1339 828
Worcester 06/02/93 1937 103
VIRGINIA:
Accomack 06/02/93 642 669
Northampton 06/02/93 261 386
</TABLE>
-27-
<PAGE>
This Instrument Prepared By
/s/ Donna J. Quisenberry
------------------------------
Donna J. Quisenberry
Delmarva Power & Light Company
800 King Street
Wilmington, DE 19801
================================================================================
DELMARVA POWER & LIGHT COMPANY
TO
CHEMICAL BANK,
Trustee.
----------------
EIGHTY-FIFTH SUPPLEMENTAL
INDENTURE
----------------
Effective as of July 1, 1993
(but executed on the dates shown on the execution page)
================================================================================
<PAGE>
DELMARVA POWER & LIGHT COMPANY
Eighty-Fifth Supplemental Indenture
Effective as of July 1, 1993
---------------
TABLE OF CONTENTS*
---------------
<TABLE>
<CAPTION>
PAGE
<S> <C>
Parties........................................................ 1
Recitals....................................................... 1
Form of Bond of the July 2003 Series........................... 2
Recitals....................................................... 6
Granting Clauses............................................... 6
Description of Property........................................ 7
Appurtenances.................................................. 9
After Acquired Property Clause................................. 9
Properties Excepted from Lien and Operation of Indenture....... 9
Habendum....................................................... 9
Subject Clause................................................. 10
Grant in Trust................................................. 10
<CAPTION>
ARTICLE I
DESIGNATIONS, PROVISIONS, DENOMINATIONS AND ISSUANCE
OF BONDS OF THE JULY 2003 SERIES
<C> <S> <C>
Sec. 1. Designations, Provisions and Denominations of Bonds
of the July 2003 Series......................... 10
Sec. 2. Limitation of Principal Amount of Bonds of the
July 2003 Series................................ 11
Sec. 3. Issuance of Bonds of the July 2003 Series............. 11
</TABLE>
- ----------------------
* The Table of Contents and recording data are not part of the Eighty-
Fifth Supplemental Indenture as executed.
i
<PAGE>
ARTICLE II
MISCELLANEOUS
<TABLE>
<CAPTION>
PAGE
<C> <S> <C>
Sec. 1. Original Indenture Confirmed as Supplemented.......... 11
Sec. 2. Execution of Counterparts............................. 11
Sec. 3. Recitals are by Company............................... 11
Sec. 4. Names and Addresses of Debtor and Secured Party....... 11
Sec. 5. Company Acknowledgment................................ 11
Testimonium.................................................... 12
Signatures and Seals........................................... 12
Acknowledgements............................................... 13
Certificate of Residence....................................... 15
Recordation Data............................................... 16
</TABLE>
ii
<PAGE>
This EIGHTY-FIFTH SUPPLEMENTAL INDENTURE, effective as of the 1st day of
July, 1993 (but executed on the dates hereinafter shown), made and entered into
by and between DELMARVA POWER & LIGHT COMPANY, a corporation of the State of
Delaware and the Commonwealth of Virginia, hereinafter called the Company, party
of the first part, and CHEMICAL BANK, a corporation of the State of New York,
hereinafter called the Trustee, party of the second part;
WITNESSETH:
WHEREAS, the Company heretofore executed and delivered its Indenture of
Mortgage and Deed of Trust (hereinafter in this Eighty-Fifth Supplemental
Indenture called the "Original Indenture"), dated as of October 1, 1943, to the
New York Trust Company, a corporation of the State of New York, as Trustee, to
which Chemical Bank is successor Trustee, to secure the First Mortgage Bonds of
the Company, unlimited in aggregate principal amount and issuable in series,
from time to time, in the manner and subject to the conditions set forth in the
Original Indenture granted and conveyed unto the Trustee, upon the trusts, uses
and purposes specifically therein set forth, certain real estate, franchises and
other property therein described, including property acquired after the date
thereof, except as therein otherwise provided; and
WHEREAS, the Original Indenture has been supplemented by eighty-four
supplemental indentures specifically subjecting to the lien of the Original
Indenture as though included in the granting clause thereof certain property in
said supplemental indentures specifically described and amending and modifying
the provisions of the Original Indenture (the Original Indenture, as amended,
modified and supplemented by all of the indentures supplemental thereto,
including this Eighty-Fifth Supplemental Indenture, is hereinafter in this
Eighty-Fifth Supplemental Indenture called the "Indenture"); and
WHEREAS, the Original Indenture provides for the issuance of bonds
thereunder in one or more series, the form of each series of bonds and of the
coupons to be attached to any coupon bonds to be substantially in the forms set
forth therein with such omissions, variations and insertions as are authorized
or permitted by the Original Indenture and determined and specified by the Board
of Directors of the Company; and
WHEREAS, the Company, by appropriate corporate action in conformity with
the terms of the Original Indenture, has duly determined to create a series of
bonds to be designated as First Mortgage Bonds, 6.40% Series due July 1, 2003
(hereinafter sometimes referred to as the "July 2003 Series Bonds" or the "bonds
of the July 2003 Series"), which said July 2003 Series Bonds are to be
substantially in the following form:
<PAGE>
[FORM OF FACE OF BOND]
DELMARVA POWER & LIGHT COMPANY
FIRST MORTGAGE BOND
6.40% Series due July 1, 2003
Number:
---
DELMARVA POWER & LIGHT COMPANY, a corporation of the State of Delaware and
the Commonwealth of Virginia (hereinafter called the Company), for value
received, hereby promises to pay to . . . . . . . . . . . . . . or registered
assigns, the sum of . . . . . . . . . . . . Dollars on July 1, 2003, at the
office or agency of the Company in the Borough of Manhattan, The City of New
York, in such coin or currency of the United States of America as at the time of
payment shall be legal tender for public and private debts, and to pay interest
thereon, semi-annually on January 1 and July 1 of each year at the rate of six
and forty hundredths percent (6.40%) per annum, at said office or agency in like
coin or currency, from the first day of January or July, as the case may be, to
which interest has been paid preceding the date hereof (unless the date hereof
is a January 1 or July 1 on which interest has been paid, in which case from the
date hereof, or unless the date hereof is prior to January 1, 1994, in which
case from July 1, 1993), until this bond shall mature, according to its terms or
on prior redemption or by declaration or otherwise, and at the highest rate of
interest borne by any of the bonds outstanding under the Mortgage hereinafter
mentioned from such date of maturity until this bond shall be paid or the
payment hereof shall have been duly provided for. Interest on this bond shall
be computed on the basis of a 360-day year consisting of twelve 30-day months.
The provisions of this bond are continued on the reverse hereof and such
continued provisions shall for all purposes have the same effect as though fully
set forth at this place.
This bond shall not become valid or obligatory for any purpose until
CHEMICAL BANK, the Trustee under the Mortgage, or its successor thereunder,
shall have signed the certificate of authentication endorsed hereon.
IN WITNESS WHEREOF, DELMARVA POWER & LIGHT COMPANY has caused this bond to
be signed in its name with the manual or facsimile signature of its President or
one of its Vice Presidents and its corporate seal, or a facsimile thereof, to be
affixed hereto and attested by the manual or facsimile signature of its
Secretary or one of its Assistant Secretaries.
-2-
<PAGE>
Dated:
Seal:
Attest: DELMARVA POWER & LIGHT COMPANY
By
- ------------------------- -------------------------------
Secretary President
Trustee's Authentication Certificate
------------------------------------
This bond is one of the bonds of the series herein designated, provided for in
the within-mentioned mortgage.
Chemical Bank, Trustee
By
-----------------------------
Authorized Officer
[FORM OF REVERSE OF BOND]
DELMARVA POWER & LIGHT COMPANY
FIRST MORTGAGE BOND
6.40% Series due July 1, 2003
This bond is one of an issue of bonds of the Company (herein referred to
as the "bonds"), not limited in principal amount, issuable in series, which
different series may mature at different times, may bear interest at different
rates, and may otherwise vary as in the Mortgage hereinafter mentioned provided,
and is one of a series known as First Mortgage Bonds, 6.40% Series due July 1,
2003 (herein sometimes referred to as "bonds of the July 2003 Series"). All
bonds of all series issued and to be issued under and equally and ratably
secured (except insofar as any sinking fund, established in accordance with the
provisions of the Mortgage hereinafter mentioned, may afford additional security
for the bonds of any particular series) by the Mortgage and Deed of Trust, dated
as of October 1, 1943, executed by the Company to THE NEW YORK TRUST COMPANY, as
Trustee, to which CHEMICAL BANK, a corporation of the State of New York, is
successor Trustee (herein, together with any indentures supplemental thereto,
including an Eighty-Fifth
-3-
<PAGE>
Supplemental Indenture, dated as of July 1, 1993, called the "Mortgage"), to
which reference is made for a description of the property mortgaged and pledged,
the nature and extent of the security, the rights and limitations of rights of
the holders of the bonds and of the Company in respect thereof, the rights,
duties and immunities of the Trustee, and the terms and conditions upon which
the bonds are, and are to be, issued and secured. The Mortgage contains
provisions permitting the Company and the Trustee, with the consent of the
holders of not less than seventy-five percent (75%) in principal amount of all
the bonds at the time outstanding (determined as provided in the Mortgage),
evidenced as in the Mortgage provided, or in case the rights under the Mortgage
of the holders of the bonds of one or more, but less than all, of the series of
bonds outstanding shall be affected, then with the consent of the holders of not
less than seventy-five percent (75%) in principal amount of the bonds at the
time outstanding of the one or more series, taken in the aggregate, affected
(determined as provided in the Mortgage), evidenced as in the Mortgage provided,
to execute supplemental indentures adding any provisions to or changing in any
manner or eliminating any of the provisions of the Mortgage or modifying in any
manner the rights of the holders of the bonds and coupons; provided, however,
that no such supplemental indenture shall (i) extend the fixed maturity of any
bonds, or reduce the rate or extend the time of payment of interest thereon, or
reduce the principal amount thereof, without the consent of the holder of each
bond so affected, or (ii) reduce the aforesaid percentage of bonds, the holders
of which are required to consent to any such supplemental indenture without the
consent of the holders of all bonds then outstanding. Any such consent by the
registered holder of this bond (unless effectively revoked as provided in the
Mortgage) shall be conclusive and binding upon such holder and upon all future
holders of this bond, irrespective of whether or not any notation of such
consent is made upon this bond. No reference herein to the Mortgage and no
provision of this bond or of the Mortgage shall alter or impair the obligation
of the Company, which is absolute and unconditional, to pay the principal of,
premium, if any, and interest on this bond at the time and place, at the rate
and in the coin or currency herein prescribed.
The fully registered bonds of the July 2003 Series are issuable in
denominations of $1,000 and any integral multiple thereof. At the office or
agency to be maintained by the Company in the Borough of Manhattan, The City of
New York and in the manner and subject to the limitations provided in the
Mortgage, fully registered bonds of such series may be exchanged for a like
aggregate principal amount of fully registered bonds of such series of other
authorized denominations, and in each case without payment of any service or
other similar charge as provided in said Eighty-Fifth Supplemental Indenture.
The bonds of the July 2003 Series shall not be subject to redemption prior
to maturity.
The principal hereof may be declared or may become due prior to the
express date of the maturity hereof on the conditions, in the manner and at the
time set forth in the Mortgage, upon the occurrence of a completed default as in
the Mortgage provided.
-4-
<PAGE>
This bond is transferable as prescribed in the Mortgage by the registered
holder hereof in person, or by his duly authorized attorney, at the office or
agency of the Company in said Borough of Manhattan, upon surrender and
cancellation of this bond, and thereupon a new fully registered bond or bonds of
authorized denominations of the same series and for the same aggregate principal
amount will be issued to the transferee in exchange herefor as provided in the
Mortgage, and in each case without payment of any service or other similar
charge as provided in said Eighty-Fifth Supplemental Indenture. The Company and
the Trustee, any paying agent and any bond registrar may deem and treat the
person in whose name this bond is registered as the absolute owner hereof,
whether or not this bond shall be overdue, for the purpose of receiving payment
and for all other purposes and neither the Company nor the Trustee nor any
paying agent nor any bond registrar shall be affected by any notice to the
contrary.
No recourse shall be had for the payment of the principal of, premium, if
any, and interest on, this bond, or for any claim based hereon, or otherwise in
respect hereof, or based on, or in respect of, the Mortgage, against any
incorporator or any past, present or future subscriber to the capital stock,
stockholder, officer or director, as such, of the Company or of any successor
corporation, either directly or through the Company or any successor
corporation, under any rule of law, statute or constitution or by the
enforcement of any assessment or otherwise, all such liability of incorporators,
subscribers, stockholders, officers and directors, as such, being waived and
released by the holder and owner hereof by the acceptance of this bond and being
likewise waived and released by the terms of the Mortgage.
[END OF FORM OF BOND]
-5-
<PAGE>
WHEREAS, all acts and things prescribed by law and by the charter and by-
laws of the Company necessary to make the July 2003 Series Bonds, when executed
by the Company and authenticated by the Trustee, as in the Original Indenture
provided, valid, binding and legal obligations of the Company, entitled in all
respects to the security of the Original Indenture and indentures supplemental
thereto, have been performed; and
WHEREAS, provision is made in Sections 5.11 and 17.01 of the Original
Indenture for such further instruments and indentures, supplemental to the
Original Indenture, as may be necessary or proper to carry out more effectually
the purposes of the Original Indenture, and to subject to the lien of the
Original Indenture any property acquired after the date of the Original
Indenture and intended to be covered thereby, with the same force and effect as
though included in the granting clause thereof, and to add such further
covenants, restrictions or conditions for the protection of the mortgaged and
pledged property and the holders of the bonds as the Board of Directors of the
Company and the Trustee shall consider to be for the protection of the holders
of the bonds, and to set forth the terms and provisions of any series of bonds
to be issued under the Original Indenture and the form of the bonds and coupons
of such series; and the Company since the date of the Original Indenture has
acquired additional property not heretofore specifically subjected to the lien
of the Original Indenture; and it is desired to add certain further covenants,
restrictions and conditions for the protection of the mortgaged and pledged
property and the holders of the bonds, as provided in this Eighty-Fifth
Supplemental Indenture, which the Board of Directors of the Company and the
Trustee consider to be for the protection of the holders of the bonds; and the
Company desires to issue the July 2003 Series Bonds; and the Company therefore
deems it advisable to enter into this Eighty-Fifth Supplemental Indenture in the
form and terms hereof; and
WHEREAS, the execution and delivery of this Eighty-Fifth Supplemental
Indenture has been duly authorized by the Board of Directors of the Company at a
meeting duly called and held according to law, and all conditions and
requirements necessary to make this Eighty-Fifth Supplemental Indenture a valid,
binding and legal instrument in accordance with its terms, for the purposes
herein expressed, and the execution and delivery hereof, in the form and terms
hereof, have been in all respects duly authorized;
NOW, THEREFORE, in order further to secure the payment of the principal
and interest and premium, if any, of all bonds issued and to be issued under the
Original Indenture and any indentures supplemental thereto, including this
Eighty-Fifth Supplemental Indenture, according to their tenor, purport and
effect and the performance and observance of all the covenants and conditions in
said bonds and the Original Indenture and any indentures supplemental thereto,
including this Eighty-Fifth Supplemental Indenture, contained and to subject to
the lien of the Original Indenture, as so supplemented, with the same force and
effect as though included in the granting clause thereof, additional property
now owned by the Company, and for and in consideration of the premises and of
the sum of One Dollar ($1.00), lawful money of the United States of America, to
the Company duly paid by the Trustee at or before the ensealing and delivery
hereof, and other valuable consideration, the receipt whereof is hereby
acknowledged, and intending to be legally bound hereby, the Company has executed
and delivered this Eighty-Fifth Supplemental Indenture,
-6-
<PAGE>
and hath granted, bargained, sold, released, conveyed, assigned, transferred,
mortgaged, pledged, set over and confirmed, and granted a security interest
therein, and by these presents doth grant, bargain, sell release, convey,
assign, transfer, mortgage, pledge, set over and confirm, and grant a security
interest therein, subject to the provisions of the Indenture, unto CHEMICAL
BANK, as trustee, and to its successors in trust and to its and their assigns
forever, all the following described properties of the Company, and doth hereby
confirm that the Company will not cause or consent to a partition, either
voluntary or through legal proceedings, of property, whether herein described or
heretofore or hereafter acquired, in which its ownership shall be as tenants in
common, except as permitted by, and in conformity with, the provision of the
Original Indenture, as supplemented, and particularly of Article IX of the
Original Indenture:
All property, real, personal and mixed, tangible and intangible, owned by
the Company on the date of the execution hereof or which may be hereafter
acquired by it (except such property as in the Original Indenture expressly
excepted from the lien and operation of the Indenture).
The property covered by this Eighty-Fifth Supplemental Indenture shall
include particularly, among other property, without prejudice to the generality
of the language hereinbefore or hereinafter contained, the following described
property:
All the electric generating stations, station sites, stations, electric
reserve generating stations, substations, substation sites, gas manufacturing
plants, ice and cold storage plants, steam plants, hot water plants, hydro-
electric stations, hydro-electric station sites, electric transmission lines,
electric distribution systems, gas transportation mains, gas distribution
systems, steam distribution systems, hot water distribution systems, regulator
stations, regulator station sites, office buildings, storeroom buildings,
warehouse buildings, boiler houses, plants, plant sites, service plants, coal
storage yards, and poleyards now or hereafter owned by the Company, including
all electric works, power houses, generators, turbines, boilers, engines,
furnaces, retorts, dynamos, buildings, structures, transformers, meters, towers,
poles, tower lines, cables, pole lines, tanks, storage holders, regulators, gas
works, pipes, pipe lines, mains, pipe fittings, valves, drips, connections,
tunnels, conduits, gates, motors, wires, switch racks, switches, brackets,
insulators, and all equipment, improvements, machinery, appliances, devices,
appurtenances, supplies and miscellaneous property for generating, producing,
transforming, converting, storing and distributing electric energy, gas, ice,
steam and hot water, and furnishing cold storage, now or hereafter owned by the
Company, together with all furniture and fixtures located in the aforesaid
buildings, and all land now or hereafter owned by the Company on which the same
or any part thereof are situated, and all of the real estate, leases, leaseholds
(except the last day of the term of each lease and leasehold), and lands now or
hereafter owned by the Company, including land located on or adjacent to any
river, stream or other water, together with all flowage rights, flooding rights,
water rights, riparian rights, dams and dam sites and rights, flumes, canals,
races, raceways, head works and diversion works, and all of the municipal and
other franchises, licenses, consents, ordinances, permits, privileges, rights,
-7-
<PAGE>
servitudes, easements and rights-of-way and other rights in or relating to real
estate or the occupancy of the same now or hereafter owned by the Company, and
all of the other property, real, personal or mixed, now or hereafter owned by
the Company, forming a part of any of the foregoing property or used or enjoyed
or capable of being used or enjoyed in connection therewith or in any way
appertaining thereto, whether developed or undeveloped, or partially developed,
or whether now equipped and operating or not and wherever situated, and all of
the Company's presently held or hereafter acquired right, title and interest in
and to the land on which the same or any part thereof are situated or adjacent
thereto, and all rights for or relating to the construction, maintenance or
operation of any of the foregoing property through, over, under or upon any
public streets or highways or other lands, public or private, and (except as
hereinafter expressly excepted) all the right, title and interest of the Company
presently held or hereafter acquired in and to all other property of any kind or
nature appertaining to and/or used and/or occupied and/or enjoyed in connection
with any property hereinbefore described, and, as to all of the foregoing,
whether now owned by the Company or hereafter acquired by the Company.
Without limitation of the generality of the foregoing, the parcels of land
situate as hereinafter set forth and owned by the Company, and whether used or
not used in connection with the Company's operations, which real estate was
conveyed to the Company as hereinafter set forth by the following conveyances to
which reference is made for a more particular description, to wit:
No. 1 - All that certain piece, parcel or tract of land situate in the
Township of Lower Providence, County of Montgomery, State of Pennsylvania,
bounded and described in accordance with a map for Valley Forge Industrial Park,
Inc. (now Valley Forge Corporate Center, Inc.) by Yerkes Engineering Co. dated
August 17, 1959 and more particularly described in and was conveyed to Delmarva
Power & Light Company by a deed of Philadelphia Electric Company, dated July 17,
1992 and recorded January 7, 1993 in the Montgomery County Commissioners
Registry in and for Montgomery County, State of Delaware, in Deed Book 5031,
Page 583.
The above properties and rights are designated "498" for the purposes of
the Original Indenture and all indentures supplemental thereto. Also all other
lands and buildings and improvements thereon erected hereafter acquired.
-8-
<PAGE>
Together with all and singular the tenements, hereditaments and
appurtenances belonging or in any way appertaining to the aforesaid property or
any part thereof, with the reversion and reversions, remainder and remainders
and (subject to the provisions of Section 9.01 of the Original Indenture) the
tolls, rents, revenues, issues, earnings, income, product and profits thereof,
and all the estate, right, title and interest and claim whatsoever, at law as
well as in equity, which the Company now has or may hereafter acquire in and to
the aforesaid property and franchises and every part and parcel thereof.
IT IS HEREBY AGREED by the Company that all property, rights and
franchises acquired by the Company after the date hereof (except any in the
Original Indenture expressly excepted) shall (subject to the provisions of
Section 9.01 of the Original Indenture and to the extent permitted by law) be as
fully embraced within the lien of the Original Indenture and any indentures
supplemental thereto, including this Eighty-Fifth Supplemental Indenture, as if
such property, rights and franchises were at the time of the execution of the
Original Indenture owned by the Company and/or specifically described therein
and conveyed thereby and as if such property, rights and franchises were now
owned by the Company and/or specifically described herein and conveyed hereby;
Provided that, in addition to the reservations and exceptions herein and
elsewhere contained, the following are not and are not intended to be granted,
bargained, sold, released, conveyed, assigned, transferred, mortgaged, pledged,
set over or confirmed hereunder and are hereby expressly excepted from the lien
and operation of the Original Indenture and any indentures supplemental thereto,
including this Eighty-Fifth Supplemental Indenture, viz.: (1) cash and shares
of stock and certificates or evidence of interest therein and obligations
(including bonds, notes and other securities) not in or pursuant to the Original
Indenture or any indenture supplemental thereto, including this Eighty-Fifth
Supplemental Indenture, specifically pledged or deposited or delivered or
therein covenanted so to be; (2) any goods, wares, merchandise, equipment,
materials or supplies held or acquired for the purpose of sale or resale in the
usual course of business or for consumption in the operation of any properties
of the Company; and (3) all judgments, contracts, accounts and choses in action,
the proceeds of which the Company is not obligated as in the Original Indenture
provided to deposit with the Trustee hereunder; provided, however, that the
property and rights expressly excepted from the lien and operation of the
Original Indenture and any indentures supplemental thereto, including this
Eighty-Fifth Supplemental Indenture, in the above subdivisions (2) and (3) shall
(to the extent permitted by law) cease to be so excepted, in the event that the
Trustee or a receiver or trustee shall take possession of the mortgaged and
pledged property in the manner provided in Article X of the Original Indenture,
by reason of the occurrence of a completed default, as defined in said Article X
of the Original Indenture.
TO HAVE AND TO HOLD all such properties, real, personal, or mixed,
granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged,
pledged, set over or confirmed by the Company as aforesaid, or intended so to
be, unto the Trustee and its successors in the trusts created in the Indenture
and its and their assigns forever;
-9-
<PAGE>
SUBJECT, HOWEVER, to any reservations, exceptions, conditions, limitations
and restrictions contained in several deeds, servitudes, franchises and
contracts or other instruments through which the Company acquired, and/or claims
title to and/or enjoys the use of the aforesaid properties; and subject also to
encumbrances of the character defined in the Original Indenture as "excepted
encumbrances" in so far as the same may attach to any of the property embraced
herein;
IN TRUST NEVERTHELESS upon the terms, trusts, uses and purposes
specifically set forth in the Indenture; this Eighty-Fifth Supplemental
Indenture being made for the purpose, inter alia, of subjecting the real estate
----- ----
and premises and other property above described to the lien and operation of the
Indenture, so that the same shall be held specifically by the Trustee under and
subject to the terms and conditions of the Original Indenture in identically the
same manner and for the same trusts, uses and purposes, as though the said real
estate and premises and other property had been specifically described in the
Original Indenture.
AND IT IS HEREBY FURTHER COVENANTED AND AGREED and the Company and the
Trustee have mutually agreed, in consideration of the premises, as follows:
ARTICLE I.
DESIGNATION, PROVISIONS, DENOMINATIONS AND ISSUANCE
OF BONDS OF THE JULY 2003 SERIES
SECTION 1. The bonds of the July 2003 Series shall be designated "First
Mortgage Bonds, 6.40% Series due July 1, 2003." All bonds of the July 2003
Series shall be fully registered bonds. All bonds of the July 2003 Series shall
be dated the date of issue, and shall bear interest from the first day of
January or July, as the case may be, to which interest has been paid preceding
the date thereof, unless such date is a January 1 or July 1 on which interest
has been paid, in which case they shall bear interest from such date, or unless
such date is prior to January 1, 1994, in which case they shall bear interest
from July 1, 1993. All bonds of the July 2003 Series shall be payable on July
1, 2003, in such coin or currency of the United States of America as at the time
of payment shall be legal tender for public and private debts, and shall bear
interest, payable in like coin and currency, at the rate of six and forty
hundredths percent (6.40%) per annum, payable semi-annually on January 1 and
July 1 of each year, until maturity, and at the highest rate of interest borne
by any of the bonds outstanding under the Original Indenture and any indenture
supplemental thereto, from such date of maturity until they shall be paid or
payment thereof shall have been duly provided for. Principal of, and interest
on, the bonds of the July 2003 Series shall be payable at the office or agency
of the Company in the Borough of Manhattan, the City of New York.
No bonds of the July 2003 Series shall be redeemable prior to maturity.
-10-
<PAGE>
Bonds of the July 2003 Series shall be issuable in denominations of $1,000
and multiples thereof. Bonds of the July 2003 Series may be exchanged at the
option of the holders thereof, for a like aggregate principal amount of fully
registered bonds of such series of other authorized denominations.
No service or other similar charge shall be made for any exchange,
transfer, or registration of the bonds of the July 2003 Series, but the Company
may require payment of a sum sufficient to cover any tax or taxes or other
governmental charges required to be paid by the Company in relation thereto.
SECTION 2. The principal amount of the bonds of the July 2003 Series
which may be authenticated and delivered hereunder is not limited, except as the
Original Indenture, as amended, limits the principal amount of bonds which may
be issued thereunder.
SECTION 3. Bonds of the July 2003 Series for the aggregate principal
amount of $90,000,000, being the initial issue of bonds of said Series, shall
forthwith be executed by the Company and delivered to the Trustee and shall be
authenticated by the Trustee and delivered, either before or after the recording
hereof, in accordance with the request of the Company, signed in the name of the
Company by its President or one of its Vice Presidents and its Treasurer or one
of its Assistant Treasurers, upon compliance by the Company with the applicable
provisions of Articles III and IV of the Original Indenture, as amended.
ARTICLE II.
MISCELLANEOUS
SECTION 1. As supplemented and amended by this Eighty-Fifth Supplemental
Indenture, the Original Indenture and all indentures supplemental thereto are in
all respects ratified and confirmed and the Original Indenture and the aforesaid
supplemental indentures and this Eighty-Fifth Supplemental Indenture shall be
read, taken and construed as one and the same instrument.
SECTION 2. This Eighty-Fifth Supplemental Indenture shall be
simultaneously executed in several counterparts, and all such counterparts
executed and delivered, each as an original, shall constitute but one and the
same instrument.
SECTION 3. The recitals of fact contained herein shall be taken as the
statements of the Company, and the Trustee assumes no responsibility for the
correctness of the same.
SECTION 4. The debtor and its mailing address are Delmarva Power & Light
Company, 800 King Street, P.O. Box 231, Wilmington, Delaware 19899. The secured
party and its address, from which information concerning the security interest
hereunder may be obtained, are Chemical Bank, 450 West 33rd Street, New York,
New York 10001, Attn: Corporate Trustee Administration Department.
SECTION 5. The Company acknowledges that it received a true and correct
copy of this Eighty-Fifth Supplemental Indenture.
-11-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be signed in
its name and behalf by its Vice President and its corporate seal to be hereunto
affixed and attested by its Secretary and the Trustee has caused this instrument
to be signed in its name and behalf by a Vice President and its corporate seal
to be hereunto affixed and attested by a Trust Officer, effective as of the 1st
day of July, 1993.
DELMARVA POWER & LIGHT COMPANY
Date of Execution By /s/ B. S. Graham
June 25, 1993 -------------------------------------
- ------------------ B. S. GRAHAM, VICE PRESIDENT
[Seal]
Attest:
/s/ D. P. Connelly
-------------------------------------
D. P. CONNELLY, SECRETARY
CHEMICAL BANK
Date of Execution By /s/ W. B. Dodge
June 25, 1993 -------------------------------------
- ------------------ W. B. DODGE, VICE PRESIDENT
[Seal]
Attest:
/s/ J. Kirsch
------------------------------------
J. KIRSCH, TRUST OFFICER
-12-
<PAGE>
STATE OF DELAWARE )
) SS.
NEW CASTLE COUNTY )
BE IT REMEMBERED that on this 25th day of June A.D. 1993, personally came
before me, a notary public for the State of Delaware, B. S. GRAHAM, Vice
President of DELMARVA POWER & LIGHT COMPANY, a corporation of the State of
Delaware and the Commonwealth of Virginia, party to the foregoing instrument,
known to me personally to be such, and acknowledged the said instrument to be
her own act and deed and the act and deed of said corporation; that the
signature of said Vice President is in her own proper handwriting; that the seal
affixed is the common or corporate seal of the said corporation; and that her
act of signing, sealing, executing and delivering said instrument was duly
authorized by resolution of the Board of Directors of said corporation.
GIVEN under my hand and official seal the day and year aforesaid.
/s/ Sheryl R. Hynson
-----------------------------
Notary Public
Notary Public, State of Delaware
My Commission expires March 16, 1995
[Seal]
-13-
<PAGE>
STATE OF NEW YORK )
) SS.
COUNTY OF NEW YORK )
BE IT REMEMBERED that on this 25th day of June A.D. 1993, personally came
before me, a Notary Public for the State of New York, W. B. DODGE, Vice
President of CHEMICAL BANK, a corporation of the State of New York, party to the
foregoing instrument, known to me personally to be such, and acknowledged the
said instrument to be his own act and deed and the act and deed of said
corporation; that the signature of said Vice President is his own proper
handwriting; that the seal affixed is the common or corporate seal of said
corporation; and that his act of signing, sealing, executing and delivering said
instrument was duly authorized by resolution of the Board of Directors of said
Corporation.
GIVEN under my hand and official seal the day and year aforesaid.
/s/ Emily Fayan
-----------------------------
Notary Public
Notary Public, State of New York
No. 24-4737006
Qualified in Kings County
Certificate in New York County
Commission Expires December 31, 1993
[Seal]
-14-
<PAGE>
CERTIFICATE OF RESIDENCE
CHEMICAL BANK, successor Trustee to the Trustee within named, by merger,
hereby certifies that its precise residence is 450 West 33rd Street, in the
Borough of Manhattan, in The City of New York, in the State of New York.
CHEMICAL BANK
By: /s/ J. Kirsch
------------------------
J. KIRSCH, TRUST OFFICER
-15-
<PAGE>
RECORDATION DATA
Executed Counterparts of the Eighty-Fifth Supplemental Indenture were
recorded in Real Property Mortgage Records as follows:
<TABLE>
<CAPTION>
Received Mortgage Records
State and County for Record Book Page
- ------------------ ---------- ---- ----
<S> <C> <C> <C>
DELAWARE:
New Castle 06/29/93 2907 246
Kent 06/29/93 0046 308
Sussex 06/30/93 1781 094
PENNSYLVANIA:
Armstrong 06/28/93 1305 243
Adams 06/28/93 0745 129
Bedford 06/28/93 0524 186
Blair 06/29/93 1075 497
Cambria 06/29/93 0835 506
Cumberland 06/28/93 1145 830
Delaware 06/29/93 1112 795
Franklin 06/28/93 0889 361
Huntingdon 06/28/93 0328 440
Indiana 06/28/93 0470 757
Lancaster 06/28/93 3947 002
Westmoreland 06/28/93 3154 233
York 06/28/93 0662 230
NEW JERSEY:
Burlington 09/02/93 5180 220
Camden 06/29/93 4007 168
Gloucester 06/29/93 2403 044
Mercer 06/29/93 2798 263
Middlesex 06/29/93 4476 015
Salem 06/29/93 0719 162
Somerset 06/29/93 2275 675
Warren 06/29/93 1411 321
MARYLAND:
Caroline 06/29/93 0253 232
Cecil 06/29/93 0441 040
Dorchester 06/28/93 0289 839
Kent 06/30/93 0042 359
Queen Anne's 06/30/93 0431 778
Somerset 06/29/93 0412 704
Talbot 06/30/93 0754 247
Wicomico 06/29/93 1344 488
Worcester 06/29/93 1946 536
VIRGINIA:
Accomack 06/30/93 0644 533
Northampton 06/30/93 0262 008
</TABLE>
-16-
<PAGE>
PERSONAL AND CONFIDENTIAL
-------------------------
XXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXX
Dear:
Delmarva Power & Light Company (the "Company") considers it essential to the
best interests of its stockholders to foster the continuous employment of key
management personnel. In this connection, the Board of Directors of the Company
(the "Board") recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may exist and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the distraction or departure of management personnel
to the detriment of the Company and its stockholders.
The Board has determined that appropriate steps should be taken to reinforce
and encourage the continued attention and dedication of members of the Company's
management, including yourself, to their assigned duties without distraction in
the face of potentially disturbing circumstances arising from the possibility of
a change in
-1-
<PAGE>
XXXXXXXXXXXXXX
Page Two
control of the Company, although no such change is known to be contemplated.
In order to induce you to remain in the employ of the Company and in
consideration of your agreement set forth in Subsection 2(ii) hereof, the
Company agrees that you shall receive the severance benefits set forth in this
letter agreement ("Agreement") in the event your employment with the Company is
terminated subsequent to a "change in control of the Company" (as defined in
Section 2 hereof) under the circumstances described below.
1. Term of Agreement. This Agreement shall commence on the date hereof and
------------------
shall continue in effect through December 31, XXXX; provided, however, that
commencing on January 1, XXXX, and each January 1 thereafter, the term of this
Agreement shall automatically be extended for one additional year unless, not
later than September 30 of the preceding year, the Company shall have given
notice that it does not wish to extend this Agreement; provided, further, if a
change in control of the Company shall have occurred during the original or
extended term of this Agreement, this Agreement shall continue in effect for a
period of twenty-four (24) months beyond the month in which such change in
control occurred.
-2-
<PAGE>
XXXXXXXXXXXXXX
Page Three
2. Change in Control. (i) No benefits shall be payable hereunder unless
------------------
there shall have been a change in control of the Company, as set forth below.
For purposes of this Agreement, a "change in control of the Company" shall be
deemed to have occurred if (A) any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), other than a trustee or other fiduciary holding securities
under an employee benefit plan of the Company or a corporation owned, directly
or indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing 25% or more of the
combined voting power of the Company's then outstanding securities; or (B)
during any period of two consecutive years (not including any period prior to
the execution of this Agreement), individuals who at the beginning of such
period constitute the Board and any new director (other than a director
designated by a person who has entered into an agreement with the Company to
effect a transaction
-3-
<PAGE>
XXXXXXXXXXXXXX
Page Four
described in clauses (A) or (C) of this Subsection) whose election by the Board
or nomination for election by the Company's stockholders was approved by a vote
of at least two-thirds (2/3) of the directors then still in office who either
were directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to constitute a
majority thereof; or (C) the shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least 80% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation, or the shareholders of the Company approve a plan
of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all the Company's assets.
(ii) For purposes of this Agreement, a "potential change in control of the
Company" shall be deemed to have
-4-
<PAGE>
XXXXXXXXXXXXXX
Page Five
occurred if (A) the Company enters into an agreement, the consummation of which
would result in the occurrence of a change in control of the Company, (B) any
person (including the Company) publicly announces an intention to take or to
consider taking actions which if consummated would constitute a change in
control of the Company; (C) any person, other than a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or a
corporation owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportion as their ownership of stock of the Company,
who is or becomes the beneficial owner, directly or indirectly, of securities of
the Company representing 9.5% or more of the combined voting power of the
Company's then outstanding securities, increases his beneficial ownership of
such securities by 5% or more over the percentage so owned by such person on the
date hereof; or (D) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a potential change in control of the Company has
occurred. You agree that, subject to the terms and conditions of this
Agreement, in the event of a potential change in control of the Company, you
will remain in the employ of the Company until the earliest of (i) a date
-5-
<PAGE>
XXXXXXXXXXXXXX
Page Six
which is six (6) months from the occurrence of such potential change in control
of the Company, (ii) the termination by you of your employment by reason of
Disability or Retirement (at your normal retirement age), as defined in
Subsection 3(i), or (iii) the occurrence of a change in control of the Company.
3. Termination Following Change in Control. If any of the events described
---------------------------------------
in Subsection 2(i) hereof constituting a change in control of the Company shall
have occurred, you shall be entitled to the benefits provided in Subsection
4(iii) hereof upon the subsequent termination of your employment during the term
of this Agreement unless such termination is (A) because of your death,
Disability or Retirement, (B) by the Company for Cause, or (C) by you other than
for Good Reason.
(i) Disability; Retirement. If, as a result of your incapacity due to
----------------------
physical or mental illness, you shall have been absent from the full-time
performance of your duties with the Company for six (6) consecutive months, and
within thirty (30) days after written notice of termination is given you shall
not have returned to the full-time performance of your duties, your employment
may be
-6-
<PAGE>
XXXXXXXXXXXXXX
Page Seven
terminated for "Disability". Termination by the Company or you of your
employment based on "Retirement" shall mean termination in accordance with the
Company's retirement policy, including early retirement, generally applicable to
its salaried employees or in accordance with any retirement arrangement
established with your consent with respect to you.
(ii) Cause. Termination by the Company of your employment for "Cause"
-----
shall mean termination upon (A) the willful and continued failure by you to
substantially perform your duties with the Company (other than any such failure
resulting from your incapacity due to physical or mental illness or any such
actual or anticipated failure after the issuance of a Notice of Termination, by
you for Good Reason as defined in Subsections 3(iv) and 3(iii), respectively)
after a written demand for substantial performance is delivered to you by the
Board, which demand specifically identifies the manner in which the Board
believes that you have not substantially performed your duties, or (B) the
willful engaging by you in conduct which is demonstrably and materially
injurious to the Company, monetarily or otherwise. For purposes of this
Subsection, no act, or failure to act, on your part shall be deemed
-7-
<PAGE>
XXXXXXXXXXXXXX
Page Eight
"willful" unless done, or omitted to be done, by you not in good faith and
without reasonable belief that your action or omission was in the best interest
of the Company. Notwithstanding the foregoing, you shall not be deemed to have
been terminated for Cause unless and until there shall have been delivered to
you a copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters (3/4) of the entire membership of the Board at a meeting of the
Board called and held for such purpose (after reasonable notice to you and an
opportunity for you, together with your counsel, to be heard before the Board),
finding that in the good faith opinion of the Board you were guilty of conduct
set forth above in clauses (A) or (B) of the first sentence of this Subsection
and specifying the particulars thereof in detail.
(iii) Good Reason. You shall be entitled to terminate your employment for
-----------
Good Reason. For purposes of this Agreement, "Good Reason" shall mean, without
your express written consent, the occurrence after a change in control of the
Company of any of the following circumstances unless, in the case of paragraphs
(A), (E), (F), (G) or (H), such circumstances are fully corrected prior to the
-8-
<PAGE>
XXXXXXXXXXXXXX
Page Nine
Date of Termination specified in the Notice of Termination, as defined in
Subsections 3(v) and 3(iv), respectively, given in respect thereof:
(A) the assignment to you of any dutiesinconsistent with your status
as XXXXXXXXXXXXXXXXXXXXX, of the Company, or a substantial adverse
alteration in the nature or status of your responsibilities from those in
effect immediately prior to the change in control of the Company;
(B) a reduction by the Company in your annual base salary as in effect
on the date hereof or as the same may be increased from time to time
except for across-the-board salary reductions similarly affecting all
executives of the Company and all executives of any person in control of
the Company;
(C) the relocation of the Company's principal executive offices
(presently located at 800 King Street, Wilmington, Delaware) to a location
more than fifty (50) miles from the location of such offices prior to the
change in control of the Company, or the closing thereof, or the Company's
requiring you to be based anywhere other than the location at which you
-9-
<PAGE>
XXXXXXXXXXXXXX
Page Ten
are based immediately prior to the change in control of the Company, except
for required travel on the Company's business to an extent substantially
consistent with your present business travel obligations;
(D) the failure by the Company, without your consent, to pay to you
any portion of your current compensation except pursuant to an across-the-
board compensation deferral similarly affecting all executives of the
Company and all executives of any person in control of the Company ;
(E) the failure by the Company to offer you any compensation plan
introduced to other executives of similar responsibility or any substitute
plans adopted prior to the change in control, unless an equitable
arrangement (embodied in an ongoing substitute or alternative plan) has
been made with respect to such plan, or the failure by the Company to
continue your participation therein (or in such substitute or alternative
plan) on a basis not materially less favorable, both in terms of the
amount of benefits provided and the level of your participation relative
to other participants, as existed at the time of the change in control;
-10-
<PAGE>
XXXXXXXXXXXXXX
Page Eleven
(F) the failure by the Company to continue to provide you with
benefits substantially similar to those enjoyed by you under any of the
Company's pension, savings and thrift, group life insurance, medical,
dental or disability plans in which you were participating at the time of
the change in control of the Company, the taking of any action by the
Company which would directly or indirectly materially reduce any of such
benefits or deprive you of any material fringe benefit enjoyed by you at
the time of the change in control of the Company, or the failure by the
Company to provide you with the number of paid vacation days to which you
are entitled on the basis of years of service with the Company in
accordance with the Company's normal vacation policy in effect at the time
of the change in control of the Company;
(G) the failure of the Company to obtaina satisfactory agreement from
any successor to assume and agree to perform this Agreement, as
contemplated in Section 5 hereof; or
(H) any purported termination of your employment which is not effected
pursuant to a Notice of Termination satisfying the requirements of
Subsection
-11-
<PAGE>
XXXXXXXXXXXXXX
Page Twelve
(iv) below (and if applicable, the requirements of Subsection (ii) above);
for purposes of this Agreement, no such purported termination shall be
effective.
Your right to terminate your employment pursuant to this Subsection shall not be
affected by your incapacity due to physical or mental illness. Your continued
employment shall not constitute consent to, or a waiver of rights with respect
to, any circumstance constituting Good Reason hereunder.
(iv) Notice of Termination. Any purported termination of your employment
----------------------
by the Company or by you shall be communicated by written Notice of Termination
to the other party hereto in accordance with Section 6 hereof. For purposes of
this Agreement, a "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of your employment under the provision so
indicated.
(v) Date of Termination, Etc. "Date of Termination" shall mean (A) if your
-------------------------
employment is terminated for
-12-
<PAGE>
XXXXXXXXXXXXXX
Page Thirteen
Disability, thirty (30) days after Notice of Termination is given (provided that
you shall not have returned to the full-time performance of your duties during
such thirty (30) day period), and (B) if your employment is terminated pursuant
to Subsection (ii) or (iii) above or for any other reason (other than
Disability), the date specified in the Notice of Termination (which, in the case
of a termination pursuant to Subsection (ii) above shall not be less than thirty
(30) days, and in the case of a termination pursuant to Subsection (iii) above
shall not be less than fifteen (15) nor more than sixty (60) days, respectively,
from the date such Notice of Termination is given); provided that if within
fifteen (15) days after any Notice of Termination is given, or, if later, prior
to the Date of Termination (as determined without regard to this proviso), the
party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, the Date of Termination shall be the
date on which the dispute is finally determined, either by mutual written
agreement of the parties, by a binding arbitration award, or by a final
judgment, order or decree of a court of competent jurisdiction (which is not
appealable or with respect to which the time for appeal therefrom has expired
and no
-13-
<PAGE>
XXXXXXXXXXXXXX
Page Fourteen
appeal has been perfected); provided further that the Date of Termination shall
be extended by a notice of dispute only if such notice is given in good faith
and the party giving such notice pursues the resolution of such dispute with
reasonable diligence. Notwithstanding the pendency of any such dispute, the
Company will continue to pay you your full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to, base
salary) and continue you as a participant in all compensation, benefit and
insurance plans in which you were participating when the notice giving rise to
the dispute was given, until the dispute is finally resolved in accordance with
this Subsection. Amounts paid under this Subsection are in addition to all
other amounts due under this Agreement and shall not be offset against or reduce
any other amounts due under this Agreement except to the extent otherwise
provided in paragraph (E) of Subsection 4(iii).
4. Compensation Upon Termination or During Disability. Following a change
--------------------------------------------------
in control of the Company, as defined by Subsection 2(i), upon termination of
your employment or during a period of disability you shall be entitled to the
following benefits:
-14-
<PAGE>
XXXXXXXXXXXXXX
Page Fifteen
(i) During any period that you fail to perform your full-time duties with
the Company as a result of incapacity due to physical or mental illness, you
shall continue to receive your base salary at the rate in effect at the
commencement of any such period, together with all compensation payable to you
under any other plan in effect during such period, until this Agreement is
terminated pursuant to Section 3(i) hereof. Thereafter, or in the event your
employment shall be terminated by the Company or by you for Retirement, or by
reason of your death, your benefits shall be determined under the Company's
retirement, insurance and other compensation programs then in effect in
accordance with the terms of such programs.
(ii) If your employment shall be terminated by the Company for Cause or by
you other than for Good Reason, Disability, death or Retirement, the Company
shall pay you your full base salary through the Date of Termination at the rate
in effect at the time Notice of Termination is given, plus all other amounts to
which you are entitled under any compensation plan of the Company at the time
such payments are due, and the Company shall have no further obligations to you
under this Agreement.
-15-
<PAGE>
XXXXXXXXXXXXXX
Page Sixteen
(iii) If your employment by the Company shall be terminated (a) by the
Company other than for Cause, Retirement or Disability or (b) by you for Good
Reason, then you shall be entitled to the benefits provided below:
(A) the Company shall pay you your full base salary through the Date of
Termination at the rate in effect at the time Notice of Termination is
given, plus all other amounts to which you are entitled under any
compensation plan of the Company, at the time such payments are due,
except as otherwise provided below.
(B) in lieu of any further salary payments to you for periods
subsequent to the Date of Termination, the Company shall pay as severance
pay to you a lump sum severance payment (the "Severance Payment") equal to
2.99 times your "base amount", as defined in section 280G of the Internal
Revenue Code of 1954, as amended (the "Code"). Such base amount shall be
determined in accordance with temporary or final regulations, if any,
promulgated under section 280G of the Code and based upon the advice of
the tax counsel referred to in paragraph (C), below.
-16-
<PAGE>
XXXXXXXXXXXXXX
Page Seventeen
(C) The Severance Payment shall be reduced by the amount of any other
payment or the value of any benefit received or to be received by you in
connection with a change in control of the Company or your termination of
employment (whether pursuant to the terms of this Agreement or any other
plan, agreement or arrangement with the Company, any person whose actions
result in a change of control, or any person affiliated with the Company
or such person) unless (i) you shall have effectively waived your receipt
or enjoyment of such payment or benefit prior to the date of payment of
the Severance Payment, (ii) in the opinion of tax counsel selected by the
Company's independent auditors and acceptable to you, such other payment
or benefit does not constitute a "parachute payment" within the meaning of
section 280G(b)(2) of the Code, or (iii) in the opinion of such tax
counsel, the Severance Payment (in its full amount or as partially reduced
under this paragraph (C), as the case may be) plus all other payments or
benefits which constitute "parachute payments" within the meaning of
section 280G(b)(2) of the Code are reasonable compensation for services
actually
-17-
<PAGE>
XXXXXXXXXXXXXX
Page Eighteen
rendered, within the meaning of section 280G(b)(4) of the Code or are
otherwise not subject to disallowance as a deduction by reason of section
280G of the Code. The value of any non-cash benefit or any deferred payment
or benefit shall be determined by the Company's independent auditors in
accordance with the principles of sections 280G(d)(3) and (4) of the Code.
(D) The Company shall pay to you all legal fees and expenses incurred
by you as a result of such termination (including all such fees and
expenses, if any, incurred in contesting or disputing any such termination
or in seeking to obtain or enforce any right or benefit provided by this
Agreement or in connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Code to any payment
or benefit provided hereunder), such payment to be made at the later of
the times provided in paragraph (E), below, or within five (5) days after
your request for payment accompanied with such evidence of fees and
expenses incurred as the Company reasonably may require.
-18-
<PAGE>
XXXXXXXXXXXXXX
Page Nineteen
(E) The payments provided for in paragraphs (B) and (D), above, shall
(except as otherwise provided therein) be made not later than the fifth
day following the Date of Termination, provided, however, that if the
amounts of such payments, and the limitation on such payments set forth in
paragraph (C) above, cannot be finally determined on or before such day,
the Company shall pay to you on such day an estimate, as determined in
good faith by the Company, of the minimum amount of such payments and
shall pay the remainder of such payments (together with interest at the
rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount
thereof can be determined but in no event later than the thirtieth day
after the Date of Termination. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have been
due, such excess shall constitute a loan by the Company to you, payable on
the fifth day after demand by the Company (together with interest at the
rate provided in Section 1274(b)(2)(B) of the Code).
-19-
<PAGE>
XXXXXXXXXXXXXX
Page Twenty
(F) In the event that any payment or benefit received or to be
received by you in connection with a change in control of the Company or
the termination of your employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Company,
any person whose actions result in a change in control or any person
affiliated with the Company or such person) (collectively with the
Severance Payments, "Total Payments") would not be deductible (in whole or
part) as a result of section 280G of the Code by the Company, an affiliate
or other person making such payment or providing such benefit, the
Severance Payments shall be reduced until no portion of the Total Payments
is not deductible, or the Severance Payments are reduced to zero. For
purposes of this limitation (i) no portion of the Total Payments the
receipt or enjoyment of which you shall have effectively waived in writing
prior to the date of payment of the Severance Payments shall be taken into
account, (ii) no portion of the Total Payments shall be taken into account
which in the opinion of tax
-20-
<PAGE>
XXXXXXXXXXXXXX
Page Twenty-One
counsel selected by the Company's independent auditors and acceptable to you
does not constitute a "parachute payment" within the meaning of section
280G(b)(2) of the Code, (iii) the Severance Payments shall be reduced only
to the extent necessary so that the Total Payments (other than those
referred to in clauses (i) or (ii)) in their entirety constitute reasonable
compensation for services actually rendered within the meaning of section
280G(b)(4) of the Code or are otherwise not subject to disallowance as
deductions, in the opinion of the tax counsel referred to in clause (ii);
and (iv) the value of any non-cash benefit or any deferred payment or
benefit included in the Total Payments shall be determined by the Company's
independent auditors in accordance with the principles of sections
280G(d)(3) and (4) of the Code.
(G) If it is established pursuant to a final determination of a court
or an Internal Revenue Service proceeding that, notwithstanding the good
faith of you and the Company in applying the terms of this
-21-
<PAGE>
XXXXXXXXXXXXXX
Page Twenty-Two
Subsection 4(iii), the aggregate "parachute payments" paid to or for your
benefit are in an amount that would result in any portion of such "parachute
payments" not being deductible by reason of section 280G of the Code, then
you shall have an obligation to pay the Company upon demand an amount equal
to the sum of (1) the excess of the aggregate "parachute payments" paid to
or for your benefit over the aggregate "parachute payments" that could have
been paid to or for your benefit without any portion of such "parachute
payments" not being deductible by reason of section 280G of the Code; and
(2) interest on the amount set forth in clause (1) of this sentence at the
rate provided in Section 1274(b)(2)(B) of the Code) from the date of your
receipt of such excess until the date of such payment.
(iv) If your employment shall be terminated (A) by the Company other than
for Cause, Retirement or Disability or (B) by you for Good Reason, then for a
twenty-four (24) month period after such termination, the Company shall arrange
to provide you with group life, disability, medical and dental insurance
benefits substantially similar to
-22-
<PAGE>
XXXXXXXXXXXXXX
Page Twenty-Three
those which you are receiving immediately prior to the Notice of Termination.
Benefits otherwise receivable by you pursuant to this Subsection 4(iv) shall be
reduced to the extent comparable benefits are actually received by you during
the twenty-four (24) month period following your termination, and any such
benefits actually received by you shall be reported to the Company. If the
benefits provided to you under this Subsection shall result in a decrease,
pursuant to paragraph (E) of Subsection 4(iii), in the Severance Payments and
such benefits are thereafter reduced pursuant to the immediately preceding
sentence, the Company shall, at the time of such reduction, pay to you the
lesser of (a) the amount of such decrease in the Severance Payments or (b) the
maximum amount which can be paid to you without being, or causing any other
payment to be, nondeductible by reason of section 280G of the Code.
(v) If your employment shall be terminated (A) by the Company other than
for Cause, Retirement or Disability or (B) by you for Good Reason, then in
addition to the retirement benefits to which you are entitled under the
Company's Retirement Plan and Supplemental Executive
-23-
<PAGE>
XXXXXXXXXXXXXX
Page Twenty-Four
Retirement Plan or any successor plans thereto, the Company shall pay you in
cash at the time and in the manner provided in paragraph (E) (F) (G) of
Subsection 4(iii), a lump sum equal to the actuarial equivalent of the excess of
(x) the retirement pension (determined as a straight life annuity commencing at
age 65) which you would have accrued under the terms of the Company's Retirement
Plan and Supplemental Executive Retirement Plan (without regard to any amendment
to the Company's Retirement Plan and Supplemental Executive Retirement Plan made
subsequent to a change in control of the Company and on or prior to the Date of
Termination, which amendment adversely affects in any manner the computation of
retirement benefits thereunder, determined as if you were fully vested
thereunder and had accumulated (after the Date of Termination) twenty-four (24)
additional months of service credit thereunder at your highest annual rate of
compensation during the twelve (12) months immediately preceding the Date of
Termination and (y) the retirement pension (determined as a straight life
annuity commencing at age sixty-five (65) which you had then accrued pursuant to
the provisions of the Company's Retirement Plan and
-24-
<PAGE>
XXXXXXXXXXXXXX
Page Twenty-Five
Supplemental Executive Retirement Plan. For purposes of this Subsection,
"actuarial equivalent" shall be determined using the same methods and
assumptions utilized under the Company's Retirement Plan and Supplemental
Executive Retirement Plan immediately prior to the change in control of the
Company.
(vi) You shall not be required to mitigate the amount of any payment
provided for in this Section 4 by seeking other employment or otherwise, nor
shall the amount of any payment or benefit provided for in this Section 4 be
reduced by any compensation earned by you as the result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by you to the Company, or otherwise.
(vii) In addition to all other amounts payable to you under this Section 4,
you shall be entitled to receive all benefits payable to you under the Company's
Retirement Plan, Savings and Thrift Plan and any other plan or agreement
relating to retirement benefits.
5. Successors; Binding Agreement. (i) The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or
-25-
<PAGE>
XXXXXXXXXXXXXX
Page Twenty-Six
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such assumption and agreement
prior to the effectiveness of any such succession shall be a breach of this
Agreement and shall entitle you to compensation from the Company in the same
amount and on the same terms as you would be entitled to hereunder if you
terminate your employment for Good Reason following a change in control of the
Company, except that for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assume and agrees to perform this Agreement by operation of law,
or otherwise.
(ii) This Agreement shall inure to the benefit of and be enforceable by
your personal or legal representatives, executors, administrators, successors,
heirs, distributees,
-26-
<PAGE>
XXXXXXXXXXXXXX
Page Twenty-Seven
devisees and legatees. If you should die while any amount would still be
payable to you hereunder if you had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to your devisee, legatee or other designee or, if there is no such
designee, to your estate.
6. Notice. For the purpose of this Agreement, notices and all other
------
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notice to the Company shall be directed to the attention of the Board
with a copy to the Secretary of the Company, or to such other address as either
party may have furnished to the other in writing in accordance herewith, except
that notice of change of address shall be effective only upon receipt.
7. Miscellaneous. No provision of this Agreement may be modified, waived
-------------
or discharged unless such waiver,
-27-
<PAGE>
XXXXXXXXXXXXXX
Page Twenty-Eight
modification or discharge is agreed to in writing and signed by you and such
officer as may be specifically designated by the Board. No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not expressly set
forth in this Agreement. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Delaware. All references to sections of the Exchange Act or the Code shall be
deemed also to refer to any successor provisions to such sections. Any payments
provided for hereunder shall be paid net of any applicable withholding required
under federal, state or local law. The obligations of the Company under Section
4 shall survive the expiration of the term of this Agreement.
-28-
<PAGE>
XXXXXXXXXXXXXX
Page Twenty-Nine
8. Validity. The invalidity or unenforceability or any provision of this
--------
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
9. Counterparts. This Agreement may be executed in several counterparts,
------------
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
10. Arbitration. Any dispute or controversy arising under or in connection
-----------
with this Agreement shall be settled exclusively by arbitration in Wilmington,
Delaware in accordance with the rules of the American Arbitration Association
then in effect. Judgment may be entered on the arbitrator's award in any court
having jurisdiction; provided, however, that you shall be entitled to seek
specific performance of your right to be paid until the Date of Termination
during the pendency of any dispute or controversy arising under or in connection
with this Agreement.
-29-
<PAGE>
XXXXXXXXXXXXXX
Page Thirty
This letter is submitted in duplicate. If it sets forth our agreement on
the subject matter hereof, kindly sign both copies and return one copy to me
within thirty (30) days (after which this offer of severance benefits will
lapse). These letters will then constitute our agreement on this subject. If
you do not wish to accept the offer of severance benefits set out in this
letter, please fill out the attached form and return the completed form to me
for the Company's records.
Sincerely,
DELMARVA POWER & LIGHT COMPANY
By_____________________________
Name: Donald E. Cain
Title: Vice President, Administration
Agreed to this ________ day
of ______________ , XXXX.
- ---------------------------------
-30-
<PAGE>
TO: Donald E. Cain
Delmarva Power & Light Company
800 King Street
P. O. Box 231
Wilmington, DE 19899
I hereby decline to accept the Company's XXXXXXXXXXXXXX, offer of Severance
Benefits. I do so voluntarily and with the understanding that I may not be
offered such benefits in the future or be given the opportunity to reconsider my
decision.
- -------------------------- -------------------------------
Date Signature
-------------------------------
Please Print Name
-31-
<PAGE>
DELMARVA POWER & LIGHT COMPANY
1993 FORM 10-K
EXHIBIT 10-G
CURRENT LISTING OF SEVERANCE AGREEMENTS
AS OF FEBRUARY 23, 1994
----------------------------------------
<TABLE>
<CAPTION>
DATE OF
NAME CURRENT TITLE AGREEMENT
-------------------------- ------------------------------------------------------- ------------
<S> <C> <C>
1. Arturo F. Agra Manager, Financial Analysis 03/25/91
2. Heinz J. Beck Manager, Transmission & Distribution 05/07/93
3. W. Douglas Boyce Vice President, Central Division 05/07/93
4. Roberta S. Brown General Manager, Electric System Engineering 05/07/93
5. Donald E. Cain Vice President 05/22/89
6. Raymond V. Civatte Manager, Operations 03/25/91
7. Peter F. Clark Counsel, Assistant General 05/11/89
8. Donald P. Connelly Secretary, Corporate 02/11/87
9. Howard E. Cosgrove Chairman, President & Chief Executive Officer 05/07/93
10. Richard H. Evans Vice President, Corporate Communications 02/11/87
11. Carmine F. Gargiulo Manager, Systems Development 02/11/87
12. Charles R. Gates Plant Manager (Indian River) 02/11/87
13. Paul S. Gerritsen Vice President 05/07/93
14. Barbara S. Graham Vice President & Chief Financial Officer 05/07/93
15. R. Erik Hansen General Manager, Regulatory Practice 05/07/93
16. Hudson P. Hoen, III General Manager, Production Services 01/27/92
17. Kenneth K. Jones Vice President, Planning 02/11/87
18. Albert F. Kirby General Manager, Mechanical Engineering & Standards 03/04/90
19. Ralph E. Klesius Sr. Vice President 05/07/93
20. H. Ray Landon Executive Vice President 05/11/89
21. James P. Lavin Comptroller/Corporate Accounting 05/22/89
22. Wayne A. Lyons Vice President 02/11/87
23. D. Bruce McClenathan Plant Manager (Delaware City) 02/11/87
24. Dennis R. McDowell Comptroller/Operating Accounting 05/22/89
25. Robert F. Molzahn General Manager, Environmental Affairs 05/22/89
26. Louise M. Morman General Manager, Strategic Energy Markets 05/07/93
27. James L. Parks Manager, Fuel Supply 05/07/93
28. John E. Perkner General Manager, Marketing 05/07/93
29. Frank J. Perry, Jr. Vice President 03/14/90
30. John L. Peterson Plant Manager (Hay Road) 05/07/93
31. Philip S. Reese Treasurer 05/07/93
32. Mark H. Schneider Manager, Solid Waste Group 05/07/93
33. Thomas S. Shaw Sr. Vice President/President, DCI 05/07/93
34. James R. Silvius Manager, Electrical Engineering 05/11/89
35. William H. Spence Manager, Gas Operations & Planning 05/07/93
36. Dale G. Stoodley Vice President & General Counsel 04/18/89
37. Duane C. Taylor Vice President, Information Systems 02/11/87
38. Jack Urban Vice President, Gas Division 01/27/91
39. George G. Vapaa Manager, Corporate Planning 03/25/91
40. Kent A. Williams Manager, Fleet Services 02/11/87
41. James R. Wittine General Manager, System Planning 05/07/93
42. Jeremiah F. Wright, Jr. General Manager, Purchasing 03/14/90
43. D. Wayne Yerkes Vice President, Northern Division 03/14/90
44. John T. Zimmerman Manager, Employee Relations 03/25/91
</TABLE>
2/28/94-clw
<PAGE>
Exhibit 12-A
Delmarva Power & Light Company
Ratio of Earnings to Fixed Charges
----------------------------------
(Dollars in Thousands)
<TABLE>
<CAPTION>
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
Net income (1) $111,076 $98,526 $80,506
--------- --------- ---------
Income taxes (1) 67,102 54,834 43,249
--------- --------- ---------
Fixed charges:
Interest on long-term debt
including amortization of
discount, premium and expense 62,651 66,976 68,133
Other interest 9,245 8,449 10,192
--------- --------- ---------
Total fixed charges 71,896 75,425 78,325
--------- --------- ---------
Nonutility capitalized interest (246) (231) (143)
--------- --------- ---------
Earnings before income taxes
and fixed charges $249,828 $228,554 $201,937
========= ========= =========
Ratio of earnings to fixed charges 3.47 3.03 2.58
</TABLE>
For purposes of computing the ratio, earnings are net income plus
income taxes and fixed charges less nonutility capitalized interest.
Fixed charges consist of interest on long- and short-term debt,
amortization of debt discount, premium and expense, plus the interest
factor associated with the Company's major leases, and one-third of
the remaining annual rentals.
(1) Net income and income taxes related to the cumulative effect of a
change in accounting for unbilled revenues recorded in 1991 are
excluded from the computation of this ratio.
<PAGE>
Exhibit 12-B
Delmarva Power & Light Company
Ratio of Earnings to Fixed Charges and Preferred Dividends
----------------------------------------------------------
(Dollars in Thousands)
<TABLE>
<CAPTION>
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
Net income (1) $111,076 $98,526 $80,506
--------- --------- ---------
Income taxes (1) 67,102 54,834 43,249
--------- --------- ---------
Fixed charges:
Interest on long-term debt
including amortization of
discount, premium and expense 62,651 66,976 68,133
Other interest 9,245 8,449 10,192
--------- --------- ---------
Total fixed charges 71,896 75,425 78,325
--------- --------- ---------
Nonutility capitalized interest (246) (231) (143)
--------- --------- ---------
Earnings before income taxes
and fixed charges $249,828 $228,554 $201,937
========= ========= =========
Fixed charges $71,896 $75,425 $78,325
Preferred dividend requirements 14,803 15,785 11,672
--------- --------- ---------
$86,699 $91,210 $89,997
========= ========= =========
Ratio of earnings to fixed charges
and preferred dividends 2.88 2.51 2.24
</TABLE>
For purposes of computing the ratio, earnings are net income plus
income taxes and fixed charges less nonutility capitalized interest.
Fixed charges consist of interest on long- and short-term debt,
amortization of debt discount, premium and expense, plus the interest
factor associated with the Company's major leases, and one-third of
the remaining annual rentals. Preferred dividend requirements
represent annualized preferred dividend requirements multiplied by the
ratio that pre-tax income bears to net income.
(1) Net income and income taxes related to the cumulative effect of a
change in accounting for unbilled revenues recorded in 1991 are
excluded from the computation of this ratio.
<PAGE>
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
(Dollars in Thousands, Except Per Share Amounts)
Year Ended December 31,
1993 1992 1991 1990 1989
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING DATA
Operating Revenues $970,607 $864,044 $855,821 $812,217 $796,614
Operating Income $164,139 $143,711 $136,410 $144,473 $137,650
Income Before Cumulative Effect of a
Change in Accounting Principle $111,076 $98,526 $80,506 $37,311 $91,308
Cumulative Effect of a Change in
Accounting for Unbilled Revenues -- -- $12,730 -- --
Net Income $111,076 $98,526 $93,236 $37,311 $91,308
Electric Sales (kWh 000) 12,280,230 11,520,811 11,460,280 11,081,211 10,828,839
Interchange Deliveries (kWh 000) 2,225,384 998,679 1,113,423 726,090 894,402
Gas Sales (mcf 000) 18,066 17,013 15,574 16,069 16,645
Gas Transported (mcf 000) 1,539 3,155 2,610 2,194 677
COMMON STOCK DATA
Earnings Per Share of Common Stock:
Before Cumulative Effect of a Change
in Accounting Principle $1.76 $1.69 $1.44 $0.60 $1.80
Cumulative Effect of a Change in
Accounting for Unbilled Revenues -- -- $0.25 -- --
Total Earnings Per Share $1.76 $1.69 $1.69 $0.60 $1.80
Dividends Declared Per
Share of Common Stock $1.54 $1.54 $1.54 $1.54 $1.51
Average Shares Outstanding (000) 57,557 53,456 50,581 47,534 46,687
Year-End Common Stock Price $23 5/8 $23 1/4 $21 1/4 $18 1/8 $20 7/8
Book Value Per Common Share $14.66 $13.77 $13.42 $12.84 $13.67
Return on Average Common Equity 12.0% 12.2% 12.4% 4.3% 13.2%
CAPITALIZATION
Variable Rate Demand Bonds (VRDB)/(1)/ $ 41,500 $ 41,500 $ 41,500 $ 41,500 $ 41,500
Long-Term Debt 736,368 787,387 770,146 741,032 662,544
Preferred Stock 168,085 176,365 136,365 136,365 136,442
Common Stockholders' Equity 862,195 745,789 706,583 614,692 642,641
------------------------------------------------------------------------
Total Capitalization with VRDB $1,808,148 $1,751,041 $1,654,594 $1,533,589 $1,483,127
------------------------------------------------------------------------
OTHER INFORMATION
Total Assets $2,593,529 $2,374,793 $2,263,718 $2,125,715 $2,028,661
Long-Term Capital Lease Obligation $23,335 $26,081 $29,337 $32,354 $2,071
Construction Expenditures/(2)/ $159,991 $207,439 $181,820 $187,823 $175,843
Internally Generated Funds (IGF)/(3)/ $108,693 $130,275 $96,081 $112,551 $106,698
IGF as a Percent of Construction Expenditures 68% 63% 53% 60% 61%
</TABLE>
(1) Although Variable Rate Demand Bonds are classified as current liabilities,
the Company intends to use the bonds as a source of long-term financing as
discussed in Note 9 to the Consolidated Financial Statements.
(2) Excludes Allowance for Funds Used During Construction.
(3) Net cash provided by operating activities less common and preferred
dividends.
-18-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
EARNINGS
The earnings per average share of common stock attributed to the core utility
business and nonutility subsidiaries are shown below.
<TABLE>
<CAPTION>
1993 1992 1991
---------------------------------
<S> <C> <C> <C>
Core Utility
Operations $1.73 $1.47 $1.41
Peach Bottom lawsuit settlement -- 0.21 --
Cumulative effect of a change
in accounting for unbilled revenues -- -- 0.25
---------------------------------
1.73 1.68 1.66
Nonutility subsidiaries 0.03 0.01 0.03
---------------------------------
Total $1.76 $1.69 $1.69
=================================
</TABLE>
DIVIDENDS
On December 30, 1993, the Board of Directors declared a common stock dividend
of $0.38 1/2 per share for the fourth quarter. For 1993, dividends declared
per share of common stock were $1.54. The Board believes that the current
dividend level is appropriate, secure and sustainable. The current dividend
level represents an above average yield in comparison to alternative utility
investments of similar quality and is reflective of the Company's future
financial prospects during a period of increasing competition. At the current
yield, the dividend supports the price of the Company's stock at a level which
is competitive with the industry average as measured by the ratio of market
price per share to book value per share.
CORE UTILITY EARNINGS
The components of change from the prior year in core utility earnings per
share are shown below.
<TABLE>
<CAPTION>
1993 vs. 1992 1992 vs. 1991
---------------------------------
<S> <C> <C>
Operations
Electric revenues,
net of fuel expense
Rate increases $0.31 $0.33
Sales volume and other 0.37 (0.10)
Gas revenues,
net of fuel expense 0.01 0.09
Operation and
maintenance expense (0.17) (0.08)
Depreciation (0.07) (0.08)
Effect of increased number of
average common shares (0.13) (0.09)
Other (0.06) (0.01)
---------------------------------
0.26 0.06
Peach Bottom
lawsuit settlement (0.21) 0.21
Cumulative effect of a change
in accounting for
unbilled revenues -- (0.25)
---------------------------------
$0.05 $0.02
=================================
</TABLE>
Earnings per share from core utility operations increased by $0.26 in 1993
compared to 1992 primarily due to growth in electric revenues attributed to
higher customer base rates and a 6.6% increase in kilowatt-hour (kWh) sales.
Electric sales benefited from hotter summer weather and a 2.0% increase in the
number of customers. Electric customer base rates were raised in 1993 to
recover higher costs, including the costs of adding electric generating
capacity to meet the demand for electricity within the Company's service
territory. (Refer to Note 2 to the Consolidated Financial Statements for
additional information concerning changes in customer base rates.) The
earnings growth from higher electric revenues was partially offset by
increased non-fuel expenses, including operation and depreciation expenses,
and also by the dilutive effect on earnings per share of more common shares
outstanding. Financing requirements associated with utility plant were
principally satisfied by issuing common stock in order to strengthen the
Company's capitalization and reduce the level of financial risk.
-19-
<PAGE>
In 1992, earnings per share from core utility operations increased by $0.06 in
comparison to 1991, primarily due to additional electric and gas revenues from
higher customer base rates. The additional base revenues from higher customer
rates were partially offset by unfavorable effects of cooler summer weather on
electric revenues, increased non-fuel expenses, and an increase in the number
of common shares outstanding.
Core utility earnings for 1992 and 1991 include earnings from one-time,
unusual items, not related to ongoing utility operations. As discussed in Note
4 to the Consolidated Financial Statements, in 1992, net income and earnings
per share were increased by $11,397,000 and $0.21, respectively, due to
settlement of a lawsuit filed by the Company concerning the 1987-1989 shutdown
of the Peach Bottom Atomic Power Station by the Nuclear Regulatory Commission.
In 1991, as discussed in Note 1 to the Consolidated Financial Statements, a
change in accounting for unbilled revenues increased net income and earnings
per share by $12,730,000 and $0.25, respectively.
As a regulated public utility, the Company may file applications for customer
rate increases with regulatory commissions having jurisdiction over the
Company's utility business in order to recover cost increase associated with
supplying electricity and gas. The process of raising customer rates has
certain risks, including the possibility that protracted hearings may result
in a lag between the time when costs rise and when prices can be adjusted.
During 1992 and 1993, the Company increased customer rates in a timely manner
by amounts sufficient to recover higher costs. Even after these rate
increases, the Company's electric rates are comparable to 1983 levels and
lower than the average of utilities in the region.
COMPETITION
In October 1992, the Energy Policy Act of 1992 (the Energy Act) was enacted.
The Energy Act enabled the Federal Energy Regulatory Commission (FERC) to
order the provision of transmission service (wheeling of electricity) for
wholesale (resale) electricity producers and also provided for the creation of
a new category of electric power producers called exempt wholesale generators
(EWGs). These provisions of the Energy Act have enhanced the ability of
utilities and non-utility generators to compete to serve resale customers
currently served by a particular utility. Partly as a result of the Energy
Act, industry-wide resale markets are experiencing increased competition. In
1993, gross electric revenues from the Company's resale business were $105.0
million or 13.0% of billed electric sales revenues.
In response to the changing environment in the electric utility industry, the
Company has modified existing strategies and also developed new strategies.
From a customer or market perspective, the Company has concluded that focusing
on growing the retail portion of the business provides the best opportunity to
meet the twin objectives of satisfying customers' needs while providing a fair
return to shareholders. In order to maintain acceptable profitability levels
while keeping customer prices competitive, the Company is stepping up efforts
to find ways of reducing costs.
To facilitate implementation of this plan, the Company has developed market
specific strategies intended to grow retail sales. The Company's retail prices
are among the lowest in the region and the Company continues to maintain high
customer favorability ratings. The Company believes it should have the ability
to offer flexible pricing in order to compete to serve large retail customers.
Such changes in pricing methods could require modification to the existing
regulatory process. In Delaware, the Governor has convened a task force "to
recommend reforms to the existing regulatory process, structure, and
organization that will improve utility efficiency and encourage utility
innovation, while assuring continued availability of utility services at
affordable and competitive prices." The task force includes representatives
from the Delaware Public Service Commission, utilities (including the
Company), industrial customers, government, and the public.
In the resale market, the Company seeks to reduce the risk associated with a
customer switching energy suppliers on short notice because providing
electricity service requires investments in capital-intensive facilities which
have long lives and require long lead-times for construction. In the Company's
most recent resale base rate case, the resale customers agreed to provide a
two-year notice for load reductions up to 30% and a five-year notice for load
reductions greater than 30%.
Prior to this agreement, Old Dominion Electric Cooperative (ODEC), a resale
customer, advised the Company that it would purchase up to 150 megawatts (MW)
from another utility, beginning January 1, 1995. The Company is continuing to
negotiate a partial-requirements service agreement (to serve the balance of
ODEC's load) and a transmission service agreement (to transport the
electricity ODEC plans to purchase) with ODEC to become effective January 1,
1995. The maximum reduction in annual non-fuel revenues that could result from
ODEC's purchase of 150 MW from another utility is estimated to be about $24
million or $0.24 per share based on projected shares outstanding in 1995. To
mitigate the potential impact of this loss of business, the Company is
pursuing off-system sales of capacity and energy, intensifying cost control
efforts, and if necessary, may apply for increases in customer rates. The
Company expects that these strategies will reduce to approximately $0.08 or
less, or possibly eliminate, the adverse earnings per share effect; however,
the ultimate effect on future earnings depends on the degree of success
experienced by the Company in implementing its strategies.
-20-
<PAGE>
OTHER UTILITY CUSTOMER MATTERS
The Company is exploring various opportunities for increasing power sales. As
part of the Company's efforts to grow its retail business, in December 1993,
the Company offered $103.5 million to purchase the electrical system of the
City of Dover, Delaware. The City of Dover has approximately 18,500 electric
customers and annual revenues from electricity sales of about $37 million.
Although the Company expects that the impact on earnings from the potential
purchase would be minimal over the first year or two, incremental earnings are
expected once economies of scale are achieved.
In December 1992, General Motors announced plans to close its Delaware
manufacturing plant in 1996. The plant's closing could increase Delaware's
unemployment rate by one to two percentage points. The direct impact on the
Company's revenues from the loss of General Motors as a utility customer would
be a decrease in non-fuel revenues of approximately $4 million or $0.04 per
share.
COMPONENTS OF UTILITY REVENUES
Fuel and energy costs billed to customers (fuel revenues) are based on rates
in effect in fuel adjustment clauses which are adjusted periodically to
reflect cost changes and are subject to regulatory approval. Rates for
non-fuel costs billed to customers are dependent on rates determined in base
rate proceedings before regulatory commissions. Changes in non-fuel (base
rate) revenues can directly affect the earnings of the Company. Fuel revenues,
or fuel costs billed to customers, generally do not affect net income since
the expense recognized as fuel costs is adjusted to match the fuel revenues.
The amount of under- or over-recovered fuel costs is generally deferred until
it is subsequently recovered from or returned to utility customers.
Electric revenues also include interchange delivery revenues which result from
the sale of electric power to the Pennsylvania-New Jersey-Maryland
Interconnection Association (PJM Interconnection) and certain utilities. The PJM
Interconnection is an electric power pool comprised of a number of utilities
in the region, including the Company. The power pool provides both capital and
operating economies to member utilities. Interchange delivery revenues are
reflected in the calculation of rates charged to customers under fuel
adjustment clauses. Due to this ratemaking treatment, interchange delivery
revenues do not affect net income.
(A graph titled "Regional Electric Price Comparison" is displayed on page 21
of the 1993 Annual Report to Stockholders. A description of this graph is
included in the Appendix to Management's Discussion and Analysis of Financial
Condition and Results of Operations.
-21-
<PAGE>
ELECTRIC REVENUES AND SALES
In 1993, the percentages of total billed sales revenues contributed by the
various customer classes were as follows: residential--37.9%; commercial
- --29.5%; industrial--18.7%; resale--13.0%; and other--0.9%.
Details of the changes in the various components of electric revenues are
shown below.
Comparative Increase (Decrease) from
Prior Year in Electric Revenues
<TABLE>
<CAPTION>
(Dollars in Millions) 1993 1992
---------------------
<S> <C> <C>
Non-fuel (Base Rate) Revenue
Increased Rates $26.6 $27.4
Sales Volume and Other 32.2 (5.1)
Fuel Revenue 5.9 (23.8)
Interchange Delivery Revenue 30.8 (2.9)
----------------------
Total $95.5 $(4.4)
======================
</TABLE>
The increases in non-fuel revenues shown above as "Increased Rates" of $26.6
million for 1993, and $27.4 million for 1992, resulted from the increases in
electric customer base rates discussed in Note 2 to the Consolidated Financial
Statements.
The non-fuel revenue variances shown in the above table as "Sales Volume and
Other" are attributable to changes in sales volume, sales mix, and other
factors. "Sales Volume and Other" variances for 1993 compared to 1992 were
principally due to a 6.6% increase in total kWh sold. Sales to residential,
commercial, and resale customers increased by 8.4%, 6.3% and 7.3%
respectively, mainly due to increased kWh usage during the 1993 summer cooling
season, which was hotter than normal (based on a historical 21-year average)
and much hotter than 1992. Residential and commercial sales also benefited
from increases in the number of customers served of 2.0% and 2.1%
respectively. Industrial sales increased 3.7% due to increased production
levels of certain large customers and more kWh sales to a major customer which
provides some of its own power.
Despite a 0.5% increase in total kWh sold during 1992 in comparison to 1991,
"Sales Volume and Other" variances resulted in a $5.1 million decrease in 1992
non-fuel revenues due to adverse effects of unusually cool summer weather on
revenues. Charges billed to resale and other large customers for peak demand
usage decreased, and a disproportionately lower volume of residential sales
occurred during the summer when customer rates are higher. For 1992 sales
compared to 1991, residential sales were relatively flat, but commercial and
resale sales, which were not as strongly affected by the cool summer weather,
increased by 1.3% and 1.8%, respectively, primarily due to customer growth.
Industrial sales in 1992 remained at about the 1991 level due to the slow
economic recovery.
Electric fuel revenues increased $5.9 million in 1993 due to higher kWh sales
partially offset by lower rates charged to customers under the fuel adjustment
clauses. In 1992, electric fuel revenues decreased $23.8 million due to lower
fuel adjustment clause rates.
Interchange delivery revenues increased $30.8 million in 1993 mainly due to
higher sales to the PJM Interconnection which resulted from increased demand
for electricity in the region and greater availability of the Company's
generating units. In 1992, interchange delivery revenues decreased $2.9
million due to extended maintenance outages at the Company's generating units,
which reduced potential sales to the PJM Interconnection.
GAS REVENUES, SALES, AND TRANSPORTATION
The Company earns gas revenues from the sale of gas to customers and also from
transporting gas through the Company's system for some customers who purchase
gas directly from gas producers and pipelines.
Total 1993 gas revenues increased $11.1 million from 1992 due to a $1.2
million increase in non-fuel revenues and a $9.9 million increase in fuel
revenues. Non-fuel revenues increased despite a 2.8% decrease in total cubic
feet of gas sold and transported mainly due to increased sales to firm
customers which are billed at higher rates than sales to non-firm
(interruptible) and transportation customers. Firm sales increased 1.8% due
to growth in the number of residential space-heating and commercial customers.
The $9.9 million increase in gas fuel revenues was principally attributed to
higher average fuel rates.
In 1992, total gas revenues increased $12.6 million in comparison to 1991 due
to a $7.0 million increase in non-fuel revenues and a $5.6 million increase in
fuel revenues. Non-fuel revenues increased due to $3.2 million of additional
revenue from higher customer base rates, as discussed in Note 2 to the
Consolidated Financial Statements, and due to a $3.8 million increase in sales
volume. Total cubic feet of gas sold and transported in 1992 increased 10.9%
over 1991 due to colder winter weather and new customers. Gas fuel revenues
increased $5.6 million in 1992 primarily due to higher sales and bill-credits
made to customers during 1991 for previously over-collected fuel costs.
-22-
<PAGE>
ELECTRIC FUEL AND PURCHASED POWER EXPENSES
The components of the changes in electric fuel and purchased power expenses
are shown in the table below.
Comparative Increase (Decrease) from Prior Year in Electric Fuel and Purchased
Power Expenses
<TABLE>
<CAPTION>
(Dollars in Millions) 1993 1992
------------------
<S> <C> <C>
Average Cost of Electric Fuel
and Purchased Power $(6.9) $ (9.9)
Increased (Decreased) kWh Output 39.2 (1.9)
Deferral of Energy Costs 4.2 (12.0)
-----------------
Total $36.5 $(23.8)
-----------------
</TABLE>
In 1993, the "Average Cost of Electric Fuel and Purchased Power" decreased
$6.9 million from 1992 primarily due to addition to the electric system on
June 1, 1993 of Hay Road Unit 4, a 175 MW combined cycle unit which uses
exhaust heat from the three existing Hay Road combustion turbine units as its
energy source. Lower oil prices also contributed to the decrease. The 1992
"Average Cost of Electric Fuel and Purchased Power" decreased $9.9 million
from 1991 mainly due to lower coal and oil prices and increased power purchases
at lower prices.
The $39.2 million increase in 1993 shown as "Increased (Decreased) kWh Output"
was due to higher aggregate output from electric generating units and
purchased power. Output rose in 1993 due to greater electric sales demand in
the Company's service territory and increased interchange deliveries. In 1992,
the $1.9 million decrease in kWh output was due to extended maintenance
outages at certain generating units.
The kWh output required to serve load within the Company's service territory
is equivalent to total output less interchange deliveries. In 1993, the
Company's output for load within its service territory was provided by 46.7%
coal generation, 14.6% nuclear generation, 26.0% oil and gas generation, and
12.7% net purchased power, which consisted primarily of purchases under an
agreement with PECO Energy Company (PECO).
The variances shown in the table as "Deferral of Energy Costs" were due to
varying levels of under- and/or over-collections of fuel costs which are
subsequently recovered from or returned to utility customers.
OPERATION, MAINTENANCE, DEPRECIATION, AND INCOME TAX EXPENSES
In 1993, operation and maintenance expenses increased by $15.0 million from
1992 largely due to higher administrative and general expenses, including
increases for salaries and wages, and postretirement benefits other than
pensions due to adoption of the accounting required by Statement of Financial
Accounting Standards (SFAS) No. 106. (Refer to Note 11 to the Consolidated
Financial Statements for information on SFAS No. 106.) Although future
increases in operation and maintenance expenses are expected due to additions
of new utility plant, aging of existing utility plant, and normal inflationary
pressures, the Company is actively working to minimize any such increases.
Operation and maintenance expenses increased by $6.8 million in 1992 in
comparison to 1991 primarily due to higher maintenance outage costs for
electric generating units and due to charges for the purchase of 48 MW of
capacity which began June 1, 1992. These increases were partially offset by
decreases in administrative and general expenses, including pension cost, and
lower costs of operating and maintaining the electric transmission and
distribution systems.
Depreciation expense increased $5.6 million in 1993 and $6.7 million in 1992
principally due to additions to the electric system, which included Hay Road
Unit 4 in 1993 and a new stack for the Indian River power plant in 1992. The
1992 increase also reflects a full year's depreciation for Hay Road Unit 3
which was completed on June 1, 1991. Depreciation expense is expected to
continue to increase as new electric plant is added and capital projects for
environmental compliance are completed.
Income tax expense on operations increased $18.7 million in 1993 and $3.5
million in 1992 primarily due to higher pre-tax income. The 1993 increase also
includes $1.6 million due to the increase in the federal income tax rate from
34% to 35%, effective January 1, 1993. Due to adoption in 1993 of SFAS No.
109, "Accounting for Income Taxes," deferred charges and deferred income tax
liabilities increased $144.5 million. Cash flow and earnings were not
materially affected and are not expected to be materially affected in the
future due to anticipated recovery of the deferred tax liability through
customer rates. Refer to Note 3 to the Consolidated Financial Statements for
additional information on SFAS No. 109.
(Graphs titled "1993 Sources of Electricity" and "Electric Operation &
Maintenance Expenses per kWh sold" are displayed on page 23 of the 1993 Annual
Report to Stockholders. Descriptions of these graphs are included in the
Appendix to Management's Discussion and Analysis of Financial Condition and
Results of Operations.)
-23-
<PAGE>
UTILITY FINANCING COSTS
Interest charges on debt of the core utility decreased $5.2 million in 1993
and $1.3 million in 1992 primarily due to lower interest rates which enabled
the Company to reduce the average cost of its outstanding long-term debt
through refinancings. The 1993 decrease in interest expense also reflects the
effect of redeeming $50 million of 10% First Mortgage Bonds on June 1, 1993
with proceeds from a public offering of common stock. The Company refinanced
$133.2 million, $255.5 million, and $85.5 million of its long-term debt in
1993, 1992, and 1991, respectively, resulting in annualized interest savings
of $7.5 million in total. The interest savings are ultimately reflected in
rates charged to utility customers.
Dividends on preferred stock increased $1.7 million in 1993 mainly because $40
million of 7 3/4% preferred stock issued in August 1992 was outstanding for
all of 1993 compared to part of 1992. In 1992, the increase in preferred
dividends due to issuance of the 7 3/4% preferred stock was largely offset by
lower dividend payments on $61.1 million of the Company's preferred stock
which has market-based dividend rates.
Allowance for equity and borrowed funds used during construction (AFUDC)
decreased $1.0 million in 1993 mainly because construction of Hay Road Unit 4
was completed on May 31, 1993, resulting in lower average construction
work-in-progress balances. AFUDC as a percentage of net income decreased from
8.3% in 1992 to 6.6% in 1993. In 1992, AFUDC increased $2.1 million from 1991,
principally due to higher average construction work-in-progress balances
attributable to construction of Hay Road Unit 4.
Due to increased common equity financing, the average number of shares of
common stock outstanding increased in 1993 and 1992. Rates charged to
customers are designed to result in sufficient revenues to offset the dilution
of earnings per share due to increased common equity financing. The adverse
effect on earnings per share of $0.13 in 1993 and $0.09 in 1992 from
additional common shares outstanding was largely offset by revenues from base
rate increases.
ENERGY SUPPLY
The Challenge 2000 Plan is the Company's strategy for providing an adequate,
reliable supply of electricity to customers at reasonable rates, while
minimizing adverse impacts on the environment. The Company's plan, which is
updated periodically, is based on forecasts of demand for electricity in the
service territory and PJM Interconnection reserve requirements. The Company's
plan combines customer energy conservation and load management programs ("Save
Some"), power purchases ("Buy Some"), and new power plants ("Build Some"). The
plan is flexible and balanced. The plan's flexibility was recently
demonstrated when the Company delayed the planned date of a power purchase by
two years due to the decision of a resale customer (ODEC) to purchase 150 MW
of its load from another utility beginning January 1, 1995.
As an electric utility, the Company must balance the potential risks of
providing too much or not enough capacity. The main risks of excess capacity
are that customer rates may become uncompetitive and regulators may not allow
the associated costs to be recovered from ratepayers. The principal risks of
inadequate capacity are reliability of service and that capacity deficiency
charges would be owed to the PJM Interconnection which requires the Company to
plan for and provide a certain capacity level.
During the past three years, the Challenge 2000 Plan has included 95 MW of
additional load reduction from energy management programs, a 48 MW capacity
purchase which began in 1992, and 297 MW of capacity from two new power
plants, Hay Road Unit 3 and Unit 4, which were completed in 1991 and 1993,
respectively. Looking forward through 2003, the Company's current plans for
meeting the demand for energy include the following:
(1) "Save Some"--Approximately 140 MW of additional load reduction from
various customer-oriented energy management programs.
(2) "Buy Some"--205 MW of capacity purchases, including 165 MW beginning in
1998 or later, and 40 MW in 1999 or later.
(3) "Build Some"--The Company has filed for a Certificate of Public
Convenience and Necessity to preserve the option of constructing by the year
2000 or later a 300 MW pulverized coal-fired baseload unit in Dorchester
County, Maryland. The power plant, as currently planned, has an estimated
construction cost of $695 million, including AFUDC.
-24-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary capital resources are internally generated funds (net
cash provided by operating activities less common and preferred dividends) and
external financings. These resources provide capital for investments in utility
plant and other capital requirements, such as repayment of maturing debt and
capital lease obligations.
Operating activities provided net cash inflows of $206.7 million in 1993,
$220.8 million in 1992, and $181.1 million in 1991. In 1992, operating cash
flow was increased by $11.4 million, net of income taxes, from receipt of a
payment for settlement of the Peach Bottom lawsuit. Common dividends paid
during 1993, 1992, and 1991 were $88.0 million, $82.0 million, and $77.1
million, respectively. These amounts represented 43%, 37%, and 43% of net cash
provided by operating activities in 1993, 1992, and 1991, respectively. The
ratio of common dividends paid per share to earnings per share was 88% in
1993, and 91% in 1992 and 1991.
Utility construction expenditures, the Company's largest capital requirement,
are affected by many factors, including growth in demand for electricity,
compliance with environmental regulations, and the need for improvement and
replacement of existing facilities. Utility construction expenditures were
$160.0 million in 1993, $207.4 million in 1992, and $181.8 million in 1991.
Construction expenditures decreased $47.4 million in 1993 primarily because
construction of Hay Road Unit 4 was completed in May 1993. Construction
expenditures in 1993 included $9.2 million for projects attributed to
environmental compliance. Internally generated funds provided 68%, 63%, and 53%
of the cash required for construction in 1993, 1992, and 1991, respectively.
Capital raised from financial markets during 1991-1993, net of $557 million of
refinancings and redemptions, consisted of $229 million of common stock, $32
million of preferred stock, and $20 million of long-term debt. After considering
the costs associated with issuing and refinancing debt and equity securities
during 1991-1993 of approximately $37 million, the net amount of capital raised
from external financings during this period was $244 million.
Sales of various equity interests in leveraged leases by the Company's
nonutility subsidiaries resulted in a $21.5 million cash inflow during 1993.
The Company issued $158.2 million of long-term debt in 1993 at an average
interest rate of 6.0% and redeemed $184.2 million of long-term debt which had
an average interest rate of 8.1%. Debt refinancings in 1993 also included
$15.5 million of variable rate demand bonds which were refinanced with similar
bonds that have more favorable terms and an additional 14 years until
maturity. The Company also refinanced its 7.88% and 7.84% series of preferred
stock, $28.28 million in total, with $20 million of 6 3/4% preferred stock,
and cash. The Company issued $109.5 million of common stock in 1993, including
$77.1 million from a public offering of 3,300,000 shares in March 1993. Book
value per share of common stock increased from $13.77 as of December 31, 1992,
to $14.66 as of December 31, 1993. Approximately 70(cents) of the 89(cents)
increase resulted from the sale of common stock at prices exceeding book
value. The Company's capital structure as of December 31, 1993 and 1992
expressed as a percentage of total capitalization is shown below.
<TABLE>
<CAPTION>
1993 1992
-------------------
<S> <C> <C>
Long-term debt and variable
rate demand bonds 43.0% 47.3%
Preferred stock 9.3% 10.1%
Common stockholders' equity 47.7% 42.6%
</TABLE>
Capital requirements for the period 1994-1995 are estimated to be $395 million,
including $25 million for maturity of First Mortgage Bonds in 1994 and $334
million for utility construction, excluding AFUDC. The estimate of 1994-1995
utility construction requirements includes $44 million of environmental
construction expenditures primarily related to plans for compliance with
provisions of the Clean Air Act. During 1996-1998, an additional $65 million of
construction expenditures (excluding AFUDC) related to compliance with
environmental regulations are planned.
The Company anticipates that $250 million will be generated internally (net of
common and preferred dividends) during 1994-1995. Forecasted internally
generated funds for 1994-1995 represent 63% of estimated capital requirements
and 75% of estimated utility construction expenditures. The balance is expected
to be externally financed. During 1994-1995, long-term external financings are
presently estimated at $140 million, including $90 million of long-term debt and
$50 million (market value) of common stock.
After a recent review of the electric utility industry, bond rating agencies
adopted more stringent rating guidelines for electric utilities due to increased
risk associated with competition and other factors. The higher standards could
potentially result in increased borrowing costs for the industry in general.
Moody's and Duff & Phelps maintained their ratings of the Company's senior
secured debt as "A2" and "A+," respectively. Standard & Poor's lowered its
rating of the Company's senior secured debt to "A" from "A+." The Company
views positively the relatively minimal movement in ratings of its senior
secured debt after considering the higher standards adopted by the rating
agencies.
(A graph titled "Internally Generated Funds & Construction Expenditures" is
displayed on page 25 of the 1993 Annual Report to Stockholders. A description of
this graph is included in the Appendix to Management's Discussion and Analysis
of Financial Condition and Results of Operations.)
-25-
<PAGE>
NONUTILITY SUBSIDIARIES
Information on the Company's nonutility subsidiaries, in addition to the
following discussion, can be found in Notes 1 and 16 to the Consolidated
Financial Statements.
Nonutility subsidiaries earned $0.03 per share in 1993 primarily due to
after-tax gains on sales of equity and residual value interests in leveraged
leases. Earnings also reflect income from ongoing leveraged leasing
operations, operating services (management and operation of power plants), and
landfill and waste hauling activities. Such income was offset by
administrative and general expenses.
Nonutility subsidiaries earned $0.01 per share in 1992 primarily due to
earnings from leveraged leases, operating services, and other businesses.
These earnings were largely offset by an operating loss for landfill and waste
hauling activities and by administrative and general expenses.
In 1991, the nonutility subsidiaries earned $0.03 per share. Gains from sales
of purchase options on leveraged leases, which contributed $0.07 to 1991
earnings per share, were partly offset by an operating loss for landfill and
waste hauling activities, accruals for potential settlements of litigation,
and administrative and general expenses.
One of the nonutility subsidiaries leases five aircraft, in total, to Northwest
Airlines, Inc.; Singapore Airlines Limited; and Express Airlines I, Inc. as
part of its leveraged leasing business. The airline industry continues to be
intensely competitive and certain airlines, which are not lessees of the
Company's subsidiaries, have filed for protection under the bankruptcy laws.
The Company's aircraft lessees are current on their lease payments.
In 1993, total subsidiary revenues, including gains, were $37.6 million
compared to $14.4 million in 1992. The revenue increase was mainly due to the
transfer of the contract for operation and maintenance of the Delaware City
Power Plant (owned by Star Enterprise) from the parent company to a nonutility
subsidiary.
-26-
<PAGE>
REPORT OF MANAGEMENT
Management is responsible for the information and representations contained
in the Company's financial statements. Our financial statements have been
prepared in conformity with generally accepted accounting principles, based
upon currently available facts and circumstances and management's best
estimates and judgments of the expected effects of events and transactions.
Delmarva Power & Light Company maintains a system of internal controls
designed to provide reasonable, but not absolute, assurance of the reliability
of the financial records and the protection of assets. The internal control
system is supported by written administrative policies, a program of internal
audits, and procedures to assure the selection and training of qualified
personnel.
Coopers & Lybrand, independent accountants, are engaged to audit the financial
statements and express their opinion thereon. Their audits are conducted in
accordance with generally accepted auditing standards which include a review
of selected internal controls to determine the nature, timing, and extent of
audit tests to be applied.
The Audit Committee of the Board of Directors, composed of outside directors
only, meets with management, internal auditors, and independent accountants to
review accounting, auditing, and financial reporting matters. The independent
accountants are appointed by the Board on recommendation of the Audit
Committee, subject to stockholder approval.
Howard E. Cosgrove
Chairman of the Board, President and
Chief Executive Officer
Barbara S. Graham
Vice President and
Chief Financial Officer
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Delmarva Power & Light Company
Wilmington, Delaware
We have audited the accompanying consolidated balance sheets and statements of
capitalization of Delmarva Power & Light Company and Subsidiary Companies as of
December 31, 1993 and 1992, and the related consolidated statements of income,
changes in common stockholders' equity, and cash flows for each of the three
years in the period ended December 31, 1993. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatements. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Delmarva Power &
Light Company and Subsidiary Companies as of December 31, 1993 and 1992, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1993 in conformity with
generally accepted accounting principles.
As discussed in Notes 1, 3 and 11, respectively, to the consolidated financial
statements, in 1991 the Company changed its method of accounting for unbilled
revenues and in 1993 changed its method of accounting for income taxes and
postretirement benefits other than pensions.
Coopers & Lybrand
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 4, 1994
-27-
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31,
(Dollars in Thousands) 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues
Electric $875,663 $780,175 $784,599
Gas 94,944 83,869 71,222
-----------------------------------
970,607 864,044 855,821
-----------------------------------
Operating Expenses
Electric fuel and purchased power 298,307 261,784 285,595
Gas purchased 53,631 43,797 38,140
Operation and maintenance 248,052 233,038 226,240
Depreciation 100,929 95,285 88,610
Taxes other than income taxes 37,419 37,037 34,918
Income taxes 68,130 49,392 45,908
-----------------------------------
806,468 720,333 719,411
-----------------------------------
Operating Income 164,139 143,711 136,410
-----------------------------------
Other Income
Nonutility Subsidiaries
Revenues and gains 37,636 14,397 15,448
Expenses including interest and income taxes (35,828) (13,908) (14,170)
-----------------------------------
Net earnings of nonutility subsidiaries 1,808 489 1,278
Allowance for equity funds used during construction 5,309 5,631 4,199
Other income, net of income taxes 511 12,855 4,042
-----------------------------------
7,628 18,975 9,519
-----------------------------------
Income Before Utility Interest Charges 171,767 162,686 145,929
-----------------------------------
Utility Interest Charges
Debt 60,431 65,667 66,952
Other 3,664 2,570 1,907
Allowance for borrowed funds used during construction (3,404) (4,077) (3,436)
-----------------------------------
60,691 64,160 65,423
-----------------------------------
Earnings
Income before cumulative effect of a change in accounting principle 111,076 98,526 80,506
Cumulative effect of a change in accounting for unbilled revenues -- -- 12,730
-----------------------------------
Net income 111,076 98,526 93,236
Dividends on preferred stock 10,002 8,349 7,977
-----------------------------------
Earnings applicable to common stock $101,074 $ 90,177 $ 85,259
===================================
Average Shares of Common Stock Outstanding (000) 57,557 53,456 50,581
Earnings Per Average Share of Common Stock
Before cumulative effect of a change in accounting principle $1.76 $1.69 $1.44
Cumulative effect of a change in accounting for unbilled revenues -- -- 0.25
-----------------------------------
Total earnings per share $1.76 $1.69 $1.69
===================================
Dividends Declared Per Share of Common Stock $1.54 $1.54 $1.54
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
-28-
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(Dollars in Thousands) Year Ended December 31,
1993 1992 1991
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $111,076 $98,526 $93,236
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization 112,926 105,624 99,313
Allowance for equity funds used during construction (5,309) (5,631) (4,199)
Investment tax credit adjustments, net (2,515) (2,417) (2,844)
Deferred income taxes, net (1,171) 10,749 12,870
Net change in:
Accounts receivable (15,851) (4,384) (26,528)
Inventories 5,314 9,696 (171)
Accounts payable (3,749) 8,779 (12,428)
Other current assets & liabilities/(1)/ 11,441 (680) 22,338
Other, net (5,438) 491 (462)
---------------------------------------------------
Net cash provided by operating activities 206,724 220,753 181,125
---------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Construction expenditures, excluding AFUDC (159,991) (207,439) (181,820)
Allowance for borrowed funds used during construction (3,404) (4,077) (3,436)
Change in working capital for construction 3,123 (9,823) 14,538
Cash flows from leveraged leases
Sale of interests in leveraged leases 21,542 -- 5,375
Insurance proceeds from casualty loss -- 4,115 --
Other 1,511 1,858 4,750
Investment in subsidiary projects and operations (2,827) (7,013) (4,504)
Net (increase)/decrease in bond proceeds held in trust funds 1,152 6,076 (205)
Deposits to nuclear decommissioning trust funds (2,657) (3,770) (1,831)
Sale of utility plant and inventory -- -- 4,733
Other, net (389) (2,677) (1,332)
---------------------------------------------------
Net cash used by investing activities (141,940) (222,750) (163,732)
---------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends: Common (87,989) (81,986) (77,097)
Preferred (10,042) (8,492) (7,947)
Issuances: Long-term debt/(2)/ 148,200 273,335 117,000
Variable rate demand bonds 15,500 -- --
Common stock 109,463 32,200 87,900
Preferred stock 20,000 40,000 --
Redemptions: Long-term debt (184,206) (257,178) (86,794)
Variable rate demand bonds (15,500) -- --
Common stock (748) (259) --
Preferred stock (28,280) -- --
Principal portion of capital lease payments (9,956) (10,339) (10,593)
Net change in term loan 10,000 -- --
Net change in short-term debt (17,000) 5,950 (12,250)
Cost of issuances and refinancings (13,097) (16,187) (7,900)
---------------------------------------------------
Net cash provided/(used) by financing activities (63,655) (22,956) 2,319
---------------------------------------------------
Net change in cash and cash equivalents 1,129 (24,953) 19,712
Beginning of year cash and cash equivalents 21,888 46,841 27,129
---------------------------------------------------
End of year cash and cash equivalents $23,017 $21,888 $46,841
===================================================
</TABLE>
(1) Other than debt and deferred income taxes classified as current.
(2) Excluding net change in term loan.
See accompanying Notes to Consolidated Financial Statements.
-29-
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Dollars in Thousands) As of December 31,
1993 1992
- -------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Utility Plant--At Original Cost
Electric $2,561,507 $2,345,869
Gas 176,167 163,139
Common 122,182 127,852
---------------------------------
2,859,856 2,636,860
Less: Accumulated depreciation 989,351 929,869
---------------------------------
Net utility plant in service 1,870,505 1,706,991
Construction work-in-progress 91,001 187,844
Leased nuclear fuel, at amortized cost 33,905 36,782
---------------------------------
1,995,411 1,931,617
---------------------------------
Investments and Nonutility Property
Investment in leveraged leases 50,914 72,858
Funds held by trustee 17,577 15,274
Other investments and nonutility property, net 55,248 59,163
---------------------------------
123,739 147,295
---------------------------------
Current Assets
Cash and cash equivalents 23,017 21,888
Accounts receivable
Customers 98,472 88,499
Other 18,405 12,527
Inventories, at average cost
Fuel (coal, oil, and gas) 27,335 32,624
Materials and supplies 37,687 39,055
Prepayments 9,534 7,907
Deferred income taxes, net 10,713 8,236
---------------------------------
225,163 210,736
---------------------------------
Deferred Charges and Other Assets
Unamortized debt expense 11,222 11,219
Deferred debt refinancing costs 28,794 22,510
Deferred recoverable plant costs 15,613 15,019
Deferred recoverable income taxes 144,463 --
Other 49,124 36,397
---------------------------------
249,216 85,145
---------------------------------
Total $2,593,529 $2,374,793
=================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
-30-
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Dollars in Thousands) As of December 31,
1993 1992
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
CAPITALIZATION AND LIABILITIES
Capitalization (See Statements of Capitalization)
Common stock, $2.25 par value; 90,000,000 shares authorized;
shares outstanding: 1993--58,829,283, 1992--54,143,853 $ 132,366 $ 121,824
Additional paid-in capital 470,997 374,976
Retained earnings 259,507 249,176
Unearned compensation (675) (187)
------------------------------------
Total common stockholders' equity 862,195 745,789
Preferred stock 168,085 176,365
Long-term debt 736,368 787,387
------------------------------------
1,766,648 1,709,541
------------------------------------
Current Liabilities
Short-term debt -- 17,000
Long-term debt due within one year 25,986 946
Variable rate demand bonds 41,500 41,500
Accounts payable 55,175 56,389
Taxes accrued 10,987 11,593
Interest accrued 15,522 15,190
Dividends declared 22,664 20,900
Current capital lease obligation 12,684 12,709
Deferred energy costs 14,229 7,933
Other 32,681 25,265
------------------------------------
231,428 209,425
------------------------------------
Deferred Credits and Other Liabilities
Deferred income taxes, net 497,457 352,474
Deferred investment tax credits 49,475 51,990
Long-term capital lease obligation 23,335 26,081
Other 25,186 25,282
------------------------------------
595,453 455,827
------------------------------------
Commitments and Contingencies (Notes 12, 13, and 14) -- --
------------------------------------
Total $2,593,529 $2,374,793
====================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
-31-
<PAGE>
CONSOLIDATED STATEMENTS OF CAPITALIZATION
<TABLE>
<CAPTION>
(Dollars in Thousands) As of December 31,
1993 1992
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKHOLDERS' EQUITY
Total common stockholders' equity/(1)/ $ 862,195 $ 745,789
------------------------------
CUMULATIVE PREFERRED STOCK
Par value $1 per share, 10,000,000 shares authorized, none issued --- ---
Par value $25 per share, 3,000,000 shares authorized,
7 3/4% Series, 1,600,000 shares issued/(2)/ 40,000 40,000
Par value $100 per share, 1,800,000 shares authorized:
<CAPTION>
Current call
Series Shares outstanding price per share
- -------------------------------------------------------------------------------
(1993 and 1992)
<S> <C> <C> <C> <C>
3.70%-5% 320,000 and 320,000 $103.00-$105.00 32,000 32,000
6 3/4% 200,000 and 0 /(3)/ 20,000 ---
7.52% 150,000 and 150,000 $103.50 15,000 15,000
7.84%-7.88% 0 and 282,800 --- --- 28,280
Adjustable---5.54%, 5.83%/(4)/ 160,850 and 160,850 $103.00 16,085 16,085
Auction rate---2.71%, 3.05%/(4)/ 450,000 and 450,000 $100.00 45,000 45,000
------------------------------
168,085 176,365
------------------------------
<CAPTION>
LONG-TERM DEBT
First Mortgage Bonds:
12/31/93 12/31/92
Maturity Interest Rates Interest Rates
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994 4 5/8% 4 5/8% 25,000 25,000
1997 6 3/8% 6 3/8% 25,000 25,000
1998 --- 7% --- 25,000
2002-2003 6.40%-6.95% 6.95%-8% 120,000 120,000
2004 --- 6.60% --- 18,200
2014-2015 7.30%-8.15% 7.30%-8.15% 81,000 81,000
2018-2022 5.90%-8.50% 6.75%-10% 208,200 240,000
2032 6.05% --- 15,000 ---
------------------------------
474,200 534,200
Other Bonds, due 2011-2017, 7.15%-7.50% 54,500 54,500
Pollution Control Notes:
Series 1973, due 1994-1998, 5.75% 6,500 6,650
Series 1976, due 1994-2006, 7 1/8%-7 1/4% 3,300 3,400
Medium Term Notes, due 1998, 5.69% 25,000 ---
Medium Term Notes, due 1999, 7 1/2% 30,000 30,000
Medium Term Notes, due 2002-2004, 8.30%-9.29% 39,000 39,000
Medium Term Notes, due 2007, 8 1/8% 50,000 50,000
Medium Term Notes, due 2020-2021, 8.96%-9.95% 61,000 61,000
First Mortgage Notes, 9.65%/(5)/ 8,244 8,809
Term Loan, due 1996, 3.27%/(6)/ 10,000 ---
Other Obligations, due 1994-2000, 8.5% 1,307 1,497
Unamortized premium and discount, net (697) (723)
Current maturities of long-term debt (25,986) (946)
------------------------------
Total long-term debt 736,368 787,387
------------------------------
Total capitalization 1,766,648 1,709,541
------------------------------
Variable Rate Demand Bonds/(7)/ 41,500 41,500
------------------------------
Total capitalization with Variable Rate Demand Bonds $1,808,148 $1,751,041
==============================
</TABLE>
(1) Refer to Consolidated Statements of Changes in Common Stockholders' Equity
for additional information.
(2) Redeemable beginning September 30, 2002, at $25 per share.
(3) Redeemable beginning November 1, 2003, at $100 per share.
(4) Average rates during 1993 and 1992, respectively.
(5) Repaid through monthly payments of principal and interest over 15 years
ending November 2002.
(6) Refer to item 7 of Note 9 to the Consolidated Financial Statements.
(7) Classified under current liabilities as discussed in item 9 of Note 9 to the
Consolidated Financial Statements.
See accompanying Notes to Consolidated Financial Statements.
-32-
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(Dollars in Thousands)
Common Additional Unearned
Shares Par Paid-in Retained Treasury Compen-
Outstanding Value/(1)/ Capital Earnings Stock sation Total
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance as of January 1, 1991 47,889,358 $107,751 $271,694 $235,247 -- -- $614,692
Net income 93,236 93,236
Cash dividends declared
Common stock ($1.54) (78,937) (78,937)
Preferred stock (7,977) (7,977)
Issuance of common stock
Public offering 3,500,000 7,875 56,000 63,875
DRIP/(2)/ 1,126,802 2,535 18,640 21,175
Stock options 150,450 339 2,471 2,810
Other issuance 2,354 5 35 40
Expenses (2,331) (2,331)
-----------------------------------------------------------------------------------------
Balance as of December 31, 1991 52,668,964 118,505 346,509 241,569 -- -- 706,583
Net income 98,526 98,526
Cash dividends declared
Common stock ($1.54) (82,570) (82,570)
Preferred stock (8,349) (8,349)
Issuance of common stock
DRIP/(2)/ 1,336,871 3,008 26,471 29,479
Stock options 129,500 292 2,256 2,548
Other issuance 8,518 19 154 173
Expenses of common and preferred
stock issuances (414) (414)
Reacquired shares (12,490) (259) (259)
Shares granted/(3)/ 12,490 259 (259) --
Amortization of unearned compensation 72 72
-----------------------------------------------------------------------------------------
Balance as of December 31, 1992 54,143,853 121,824 374,976 249,176 -- (187) 745,789
Net income 111,076 111,076
Cash dividends declared
Common stock ($1.54) (89,792) (89,792)
Preferred stock (10,002) (10,002)
Issuance of common stock
Public offering 3,300,000 7,425 69,713 77,138
DRIP/(2)/ 1,246,380 2,804 26,519 29,323
Stock options 139,050 313 2,689 3,002
Expenses (2,627) (2,627)
Reacquired shares (31,490) (748) (748)
Shares granted/(3)/ 31,490 748 (748) --
Amortization of unearned compensation 260 260
Refinancing of preferred stock (273) (951) (1,224)
-----------------------------------------------------------------------------------------
Balance as of December 31, 1993 58,829,283 $132,366 $470,997 $259,507 -- $ (675) $862,195
=========================================================================================
</TABLE>
/(1)/ The Company's common stock has a par value of $2.25 per share and
90,000,000 shares are authorized.
/(2)/ Dividend Reinvestment and Common Share Purchase Plan (DRIP) -- As
of December 31, 1993, 2,818,536 shares were reserved for issuance through
the DRIP.
/(3)/ Shares of restricted common stock granted under the Company's Long Term
Incentive Plan.
See accompanying Notes to Consolidated Financial Statements.
-33-
<PAGE>
1. SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
The Company is predominantly a public utility that provides electric service
on the Delmarva Peninsula in an area consisting of about 5,700 square miles
with a population of approximately 1.0 million. The Company also provides gas
service in an area consisting of about 275 square miles with a population of
approximately 457,000 in northern Delaware, including the City of Wilmington.
In addition, the Company has wholly owned subsidiaries engaged in nonutility
activities.
REGULATION OF UTILITY OPERATIONS
The Company is subject to regulation with respect to its retail utility sales
by the Delaware and Maryland Public Service Commissions (DPSC and MPSC,
respectively) and the Virginia State Corporation Commission (VSCC), which have
broad powers over rate matters, accounting, and terms of service. Gas sales
are subject to regulation by the DPSC. The Federal Energy Regulatory
Commission (FERC) exercises jurisdiction with respect to the Company's
accounting systems and policies, and the wholesale (resale) transmission and
sale of electric energy. FERC also regulates the price and other terms of
transportation of natural gas purchased by the Company. The percentage of
utility operating revenues regulated by each Commission for the year ended
December 31, 1993 was as follows: DPSC 64%, MPSC 22%, VSCC 3%, and FERC 11%.
In conformity with generally accepted accounting principles, the Company's
accounting policies reflect the financial effects of rate regulation and
decisions issued by regulatory commissions having jurisdiction over the
Company's utility business. In accordance with the provisions of Statement of
Financial Accounting Standards No. 71, "Accounting for the Effects of Certain
Types of Regulation," the Company defers expense recognition of certain costs
("deferred charges"). Deferred charges are subsequently amortized to expense
over the period that the cost is recovered through customer rates.
REPORTING OF SUBSIDIARIES
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries--Delmarva Energy Company; Delmarva Industries,
Inc.; Delmarva Services Company; and Delmarva Capital Investments, Inc. and
its subsidiaries. The results of operations of the Company's nonutility
subsidiaries are reported in the consolidated statements of income as "Other
income." Refer to Note 16 to the Consolidated Financial Statements for
financial information about the Company's subsidiaries.
UTILITY REVENUES
Prior to 1991, the Company recorded revenues as billed to its customers on a
monthly cycle billing basis. At the end of each month, there was an amount of
unbilled electric and gas service that had been rendered from the last meter
reading to the month-end. Effective January 1, 1991, the Company began
recording non-fuel (base rate) revenues for services provided but not yet
billed to more closely match revenues with expenses. The cumulative effect of
the one-time change in accounting for unbilled revenues increased 1991 net
income by $12,730,000 ($0.25 per share).
When interim rates are placed in effect subject to refund, the Company
recognizes revenues based on expected final rates.
FUEL EXPENSE
Fuel costs charged to the Company's results of operations are generally
adjusted to match fuel costs included in customer billings (fuel revenues).
The difference between fuel revenues and actual fuel costs incurred is
reported on the balance sheet as "deferred energy costs." The deferred balance
is subsequently recovered from or returned to utility customers.
The Company's share of nuclear fuel at the Peach Bottom Atomic Power Station
(Peach Bottom) and the Salem Nuclear Generating Station (Salem) is financed
through a contract which is accounted for as a capital lease. Nuclear fuel
costs, including a provision for the future disposal of spent nuclear fuel,
are charged to fuel expense on a unit of production basis.
DEPRECIATION EXPENSE
The annual provision for depreciation on utility property is computed on the
straight-line basis using composite rates by classes of depreciable property.
The relationship of the annual provision for depreciation for financial
accounting purposes to average depreciable property was 3.7% for 1993, 3.6%
for 1992, and 3.7% for 1991. Depreciation expense includes a provision for the
Company's share of the estimated cost of decommissioning (decontaminating and
removing) nuclear power plant reactors based on amounts billed to customers
for such costs. Refer to Note 6 to the Consolidated Financial Statements for
information on nuclear decommissioning.
INTEREST EXPENSE
The amortization of debt discount, premium, and expense, including refinancing
expenses, is included in other interest charges. On a consolidated basis,
total interest charges incurred were $65,421,000 in 1993, $70,156,000 in 1992,
and $72,456,000 in 1991.
ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION
Allowance for funds used during construction (AFUDC) is included in the cost
of utility plant and represents the cost of borrowed and equity funds used to
finance construction of new utility facilities. The amount of AFUDC capitalized
is also reported in the Consolidated Statements of Income as a reduction of
interest charges for the borrowed funds component and as other income for the
equity funds component. AFUDC was capitalized on utility plant construction at
the rates of 9.6% in 1993 and 1992, and 9.9% in 1991.
LEVERAGED LEASES
The Company's investment in leveraged leases includes the aggregate of rentals
receivable (net of principal and interest on nonrecourse indebtedness) and
estimated residual values of the leased equipment less unearned and deferred
income (including investment tax credits). Unearned and deferred income is
recognized at a level rate of return during the periods in which the net
investment is positive.
FUNDS HELD BY TRUSTEE
Funds held by trustee generally includes deposits in the Company's external
nuclear decommissioning trusts and unexpended, restricted or tax exempt bond
proceeds. Earnings on such trust funds are also reflected in the balance.
-34-
<PAGE>
2. BASE RATE MATTERS
Electric base rate increases were filed with regulatory commissions beginning
in October 1992 to recover higher costs associated with Hay Road Unit 4 which
was placed in service on June 1, 1993, postretirement benefit costs under SFAS
No. 106, and other items including general inflation. Base rate increases
which became effective in 1993 are summarized below.
<TABLE>
<CAPTION>
Annualized Base Effective
Jurisdiction Revenue Increase Date
- ----------------------------------------------------------
<S> <C> <C>
Retail electric
Delaware(1) $24.9 million or 5.8% 06/01/93
Maryland(2) $ 7.8 million or 4.3% 04/01/93
Virginia(3) $ 1.3 million or 7.2% 10/05/93
Resale (FERC)(4) $ 1.5 million or 1.5% 06/03/93
</TABLE>
(1) Based on a settlement agreement approved by the DPSC on October 5, 1993,
which included an 11.5% return on equity. Net of fuel savings from Hay
Road Unit 4, customer rates increased 3.7%.
(2) Based on a settlement agreement approved by the MPSC on March 26, 1993.
Although a return on equity was not specified in the settlement agreement,
the Company believes that the implied return on equity approaches 12%. Net
of fuel savings from Hay Road Unit 4, customer rates increased 2.3%.
(3) Based on a pending settlement agreement which is subject to approval by
the VSCC. The agreement reflects an 11.05% return on equity.
(4) Based on a settlement agreement which is subject to approval by the FERC.
Changes in base rates which became effective in 1992 are summarized below.
<TABLE>
<CAPTION>
Annualized Base Effective
Jurisdiction Revenue Increase Date
- ----------------------------------------------------------
<S> <C> <C>
Retail electric
Delaware(1) $18.5 million or 4.3% 01/01/92
Maryland(2) $ 5.5 million or 3.3% 01/01/92
Virginia(3) $ 1.15 million or 5.1% 07/01/92
Resale (FERC)(4) $ 4.125 million or 4.4% 02/19/92
Delaware Gas(5) $ 4.1 million or 5.6% 02/02/92
</TABLE>
(1) Included a 12.5% return on equity.
(2) A specific return on equity was not stated in the settlement agreement
approved by the MPSC.
(3) Included on 11.5% return on equity.
(4) A specific return on equity was not stated in the settlement agreement
approved by the FERC.
(5) Included a 12.5% return on equity.
-35-
<PAGE>
3. INCOME TAXES
The Company and its wholly owned subsidiaries file a consolidated federal
income tax return. Income taxes are allocated to the Company's utility
business and subsidiaries based upon their respective taxable incomes, tax
credits, and effects of the alternative minimum tax, if any.
Prior to January 1, 1993, deferred income taxes were provided on timing
differences between the tax and financial accounting recognition of certain
income and expenses. Effective January 1, 1993, the Company adopted SFAS No.
109, "Accounting for Income Taxes," which replaced the deferred method of
income tax accounting with the liability method. Under the liability method,
deferred income tax assets and liabilities represent the tax effects of
temporary differences between the financial statement and tax bases of
existing assets and liabilities and are measured using presently enacted tax
rates. The principle effects on the Company's financial statements of adopting
SFAS No. 109 were a $144.5 million increase in net deferred tax liabilities
and a $144.5 million increase in "deferred recoverable income taxes," which is
an asset representing future recovery of the deferred taxes over the lives of
the related assets through rates charged to utility customers. These amounts
include $17.4 million of adjustments to recognize the effect of the increase
in the federal income tax rate from 34% to 35% during 1993. Deferred income
tax expense under SFAS No. 109 represents the net change during the reporting
period in the net deferred tax liability and deferred recoverable income
taxes.
Investment tax credits from regulated operations are being amortized over the
useful lives of the related utility plant. Investment tax credits associated
with leveraged leases are being amortized over the lives of the related leases
during the periods in which the net investment is positive.
-36-
<PAGE>
<TABLE>
<CAPTION>
COMPONENTS OF CONSOLIDATED INCOME TAX EXPENSE
(Dollars in Thousands) 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operation
Federal: Current $50,264 $30,819 $31,777
Deferred 7,710 11,597 8,924
State: Current 10,839 6,755 6,596
Deferred 1,832 2,638 1,455
Investment tax credit adjustments, net (2,515) (2,417) (2,844)
Other income
Federal: Current 9,398 7,559 (4,773)
Deferred (9,398) (3,482) 2,336
State: Current 287 1,369 (34)
Deferred (1,315) (4) (188)
Income taxes on cumulative effect of a
change in accounting for unbilled revenues -- -- 8,520
------------------------------------------
Total income tax expense $67,102 $54,834 $51,769
==========================================
</TABLE>
RECONCILIATION OF EFFECTIVE INCOME TAX RATE
The amount computed by multiplying income before tax by the federal statutory
rate is reconciled below to the total income tax expense.
<TABLE>
<CAPTION>
1993 1992 1991
(Dollars in Thousands) Amount Rate Amount Rate Amount Rate
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Statutory federal income
tax expense $62,362 35% $52,142 34% $49,302 34%
Increase (decrease) due to
Depreciation not normalized 1,676 1 1,959 1 2,103 1
ITC amortization (2,832) (2) (2,780) (2) (3,456) (2)
State income taxes, net of
federal tax benefit 7,567 4 7,099 5 6,120 4
Other, net (1,671) -- (3,586) (2) (2,300) (1)
---------------------------------------------------------------------------------
Total income tax expense $67,102 38% $54,834 36% $51,769 36%
=================================================================================
</TABLE>
COMPONENTS OF DEFERRED INCOME TAXES
The tax effect of temporary differences which give rise to the Company's net
deferred tax liability are shown below.
<TABLE>
<CAPTION>
As of
(Dollars in Thousands) 12/31/93
- --------------------------------------------------------------------
<S> <C>
Deferred Tax Liabilities
Utility plant basis differences
Accelerated depreciation $292,655
Other 97,530
Leveraged leases 49,339
Deferred recoverable income taxes 62,124
Other 30,630
-----------
Total deferred tax liabilities 532,278
-----------
Deferred Tax Assets
Deferred investment tax credits 17,316
Other 28,218
-----------
Total deferred tax assets 45,534
-----------
Total deferred taxes, net $486,744
===========
</TABLE>
Valuation allowances for deferred tax assets were not material as of
December 31, 1993.
-37-
<PAGE>
4. OTHER INCOME
The components of "Other income, net of income taxes" as presented in the
Consolidated Statements of Income are shown in the table below. Effective
January 1, 1993, the contract for operation and maintenance of the Delaware
City Power Plant (owned by Star Enterprise) was transferred from the parent
company to a nonutility subsidiary. The 1993 revenues and expenses associated
with the contract are included in the operating results of the Company's
nonutility subsidiaries as reported in Note 16 to the Consolidated Financial
Statements.
<TABLE>
<CAPTION>
(Dollars in Thousands) 1993 1992 1991
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues and Income
Revenues $2,413 $14,837 $22,509
Peach Bottom lawsuit settlement -- 18,538 --
Interest, dividends, other income 2,457 2,424 3,966
Expenses
Operating and other expenses 4,793 15,326 22,192
Income tax expense (benefit) (434) 7,618 241
------------------------------------------
Net $ 511 $12,855 $ 4,042
==========================================
</TABLE>
On July 27, 1988, the Company, Atlantic City Electric Company, and Public
Service Electric and Gas Company filed lawsuits against PECO to recover
replacement power and other costs incurred as a result of the shutdown of
Peach Bottom by the Nuclear Regulatory Commission (NRC) on March 31, 1987. The
Company's share of costs resulting from the shutdown were charged against
earnings during the period of the shutdown (March 1987 through November 1989).
On March 31, 1992, the Peach Bottom co-owners reached a settlement agreement
under which PECO paid $18,538,000 to the Company. The settlement increased
1992 net income by $11,397,000 ($0.21 per share).
5. JOINTLY OWNED PLANT
The Company's balance sheet includes its proportionate share of assets and
liabilities related to jointly owned plant. The Company's share of operating and
maintenance expenses of the jointly owned plant is included in the corresponding
expenses in the Consolidated Statements of Income. The Company is responsible
for providing its share of financing for the jointly owned facilities.
Information with respect to the Company's share of jointly owned plant as of
December 31, 1993 was as follows:
<TABLE>
<CAPTION>
Megawatt Construction
Ownership Capability Plant in Accumulated Work in
(Dollars in Thousands) Share Owned Service Depreciation Progress
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nuclear
Peach Bottom 7.51% 157 MW $122,955 $ 57,881 $ 6,386
Salem 7.41% 164 MW 199,737 85,077 10,584
Coal-Fired
Keystone 3.70% 63 MW 16,020 6,823 695
Conemaugh 3.72% 63 MW 17,236 7,723 8,388
Transmission Facilities Various 4,563 1,932 --
--------------------------------------
Total $360,511 $159,436 $26,053
======================================
</TABLE>
-38-
<PAGE>
6. NUCLEAR RECOMMISSIONING
The Company is funding its share of the estimated future cost of
decommissioning (decontaminating and removing) the Peach Bottom and Salem
nuclear reactors over the remaining lives of the plants. The Company estimates
its share of future decommissioning costs based on NRC regulations concerning
the minimum nuclear decommissioning financial assurance amount. The ultimate
cost of decommissioning the Peach Bottom and Salem nuclear reactors may exceed
the NRC minimum nuclear decommissioning financial assurance amount. This
amount is updated annually for inflation and increased in 1993 to
approximately $117 million from the Company's previous estimate of $53.7
million primarily due to higher estimated costs for disposing of low level
radioactive waste. The Company's accrued decommissioning liability, which is
reflected in the accumulated reserve for depreciation, was $29.1 million as of
December 31, 1993. External trust funds established by the Company for the
purpose of funding decommissioning costs had an aggregate balance of $17.3
million and a fair market value of $18.6 million as of December 31, 1993. The
Company is recovering, through rates charged to electric customers, nuclear
decommissioning costs based on an amount approximating the Company's previous
liability estimate of $53.7 million. Based on prior decisions by regulatory
commissions, the Company expects that customer rates will be adjusted to
provide for recovery of the Company's 1993 estimate of future decommissioning
costs of $117 million.
7. COMMON STOCK
1) The Company's Restated Certificate and Articles of Incorporation and the
Mortgage and Deed of Trust securing the Company's outstanding bonds contain
restrictions on the payment of dividends on common stock. Such restrictions
would become applicable if the Company's capital and retained earnings fall
below certain specific levels or if preferred dividends are in arrears. Under
the most restrictive of these provisions, as of December 31, 1993,
approximately $223.8 million was available for payment of common dividends.
2) Prior to January 1, 1993, the Company had a nonqualified stock option plan
for certain employees. Options were priced at the actual market value on the
grant date. Effective January 1, 1993, the Company's Board of Directors
declared that no new stock options will be granted and that the
performance-based restricted stock program will be the program under the Long
Term Incentive Plan which is in effect. Changes in stock options are
summarized below.
<TABLE>
<CAPTION>
1993 1992 1991
Number Option Number Option Number Option
of Shares Price of Shares Price of Shares Price
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Beginning-of-year
balance 192,100 $17 1/2-$21 1/4 270,200 $17 1/2-$21 1/4 302,900 $17 1/2-$21 1/4
Options granted -- -- 59,900 $20 1/2 117,750 $18 1/8
Options exercised 139,050 $17 1/2-$21 1/4 129,500 $17 1/2-$21 1/4 150,450 $17 1/2-$17 3/4
Options forfeited -- -- 8,500 $21 1/4 -- --
End-of-year balance 53,050 $17 1/2-$21 1/4 192,100 $17 1/2-$21 1/4 270,200 $17 1/2-$21 1/4
Exercisable 53,050 $17 1/2-$21 1/4 132,200 $17 1/2-$21 1/4 152,450 $17 1/2-$21 1/4
</TABLE>
8. PREFERRED STOCK
1) On November 4, 1993, the Company issued 200,000 shares of 6 3/4%, cumulative
preferred stock, $100 per share par value, for $20 million. The dividend is
cumulative and is payable quarterly. Beginning on November 1, 2003, the 6 3/4%
preferred stock will be redeemable, at any time at the option of the Company, in
whole or in part, at $100 per share plus unpaid accumulated dividends, if any.
On December 1, 1993, the Company used the proceeds and cash on-hand to redeem
$18.28 million of the Company's 7.88% preferred stock and $10.0 million of the
Company's 7.84% preferred stock.
2) On August 4, 1992, the Company issued 1,600,000 shares of 7 3/4%, cumulative
preferred stock, $25 per share par value, for $40 million.
-39-
<PAGE>
9. DEBT
1) Substantially all utility plant of the Company now or hereafter owned is
subject to the lien of the Mortgage and Deed of Trust.
2) On June 1, 1993, $50 million of 10% First Mortgage Bonds, due December 1,
2018, were redeemed with a portion of the proceeds received from a public
offering of common stock.
3) On June 7, 1993, the Delaware Economic Development Authority issued on
behalf of the Company $15 million of 6.05% Gas Facilities Revenue Bonds
(Series A), due June 1, 2032, and also issued $18.2 million of 5.90% Pollution
Control Refunding Revenue Bonds (Series B), due June 1, 2021. The proceeds
from the Series A Bonds are being used to finance additions to the Company's
gas system. The proceeds from the Series B Bonds were used on July 8, 1993 to
redeem $18.2 million of 6.6% Pollution Control Revenue Bonds, due July 1,
2004. Both the Series A and B Bonds are collateralized by First Mortgage
Bonds and are insured.
4) On June 23, 1993, the Company issued $25 million of unsecured, 5.69% Medium
Term Notes, due June 24, 1998. The proceeds were used on July 23, 1993 to
redeem $25 million of 7% First Mortgage Bonds, due November 1, 1998.
5) On July 1, 1993, the Company issued $90 million of 6.40% First Mortgage
Bonds, due July 1, 2003. The proceeds were used on August 2, 1993 to redeem
$90 million of First Mortgage Bonds comprised of the following series: $35
million, 7 5/8% Series due 2001; $30 million, 7 1/2% Series due 2002; and $25
million, 8% Series due 2003.
6) As of December 31, 1993, the fair market value of the Company's long-term
debt was $833,502,000 in comparison to the book value of $736,368,000. As of
December 31, 1992, the fair market value of the Company's long-term debt was
$822,494,000 in comparison to the book value of $787,387,000. The fair market
value of the Company's long-term debt was estimated using discounted cash flow
calculations, based on interest rates available to the Company for debt with
similar terms, maturities, and credit worthiness.
7) As of December 31, 1993, the Company had $125 million of bank lines of
credit, including $50 million of such credit lines under which the Company may
convert short-term borrowings to a term loan maturing on July 31, 1996 (or
earlier at the discretion of the Company). As of December 31, 1993, $10
million of short-term borrowings by the Company were classified as long-term
debt ("Term Loan") in recognition of the long-term financing capability
provided by the credit lines. The Company is generally required to pay
commitment fees for its credit lines. The lines of credit are periodically
reviewed by the Company, at which time they may be renewed or cancelled.
8) Maturities of long-term debt and sinking fund requirements during the next
five years are as follows: 1994--$26,486,000; 1995--$1,346,000;
1996--$11,422,000; 1997--$26,510,000; 1998--$32,239,000.
9) A total of $41.5 million of Variable Rate Demand Bonds were outstanding as
of December 31, 1993 and 1992, respectively. Although Variable Rate Demand
Bonds are classified as current liabilities, the Company intends to use the
Variable Rate Demand Bonds as a source of long-term financing by setting the
bonds' interest rates at market rates and, if advantageous, by utilizing one
of the fixed rate/fixed term conversion options of the bonds. The bonds are
due on demand or at maturity in the years 2017 and 2028 for principal amounts
of $26.0 million and $15.5 million, respectively. During 1993, $15.5 million
of Variable Rate Demand Bonds due in 2014 were refinanced with like bonds due
in 2028. Average annual interest rates on the Variable Rate Demand Bonds were
2.5% in 1993.
-40-
<PAGE>
10. PENSION PLAN
The Company has a defined benefit pension plan covering all regular employees.
The benefits are based on years of service and the employee's compensation.
The Company's funding policy is to contribute each year the net periodic
pension cost for that year. However, the contribution for any year will not be
less than the minimum required contribution nor greater than the maximum tax
deductible contribution. There were no pension contributions in 1993, 1992, or
1991. Pension plan assets consist primarily of equity securities and public
bond securities.
The following schedules show the funded status of the plan, the components of
pension cost, and assumptions.
<TABLE>
<CAPTION>
RECONCILIATION OF FUNDED STATUS OF THE PLAN As of December 31,
(Dollars in Thousands) 1993 1992
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Accumulated benefit obligation
Vested $ 236,209 $218,776
Nonvested 25,721 22,699
-------------------------------------------
261,930 241,475
Effect of estimated future compensation increases 123,562 112,941
-------------------------------------------
Projected benefit obligation 385,492 354,416
Plan assets at fair value 521,897 475,690
-------------------------------------------
Excess of plan assets over projected benefit obligation 136,405 121,274
Unrecognized prior service cost 19,255 18,988
Unrecognized net gain (108,183) (93,407)
Unrecognized net transition asset (36,455) (39,769)
-------------------------------------------
Prepaid pension cost $ 11,022 $ 7,086
===========================================
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
COMPONENTS OF NET PENSION COST 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C>
Service cost--benefits earned during period $13,152 $12,606 $ 9,815
Interest cost on projected benefit obligation 26,411 24,261 21,909
Actual return on plan assets (58,247) (39,104) (96,302)
Net amortization and deferral 14,748 (1,715) 64,438
-------------------------------------------
Net pension cost $(3,936) $(3,952) $ (140)
===========================================
<CAPTION>
ASSUMPTIONS 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rates used to determine projected
benefit obligations as of December 31 7.25% 7.25% 7.00%
Rates of increase in compensation levels 6.50% 6.50% 6.50%
Expected long-term rates of return on assets 8.25% 8.25% 8.00%
</TABLE>
-41-
<PAGE>
11. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Effective January 1, 1993, the Company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," which requires
accrual accounting for postretirement benefits other than pensions. The
Company provides health-care and life insurance benefits for its retired
employees and substantially all of the Company's employees may become eligible
for these benefits upon retirement. Prior to adoption of SFAS No. 106, the
Company recognized the costs of these benefits by expensing the benefits as
paid. The amounts expensed in 1992 and 1991 were $4,496,000 and $4,176,000,
respectively.
The Company has elected to recognize the cost of its transition obligation
(the accumulated postretirement benefit obligation as of January 1, 1993) by
amortizing it on a straight-line basis over 20 years. The Company's SFAS No.
106 obligation and cost are based on a discount rate of 7.75% as of January 1,
1993 and 7.25% as of December 31, 1993. The assumed rate of increase in health-
care costs (health-care cost trend rate) was 12% in 1993, decreasing to 11% in
1994 and gradually decreasing to 5.5% by 2011. Increasing the health-care cost
trend rates of future years by one percentage point would increase the
accumulated postretirement benefit obligation by $3.3 million and would
increase annual aggregate service and interest costs by $0.3 million.
In December 1993, the Company contributed $5.8 million to external trust funds
in order to begin to fund the SFAS No. 106 obligation. The assets in the
trusts consist primarily of short-term taxable and tax-exempt marketable
securities. The Company's policy is to fund the obligation to the extent that
SFAS No. 106 costs are reflected in customer rates, including amounts which
are capitalized.
The following schedules show the funded status of the plan and the components
of the cost of postretirement benefits other than pensions.
<TABLE>
<CAPTION>
RECONCILIATION OF FUNDED STATUS OF THE PLAN As of
(Dollars in thousands) 12/31/93
- ----------------------------------------------------------------------------
<S> <C>
Accumulated postretirement benefit obligation (APBO):
Active employees fully eligible for benefits $17,380
Other active employees 20,351
Current retirees 43,118
-----------
80,849
Plan assets at fair value 5,825
-----------
APBO in excess of plan assets 75,024
Unrecognized transition obligation (68,728)
Unrecognized net loss (4,939)
-----------
Accrued postretirement benefit cost $ 1,357
===========
</TABLE>
<TABLE>
<CAPTION>
ANNUAL COST OF POSTRETIREMENT BENEFITS OTHER THAN PENSIONS Year ended
(Dollars in thousands) 12/31/93
- ----------------------------------------------------------------------------
<S> <C>
Service cost--benefits earned during period $ 2,206
Interest cost on projected benefit obligation 5,613
Amortization of the unrecognized transition obligation 3,617
-----------
Net SFAS No. 106 cost $11,436
===========
</TABLE>
-42-
<PAGE>
12. COMMITMENTS
The Company estimates that approximately $155.3 million, excluding AFUDC, will
be expended for construction purposes in 1994.
The Company has a 26-year agreement with Star Enterprise effective through May
31, 2018 to purchase 48 MW of capacity supplied by the Delaware City Power
Plant, which the Company sold to Star Enterprise in December 1991. Under the
terms of the agreement, the maximum capacity charge for a year is $3.4 million,
if the unit's availability exceeds 85 percent.
The Company has an agreement for the future purchase of 165 MW of power over a
30-year period from a cogeneration facility to be constructed by the Delaware
Clean Energy Project (DCEP) and located in Delaware. On April 20, 1993, the
DPSC issued an order which neither approved nor disapproved the DCEP
agreement. The agreement, as amended, provides the Company and DCEP the right,
until November 1, 1994, to terminate the agreement. The date for the start of
commercial operations of the facility remains to be determined, but in any
event will not be prior to June 1, 1998. Assuming 93% availability, capacity
charges under the agreement are currently expected to be approximately $44.5
million per year for the first 16 years and $31.2 million per year for the
remaining 14 years.
In order to ensure adequate supplies of fuel, the Company has certain
commitments under long-term fuel supply contracts. Excluding nuclear fuel
discussed below, the Company's commitments under its long-term fuel supply
contracts are $76 million in 1994, $62 million in 1995, $57 million in 1996,
$45 million in 1997, and $38 million in 1998.
The Company's share of nuclear fuel at Peach Bottom and Salem is financed
through a nuclear fuel energy contract which is accounted for as a capital
lease. Payments under the contract are based on the quantity of nuclear fuel
burned by the plants. The Company's obligation under the contract is generally
the net book value of the nuclear fuel financed, which was $33.9 million as of
December 31, 1993.
The Company leases an 11.9% interest in the Merrill Creek Reservoir. The lease
is considered an operating lease and payments over the remaining lease term,
which ends in 2032, are $165.6 million in aggregate. The Company also has long-
term leases for certain other facilities and equipment. Minimum commitments as
of December 31, 1993 under all noncancelable lease agreements (excluding
payments under the nuclear fuel energy contract which cannot be reasonably
estimated) are as follows: 1994-$6,716,000; 1995-$6,691,000; 1996-$6,639,000;
1997-$5,552,000; 1998-$5,345,000; after 1998-$150,296,000; total-$181,239,000.
Approximately 91% of the minimum lease commitments shown above are payments
due under the Company's lease of an 11.9% interest in the Merrill Creek
Reservoir.
RENTALS CHARGED TO OPERATING EXPENSES
The following amounts were charged to operating expenses for rental payments
under both capital and operating leases:
<TABLE>
<CAPTION>
(Dollars in Thousands) 1993 1992 1991
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Interest on nuclear fuel capital lease $1,014 $1,111 $1,633
Interest on other capital leases 282 321 345
Amortization of nuclear fuel capital lease 9,956 10,231 10,242
Amortization of other capital leases 287 323 351
Operating leases 15,176 14,063 14,507
---------------------------------
$26,715 $26,049 $27,078
=================================
</TABLE>
-43-
<PAGE>
13. ENVIRONMENTAL MATTERS
The Company is subject to regulation with respect to the environmental effects
of its operations, including air and water quality control, solid waste
disposal and limitation on land use by various federal, regional, state and
local authorities. The Company has incurred, and expects to continue to
incur, capital expenditures and operating costs because of environmental
considerations and requirements. The disposal of Company-generated hazardous
substances can result in costs to clean up facilities found to be contaminated
due to past disposal practices. Federal and state statutes authorize
governmental agencies to compel responsible parties to clean up certain
abandoned or uncontrolled hazardous waste sites. The Company is currently a
potentially responsible party (PRP) at one such site and is alleged to be a
third party contributor at two other such sites. The Company also has three
former coal gasification sites and is currently conducting a study of
one of the three sites to assess the extent of contamination and risk to the
environment. The Company does not expect clean-up and other potential costs
related to the PRP and coal gasification sites, either separately or
cumulatively, to have a material effect on the Company's financial position or
results of operations.
14. CONTINGENCIES
1) Nuclear Insurance
In the event of an incident at any commercial nuclear power plant in the
United States, the Company could be assessed for a portion of any third party
claims associated with the incident. 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), the Company could be assessed up to
$23.7 million for third party claims. In addition, Congress could impose a
revenue raising measure on the nuclear power industry to pay such claims.
The co-owners of Peach Bottom and Salem maintain nuclear property damage and
decontamination insurance in the aggregate amount of $2.7 billion for each
station. The Company is self-insured, to the extent of its ownership
interest, for its share of property losses in excess of insurance coverages.
Under the terms of the various insurance agreements, the Company could be
assessed up to $3.5 million in any policy year for losses incurred at nuclear
power plants insured by the insurance companies.
The Company is a member of an industry mutual insurance company, which
provides replacement power cost coverage in the event of a major accidental
outage at a nuclear power plant. The premium for this coverage is subject to
retrospective assessment for adverse loss experience. The Company's present
maximum share of any assessment is $1.4 million per year.
2) Other
On December 14, 1993, Star Enterprise (Star) filed a lawsuit against the
Company seeking an accounting, a refund, and damages totalling $9.3 million.
Star alleges that the Company overcharged Star for pension and tax-related
costs under a contract entered into by the parties' predecessors in 1955 (the
"1955 Agreement"). The Company believes it acted properly under the 1955
Agreement and that it does not owe Star any amounts claimed in this lawsuit.
The Company cannot predict the outcome of the lawsuit.
The Company is involved in certain other legal and administrative proceedings
before various courts and governmental agencies concerning rates, fuel
contracts, tax filings, and other matters. The Company expects that the
ultimate disposition of these proceeding will not have a material effect on
the Company's financial position or results of operations.
15. SUPPLEMENTAL CASH FLOW INFORMATION
In the consolidated financial statements, the Company considers highly liquid
marketable securities and debt instruments purchased with a maturity of three
months or less to be cash equivalents.
<TABLE>
<CAPTION>
CASH PAID DURING THE YEAR FOR Year Ended December 31,
(Dollars In Thousands) 1993 1992 1991
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest, net of capitalized amount $58,154 $62,127 $65,788
Income taxes, net of refunds $72,384 $46,310 $37,397
</TABLE>
-44-
<PAGE>
16. NONUTILITY SUBSIDIARIES
The following presents condensed financial information of the Company's
nonregulated wholly owned subsidiaries: Delmarva Energy Company; Delmarva
Industries, Inc; and Delmarva Capital Investments, Inc. A subsidiary which
leases real estate to the Company's utility business, Delmarva Services
Company, is excluded from these statements since its income is derived from
intercompany transactions which are eliminated in consolidation.
<TABLE>
<CAPTION>
CONDENSED SUBSIDIARY STATEMENTS OF INCOME
(Dollars in Thousands)
1993 1992 1991
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues and Gains
Landfill and waste hauling $11,745 $9,021 $ 6,154
Operating services 22,118 3,038 2,939
Other revenues 2,117 998 1,129
Leveraged leases/(1)/ 835 61 5,044
Other investment income 821 1,279 182
--------------------------------------------
37,636 14,397 15,448
--------------------------------------------
Costs and Expenses
Operating expenses 36,424 15,765 15,509
Interest expense 246 550 1,704
Capitalized interest (246) (231) (143)
Income tax (benefit) (596) (2,176) (2,900)
--------------------------------------------
35,828 13,908 14,170
--------------------------------------------
Net income $ 1,808 $ 489 $ 1,278
============================================
Earnings per share of common stock attributed to
subsidiaries $ 0.03 $ 0.01 $ 0.03
</TABLE>
/(1)/ On an after-tax basis, leveraged leasing, including gains on sales of
equity and residual value interests, contributed $1,754,000, $1,813,000, and
$4,663,000 to earnings in 1993, 1992, and 1991, respectively.
<TABLE>
<CAPTION>
CONDENSED SUBSIDIARY BALANCE SHEETS
(Dollars In Thousands)
As of December 31, Liabilities and As of December 31,
Assets 1993 1992 Stockholder's Equity 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Current Assets Current Liabilities
Cash and cash equivalents $15,929 $ 6,033 Debt due within
one year $ 193 $ 181
Other 7,489 2,477 Other 11,903 9,689
-------------------- ---------------------
23,418 8,510 12,096 9,870
---------------------
Noncurrent assets Noncurrent liabilities
Investment in Deferred income taxes 55,008 65,604
Leveraged leases 50,914 72,858 Other 3,089 3,196
Other 4,623 5,481 ---------------------
58,097 68,800
---------------------
Property, plant & equipment
Landfill & waste hauling 27,420 28,488
Other 3,512 2,089 Stockholder's Equity 40,392 39,981
Other 698 1,225
--------------------- ---------------------
Total $110,585 $118,651 Total $110,585 $118,651
===================== =====================
</TABLE>
-45-
<PAGE>
17. SEGMENT INFORMATION
Segment information with respect to electric and gas operations was as
follows:
<TABLE>
<CAPTION>
(Dollars in Thousands) 1993 1992 1991
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Electric Operations
Operating revenues $ 875,663 $ 780,175 $ 784,599
Operating income 154,412 134,260 129,295
Depreciation 94,549 89,421 83,363
Construction expenditures 142,238 192,493 163,399
Gas Operations
Operating revenues 94,944 83,869 71,222
Operating income 9,727 9,451 7,115
Depreciation 6,380 5,864 5,247
Construction expenditures 17,753 14,888 18,302
Identifiable Assets, Net
Electric 2,268,100 2,042,496 1,895,124
Gas 160,618 142,740 130,875
Assets not allocated 164,811 189,557 237,719
</TABLE>
18. QUARTERLY FINANCIAL INFORMATION
The quarterly data presented below reflect all adjustments necessary in the
opinion of the Company for a fair presentation of the interim results.
Quarterly data normally vary seasonally with temperature variations,
differences between summer and winter rates, the timing of rate orders, and
the scheduled downtime and maintenance of electric generating units.
<TABLE>
<CAPTION>
Earnings Earnings
Applicable Average per
Quarter Operating Operating Net to Common Shares Average
Ended Revenue Income Income Stock Outstanding Share
(Dollars in Thousands) (In Thousands)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1993
March 31 $248,007 $ 46,278 $ 34,414 $ 31,911 55,135 $0.58
June 30 214,638 31,239 18,758 16,279 58,036 $0.27
September 30 275,385 59,015 44,279 41,789 58,372 $0.72
December 31 232,577 27,607 13,625 11,095 58,687 $0.19
--------------------------------------------------------------------------------
$970,607 $164,139 $111,076 $101,074 57,557 $1.76
================================================================================
1992
March 31 $225,130 $ 38,058 $34,789 $32,988 52,876 $0.62
June 30 193,797 29,279 14,259 12,464 53,285 $0.24
September 30 237,717 48,080 34,056 31,810 53,685 $0.59
December 31 207,400 28,294 15,422 12,915 53,980 $0.24
--------------------------------------------------------------------------------
$864,044 $143,711 $98,526 $90,177 53,456 $1.69
================================================================================
</TABLE>
In the first quarter of 1992, the Company recorded the results of the Peach
Bottom lawsuit settlement (Note 4 to the Consolidated Financial Statements)
which increased 1992 net income by $11,397,000 ($0.21 per share).
-46-
<PAGE>
Appendix to Management's Discussion and Analysis of Financial
Condition and Results of Operations
Descriptions of Graphs
"Regional Electric Price Comparison"
- ------------------------------------
On page 21 of the 1993 Annual Report to Stockholders, a graph titled
"Regional Electric Price Comparison" is displayed. The graph compares
electric prices for Delmarva Power to a regional average of electric
utilities. The price comparisons are based on 1992 average electric prices
per kilowatt-hour (kWh) and are made for the residential, commercial, and
industrial customer classes.
For each of the customer classes (residential, commercial, and industrial),
two side-by-side vertical, rectangular bars are displayed. The bar on the
left represents the Delmarva Power price and the bar on the right represents
the regional average price. The y-axis is scaled in cents, beginning at
zero, increasing by increments of two cents, and ending at ten cents. The
prices graphed are as follows:
<TABLE>
<CAPTION>
Delmarva Regional
Power Average
-------- --------
<S> <C> <C>
Residential 8.48 9.86
Commercial 7.04 8.64
Industrial 4.63 6.59
</TABLE>
"1993 Sources of Electricity"
- -----------------------------
On page 23 of the 1993 Annual Report to Stockholders, a pie graph titled
"1993 Sources of Electricity" is displayed. The sources of electricity shown
on the pie graph are as follows:
<TABLE>
<S> <C>
Purchased Power, net 12.7%
Coal 46.7%
Oil and Gas 26.0%
Nuclear 14.6%
</TABLE>
-1-
<PAGE>
Appendix to Management's Discussion and Analysis of Financial
Condition and Results of Operations
Descriptions of Graphs
"Electric Operation & Maintenance Expenses Per kWh Sold"
- --------------------------------------------------------
On page 23 of the 1993 Annual Report to Stockholders, a graph titled
"Electric Operation & Maintenance Expenses Per kWh Sold" is displayed.
Electric operation and maintenance expenses, expressed in cents per kWh sold,
are graphed for Delmarva Power, a regional average of electric utilities, and
a national average of electric utilities. The y-axis is scaled in cents,
beginning at 1.00, increasing by increments of 0.25, and ending at 2.75. The
x-axis consists of the years 1988, 1989, 1990, 1991, 1992, and 1993. The
following data points, cents per kWh sold, are plotted as lines on the graph.
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993
---- ---- ---- ---- ---- -----
(Cents Per kWh)
<S> <C> <C> <C> <C> <C> <C>
Delmarva Power 1.54 1.55 1.60 1.68 1.73 1.59
Regional Average 1.81 1.83 1.93 1.95 1.98 (1)
National Average 2.06 2.11 2.28 2.42 2.52 (1)
</TABLE>
(1) Data not available and not graphed.
"Internally Generated Funds & Construction Expenditures"
- --------------------------------------------------------
On page 25 of the 1993 Annual Report to Stockholders, a graph titled
"Internally Generated Funds & Construction Expenditures" is displayed. The
y-axis is scaled in millions of dollars, beginning at zero, increasing by
increments of $30 million, and ending at $210 million. The x-axis consists
of the years 1991, 1992, 1993, 1994 (forecast), and 1995 (forecast). For
each year, two side-by-side vertical, rectangular bars are displayed. The
bar on the left is internally generated funds and the bar on the right is
construction expenditures. The graphed data are as follows:
<TABLE>
<CAPTION>
1991 1992 1993 1994* 1995*
---- ---- ---- ----- -----
(millions of dollars)
<S> <C> <C> <C> <C> <C>
Internally Generated
Funds 96 130 109 125* 125*
Construction
Expenditures 182 207 160 155* 179*
*Forecast
</TABLE>
-2-
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements of Delmarva Power & Light Company on Form S-3 (File Nos. 33-39756 and
33-63582) and on Form S-8 (File No. 33-33810) of our reports, which include an
explanatory paragraph regarding the Company's changes in its methods of
accounting for unbilled revenues, income taxes, and postretirement benefits
other than pensions, dated February 4, 1994, on our audits of the consolidated
financial statements and financial statement schedules of Delmarva Power & Light
Company and its subsidiary companies, as of December 31, 1993 and 1992 and for
each of the three years in the period ended December 31, 1993, which reports are
incorporated by reference and included, respectively, in this Annual Report on
Form 10-K.
Coopers & Lybrand
2400 Eleven Penn Center
Philadelphia, Pennsylvania
March 22, 1994
